The Department of Mineral and Petroleum Resources has, through the Central Energy Fund (CEF), concluded a transaction on the sale of assets located at the South African Petroleum Refinery (Sapref) Precinct in response to the premature closures of oil refineries.
This was announced by Minister Gwede Mantashe in his Budget Vote speech before Parliament on Thursday.
Mantashe said the Strategic Fuel Fund, a subsidiary of the CEF, had also acquired the majority stake in the liquefied petroleum gas (LPG) company as well as the storage terminal that was previously owned by BP in Cape Town to store and supply diesel.
“While we appreciate the return to full operation of the Cape Town refinery, we are also mindful of the need for investments in new refining capacity, particularly in light of the recent oil and gas discoveries both in the South African and Namibian waters,” he said.
Mantashe said the government needed a way to address the litigation by foreign-funded non-governmental organisations (NGOs) aimed at halting seismic data acquisitions, which are highly non-invasive with minimal impact on marine life, following the Supreme Court of Appeal’s decision to afford applicants an opportunity to cure identified defects in application processes.
He said the recent successful 3D seismic data acquisition in April this year on the West Coast by UK geoscience data firm Searcher had proven that these operations can be done successfully without any harm to the environment.
He said it was disingenuous to assume that the exit of Shell from its downstream business in South Africa was prompted by policy uncertainty as it was part of its long-term strategy, which saw the company exiting jurisdictions such as Australia, New Zealand, and most African countries in 2011.
“Despite this development, South Africa’s petroleum industry has a great potential for growth facilitated by the government’s commitment to promote efficient manufacturing, wholesaling, and retailing of petroleum products,” Mantashe said.
He said of the R8.84 billion budget allocation in the 2024/25 financial year, the department had earmarked R6.4bn for transfers to public entities, municipalities, and other institutions or implementing agents.
He said to address poverty alleviation through increased access to electricity, R3.94bn of their budget allocation to Integrated National Electricity Programme (INEP) had been allocated as follows: R2.2bn for the INEP Eskom grant and R1.8bn for the INEP municipal grant.
A further R181.9 million had been prioritised from the INEP to fund the government’s programme of rehabilitating derelict and ownerless mines, bringing the total allocation to R310.82m in the 2024/25 financial year.
Other developments included the gazetting of the Integrated Resource Plan (IRP) in 2019, procurement of 6 094MW from a diversified energy mix to meet the country’s growing electricity demand, while reducing carbon emissions from high carbon emissions to low carbon emissions as part of efforts to attain goal seven of the UN’s Sustainable Development Goals (SDGs).
He said of this capacity, 150MW procured under the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) had been connected to the national grid, while 278MW was currently under construction and expected to be connected to the grid by the end of this month.
Four gas projects and one hybrid project, with a combined capacity of 1 570MW, failed to achieve commercial and financial closure due to failure to obtain environmental authorisations, secure port access, and conclude financial close requirements by the due date set in the Project Agreements.
Mantashe said of the 2 583MW procured under Bid Window 5 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), 1 159MW was under construction and expected to start connecting to the grid by September this year.
The remainder of 1 424MW, however, failed to achieve commercial close due to price increase on the components driven largely by supply chain interruptions during the Covid-19 pandemic and geopolitics.
Mantashe said of the 4 200MW that were released to the market under Bid Window 6 of the REIPPPP, 3 200MW of wind technology could not be appointed due to limited grid capacity. Consequently, 1 000MW of solar PV was procured.
Despite this hurdle, Mantashe said at least two projects with a combined capacity of 360MW were under construction, while other projects with a total capacity of 640MW were waiting for Eskom to issue them budget quotes.
He said project developers of projects procured under Bid Window 1 of Battery Storage with a total capacity of 513MW were awaiting their budget quotes from Eskom.
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