Forum

: Africa Assembly, Paris, 23-25th of June 2015

Presenter : Lolette Kritzinger-van Niekerk, Head: Economics
Independent Power Producers Procurement Programme (IPPPP) Office,
Republic of South Africa
www.ipp-projects.co.za

Overview of discussion

The South African IPPPP Office, role and mandate

South African energy planning framework & context
South African energy context overview
Focus on the South African Gas Utilisation Master Plan
Opportunity for foreign investment
focus on the upcoming Gas to Power Programmes
Summary

Where does the IPPPP Office fit in ?

Role and mandate
Primary mandate is to secure electrical energy from the private
sector for renewable and non-renewable energy sources.
- Established (Nov 2010) by the South African Department of Energy (DoE),
National Treasury (NT) and the Development Bank of Southern Africa (DBSA)

Designed to contribute to the broader national

development objectives of job creation,
social upliftment and broadening of
economic ownership.
Evolving
scope of
services

Where does the IPP Office fit in ?

Role and mandate
Lack of security and reliability of energy supply
- a key contributor to impairing growth in the South African economy.

IPPPP designed as one of the South African governments urgent

interventions addressing reliability and security of supply challenge.
Evolving transformation of South Africas energy generation landscape.
in process of procuring additional renewable energy, coal, gas and
cogeneration capacity from the private sector.

A total of 17 000 MW new operational capacity targeted up to 2022.

current determinations = 15 690 MW
new determinations = additional 7 300MW
(6 300 MW for Renewable Energy and 1 000 MW for co-generation)

Indicative IPP procurement scope and timelines

Attracting significant investment

into the South African economy
The Renewable Energy Independent Power Producers Procurement
Programme (REIPPPP) has attracted significant investment
The total investment,
including interest during
construction, of projects
under construction and
projects in the process of
closure is ZAR 193 billion
(approx. US$ 16 billion)

Energy planning
framework & context
Integrated energy planning informed by National Development Plan (NDP)

Focus of this
presentation
Gas and
electricity.
There are
opportunities in
liquid fuels and
related industry,
but not currently in
scope and mandate
of
IPP Office to
discuss.

Energy
context overview - Africa
Energy supply landscape characterized by:
regulatory constraints; fragmented energy markets and high generation
costs associated with small economies; underexploited energy resources
and domination of fossil fuels in the energy mix;
Unreliable and inadequate electricity supply hampering the sustainable
long-term economic development potential of the African continent and
its member states in recent years also the case for South Africa
Out of Africas typical installed generation capacity, approximately 25% is
not operational at any given time mainly due to factors such as a lack of
maintenance, ageing power plants and high transmission and distribution
losses.
African firms often lose 5% to 20% of potential sales due to power
outages.
Costs associated with power outages typically range between 2% and 6%
of Gross Domestic Product (GDP).

Energy
context South Africa
Primary energy structure
historically was and still is dominated by
Coal (69%), followed by Oil (14.7%)
based products

Electricity production
historically dominated by Coal (92.8%),
followed by Nuclear (5.1%)

Energy
future context South Africa
Future electricity production structure
Significant opportunities over the
spectrum of electricity generating
technologies and fuels sources for the
next 20 to 30 years and more.
Coal fired electricity is still currently
envisaged to be the anchor source of
supply, but reducing to only 46% in the
next 20-30 years, the bulk of the switch
picked up by Nuclear (13%) and
Renewables (21%).

However for the oil & gas industry

opportunity exists in traditional sectors,
but also in broader energy context (e.g. renewable)

Focus on the South African

Gas Utilisation Master Plan (GUMP)
The GUMP is a strategy geared towards increasing energy diversity
and security for South Africa.
Provides a long-term evolutionary roadmap
- that will inform strategic, policy and institutional decisions which,
- in turn, will enable investment to be designed, fostered and
implemented in a fully coordinated manner,
- while at the same time emphasizing key actions in the shorter and
medium-term.
In this way the GUMP aims to facilitate the development of natural gas
as a sustainable alternative national energy source for South Africa.

Evolutionary planning approach

Gas Utilisation Master Plan (GUMP)
Future of indigenous gas for South Africa unclear at this point in
time, therefore approach is to plan for evolutionary approach

Gas Utilisation Master Plan (GUMP)

Gas resources
Potential gas resources identified from work done
by the GUMP team:
Domestic resources
CBM/ UCG/ IGCC
Shale gas
Piped field gas (currently Ibhubesi but focused on Eskom
supply)

International resources
LNG
CNG
Piped field gas (highest probability Mozambique/ Namibia)

Pump priming the gas industry

GUMP and Gas to Power
GUMP focuses on the development of an SA gas based industry
Electrical power is identified as anchor demand to pump prime the
gas industry
Large-scale electrical power needs will underpin a LNG to Power
Programme
Role for LNG to Power projects
More power onto the grid
Gas into the economy, creating demand signals for development of a
gas industry
Increased energy security, diversification of energy mix
Increased grid flexibility

