fossil fuel foundation gas conference: further … fuel foundation gas conference: further...

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fossil fuel foundation gas conference: further developing gas infrastructure in South Africa

21 May 2014



What we will share with you today

key messages

• Sasol is anchored in SA & is committed to country and regional development

• Sasol’s successful regional governmental collaboration holds lessons

• Gas is good

• Blending national and business drivers has successfully driven economic growth

• Further gas infrastructure development must be deliberate and conscious

• The current innovative approach in the policy and regulatory framework is a good base to

replicate these experiences

Open cycle gas turbines, Secunda Sasol Synfuels, Secunda



Sasol has exploration, development, production, marketing and sales operations in 37

countries across the world, employing more than 34 000 people

our vision is to grow profitably, sustainably and inclusively, delivering value to stakeholders

through technology and the talent of our people in the energy and chemical markets in Southern

Africa and worldwide

Sasol is a proud South African based international company



Sasol is committed to a strategy of investment in South Africa

● R14bn Sasol Mine Replacement

Programme

● Exploration in SA and region

continues

● 800 jobs created during

the construction phase

● 52 permanent jobs

created

● 5,200 jobs created

during construction

phase

● 165 permanent jobs on

project completion

● 5,000 jobs created

during the construction

phase

● 4,000 permanent jobs

retained

Reducing

carbon

footprint

Growing

production

Ensuring

long term

sustainability

Current investment

Long term sustainability in SA requires a secure and continuous supply of coal and gas

● R1.5bn Natural Gas Power

Generation Unit

● Generate 70% of internal

electricity requirements

● R14bn Secunda Growth Project

● R13bn FT Wax Expansion Project

● R1.9bn Ethylene Purification

Plant

● R1.3: Propylene Extraction

● R1.1bn Cobalt Catalyst Plant



We are on a good trajectory to secure our feedstock requirements

• R14bn Sasol Mine Replacement

Programme

• Exploration in SA and region

continues

Ensuring

long term

sustainability

Sasol Mining

● New Shafts

• Shondoni

● New Mines

• Impumelelo Phase 1

• Thubelisha

• Limpopo West

• 60% of R14 billion already

spent

Coal

Sasol Petroleum International

● 2 sizeable offshore licenses

• Exploration rights: KZN base

• Block 3A-4A (JV with PetroSA)

Natural Gas

We are focused on the further development of the gas market

.

. .

.

.

.

.

Harare

Mbabane

Maseru

Maputo

Windhoek

Pretoria

Gaborone

35°0'0"E

35°0'0"E

30°0'0"E

30°0'0"E

25°0'0"E

25°0'0"E

20°0'0"E

20°0'0"E

15°0'0"E

15°0'0"E

20°0

'0"S

20°0

'0"S

25°0

'0"S

25°0

'0"S

30°0

'0"S

30°0

'0"S

35°0

'0"S

35°0

'0"S

0 150 300 450 600 750 75 Kilometers

NAMIBIA

BOTSWANA

ZIMBABWE MOZAMBIQUE

SOUTH AFRICA

GCS_WGS_1984

Cape Town

Durban

Secunda Sasolburg

Johannesburg

Port Elizabeth

Richards Bay Bloemfontein

East London

P P

Beira

. Vilankulo

Sofala Block PL 134, 135, 136

Block

16/19

Area A

ER 236

TCP

3A/4A



Developing a gas market is very capital intensive and high risk with a low success rate

Midstream

● Delivery to processing plant

● Gas processing

● Delivery to export terminals (high pressure)

● Pipeline distribution network (lower pressure)

● A number of possible beneficiation pathways

Gas-to-Power

Gas-to-Chemicals

Gas-to- Liquid

LNG

● In-process application

Process heat generation

Methane gas

Natural gas

Gas Pipeline 2200km transmission

pipeline network

the development of a natural gas market requires large up-front capital

commitments

Most effectively mitigated through strong collaborative partnerships

Source: Sasol Gas



Sasol and partners would have invested at least R21bn by the end of 2014

7

On

go

ing

: E

xplo

ration

in S

outh

ern

Afr

ica

(R3B

in

2009-1

1)

2004

Time

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

To

da

y

2010:

New

com

pre

ssor

sta

tion a

t K

om

atipoort

(R1B

)

2012:

Expansio

n o

f th

e

CP

F1 in T

em

ane to 1

83

mG

J (R

1.8

B)

2014:

New

128km

loop lin

e

in M

ozam

biq

ue (R

2B

)

