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Interview

with Ms. Dipuo Peters, Minister of Energy, MP, Department of Energy – Republic of South Africa

27.02.2012 / Energyboardroom

In line with the COP17 success, the United Nations has declared 2012 as the year of universal access to energy in Africa. South Africa is already the most developed economy on the continent and hosts a strong refining capacity and advanced technological capabilities in energy. What role do you see the country playing in going beyond its boundaries and supporting energy access in the African continent?
The issue of access to energy is key at the moment, and remains an important challenge for South Africa as a whole. Despite being such an industrialized country, energy access has remained an issue to address. This is why we are driving access with the Integrated National Electrification Programme to ensure that the rural areas of South Africa –such as the Provinces of KwaZulu-Natal, the Eastern Cape and Limpopo in particular- receive appropriate access to electricity. As a country, we face the dichotomy of access, which has a far-reaching socio-economic impact. This is what worries us as a government, and has been an area to which we have devoted significant time and effort.
President Zuma has established the Inter-Ministerial Committee on Energy (IMC), comprising key personalities such as the Minister of Finance, the Minister of Trade and Industry, the Minister of Environmental Affairs, the Minister of Water as well as the Minister of Mineral Resources, etc. The Department: Science & Technology has also been included because we need to look at what is possible from a scientific point of view to address these issues of energy access.
Looking at oil and gas services and products, we still face serious challenges too. We have decaying infrastructure in the oil and gas space and our refineries are mostly over 40 years old. We are aware of other challenges such as constraints in port facilities, as well as transportation and storage infrastructure. This is why we are quite excited about future developments in the energy sector, as both the Minister and the deputy-Minister has been appointed by the President to serve in the Presidential Infrastructure Coordinating Commission (PICC). We need to look at how we can make it possible to secure the supply of energy in South Africa.
In 2005, we faced the challenge of security of supply of liquid fuel products, while we additionally faced challenges of electricity supply in 2008. Those events almost spurred us to act, as a result of which we now have the 20-year Integrated Resource Plan (IRP) in place. This is a country energy mix plan where we look at the total energy base as well as the different resources. This is an important tool to plan for the future.
In terms of liquid fuels infrastructure, we are proud to have developed the National Multiproduct Pipeline (NMP) that brings the product from the coast and the refineries inland, where the bulk of the consumption takes place. This is why storage facilities are necessarily located around Gauteng. We are revising our strategic stocks policy to be able to look at the growth points and determine where there is a higher need for particular products. In terms of other energy infrastructure, we have also realized that the Northern Cape has the potential to become a hub in terms of solar power.
As part of the Southern African Development Community (SADEC) region and the continent of Africa, we also need to have Integrated Resource Plans for the region because of our so-called Southern African power pool. We need to make sure that this pool becomes very active and need the capacity as well as the technological and financial support to do so. We have already started to engage with the International Energy Agency (IEA) to help us with studies in South Africa and the region. This needs to help us –as a collective- in working towards the development of a resource map and resource plan for the region.
In this plan, we also need to speak about issues such as the need for the modernization of our grids, which are not yet smart grids. Within our own IRP, we include about 42% renewable energy. The grid, however, is not yet smart enough to generate the technology that will be deployed. This is why we are also looking at bringing in more independent power producers to secure supply. For this reason, we have established the “Independent System and Market Operator” office. I am further pleased to announce that we have already started with a ring-fenced unit within Eskom, whereas we are now also busy finalizing the legislation that will lead to a truly independent office with its own governance and management systems. This office would buy power from the independent power producers as well as Eskom, in order to be able to minimize the conflicting role of Eskom as both buyer and referee and player in the power sector. We are thus creating competition for our own utility.