Requirement for Alignment

Requirement for oil and gas
sector development is alignment :

from Upstream to Midstream and

Downstream;
from policies, legislations,
regulations, strategies to plans;
covering Fiscal, Regulatory,
Industrial, Market, Infrastructure,
Environment, Services and cross
border (Southern African Regional)
dimensions;
of Stakeholders e.g. DMR, NERSA,
the dti, DEA, DWS, DPE, NT, TNPA /
PRSA;

Opportunity for foreign investment

- upcoming Gas to Power Programmes
Gas to Power Request for Information (RFI)
- Released to the market on 19 May 2015 and is available for
download on www.ipp-gas.co.za
- Opportunity to submit RFI Response Forms will remain open
until 20 July 2015
- Responses to the RFI will be considered in framing the design of
the Gas to Power Procurement Programme for a combined
3 126 MW allocation planned for release towards end 2015 /
begin 2016.
- It is important to note that the Gas to Power Programme is
aligned with the Gas Utilisation Master Plan (GUMP) for South
Africa.

LNG Gas to Power: RFI

Non-mandatory
Solicit information re each procurement approach:
Bundled approach
Unbundled approach

Solicit information re each separate Element:

LNG Supply
Regasification Facility
Power Generation Facility

Solicit information around the potential for early

power generation:
Power barges/ powerships
Opportunities to expedite the importation of gas

Source of
Natural
Gas

Import
& Regasification Facility
-FSRU
-Land based

Vertical Integration

Transportation

Indigenous
(e.g.)
-Conventional (Offshore)
-Un conventional
(e.g. CBM, Syngas, Shale, Tight, etc.)
Pipeline
- Up to Border

? Not clear no explicit reference

- Dedicated Pipeline
(e.g. to Power)
- Transmission Pipeline

Gas-toLiquid Fuels /
Chemicals /
Fertilizer

? Implied (questions asked)

but I4P no mandate

Horizontal Integration
Uses /
Applications

Demand

Downstream
/ Market

Intermediate
Processing

Midstream

Supply

Imports
-Shipping of Liquefied
Natural Gas (LNG)
- Regional cross-border

Import
facility

Upstream

Context of Gas-to-Power RFI, value chain & stakeholders

Power Plants
- Electricity Generation
(baseload / mid-merit)
including Power Barges
(medium term)

Potential Multiple IPPs

RFI add-on
Power barges (HFO) Short Term
LPG Short Term

Direct Energy
- Industrial energy/heating
- Commercial energy/heating
- Domestic energy/heating

Industrial Products
- Fertilizer
- Chemicals
- Liquid Fuels

? Implied (questions asked + other

e.g. water - desalination)
but I4P no mandate
DMR

DoE

NERSA

the dti

Transportation Fuel
Liquid Natural Gas (LNG)
- Ship Fuel
- Rail Fuel
Compressed Natural Gas (CNG)
- Road Fuel: Vehicles Fuel
(Cars, Buses, Taxis, Trucks)

DEA

DWS

DPE

NT

TNPA/
PRSA

Gas Distribution network not included in the illustration for sake of brevity.

LNG Gas to Power: Unbundled

Create a contracting structure with different parties
responsible for different risks along the gas and power value chain

Unbundled Gas and Power

Value Chain

Buy LNG

LNG and
FSRU
Supply

LNG
Supply &
Shipping

Regas
Terminal

Gas
Purchase

Gas Aggregator/
Marketer

Sell Power

Power
Supply

Gas
Transmissi
on

Onshore
pipelines

Power
Generation

Likely that Government guarantees required behind the

Gas Purchase Agreement and behind the PPA

PPA

LNG Gas to Power: Bundled

Create a contracting structure with Gas IPP taking all
responsibility from LNG contracting to power

Integrated
supplier
Develops as single project
or forms consortium to
make necessary asset

Buy LNG

Sell Power

investments

LNG Supply &

Shipping

Regas
Terminal

Gas pipelines

Power
Generation

Gas and Power Value Chain hangs off the PPA

with soft government guarantee

PPA

LNG Gas to Power: RFI

The IPP Office is actively engaging with participants in the gas to power
sector to solicit information to inform its procurement approach to
procure gas-fired power generation.
We would welcome further discussion with those that have a potential
interest to participate in such a programme.

Please contact:
karen.breytenbach@ipp-projects.co.za
Lolette.vanniekerk@ipp-projects.co.za

Summary
South Africa is at the starting point of developing gas (initial focus on
natural gas) as an alternative source of energy for the economy over the
next 20 to 30 years guided by the GUMP, but monitored and managed
actively.
In the shorter term there are opportunities for Oil & Gas (Energy)
companies to invest in developments not only the Gas to Power
programme, but also other programmes such as renewables.
Although there are and will be challenges around such investments, the
opportunities are real, and mechanisms to deal with the challenges are
developed as they arise the IPPPP Office and programme is living

proof of this.

South Africa is open for business and welcomes foreign direct

investment !

THANK YOU
www.doe.gov.za
www.ipp-projects.co.za