Biofuels to power Eastern Cape?

Hum. Reading a gushing piece about how bio-fuels were going to bring peace light and prosperity to the Eastern Cape, I was reminded of the infamous groundnut scheme that soaked up thousands of pounds of British taxpayers' money in the then Tanganyika, just after the end of the Second World War.

Briefly: It was typical back-of-the-cigarette-box bit of economics. Britain at the time still had an empire. Tanganyika was part of it and lots of land was available to the imperial power which had just fought the war and damn near starved to death to win it. Then some bright spark in the British civil service thought," why not grow peanuts, and make peanut butter to feed the British masses? Plenty of space in Tanganyika, plenty of bulldozers left over from the war. The idea went up the line to the newly elected Labour Government and immediately got the nod. Off they went. Thousands of acres were ploughed up and planted. The socialist planners sat back to await the harvest bonanza. Then, oops, our clever Pom knew nothing of drought. Africa struck back and the crop was ruined. No doubt the civil servant was promoted. Now back to the Eastern Cape. Read on and weep. "South Africa is moving to establish a bio-fuels industry that could create thousands of jobs and draw billions of rands in investment in the Eastern Cape, a part of the country that is rich in under-used, high-potential arable land. Felix Hobson, senior manager of the Eastern Cape government's agriculture resource planning and management division, said this week that the government had set aside R9.5-million for fencing land and planting canola and R8-million for planting sugar beet in the N2 Mbhashe local municipality to kick-start the project. Developing a bio fuels industry is part of a new agrarian transformation plan for the province and one of the Eastern Cape's priority projects under the Accelerated and Shared Growth Initiative for South Africa (Asgi-SA), a government strategy to boost economic growth and reduce unemployment in the country. "The bio fuel project is envisaged to be a major Asgi-SA project in the Eastern Cape," Hobson said, adding that it would create "a huge market for agricultural products including canola, Soya beans and sunflower which was not there before." This would be achieved through establishing 500 000 hectares of currently under-used land for integrated rotational cropping within the next five years, Hobson said. The crops would be used to feed a planned 200 000 ton-per-annum bio diesel plant in the East London Industrial Development Zone, as well as other biofuel and agro-processing initiatives. European investors have reportedly expressed interested in developing the East London plant. "This intervention will require an investment by government of R1.5-billion that will secure a simultaneous R3.82-billion foreign direct investment and a R7-billion investment from local financial institutions," Hobson said. According to Hobson, the initiative would create around 23 000 new jobs and a sustainable R2.9-billion a year in agricultural production and processing in the province". I suggest the following words to be eaten at a later date: Billions of rands in investment in the Eastern Cape, A new agrarian transformation plan for the province, A planned 200 000 ton per annum diesel plant, European investors have reportedly expressed interest, A R7 billion investment from local financial institutions. (See Dancing down the yellow brick road)

More on the bio-fuels boondoggle

MORE pie in the sky on bio-fuels. It is reported that factories to convert maize or sugar into ethanol or Soya and sunflower into diesel will cost R1billion each. Guess where the money is to come from? You are right! The poor bloody taxpayer.

It is certainly not going to be anyone else's money -- unless a wave of madness overtakes the business community.

The public are likely to have to cough up in the end because the whole thing is a political idea -- back-of-cigarette- box economics rampant. To grow bio-fuels; to manufacture bio-fuels, you will need a licence. Why? If it is such a sure thing, why not let the market get on with it? Left to themselves, businessmen might put bio-fuels plants near farmers who grow maize/sugar/Soya or sunflowers who produce it most cheaply. Can't have that, now, can we?

Nope. All this maize, Soya, beet or whatever will be grown, by government decree, on two million hectares of under-utilised land in the former homelands -- in other words, where the agricultural skills and transport infrastructure are most lacking: where the roads are all crappy and all the men have bunked off to the mines because agriculture is women's' work.

This is the brilliant idea of the same department of agriculture that once proclaimed that everyone in South Africa should have equal access to land: forty million South Africans and about one million hectares to go round. I feel sorry for the poor suckers who get their 500 hectares in the middle of the Gariep Dam.

But bugger property rights, never mind our crumbling transport infrastructure, logistical efficiency and security of feedstock supply, this is a GOOD IDEA. Government is going to provide incentives -- the solution to the flaws in all such schemes -- incentives being the code word for more taxes. You can be damned sure that the incentives proposed will be too small or too big. Either way the man in the street is going to get screwed, just as he was when Sasol, Secunda and Mossgas were launched.

Does anyone out there remember what happened to the cotton industry and the tea growing industry when the IDC pulled out ? And when mandatory purchases of these products were stopped? . Nothing happened. They are dead. Government is already talking up the idea of a 15-year subsidy to a bio-fuels industry. What goes around comes around.

