UNCTUOUS TO A FAULT

UNCTUOUS is the only way to describe the statement put out by the newly-elected chairperson (sic) of the South African Petroleum Association, Engen chief executive, Rashid Yusof. Oozing political correctness, Mr Yusof felt compelled to say he would "continue the process of building strong relations between the industry and government that had been established by … previous Sapia chairpersons", (Oh, yeah?) and to note, fatuously, that "his appointment came at a time when the industry was being challenged to meet the rapidly growing demand for petroleum products" ( you don't say!). He went on to assure "fuel users" (did he mean petrol sniffers?) that "steps were being taken to ensure that the industry will be able to meet the growth in demand” (Oh, a new Engen refinery, perhaps?). There was also the inevitable bow towards "transformation targets" and finally this beauty: "We want to contribute to creating jobs and thus overcoming (sic) poverty." Don't you just love this self importanceand lousy grammar? Mr Yusuf should know that the South African crude-based oil industry employs very few people. Those it does employ are the skilled. Pump jockeys are actually employed by service station operators, not oil companies like Engen. Remove the regulations that ban self-service at petrol stations and attendants would vanish overnight. As for overcoming poverty, what tripe!

Could PetroSA run a brewery, perhaps?

THE State-owned petroleum, oil and gas company, PetroSA, has been making urgent repairs to its underwater gas pipeline, meanwhile operating at only half its capacity. This is not a crisis since PetroSA at full production only supplies 7% of South Africa's liquid fuel needs and, as PetroSA has assured us; discussions were taking place with the oil industry to ensure that any shortfall was addressed. Translate this a bit and you notice that the PetroSA shortfall will be addressed by Chevron, BP and Shell -- the very oil companies that advised the Government, back in the days when Mossgas was conceived, that the project was woefully uneconomic, would run out of feedstock quite soon, and it would be far better to offer tax breaks to build a brand-new conventional crude oil refinery in Richards Bay. If that advice had been heeded, the South African economy would not now be facing an uphill battle to supply its liquid fuels needs.

Mobil's exit from SA comes home to roost

THOSE who can remember the withdrawal from the South African market of Mobil Oil, thanks to the pressures of the Reverend Sullivan and the various world anti-apartheid groups, may be permitted a wry smile at the latest news from Mobil's successor in South Africa -- Engen, the company still described by our ill-informed press as an "oil giant".

The news is that the Engen Refinery is down (again) but not to worry, "it should not have a significant impact on the country's fuel supply," according to Herb Payne, Engen's spokesperson/man. Spigot's cynicism (and wry smile) is due to the fact that the Engen Refinery, South Africa's oldest, is well known in the oil industry as being held together with string.

When Mobil retired from the SA market in the 1980s, the decision was hailed as an example of ethical business behaviour (refusing to any longer collaborate with the apartheid regime etc). In fact it was a neat excuse for Mobil to abandon a refinery and infrastructure that was fast reaching its sell-by date. What South Africa was lumbered with is an old refinery that was-- and still is -- in need of massive investment.

Needless to say, neither Engen nor Petronas who were the new owners, have made the cash injection needed, hence, the refinery totters from one crisis to the next.

The moral of the story? Chase out multinational oil companies at your peril. By way of contrast, Shell and BP, who jointly own the Sapref refinery down the road from Engen, have kept their refinery in tip-top condition, their latest investment being R700 million to make Sapref entirely lead-free.

Do BP and Shell get any thanks? What was that? I didn't hear you.

BACK TO YOUR ROOTS?

THE TIMES of London reports that BP and Royal Dutch Shell are talking about merging to create a £250 billion company larger than Exxon. "The City is awash with talk that Britain’s two largest oil companies have engaged financial advisors to discuss terms for a so-called friendly merger that could result in £2.5 billion of cost savings for the enlarged group." Around the clock negotiations are in progress. The combined entity would produce 70% more oil and gas than ExxonMobil. If this is true, it would return the two companies to the relationship they shared prior to 1974 when BP specialized in exploration and production and Shell provided the bulk of the marketing expertise.. Closer to home, there were BP/Shell joint ventures in South Africa, Kenya, Zimbabwe, some of which still exist (Zimbabwe and the Sapref refinery south of Durban). The savings of such a merger in South Africa would be considerable. The two companies already share some depots and joining the two retail operations would give them nearly 30 per event of the liquid fuels market. There would also be considerable savings in the inevitable cuts in existing marketing staff numbers.

Small business pie-in-the-sky

AN enduring myth, among many surrounding the oil industry, is that it is a huge, filthy rich and a golden opportunity for small-to-micro enterprises, particularly those owned by the previously disadvantaged.

