kaya gas george tatham case study: international lpg roll our comparisons
DESCRIPTION
Use of LP Gas is likely to grow at 30% per annum in South Africa and with current supply under strain during peak times and with unplanned refinery shutdowns this fuel source could become problematic. This event will help manufacturers and users of LPG to understand what challenges they will be facing in the medium term to enable informed decisions to ensure a continued supply of LPG.TRANSCRIPT
STABILIZING LP GAS SUPPLY FOR STABILIZING LP GAS SUPPLY FOR SOUTHERN AFRICASOUTHERN AFRICA
GEORGE TATHAM GEORGE TATHAM MD - KAYAGAS MD - KAYAGAS
14 March 2012 14 March 2012
STABILIZING LP GAS SUPPLY FOR STABILIZING LP GAS SUPPLY FOR SOUTHERN AFRICASOUTHERN AFRICA
GEORGE TATHAM GEORGE TATHAM MD - KAYAGAS MD - KAYAGAS
14 March 2012 14 March 2012
International LPG rollout comparisonsInternational LPG rollout comparisonsInternational LPG rollout comparisonsInternational LPG rollout comparisons
““Gas is the main thermal fuel in all domestic, small Gas is the main thermal fuel in all domestic, small commercial and industrial applications in most of commercial and industrial applications in most of
the world”the world”
Why is it not so in South Africa?Why is it not so in South Africa?
International LPG rolloutsInternational LPG rolloutsInternational LPG rolloutsInternational LPG rollouts
o Switching to LPG in:• Indonesia• Turkey• Morocco• India
o What a similar switch could do for South Africa
o What we need to do to make it happen
IndonesiaIndonesiaIndonesiaIndonesia
2007 - Paraffin was the main domestic fuel• Paraffin Subside of US$4bn/yr was unsustainable• Government launched the Paraffin-to-LPG
conversion programme• Aimed to replace 42 million domestic paraffin users
and SMEs with LPG. • Government distributed packages comprising a 3kg
cylinder, stove and free first fill
IndonesiaIndonesiaIndonesiaIndonesia
2008 - > 5.3 million households stopped using paraffin2009 - 42 million conversion packages delivered2010 - 6 billion litres of paraffin were withdrawn– LPG was now main cooking fuel2011 - Paraffin subsidy down by US$ 2 billion– Paraffin/kerosene diverted to jet fuels– Health benefits for poorer households2012 - LPG storage jumped from 10 000 mt to 270 000 mt
IndonesiaIndonesiaIndonesiaIndonesia
o Indonesia created:• LPG distribution industry (LPG trucks rose from 355 to 2004 units)
• Cylinder manufacturing industry• Appliance manufacturing industry• 10’s of thousands of jobs
o Alleviated pressure on jet fuel supply
Indonesia -Indonesia - Lessons Learned Lessons LearnedIndonesia -Indonesia - Lessons Learned Lessons Learned
Institutional environmento Government must appoint companies or institutions with the capacity
and proven record to execute o Government must endorse and actively drive it at Central, Provincial
and Local Government levels.o Regulations must be clear and enforcedo The logistical structure must be agreed upfront
Market creationo Education and marketing must go hand in hand
o Free appliances and a free first fill are essential incentiveso Subsidise the transition process not the product
Turkey LPG Sales growth
0500
100015002000250030003500
1965 1970 1975 1980 1985 1990 1995 2000LPG 000's Tons
• LPG growth of 180% between 1990 and 2000
• Growth due to urbanization and speed/ease of connection
MoroccoMoroccoMoroccoMorocco
o Rapid growth of LPG due to population expansion, rising living standards, easy access in rural areas.
o LPG is distributed by 20 companies and 500 agents + 30 filling stations with an annual capacity of 1.4 million tons.
o 98% of households use LPGo 40 000 grocery shops sell LPG
MoroccoMoroccoMoroccoMorocco
o An LPG industry 4 times South Africa’s with 2/3 the population and lower per capita income
o A world-class and well-regulated distribution systemo A local cylinder and appliance manufacturing
industryo Nearly all Moroccan homes use LPG for all thermal
applicationso Morocco subsidises LPG causing problems for
national budgeto The rich who heat their swimming pools with
subsidised gas.
BrazilBrazilBrazilBrazil
o LPG use began in 1937 with166 households. o Government developed an integrated energy plan
in the 1985 which allocated a roll to LPGo Today LPG is in more than 42 million households
(98 % of the total)o LPG is used by more 150 million people o LPG provides more than 350,000 direct jobs in
15,000 companieso 300 million cylinders are delivered every year
BrazilBrazilBrazilBrazil
o Regulated LPG price 1950 - 2001 (One national price)
o Excessive regulation deterred investors
o Large distribution infrastructure
o Subsidized LPG heated pools & saunas.