Running out of oil or is it more bollocks? IS the world really running out of crude oil or are we merely short of refining capacity? I think it is the latter. So do most oil company experts. Only last week 600 million barrels of oil were discovered offshore Ghana. They haven't started exploring off the Falklands Islands, or in the Arctic. I have always wondered if oil was the main reason for that funny little war against the Argentinians. We have been "running out of oil" for the last 100 years. I bet there is at least another 100 years' worth left. I know there is at least 40 years' worth already found. Perhaps in a century solar power will be an option instead of the Mickey Mouse technology it is now. As for windmills … Onward and back to the 12th century! 20 000 windmills to supply Paris, France, they say. Some solution! Back to South Africa, speaking of refinery capacity, if someone doesn't do something pretty damned quick, we are doomed to import all the additional fuel we need to sustain our economic growth. In fact, it is already too late. Funny how quick governments are to tax the oil industry but they never seem to have money of their own to actually build refineries. They expect oil companies to do it for love -- all the while calling them filthy capitalists (not to their faces, of course)

Oil industry's exorbitant profits SOUTH AFRICANS love to complain about oil industry profits. At any dinner party or in any public drinking hole the consensus will be that the oil companies make excessive profits. "All petrol is the same really. We are just paying more for all their advertising," says one knowledgeably, raising his glass of wine/beer/brandy. "It makes me sick every time I fill up," says another." I mean, it's now R6 or R7 a litre. Those oil companies are so greedy. Just think how much money they make and it's only because we have to buy it that they can get away with it." Blah, blah, blah. Fact is the price at the pump does not all go to the oil company. More than a third of the price is made up of levies and taxes that go directly to the Government. Another chunk goes to the service station operator who -- by the way -- is NOT an oil company employee but a small businessman who makes more money selling sweets and newspapers than he does selling fuel. Only some 30 cents a litre goes to the oil company than actually makes the stuff, stores it, and ships it to the service station so you can fill up Mom's taxi every week. It is a complicated, dangerous and expensive process. The truth is the general availability of petrol in South Africa is a daily miracle, considering that it is so cheap, so clean and pretty much the same price per litre whether you buy it in Agenys or Cape Town. But that is another story.

BP, ABF and DuPont to build bio-fuel plant Hello eco-warriors, have anyone of you noticed that two nasty capitalist oil companies are to spend US$400 million on a bio-fuel plant in Britain? The one is BP and the other is a minor player called Marathon Oil Corporation of Houston in the United States. So far no other oil companies have gone this far towards making bio-fuels and it proves, once again, what Spigot has been saying; that technology is not the enemy, it is the solution ( that is, if one believes that we are in imminent danger of running out of oil). Notice, no oil companies are rushing into windmill production, which is like heading back to the 13th century. While on the subject of windmills, Spigot confidently predicts that in 20 years these ghastly machines that defile the European and American landscape will be torn down and consigned to the rubbish heap where they belong. God knows how many birds they have already killed. Some green solution, I don't think.

Drako Oil and Energy Corp claim

"Well advanced" is the way Drako Oil and Energy Corporation describes its efforts to get a new refinery in Richards Bay off the ground.

The spokesman might well have added, "Old boy" just to make it all the more re-assuring. It seems all too good to be true. The environmental impact assessment, due in the middle of July, should be interesting. The site for this "state of the art" refinery will potentially impact on wetland, a fresh water lake, indigenous forest and a rural community, all of which usually gets the green lobby up in arms.

More worrying to Spigot is that the people planning to build this refinery do not seem to have any experience of doing so. They talk the talk all right, but what other refineries have they built and where are they exactly? The same confident Drako spokesman was reported in the Zululand Observer as claiming that Drako Oil had partners with experience. Really? Surely not the 25% black economic empowerment shareholders they have been so swift to claim.

Could it be the other major partner Drako boasts of --Global Eagle Minerals? Maybe, but Spigot failed to find their website, if they have one and from their name it would seem mining is their game, not petroleum.

Could we be looking at another example of the common perception, not limited to the man in the street, that the oil refining business is as simple as selling beans? Could it be that Drako Oil shareholders suffer under this common delusion? Could it be that they are so well connected that they have convinced the Department of Minerals and Energy, not to give a permit for a new Durban to Johannesburg oil/ fuels pipeline to Transnet?

Every time Drako makes an upbeat announcement, it manages to slip in a reference to how US6 billion is earmarked for a new Richards Bay-to-Reef refined products pipeline.

If all this hype is true, it will be good news for South Africa. If Drako and Co really do know what they are doing, it will be. If they don't, cynical Spigot sees another publicly-funded money trough opening up. If Drako has the huge sums of money it claims it has, Spigot will swallow this blog.

And can someone please comment on what is happening to the pipeline from Maputo to Nelspruit that was trumpeted some time ago?

