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MEDIA REMARKS BY THE MAYOR OF THE CITY OF UMHLATHUZE: CLLR MG MHLONGO ON THE LNG MEDIA BRIEFING HELD AT RICHARDS BAY CIVIC CENTRE.

11H30

EXCO ROOM

 

TO ALL MEDIA

LIQUEFIED NATURAL GAS TO CHANGE THE CITY’S ECONOMIC LAND SCAPE

The City of uMhlathuze, located in the northern coast of the Indian Ocean in Richards Bay KwaZulu-Natal, received the ground breaking news from the Minister of Energy: The Hon Tina Joemat-Pettersson, MP, to host the 2000 Mega Watts plant of Liquefied Natural Gas to energy (LNG), with great humility and pride.

The announcement was made last week at the South Africa Gas Options Conference held in Cape Town where the City of uMhlathuze was represented by the Mayor and the City Manager.

This is a mega multimillion rands investment to the City and it will result in a drastic change of economic landscape in the City of uMhlathuze. The City has already allocated about 20 hectares of land for this project around the Bay Side area.

As the City of uMhlathuze, we relish the opportunity to take on such a huge project as it gives us an opportunity to prove that we have been readily poised for economic growth. This milestone project is guaranteed to produce thousands of job opportunities during construction and hundreds of permanent jobs opportunities after completion.

The City will also work closely with all stakeholders to ensure that local business people benefit and the local economy is boosted from the ground up. Such Projects poses a great need to work closely with our tertiary institutions such as University of Zululand, uMfolozi TVET College so that they identify and relevant industry based skills and train local youth to be ready for any technical needs when the project commences.

The city working in conjunction with the Richards Bay Industrial Development Zone (RBIDZ), has worked hard in the last two years or so to position itself as a conduit for the gas to power option. The City would like to appreciate all great efforts and hard work done by the Richards Bay IDZ in ensuring that we are all ready for such humongous investment.

We would like to categorically single out the gallant effort put in by the KwaZulu-Natal Department Economic Development, Tourism and Environmental Affairs led by MEC Sihle Zikalala, for the political support and guidance as a sole shareholder in the Richards Bay IDZ. It is due to the efforts by the MEC and the lobby driven by his department trhat we were able to be in pole position to receive the bigger slice of the pie. We applaud the leadership of MEC Sihle Zikalala for ensuring that out of the 3000 MegaWatts that was on offer, Richards Bay was given 2000 MW. The negotiation astuteness and political acumen of the MEC in his lobby process needs to be firmly applauded in this regard.

The deepest harbour we have in Richards Bay and sufficient land laid a solid foundation for us to be granted this opportunity of a lifetime. Our motivating phrase: Poised for economic growth is realised sooner than we thought and we are indeed ready for business.

The City is now positioning itself to attract more industries which were adamant to invest in Richards Bay because of shortage of power supply they require for their operations.

The complexities of the project call for extra ordinary expertise and it is understandable that major part of work will be imported. Ours is to ensure that we equip local business people to be ready to seize any available opportunity and gain some skills and experience through policies such as sub-contracting, etc.

We have already begun to reshape our policies to amend them to be biased towards the previously disadvantaged and the poor. Our Supply Chain Policy now empowers women with 40%, Youth 40% and disabled with 20% of our capital budget. We also reiterate that we remain spectators while our recourses enrich outsiders.

Richards Bay will no longer be known for being a major coal exporter but also a gas hub. We want to also attract gas and energy sectors and industries to relocate to our City for research purposes and for ease of business.

ENDS

 

NB: EDITORS NOTES

LIQUEFIED NATURAL GAS TO POWER IPP PROCUREMENT PROGRAMME

The Department of Energy aims to, through the LNG to Power IPP Programme, develop the gas industry and maximise the socio-economic benefit to South Africa, while also striving to balance this outcome with the country's energy security and diversity requirements. The LNG to Power Programme has been initiated by the Department to achieve the current Determination’s objective of a total of up to 3 000MW of Capacity from the gas-fired power generation facilities.