o By 2000, around US$ 100 million spent annually to subsidize LPG
o January 2002 subsidies were removed
What factors are commonWhat factors are commonWhat factors are commonWhat factors are common
o LPG growth is driven by:• urbanisation, • increases in the income of households and • construction and debottlenecking of supply
infrastructureo Government support for transition to LPG is
important for successo Integrated planning across energy carriers gets
best results
What factors are commonWhat factors are commonWhat factors are commonWhat factors are common
o Product subsidies are disastrouso LPG infrastructure is quicker and cheaper than
electricityo LPG produces big health and environmental
benefits Vs other solid fuelso The growth of the LPG industry can create:
• whole new industries, • SMEs and • large numbers of jobs
What can LPG do for South AfricaWhat can LPG do for South AfricaWhat can LPG do for South AfricaWhat can LPG do for South Africa
o An Indonesian style switching program could:• Save at least 3.7 gigawatts of power• Provide households with cheaper energy than
electricity and reduce the impact of increasing electricity prices
• Replace 1 Medupi size power station saving South Africa aboutR70 billion
What can LPG do for South AfricaWhat can LPG do for South AfricaWhat can LPG do for South AfricaWhat can LPG do for South Africa
o Well managed, growth of the LPG industry could create manufacturing industries for:
• LPG cylinders• LPG valves• LPG trucks and rail tank cars• LPG appliances
o It could create 10s of thousands of jobs
What can LPG do for South AfricaWhat can LPG do for South AfricaWhat can LPG do for South AfricaWhat can LPG do for South Africa
o Save our wood land
o Reduce SA’s carbon foot print
o Prevent shacks fires caused by paraffin
o Increase availability of Jet fuel
To Make it HappenTo Make it HappenTo Make it HappenTo Make it Happen
o Build Inland LPG storage in Gautengo Create government forum with power to drive the
initiative across the many government institutions and departments involved in developing a LPG industry (DOE, NERSA, TNPA, DTI, DEAT etc.)
o Review regulatory structure and content of regulatory approval procedures to prevent vested interests to hi-jack processes or sub projects
o Competitions review of industry to deal with anti-competitive elements in the industry structure.
Thank You
What can LPG do for South AfricaWhat can LPG do for South AfricaWhat can LPG do for South AfricaWhat can LPG do for South Africa
o We would need fewer new power stations
o Medupi Power station will produce 4 800 megawatts
o Medupi will cost ( so far) R80 billion
o 3 700 megawatts could be saved for R12 billion
WHY IS IT SO DIFFICULT?WHY IS IT SO DIFFICULT?WHY IS IT SO DIFFICULT?WHY IS IT SO DIFFICULT?
There does not appear to be deficiencies in policy, regulatory framework or executive capacity so why does an entity like KayaGas find it so difficult to introduce innovative solutions?ANSWER:othe lack of a clear and final Government strategy for LPG othe combination of the various regulations hamstrings any developer even if they are implemented efficiently.othe lack of co-ordination between regulatory authorities /government entities and the unintended consequences produced by this othe way in which the structure and content of regulatory approval procedures enable vested interests to hi-jack proposed solutions
The effect of this is that even a small development can be delayed by years and block the supply of energy and economic development in South Africa
Macro-economic Benefits Macro-economic Benefits Macro-economic Benefits Macro-economic Benefits
A gas terminal for both LPG and LNG in Richards Bay would:o Enable the development of gas as a major clean and cost
effective fuel for the South African & the South Indian Ocean economies
o Create other gas-related industries in Richards Bay (e.g. power generation & ceramics)
o Create jobs at the terminal, in transport around it & in the related industries
o Save South Africa billions in power station construction and provide an alternative to electricity in the short term.
REGULATION BOTTLENECKSREGULATION BOTTLENECKSREGULATION BOTTLENECKSREGULATION BOTTLENECKS
At least six licences or permits are required for a new LPG import installation
oPetroleum Products Act: Wholesale licenceoPetroleum Pipelines Act: Facility licenceoPetroleum Products Act: Import guidelines: Import permitoNational Environmental Management Act: Authorization following impact assessmentoNational Ports Authority Act: Concession from the Ports AuthorityoMarine Safety Act: Permission from SA Maritime Safety Association for ships to enter territorial waters
Micro-economic BenefitsMicro-economic BenefitsMicro-economic BenefitsMicro-economic Benefits
o Domestic use of LPG will boomo Switch to gas will mean less electricity
consumptiono Fewer conventional power stations needed –less
burden on the taxpayero Healthier lives for those in informal settlements
and of lower socio-economic level
PointsPointsPointsPoints
o Why Gas• Cheaper than electricity• Infrastructure requirements cheaper and quicker to
create than electricity• More efficient than other fuels• Safer than paraffin• Better for health & environment than solid fuels
LPG potential for South Africa(1)LPG potential for South Africa(1)LPG potential for South Africa(1)LPG potential for South Africa(1)
o LPG is already 30% cheaper than electricity o Within 3-5 years LPG could replace electricity in
all domestic and small commercial thermal applications
o We could save 4 gigawatts by a converting domestic use to LPG
o Converting to gas could mean no need for another R80 billion (Medupi) coal-fired power station
LPG potential for South Africa(2)LPG potential for South Africa(2)LPG potential for South Africa(2)LPG potential for South Africa(2)
Changing to LPG would:
o Lower our CO2 emissionso Replace paraffin in low-income homeso Reduce pressure on jet fuel supply
(LPG is safer, cleaner and healthier than wood, coal (LPG is safer, cleaner and healthier than wood, coal and paraffin and cheaper than electricity)and paraffin and cheaper than electricity)