Will this mean a decreased role for Eskom?
No, Eskom will continue to be a major utility and we encourage Eskom to participate actively in renewable energy procurement. Two hundred of that power was given to Eskom, half wind and half solar. As a rule of thumb, the independent power producers will take up 30% while the remaining 70% will go to Eskom.
What we try to say is that we need to diversify the sources. You will find that where Eskom is being challenged, we are unable to pull more strength from the independent power producers. The group of women –WOESA- are for example active participants in the energy sector, of which I am particularly proud.
What also needs to be pointed out is that South Africa will continue to use its coal in the future, which is why it will also remain important to keep investing in coal-to-liquids technology and products. We also want to make sure that we can invest in the technologies that support environmental protection and mitigate greenhouse gas emissions. This is why we are very excited about Sasol’s investment with Statoil in Mongstad, as well as the investment by Eskom in the Underground Coal Gasification (UCG) initiative. Furthermore, the South African Carbon Capture & Storage (CSS) centre –housed at the Central Energy Fund (CEF) as a subsidiary of the Department of Energy- is being supported by all the oil companies, including our own PetroSA as well as Eskom and the other transport sectors. These are several initiatives that we are currently very excited about.
We have also realized that we need to invest in energy efficiency in order to benefit from the low-hanging fruits. By stretching the current limited amount of power we have, we could do more. For this, we have come up with the energy conservation scheme for the heavy industries, as well as the National Business Initiative (NBI) for other industry and businesses. The Department of Trade and Industry has also developed the building codes, to which the construction of any new building in South Africa must adhere. We are going to see a lot of modern new-types of buildings that will make more use of glass, natural light and space, green areas, and so on. Additionally, we have a program with Eskom called 49M, directed towards all South African individuals to save electricity. Through this initiative, we are trying to enhance energy consciousness, energy-saving, energy-awareness etc. Together with the Department of Education, we have also launched a life skills program where teachers can educate the children about the need of energy conservation. However, we also need to think further than that, and make our own children activists for energy. We need to make it clear to them that if they save energy, they make access possible for others that do not energy.
Despite the fact that we do not have hydrocarbon resources in South Africa does not imply that this should not be an area of investment. Together with companies such as PetroSA as well as the various imaging companies we are looking at investments in other countries in terms of crude oil exploration. Also, we need to look at the refineries that we plan on building and see whether the refinery will be multiproduct or multi-grade, whether it will take the crude from a particular country, and so on. We are looking at these various aspects in order to diversify our points of entry of crude supply into the country. It is important that we can look at the sustainability of supply for ourselves, which is why we encourage PetroSA to invest in the different upstream areas.

We do also see the Petroleum Agency South Africa (PASA) actively promoting exploration in South Africa, with examples of Project Ikhwezi in the F-O field for PetroSA and the Orange Basin Deep Water for Shell, as well as onshore potential in the Karoo despite several environmental constraints. Overall, do you see the possibility for South Africa to become a self-sufficient nation when it comes to energy?
President Zuma always says he can feel it in his blood that there are hydrocarbons in this country, because we share the same geological space with Mozambique and Namibia. Gas deposits have been found in the different blocs, which have not yet been fully developed. Exploration has taken place off the coast of the Northern Cape and there is a lot of potential. What we still need to do is determine whether we will have gas-fired power plants, gas-to-liquid processes, and so on.
Additionally, we are very excited by the notion of a high presence of shale gas, but are equally worried as a country about such production. This is why the Cabinet has established a task team to investigate the so-called fracking technology. As the Department of Energy, our message is that we are interested in shale gas production, but it will not help us if we have shale gas and no people. It is important for us that the technology will not devastate Mother Earth as we are its custodians for generations to come. We are also very sensitive to the ecological issues with regards to this area. It is very important for this report to address issues such as the technology used, the water usage and the protection of the environment.
We have a long term trajectory for carbon reduction and we know the International Energy Agency’s (IEA) claims that we have entered the “golden age of gas,” but our excitement will remain tempered until we find more answers. These answers will either give us the green, amber or red light. If it is amber, we will cautiously approach the possibility of production and see how we can improve the existing technology with the help of our sister Department of Science and Technology. While green light will mean “Christmas”, a red light will simply mean that we will have to look for resources elsewhere. It is all about finding the balance between the environmental and developmental considerations. Development should not come at any cost.

Would you have anything to add as a closing remark?
People are dying in developing countries because of a lack of energy access. There are children that cannot be given the necessary immunization because vaccines cannot be kept in fridges. There are women in labor that die because the ambulances cannot reach remote locations due to insufficient fuel supplies.
As part of the PICC, we also try to identify the growth points in order to make sure that there is supporting infrastructure, which is why the issue of rail lines, pipelines, etc. becomes so important. We are entering very exciting stages of development, but we will manage to keep South Africa working. We will keep the lights on, the cars on the roads and the planes in the air. We have been speaking to other countries to enter into supply agreements for crude in particular but also for end products. We now have a diversified energy consumption policy, where we talk about solar for water, heating or lighting, and LPG for cooking and heating. In this way, we can use the little electricity for job-generating heavy industries.

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