Jatropha

THE latter-day Luddites who make up the bulk of the eco-fascists always jeer at the idea that human ingenuity and modern technology will provide an answer to the world's so-called energy crisis ( so-called because it is complete tosh that we are in imminent danger of running out of crude oil).

For former Marxists they betray a singular lack of history knowledge. They also betray a particular conservate mindset. Take windmills, which they are so fond of. Windmills were high tech in the 13th century, for heaven's sake.

Technology in the form of the petrol engine saved modern cities from drowning in horse manure. And technology will "save" us again.

To the rescue this time is a nasty old oil company -- BP -- which has just announced that it is funding a US$9.4 million project in India to demonstrate the feasibility of producing bio-diesel from jatropha curcas.

For those who don't know,this is a plant that grows on marginal land, not used for growing food, whose seeds, when crushed produce natural diesel oil.

Now that is a damn sight better idea than attempting to make small farmers of the disgruntled unemployed who reluctantly still scratch a living in the Transkei.

Another great BP idea comes from Australia where they already make 110 million litres of bio-diesel every year using tallow as a feedstock. For the uninitiated, tallow is mutton fat rendered down. It used to be used to make candles long ago.

Is the DME listening I wonder?

South African fuel imports may hit 1bn litres

NICE TO see South African oil executives venturing out of their shells into the public domain. Years of secretive backroom "relationships" with the powers-that-be have got them absolutely nowhere in breaking down the Gordian Knot of misperceptions and fairy tales surrounding their industry.

Recently we saw BP's Communications Manager writing some sense in Business Day and then the big boss of BP in South Africa, Sipho Maseko, made sensible public statements about the state of the industry.

Now another oil executive has hit the papers with some home truths our leaders should notice. Shane Seechoonparsad, planning manager at Total South Africa, pointed out that South Africa might have to import 1 billion litres of motor fuel this year, most of which would be diesel.

One wonders if the Department of Minerals and Energy knows what that means and whether it has joined the dots between Shane's statement and the shortage of diesel Cape Town experienced last week.

So let's spell it out: In Cape Town, one off-spec import of diesel meant the Mother City's motorists couldn't get diesel for a week or so. One ship. Just one. Once the word gets out that South Africa HAS to import diesel, every sharp trader will be angling to offload off spec diesel onto us. Only the efficiency of Chevron saved us this time. Keep it up chaps, you deserve a medal.

Listen carefully, we are not running out ANYONE old enough to remember reading newspapers in the 1920s (damn few) may recall stories about the world running out of petroleum by the 1940s. Of course, what happened was that Kuwait and Saudi Arabia came on stream -- but that is another story. It does illustrate the point Spigot likes to make at every opportunity which is: the sky is not falling in, Chicken Licken. Recent case in point: the announcement that BP will invest a mere 125 million pounds Sterling in new gas facilities offshore the United Kingdom which will increase the recoverable reserves of gas. That means Chicken Licken that all the calculations about reserves of just this one hydrocarbon will now have to revise upwards. Once again, technology and know how plus human ingenuity to the rescue. Oh, and market forces, of course. Sorry, Chicken old bean. Wrong again

Gas supply back on track Well, well, gas supplies in the Western Cape are back on track, it is reported today in the Cape Times. This time the report had nothing to say about Chevron "having to explain itself to consumers", which was what the original report on the shortage gleefully contained. Significantly, today's piece had no praise for the Chevron refinery workers for getting things back to normal so quickly as they promised they would. But then Oil Company bashing is so much easier than informed reporting.

Owning a service station is a licence to print money (Not). AN enduring myth in Africa is that owning a service station selling petrol is a licence to print money. Everyone needs petrol. Sells itself, dunnit? OK, petrol does sell itself, but it doesn't automatically mean the service station owner gets rich -- even if he is lucky enough to have super site with a throughput of millions of litres a month. Selling petrol is not like selling beans. It's a dangerous flammable product. Run a poor service station and water gets into your tanks. This irritates car owners who will no longer patronise your site. Running a service station well isn't easy. It's a 24/7 operation. Forget annual holidays. So, why this Blog posting? Residents Greyton in the Western Cape are irate because their local service station no longer sells fuel -- the owner is having financial problems. The poor dears have to drive to Caledon 40 kilometres away to fill up and -- oh dear again-- it is ruining the tourist trade. Wake up Joe Public. Access to petrol is not a right. Making and selling petrol is a business. And it is not an easy one. Garage owners usually make more money selling chips and Coke drinks than they do out of selling fuel. These days it also costs thousands to fill up underground tanks. Cash flow problems mean no stock, just like in any other business. Not that I am going soft on service station operators, especially the ones who " run" poorly- sited, poorly maintained ones in places where no y business reason exists for their continued existence. They are the ones who scream loudest for Government intervention to restore them to the profits they mistakenly believe are their right. Worse, they are behind the Government's determination to license everything in the oil industry.

