News in South Africa 3rd February:
1. Water supply a major concern:
As load-shedding intensified on Wednesday there were concerns that Gauteng municipalities which suffered from water shortages would again have more communities with dry taps.
On Wednesday the power utility implemented stage 6 load-shedding from stage 5 the previous day. The utility again moved to stage 5 on Thursday, which would last until Friday morning.
This happened as Johannesburg and Tshwane metros this week had problems with water shortages. The water supply problem was blamed on constant power outages by Eskom.
DA MP Leon Basson said the government needed an urgent intervention to have backup energy supply for water pump stations.
“Load-shedding is negatively affecting Rand Water’s ability to supply our reservoirs in Gauteng with water.
“Load-shedding has been a problem since 2007 and no viable plan has been made to ensure that these critical pump stations are able to continue pumping water while experiencing load-shedding.”
Basson said if water shortages spread to other municipalities in the country it could result in many communities protesting.
“We fear that these water restrictions could lead to widespread civil unrest, and therefore call for immediate intervention.”
Tshwane utilities and operations MMC Daryl Johnston blamed the water supply problems on load-shedding.
“Higher levels of load-shedding put serious pressure on the water supply network, affecting both the City of Tshwane network and Rand Water’s bulk supply systems.
“If Rand Water cannot pump the water to Gauteng municipalities, we cannot supply it to residents.”
2. De Ruyter backs renewables:
Andre De Ruyter has defended Eskom’s move away from coal-fired power stations in response to criticism from coal producers over the utility’s transition strategy.
De Ruyter said that Eskom is not anti-coal, but building new coal-fired power stations would be slow, impractical and difficult to fund.
He said that renewable energy paired with intermittency solutions, such as pumped storage and gas, could meet South Africa’s electricity demand.
3. Eskom’s high diesel prices explained:
National oil company PetroSA says it is not overcharging Eskom for diesel, claiming that the higher prices are a result of market dynamics and a lack of a proper demand forecast from the embattled power utility.
Responding to claims by energy experts at EE Business Intelligence that Eskom was being charged ‘extortionate rates’ for diesel to run its open-cycle gas turbines, PetroSA said that the allegations misunderstand how prices are linked to product supply nominations.
EEBI noted in an article on Thursday that Eskom paid R1.3 billion for a tranche of 50 million litres of diesel from PetroSA in November 2022, which translated to an “extortionate” R26.00 per litre – about R1.00 per litre above the retail pump price at the time.
PetroSA said that its contractual terms with Eskom are based on the Basic Fuel Price (BFP) pricing mechanism, which ensures that PetroSA sells to Eskom in line with the M-1 BFP. Knowing market dynamics would come into play, PetroSA said it engaged Eskom in October and asked for a three-month forecast for their demand for diesel.
“This was mainly due to the losses that PetroSA was suffering due to the erratic or spot nature of the nominations of product volumes from Eskom,” it said.
By getting a forecast, PetroSA said it would have been able to get better product prices, saving Eskom and the South African economy money. However, the group said it was forced to get a spot demand for Eskom when it ran out of diesel in November 2022, which resulted in the group having to buy two spot cargos not linked to M-1 pricing.
“The published BFP pricing in November 2022 was based on the preceding month, which resulted in the pricing exposure,” it said.
In December 2022, PetroSA took a position in November 2022 and bought a cargo priced in November 2022 which would be aligned with the December 2022 published BFP.
PetroSA said that the point is that without at least a three-month forecast, it cannot buy and supply Eskom with diesel at the most favourable terms and pricing.
“There is no substitute for planning demand to produce a forecast when it comes to the demand side in the product market, otherwise, spot prices will prevail. It is for this reason that PetroSA advises its clients that forecasting and planning are critical to ensure that cargo prices can be locked at favourable terms,” it said.
4. No plans to replace Eskom COO:
The Eskom board has, in light of the imminent unbundling of Eskom, decided not to fill the position of chief operating officer currently held by Jan Oberholzer.
This was disclosed by board member Mteto Nyati on Thursday during a media briefing providing an update about the challenges the power system is facing.
Oberholzer has been in charge of Eskom’s operations since July 2018 and will retire at the end of April when he turns 65.
The search for a replacement for Eskom CEO André de Ruyter is underway, with the board expecting a list of possible candidates from its recruiting company in the next two weeks, from which a shortlist will be compiled, Nyati said.
De Ruyter, who has been leading Eskom for the past three years but was unable to improve the performance of its power stations, resigned in December, citing the loss of the political support needed to do his job.
Nyati said the Eskom board is keeping a close eye on the implementation of Eskom’s plan to significantly reduce load shedding in the next two years, while keeping an open mind about suggestions as to how the execution can be accelerated.
Key to this is increasing the availability of Eskom’s generation fleet, especially the completion of the refuelling and steam generator replacement of Koeberg Unit 1 and returning Kusile units 1, 2 and 3 to service. The unavailability of the Koeberg unit represents about one stage of load shedding and the Kusile units more than two stages.
Performance
Conradie admitted that Eskom does not always get the desired improved performance from its maintenance programme. Management and the board are jointly looking at what should be done to improve on that, he said.
He said it is important that the scope of the outage must be correctly determined and that preparation is crucial.
At the moment there are still issues around the availability of funds for outages after August this year, but funds for long-lead spares for 2023 and 2024, some of which must be ordered a year or two in advance, have been allocated.
5. Mossel Bay could be a major fuel supplier:
In a best-case scenario, Mossel Bay could become a major supplier of fuel in South Africa, producing enough petrol and diesel for around a third of SA’s cars, data from a request for proposal by PetroSA shows.
That would see the state-owned company’s now-mothballed refinery there rival the output of Sasol, which was the last local producer of liquid fuels left standing as other refineries shut down – raising fears of serious economic disruption should anything go wrong with imports.
PetroSA is currently looking for partners to help it use the Mossel Bay plant, which halted production in 2020.
It believes its refinery will have gas to work with again in by 2028, but wants to put the plant to work in the meanwhile.
Under one scenario, the refinery would handle imported crude oil at a rate of 200,000 barrels per day. But that is at the very top end of the company’s ambitions; it has also sketched out scenarios – requiring far less capital investment – that would make for an output as low as 7,500 barrels per day, just about 1% of what South Africa needs daily.
Getting the refinery back up and running will not be a simple process, PetroSA has warned potential partners. Even so, it hopes to see production started again soon.
At the top of PetroSA’s partner wish list is a state-owned, or at least “state supported”, company with its own oil or gas and its own cash to pump into South Africa. But it is willing to talk to anyone who can bring at least $2.5 million (around R43 million) to the table, or who can raise $150 million.
It is also keen for partners who can get to work this year, with considerably less interest in those who can only get production up and running after 2025.
All information sourced from articles posted by: TimesLive, Fin24, BusinessTech, Moneyweb, and Business Insider.