2013:

New

155km

Gaute

ng N

etw

ork

Pip

eline (R

1.6

B)

1. CPF = Central processing facility

2004:

Init

ial in

vestm

en

t

(R

12B

)



Developing a gas market has real benefits

e.g. CO2 - in the US the shale revolution has facilitated a reduction in

emissions

The development of SA gas market due to key success factors



Factors that contributed to the success of the development of the gas industry in SA

1. Anchor customer(s) to provide base load

2. Multilateral involvement and collaboration underscored by a partnership

approach, understanding each others needs and requirements

3. A Gas Master Plan

4. Enabling and supportive regulatory and fiscal environment

Further development of the gas industry will require the inclusion of the success factors



How do we further develop the gas industry in SA

1. Secure anchor customers to provide base load

› gas resources are sufficient for the region and SA is a valuable customer

2. Multilateral involvement and collaboration underscored by partnerships

› partnerships across the industry and the region must be considered

3. A Gas Master Plan

› regional energy charter crystalising benefits for all participants

4. Enabling and supportive regulatory and fiscal environment that is regionally

focused

› policy must be aligned, contextualised, clear, coherent and reasonable

creating investment opportunities



better together, one team – One Sasol

There are examples of successfully blending national and business drives for economic growth



A blend of national and business drivers can lead to economic growth – the US experience

US gas industry uniquely competitive coupled with existing infrastructure

2007/2008

● 490 850 km of transmission pipelines

● More than:

› 11 000 delivery points

› 1 400 interconnection points

providing for transfer of natural gas

nationwide

● 49 cross border natural gas pipeline

interconnections from/to Canada and

Mexico

focused on its own development of natural resources but through regional collaboration

Source: EIA



A blend of national and business drivers can lead to economic growth – the US experience (continued)

● Severe natural gas shortage in the 1970s

› Pricing policy (capping) in 1960s led to shortages in production by mid 1970s

› Ratio of reserves to production moved from 22 to 1 in 1959 to 9.8 to 1 in 1979

› Corrective regulation was introduced through the Natural Gas Policy Act of 1978

(NGPA) deregulating pricing

● Supportive government policy

› Funding of R&D programs

› Tax breaks and incentives

› Policies promoting industry restructuring, NGPA

● Technology and know-how innovations

› Hydraulic fracturing advancements

› Geological knowledge

› Horizontal drilling technique



A blend of national and regional business drivers can lead to economic growth – the UK experience

● With no natural gas reserves discovered, initial source of gas was from coal (“town

gas”)

● Through Gas Act of 1948, nationalised UK gas industry – launching British Gas

● Isolated from continental Europe

● Churchill coined the term of “Energy Security” launching a supply diversification

strategy

● First country in the world to import LNG in 1964 (the shipment was from Africa,

Algeria)

Regional partnerships and integration grew the EU market

The example of the development of the UK gas industry is worth nothing

● 1966, discovery of natural gas in UK

continental shelf, led to a policy shift

supporting development and use of this

reserve

● Now the UK is integrated into Europe and

global supplies through pipeline and LNG




What are the lessons for further development of the SA gas market in these and other experiences



Regional collaboration could be the key to the energy constraint

Sources: US Energy Information Administration

SA’s energy security inextricably linked to that of the region’s

African Proven Reserves of Natural Gas

(trillion cubic feet)

Country or Region 2012

Africa Total 509.406

Top Five 480.400

Nigeria 180.458

Algeria 159.000

Egypt 77.200

Libya 52.795

Angola 10.947

Rest of Africa 28.680

Mozambique 4.500

Tanzania 0.230

Country or Region Proven Reserves of Crude Oil (billion

barrels)

2012

Africa Total 124.209

Top Five 111.000

Libya 47.100

Nigeria 37.200

Algeria 12.200

Angola 9.500

Sudan (North & South) 5.000

Rest of Africa 13209

Data Source: Oil And Gas In Africa (KPMG Report)



Regional collaboration could be key to energy constraint (continued)

Whilst SA should focus on developing its own resources it must not lose

sight of available resources within the region

SA potential

• cbm pilot plant in Waterberg

• shale gas potential in Karoo

• new licenses for exploration activities

in or Orange Basin and East Coast of SA

SADC region

• 21 tcf of gas

• 11.1 billion barrels of oil

• several off shore finds in Rovuma & Tanzania

since 2010

regional partnerships will be key to further develop the gas industry



There are opportunities for gas, but no easy path

We will have to combine locations, production timing, logistics and market

opportunities in South Africa

Gas Opportunities

LNG

GTL

CNG

Import facilities, Pipelines, etc

GTC

GtP




Innovation in policy and regulatory framework can enable the replication of these experiences



Innovative use of existing policy and regulation can assist in the development of the gas market

Leverage and blend country and regional policy initiatives which is critical for

facilitating a viable regional gas market

South Africa

› Overarching and enabling

› National Development Plan, New Growth Path, Industrial Policy Action Plan

› Specific and Incentivising

› Special Economic Zones, National Infrastructure Development Plan, Infrastructure

Development Bill.