Food not for fuels THOSE Sandalistas who think bio-fuels will save the planet should take note of the Chinese decision this week to ban the use of food crops as a base material. With a bit of luck, the Chinese decision will hasten the use of non-food crops which -- if we persist in thinking bio-fuels are the answer to world tension --will also be a saner way to go in South Africa, rather than the existing crazy schemes which look like a recipe for disaster.

Chevron refinery saves water in Cape Town

JUST a small item of interest to those who think oil refineries are the work of the Devil: the Chevron Refinery outside Cape Town -- the one the media loves to hate -- has installed a new water recycling facility that produces enough water for the refinery to operate. It thus saves the equivalent of the water use of 6,000 homes, every month. Next time there is a summer drought in Cape Town and we all have to stop washing our own cars or watering our lawns, but still have water in our taps, we should remember this fact.

Strong-arm tactics down at the old (Sasol) tank farm?

We need a new refinery – and soon. Everyone agrees that it should be built. But where, how, by whom and who should pay for it?

Minerals and Energy Minister Sonjica has announced that business (read oil companies) and government were planning to do just this. Sasol has said that they were “considering “assisting the government. But “considering” is not the same as actually “assisting” or “being involved”. This was Sasol’s shot across the bows of the Department of Minerals and Energy and the resulting furious talks behind the scenes saw Sasol doing a little arm twisting. First, the issue of windfall taxes fell off the radar; then the issue of Sasol’s debt to the nation kind of went away as well. (Remember that Sasol it was subsidised by you and me for at least 25 years).

And, surprise, surprise, with all that nasty stuff out of the way, Sasol announced proudly that it was now in full development mode for a new gas-to-liquid and/or coal-to-liquid refinery and was scouting areas such as the coal-rich but ecologically sensitive Waterberg region for possible sites.

Richard Nixon was reputed to have said “when you have them by the balls their hearts and minds will follow”. What did Sasol do to Madame the Minister?

Sasol "expects" earnings to increase

THIS was the headline above a Reuters story in today's Cape Times, the irony expressed in Spigot's inserted quotation marks, the original sub-editor no doubt blissfully unaware of what lies behind this smug announcement. Sasol exists in its highly profitable present privatised form courtesy of the South African taxpayer who for years subsidised Sasol when it was unable to compete with conventional oil companies.

Has Sasol ever paid the exchequer back for all the cash it was loaned? Not bloody likely. Of course Sasol "expects" earnings to increase. It can hardly do otherwise. Straddling the bulk of our economy, trumpeting its patriotic contribution to the economy at every opportunity, Sasol's smugness truly epitomises big capitalism -- far more than the subsidiaries of crude oil manufacturers and marketers like Shell, BP and Chevron. Take a gander at the art works that adorn the walls of Sasol's headquarters. Better still; take a wander through the corporate underground car park where Sasol managers park their perks. There you will see the evidence of a corporation awash with cash. This is the same corporation that began life as a small parastatal in the Frees State, struggling to make fuel from coal, using a technique first established by the Nazis. It is also the same corporation that injects its fuels with MMT, a manganese-based additive that is a known neurological poison -- because its much-vaunted manufacturing method cannot produce high octane fuels without it.

Building new oil pipelines

THERE are already oil pipelines between Durban and Gauteng. This is just as well considering that there are barely enough road and rail tankers to ferry the stuff we need up there. As it is every 11 minutes a road tanker sets off from Durban to the Reef. Everyone agrees we need a new pipeline and pretty damn soon -- especially because of the upcoming World Cup Soccer 2010 Tournament. Who will build it?

Three choices:

• The international oil companies (Shell, BP, Chevron, Total);
• Petronet (the semi- state company that runs the existing pipelines); or
• A completely new lot with no experience of pipelines but with the supreme advantage of skin colour or historical disadvantage. That is to say, they may have an inside track on actually getting a licence before anyone else does.

Option one is a non-starter. None of the oil companies are going to sink R8 billion in a new pipeline unless they were certain of getting their money back, and making a profit. This isn't likely with the government seemingly intent on licensing everything in the oil industry and re-writing the fuel regulations whenever they feel like it.

Option three probably has all the betting. But, think about it. Even Historically Disadvantaged South Africans are going to need the permission of all the landowners on the route between Durban and Gauteng. Permissions mean legal servitudes and we all know how long lawyers take. So, option three looks like a no hoper -- at least in time for 2010. That leaves Petronet. They have the knowledge. They have the experience. Most of all they have the land, and they can move fast. Big question: Will sanity prevail? Will Petronet get the licence? Let's hope so. Where might the money come from? Easy. From the subsidy on pipeline charges that Sasol and Total have been enjoying all these years.