This myth has now spawned yet another conference, this time hosted by the Durban Chamber of Commerce and Industry, the Sapref crude oil refinery and the eThekwini Municipality. Aching to be politically correct, desperate to curry (pardon the pun) favour with the Durban Municipality and all "stakeholders", as the saying goes, this conference aims to "to assist historically disadvantaged South Africans and small and micro enterprises (SMEs) (micro being enterprises that employ less than 50 persons) to access business opportunities within the municipality and the petro-chemical industry ( Spigot's italics).

Oh boy!While one appreciates that all this is due to the "The Liquid Fuels Charter and the Broad-Based Black Economic Empowerment Act, it is an absurd con trick to pretend that SMEs can ever make much of an impact on the procurement budget of the petro-chemical industry.

SMEs might be able to supply some stationery, cleaning and gardening services ( Sapref could certainly improve its gardens) pest control, monkey eradication programmes, catering and some deliveries.

The really big stuff like crude supplies, engineering services, plant maintenance, pipeline installation, and welding services are quite beyond an SME staffed with previously unemployed and unskilled HDSAs.

Spigot suspects this is all smokescreen for those HDSAs who might, just might, be able to get the financial backing to pay for a VLCC load of crude oil -- of say 300 000 tonnes -- which Sapref needs every couple of weeks, assuming they also have somewhere to store the stuff until Sapref was ready to process it.

Arm-wrestling civil servants contest?

WHAT is the catch? And why the delay? Transnet, which is State owned, approved R3 billion for a multi-product pipeline between Durban and Gauteng. Petronet, a Transnet subsidiary, is ready to do the job which will help send petrol, diesel and jet fuel from the coast to Gauteng a damn sight more safely than the caravans of road tankers being used at the moment, but the whole project seems to be bogged down. Why? Delays cost money. Our money to be precise. Anything owned by the State is actually owned by all of us taxpayers, as Spigot never tires of reminding anyone who will listen. And guess what? The price of the pipeline is now reported as R9.5 billion -- OK it will be double the originally envisioned size, but still. The catch is that Petronet wants a 5.6 percent rise in pipeline tariffs to make the whole thing viable -- a request turned down by the National Energy Regulator ( gee, another State organisation) citing a lack of information -- a reason it took two months to convey to Petronet, by the way. Petronet says without an increase in tarrifs, the new pipeline is a non-starter. Ahem, for this thing to be ready by 2010 work must start next year at the latest.... This is no time for tea breaks in the civil service. No time for huffy civil service committee to get in the way. It is time for united and concerted action by all State-owned entities, not turf wars between the Department of Trade and Industry, the Department of Minerals and Energy, the National Energy Regulator or anyone else. To serve the national interest, civil servants should do just that, be civil and serve -- and get out of the way.

KNOCK, KNOK, lawful extortion

HOW's this for a neat example of governmental extortion? The Kenyan Government managed to insinuate itself into the sale, by BP, of its assets to Shell Kenya (a perfectly normal willing buyer/willing seller situation) by only approving the sale if Shell gave a tenth of its 130 petrol stations in Kenya to the State-owned National Oil Corporation of Kenya.(KNOK) Finance minister Amos Kimunya initially blocked the deal, citing a "possible" breach of monopoly and competition rules, only to approve it a few months later. Neat bit of extortion, says Spigot. And all done "perfectly legally". Shell must be mad to give into extortion like this. BP should be embarrassed too. Wait till the word travels round the continent that both companies are soft targets, if it hasn't done so already. Next thing could be Mad Bob demanding his cut in Zimbabwe. .

The Gadarene rush to bio-fuels

THE rush for bio-fuels is causing massive environmental damage and must be halted. Whole ecosystems are being destroyed and hundreds of thousands of people are being thrown off their land to make way for the crops needed to make bio-fuel. This is not Spigot talking but a British charity with impeccable green credentials. It goes on to say that some bio-fuels are as damaging as traditional fuels and there is hardly any saving on carbon emissions. The rush to bio-fuels is causing enormous environmental and social damage, "The numbers involved are mind-boggling. The Indian government is talking of planting 14 million hectares of land with jatropha. "The Inter-American Development Bank says that Brazil has 120 million hectares that could be cultivated with agro-fuel crops; and an agro-fuel lobby is speaking of 379 million hectares being available in 15 African countries. We are talking about expropriation on an unprecedented scale." In Latin America, Asia and Africa, the report claims, the push for agro-fuels is leading to the reintroduction of the old colonial plantation system at the expense of indigenous farming systems and local communities. The growing clamour for bio-fuels has led to a fall in the amount of grain being grown and a consequent rise in prices which has hit the poorest the hardest. South Africa's crazy scheme to produce bio-fuels in the former homelands should take note.