• Regional initiatives

› Africa Infrastructure Programme

› African Action Plan (AAP)

› Programme for the Infrastructural Development of Africa (PIDA).

Country specific and regional initiatives are equally important to facilitate access and

utilisation of gas in South Africa



Innovative use of existing policy and regulation can assist in the development of the gas market

Leverage from country specific initiatives: South Africa

• Positive policy and regulatory initiatives must continue to be supported

NDP

› energy feedstock

› energy supply:

› supportive infrastructure

IPAP

› strong alignment NDP

› coordinated development of African regional infrastructure and integrated value chains

› IPAP acknowledges contribution of gas to the energy mix

› Shale gas potential contribution acknowledged



innovative use of existing policy and regulation can assist in the development of the gas market (continued)

Leverage from country specific initiatives: South Africa

• Positive policy and regulatory initiatives must continue to be supported

SEZ

› One stop shop concept streamlining and shortening licencing procedures

› Investment incentives

› Public Private Partnerships

National Infrastructure Development Plan (NIDP) adopted in 2012

› Strategic Integrated Projects (SIPS) established and driven by the PICC

› SIP#17 - regional integration in cooperating and developing infrastructure for transport,

water and energy.

› SIP# 8,9 and 10 - focusing us on energy (green energy, electricity generation, and

expansion of the transmission and distribution network).

current policy provides a good platform to advance and further facilitate the further

development of the gas infrastructure



What additional policy direction is needed to further advance and facilitate investment in gas infrastructure

So what does our other policy drivers tell us

IRP

› Acknowledges the “Big Gas” case which will require gaining access to gas

› Regional gas developments referenced, shale gas potential in SA

› Implementation requires access to gas storage, either from piped gas or LNG, with

sufficient capacity to support peaking operation

IEP

› Natural gas projected to have significant potential both for power generation and direct

thermal uses

› Notes SA's limited LNG import infrastructure and the need for further infrastructure

investments

› SA's opportunity to explore options for exploiting new gas discoveries in Mozambican

Time has come to be more resolute and specific moving from identifying the opportunity to

seizing it




Gas infrastructure investment will not happen by chance

National plans to be opportunity driven aimed at seizing it

› Gas Utilisation Master Plan, IEP, IRP

• clear direction that gas is not just one of the substitutable alternatives but that it

envisaged to be a definitive and substantial part of the energy mix

› Country specific gas master plans (e.g. Mozambique, Namibia and Botswana)

• negotiated bi-lateral agreements accommodating all partner country needs

• underpinned and supported by associated businesses

Further investment in gas must be deliberate and conscious underpinned by a coherent

policy approach both from a national and regional perspective




National plans must be linked with region’s to ensure a viable regional market.

• SADC vision 2027 plans should be more visibly linked to ensure the establishment of an

implementable project pipeline.

• Africa Infrastructure Programme, African Action Plan (AAP) and the Programme for the

Infrastructural Development of Africa (PIDA).

› Match pipeline to capacity in the region

› More deliberate and systematic technology transfer programmes

› Better matching of supply and demand linked to resource developments in the region

› to attract investments and enhance regional integration and cross-border

infrastructure projects

› prioritization of energy infrastructure through addressing energy poverty and costs.

Further investment in gas must be deliberate and conscious underpinned by a coherent

policy approach both from a national and regional perspective



And in conclusion

key ingredients to further develop the gas market in South Africa

• Gas Utility Master Plan is our first step to ensuring:

› SA focused gas approach but through regional collaboration

› first step in finding a scalable and deliverable solution to energy security concerns

› multi-government department, business and civil society task team approach recognising that

energy transcends a number of areas

› gas industry must be prioritised as a viable energy alternative yet recognising that it is still in

early stage of development

› enhance the policy and fiscal framework that enables and supports the further development of

the gas industry in SA




Thank you [email protected]

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