kaya gas george tatham case study: international lpg roll our comparisons

27
STABILIZING LP GAS SUPPLY FOR STABILIZING LP GAS SUPPLY FOR SOUTHERN AFRICA SOUTHERN AFRICA GEORGE TATHAM GEORGE TATHAM MD - KAYAGAS MD - KAYAGAS 14 March 2012 14 March 2012

Upload: nigel-brown

Post on 24-May-2015

1.971 views

Category:

Business


0 download

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

Page 1: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 2: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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?

Page 3: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 4: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 5: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 6: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 7: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 8: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 9: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 10: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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.

Page 11: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 12: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 13: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 14: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 15: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 16: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 17: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 18: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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.

Page 19: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

Thank You

Page 20: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 21: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 22: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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.

Page 23: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 24: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 25: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 26: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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

Page 27: Kaya Gas George Tatham Case Study: International LPG Roll Our Comparisons

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)