The DoE conducted different studies within the vicinity of Coega (Ngqura), Richards Bay and Saldanha to assess the viability of development LNG to Power projects in these three ports. The studies indicated that Saldanha Bay requires substantial work not just on the port but on the grid infrastructure, the servitudes for the pipeline and transmission lines and the location for the power plant. Accordingly, the first phase of the programme should focus initially on Coega and Richards Bay whilst Saldanha Bay will fall to the second phase of the programme.

The two projects, in Coega and Richards Bay, will each be linked to a separate RFQ followed by a specific RFP for each Project. In respect of Coega, up to 1 000MW of power generation will be procured and the balance in Richards Bay.

The LNG to Power IPP Programme aims to identify and select successful bidders and enable them to develop, finance, construct and operate a gas-fired power generation plant at each of the two ports, Ngqura and Richards Bay. The successful bidder will also be required to put in place the gas supply chain to fuel the plant with gas from imported LNG. The LNG to Power IPP Programme will provide the anchor gas demand on which LNG import and regasification facilities can be established at the Ports of Ngqura and Richards Bay. This will provide the basis for LNG import, storage and regasification facilities to be put in place that can be available for use by other parties for LNG import and gas utilisation development. Therefore, Third Party Access will be a fundamental aspect of the LNG to Power IPP Programme. This will enable the development of gas demand by third parties and the associated economic development.

The scope of the projects for each port will include:

      •     LNG procurement and delivery;

      •     LNG storage and regasification facilities via a FSRU (or equivalent LNG regasification and storage technology);

      •     Port infrastructure, including fixed maritime structures and modifications;

      •     Gas transmission pipelines to connect the FSRU (or equivalent LNG regasification and storage technology) with the new power generation facility;

      •     LNG and or gas distribution hub(s) for third party off take;

      •     Power plant, including the high voltage connection to the electrical grid; and

      •     Arrangements for independent delivery of LNG, and the sale of a modest percentage of gas and LNG to external users. 

BACKGROUND

South Africa has the possibility of introducing a variety of sources of natural gas which could be economically available within a 25 year planning horizon to 2040. Sources could include extensive expansion in natural gas from shale gas, production from deep-water offshore fields and development of a regional natural gas pipeline network. Indigenous and regional gas can play a critical role in growing the economy of the country and the region.

The realisation of the potential natural gas reserves within the SADC region, and especially the potential held within South Africa for indigenous gas, represents a significant opportunity to boost economic growth, employment and investment. In addition to providing strategic security of supply for electricity generation, the development of these gas reserves will provide significant investment opportunities in South Africa and the region in economic infrastructure and new energy opportunities for industrial, commercial and residential applications and fuel switching.

Natural gas is capable of providing more than just electrical power, it will also provide direct heat and chemical feedstock for industrial processes, commercial and residential cooking and heating applications as well as an alternative fuel source for transport.

A number of national policy documents, including the White Paper on the Energy Policy of South Africa approved in 1998; the National Development Plan (“NDP”); the draft Integrated Energy Plan; and the Integrated Resources Plan 2010–2030 present the case for natural gas as a significant contributor to South Africa's energy mix.

The NDP identifies natural gas as a viable alternative to coal. The NDP provides as one of the infrastructure priorities, the construction of infrastructure to import LNG and increasing exploration to find domestic gas feedstock.

In support of the vision for the South African gas programme, the Department is developing an LNG to Power IPP Procurement Programme. This programme will serve as an anchor for the gas infrastructure required for the establishment of a gas market in South Africa. The introduction of gas into the South African economy will lower the country’s carbon emissions not just from the electricity generation but also from the energy sector as a whole, including the transport sector. The LNG to Power IPP Procurement Programme will be conducted within the context of the wider objective of stimulating the exploration for, and production of, indigenous gas; the encouragement of imports from adjacent sources within the SADC region; and the development of gas utilisation in industrial, commercial, transportation and residential sectors.

ENDS