Aus-SA venture could ease Eskom troubles


Cape Town - ASX-listed Sunbird Energy on Tuesday pointed to its joint venture with South Africa’s national oil company PetroSA as one of the projects which could help solve the country’s electricity crisis.

Work is well advanced to convert the Eskom diesel-powered Ankerlig (Anchor Light) peaking power station - at Atlantis north of Cape Town - into a gas-powered station which would be supplied with gas from the Orange basin, which falls in Namibian and South African sea waters.

Sunbird managing director Will Barker, speaking on the South African Ibhubesi gas project as a new energy source at the Mining Indaba in Cape Town, said: “The Ibhubesi gas project is South Africa’s largest gas field… (it) is held 76% by Sunbird and 24% by PetroSA.”

The Khulu field is north of the Namibian border and together with the Ibhubesi field forms part of the Orange basin, which has a potential gas reserve of nearly 8 trillion cubic feet– about seven times the size of the Mossgas project. Big international oil companies like Royal Dutch Shell, Anadarko Petroleum and Falcon Oil are involved in the Orange basin.

The oil companies have spent about $125m in the Ibhubesi area since 2000, he said, noting that the production licence to mine is valid for another 25 years over an area of 5 000 km².

“The most likely recovery from the (Ibhubesi) field is 540 billion cubic feet, that is the equivalent of 90 million barrels of oil… a significant energy supply for the region,” he said.

Touching on the energy crisis, Barker said load shedding is again becoming “a daily part of life of South Africa”. Load shedding was implemented again in November 2014 following the collapse of a silo at a coal-powered plant; it was the first time load shedding had taken place since 2008.

READ: Eskom blackout catches SA offguard

Owing to Eskom's low reserve margin of 1% or 2%, Baker noted that ”any outages, maintenance or unscheduled peaks of demand… force Eskom into a position where they have to load shed to save the grid from collapsing.

“To help keep those lights on Eskom is more and more reliant upon its diesel-fired gas turbine facilities. They (are the) only really peaking capacity in the country that  provide emergency power to stabilise the grid... however, it is the most expensive power... turbines fired (by) diesel.”

Last year Eskom spent about R11bn on diesel at Ankerlig some 40 km north of Cape Town at Atlantis. “That accounts for 15% of Eskom’s entire fuel budget… but produces about 1.5% of the country’s energy needs.”

The Eskom War Room established by the cabinet to oversee activities to increase generation of power has identified the replacement of diesel for gas at the diesel power power plants as one of top five priorities.

READ: Cabinet sets up 'war room' for Eskom

Noting that stage one load shedding would take place on Tuesday from 16:00 to 18:30 at the Waterfront, the City of Cape Town and Camps Bay, Barker said it is amazing to see that people are following load shedding patterns on Twitter.

It is sad to note the potential impact of load shedding on the economy but he believed his business – together with the state oil company – could play a key role in resolving this crisis. “The impact (of the energy crisis) on productivity, on industry and on GDP… is phenomenal.”

Pointing to the role Sunbird is playing, he said: “We have been working with Eskom for the past two years to do that (conversion) at the Ankerlig facility. During 2013 we worked with Eskom through an extensive due diligence process... to match... our plans... with their fuel needs at Ankerlig.” A gas supply memorandum of understanding was signed in December 2013.

Details of how to provide fuel for the Ankerlig facility were negotiated during 2014. “It is a very significant step for us… (this) will be the contract that we need to unlock the field and develop the Orange basin for domestic gas supply. What we are doing could be the very embryonic stages of what could be a vast new industry for the west coast of South Africa.”

He noted his home state of Western Australia developed a similar gas field infrastructure, with government help, including a long pipeline feeding the gas to the markets.

South Africa has LNG supply opportunities from neighbouring countries and could also tap into the shale gas potential in the Karoo in the longer term. “What we need to do is connect up (the gas) to a high demand market,” he said, noting that this includes major industrial users currently dependent on coal supplies or imported LPG.

Noting that 1 tcf of gas has the potential to provide the power needs of a million people for 20 years, he said: “We have half a tcf sitting there proven already in our licence area (Ibhubesi).”

The national benefits that flow from this stype of development could lead to fuel saving “in the order of hundreds of millions of dollars a year” by replacing imported fuel “including expensive diesel imports” for domestic gas supply; this is a new source of energy and energy security for the nation, said Barker.

“With Eskom as our foundation customer, we will be able to put in place the infrastructure required to unlock the basin. There will be a 400 km pipeline connecting our field directly into the market and Ankerlig and into Saldanha.”

In June last year Sunbird announced that it had obtained final approval for the acquisition of the Ibhubesi gas project from Forest Oil Corporation.

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