King Canute lives

A little noted fact about President Bob Mugabe of Zimbabwe is that he has had himself anointed as a Shona king, thus joining that elite group of men who believe power makes them Gods -- England's King Canute among them. Canute, it will be recalled, once had himself plonked down at low tide on a beach to demonstrate that he could stop the tide from coming in. Needless to say, he failed. Our Bob, at the weekend attempted a similar trick: He ordered all prices to be cut and then promptly arrested businessmen who failed to obey -- this from an educated man with four degrees. The best example of the inevitable result of this economic lunacy was that when petrol prices were ordered to be reduced by 70 percent, service stations quickly ran dry. It all goes to show that politicians and bureaucrats should be kept well away from the private sector. Anyone in the Department of Minerals and Energy listening?

National oil companies are not so cool

AS The Economist noted last year, the international oil companies like Shell, BP, Chevron and Exxon are small next to the industry's true giants: the national oil companies (NOCs) owned or controlled by the governments of oil-rich countries, which manage over 90% of the world's oil.. Of the 20 biggest oil firms, in terms of reserves of oil and gas, 16 are NOCs. Saudi Aramco, the biggest, has more than ten times the reserves that Exxon does and could keep the world supplied for several decades. But it is only exploiting ten of its 80 or so fields so could pump at the present rate for about 70 years even if it never discovers another drop of oil. Aramco and other NOCs could find more oil if they looked. Only 2,000 wildcat wells have ever been sunk in the Arabian Gulf region compared with more than one million wells in the United States. The worry is not the amount of oil at state oil companies' disposal. It's how they manage it. Politicians meddle and that leads to inefficiencies: overstaffing, underinvestment and so on. In short National Oil companies produce less oil and more expensively. So, how come South Africa is rushing to exert even more control over the local oil industry? Rather than learning from the boondoggle that was the origin of Sasol and Mossgas, our new rulers seem intent on making the same mistake. The flavour of the month seems to be bio-fuels. Next it will be the new refinery the country needs. It all adds up to more bureaucracy and more inefficiency, with the poor bloody taxpayer and motorist at the receiving end, again. As it is, the price of petrol could fall by 30 per cent tomorrow, if the Government wanted to cease milking the petrol pumps for levies and taxes. No chance of that, alas. The much-maligned oil companies are still the best, most honest and most regular tax gatherers, in the world.

More Bio-fuel sense

TRUST technology, not the Sandalistas.

From California comes the news that it is possible to make bio-fuels without using food crops or microbial fermentation. The University of California and West Bio-fuels LLC, is developing a prototype reactor that will use steam, sand and catalysts to convert forest, urban, and agricultural wastes that would otherwise go to landfills into alcohol that can be used as a petrol additive.

The alcohol now being added to petrol in California comes from maize, sugar cane, beet, or other farm crops and 95 percent of the alcohol comes from outside of California. The new process will use a thermo-chemical process to break down shredded cellulose wastes into a mixed alcohol, predominately ethanol.

The prototype reactor will mix the wastes with high temperature sand in a reaction chamber while the mixture is heated with steam. This generates an energy-rich combination of hydrogen (H2), carbon monoxide (CO), methane (CH4), and carbon dioxide (CO2) which will be "reformed" into alcohols.

About 30 percent of the energy content of the starting material will be burned to supply the energy needed to operate the plant.

The research team includes nine professors and seven post-doctoral fellows.

Orange County, California produces about 30,000 tons of urban green wastes per day, which is simply dumped at landfills and used as compost. This could generate 3 million gallons per day of mixed-alcohol fuel.

This will allow Californians to continue using internal combustion engines, reduce dependence on fossil fuels, and reduce the production of greenhouse gases.

A green dream, no less.

And a damn sight better one than the South African bio-fuels plan one which, Spigot predicts, will turn into a nightmare.

DANCING DOWN THE YELLOW BRICK ROAD

WELL, here we go again. As predicted by Spigot, the new bio-fuels gravy train is set to roll. Today's newspapers received the first largess in the form of quarter page adverts placed by the Department of Minerals and Energy which call for, wait for it, "Expressions of interest in subsidies for renewable energy projects in South Africa."

Oh boy! What a lot of lovely taxpayer lolly is being put up for grabs. How much, exactly, the DME is rather coy about, the only hint being the small revelation that " Project developers are … encouraged to submit their Expression of Interest as early as possible to facilitate interaction with the DME and to be eligible for support while funds are available."

Read the advertisement and weep, all you taxpayers. For along with this goes a brand-new outfit called the Renewable Energy Finance and Subsidy Office.

Was there ever a boondoggle so aptly named?

If bio-diesel and bio-ethanol are such great ideas, why the hell do they need subsidies? Or "interaction" with the DME?

Sasol was a money pit for the old regime. Mark Spigot's words; this is a new money pit for the new one.