Reading between the lines

ONE of those typically-boring press releases,extolling the virtues of a new plant, hit the media this week and, as usual, what was unsaid was much more interesting than what was. It was all about BP's "integrated safety, security and environment policies" and how they affect the company's warehousing and transport infrastructure (yawn). Quoted voluminously was Allister Kay, described as "LSC Africa logistics manager" (what, precisely LSC stands for, we were left to guess -- such is the oil industry's love of mysterious acronyms). Spigot wonders if BP controls the public utterings of its staff these days. Reading between the lines it emerged that Unitrans has been "identified" in presumably the words of Mr Kay, as a " single countrywide service provider with a mindset, outlook and culture similar to our own." Dear heaven, does he really speak like this to his mates? Spigot wonders if the trade union that recently took out BP drivers on strike will have noticed what this means for the long-term prospects (as permanent BP staffers) of its members.

Some pipeline posers

NOW here's a thing: The Petroline consortium, which plans to build a pipeline from Matola in Mocambique to Nelspruit in South Africa, applies for "permission" from the National Energy Regulator (Nersa) and gets it -- despite the Department of Minerals and Energy objecting. So, Petroline goes ahead, confident that it will begin building by the middle of next year (2008). Meanwhile, the iPayipi Consortium applies for a licence from Nersa to build a (different) pipeline from Durban to the Reef, confident that it, too, will get a licence. Then the Cabinet steps in and says Transnet Pipelines can build a new line from Durban to the Reef (ignoring Nersa's role in the process) and the DME says, in effect, "tough luck to iPayipi". But, hang on, what if iPayipi does get a licence from Nersa? Will the Cabinet step in to stop it, as the initial DME reaction seemed to infer? Will an iPayipi pipeline be viable if there is already an expanded Transnet pipeline in place between Durban and the Reef? And what about this for a thought: Could it be that the Petroline project, being backed by black women (Women in Oil and Energy South Africa), has an inside track? Could the fact that iPayipi, despite its name, has a predominantly male South African Indian and South African white complexion, have scuppered its chances? Surely not. And, what if the Mocambican Government approves Petroline's plans and the South African Cabinet does not?

Isn't free speech wonderful

Spigot's musings on the LPG industry is eliciting some interesting responses. Here are some more: What is the margin on a kilogramme of gas? Spigot knows the refinery gate price is controlled. After that it is every man for himself, some even saying that the profit on a kilogramme is higher in South Africa than anywhere else.Others have alleged a cartel or some sort of monopoly is operating. Surely not? Mind you, Spigot finds an awful lot of sameness about the price, wherever you buy the stuff. No matter. But what is curious that in the bad old days refineries used to blow the stuff out the chimneys as a bit of a nuisance. They called in flaring -- a practice frowned upon these days, thanks to the Greenie obsession with carbon dioxide. Come to think of it, bottled gas only made an appearance on the South African market in the 1970s. It was then a rich man's thing, for looking cool on a camping trip. Now of course it is a different matter. The poor are being encouraged to use it instead of coal or wood. Leading the urging is Escom. Could LPG pricing be something Nersa (the National Energy Regulator should look into. Better that than messing about with pipelines.

LPG all bottled up?

IT seems that the barriers to entry in the LPG bottled gas market are so high that smaller, new entrants have a tough row to hoe. One well-informed reader has commented thus:"...why on earth would an investor approve companies that they own shares in to buy items worth zero value to them only to hide them and not receive a return on such items? The problem with the "smaller new entry gas companies" is that they enter the market with a few thousand cylinders and expect to cover the entire market with them and get them back immediately. Little do they realise that they would need to invest in 100 000's of cylinders in order to sufficiently supply a small market let alone a large one like Gauteng, Natal or any major province in which they operate. All of the gas companies operate in the neighbouring states, so there would be no reason to pay tax at the border to move these cylinders....who is going to pay for these cylinders to be transported so far...the trucks cost a fortune...why waste time doing that...if these smaller companies want to compete on equal footing they need to invest...."He makes some good points. Any smaller new entry gas company have any different views?

Enrichment fables

The Department of Minerals and Energy this week released a White Paper on nuclear energy development in South Africa where much is made of the potential for home-grown nuclear enrichment , thousands of jobs and a golden future for the development of more power plants. For those of you that may have missed the little spat between Iran and the rest of the world about nuclear enrichment, it goes something like this: Iran wants the bomb so that it can smite all unbelievers in its neighbourhood, so it starts enriching uranium. The mullahs, of course are using the same argument as the DME – they need energy for their people, not for bombs. The rest of the world is not that dumb. Knowing that the mullahs are not the most rational or stable of folks to have in your back yard, the rest of the world are determined to put a stop to this. And so there has been ever-increasing pressure on the mullahs to step back from the edge, leading to hard games of brinkmanship, rhetoric and political and financial ball-squeezing. For those that know what happened to North Korea, Iran is not going to be a pretty sight in another year or so. The signs are already visible on its streets and markets. Back to Sandile Noxina and Tseliso Maqnbela, these deep thinking doyens of the Dept. of Minerals and Energy. Of course there is nothing wrong with nuclear energy, but do the esteemed Directors-General have any idea of the shit-storm that is about to hit them when they try to enrich the uranium that will (under state control, we hope) provide 10 000 sustainable jobs? Do these gentlemen really think that the rest of the world will stand by and watch fissile material being produced on the leakiest and most corrupt continent in the world? Watch this space for some serious diplomatic fireworks over the next few weeks and months.

Consider the humble gas bottle (2)

SEEMS like Spigot struck a nerve here. LPG suppliers are not being so friendly to each other, right now. Apparently, the game is to buy competitor-bottled LPG cylinders and then send them out of the country, to Botswana. It reminds Spigot of a rumour in the industry years ago that, somewhere on a farm in Namibia ,there is a mountain of LPG bottles. Spigot used to believe that if it existed it was probably because a farmer in that vast land had figured that the cost of returning the bottles was too high to bother with. Now, he is not so sure. If this practice of attempting to destroy small operators is being done by the big LPG suppliers, then this is surely something the Competitions Board should look into?

DME, NERSA or THE CABINET: WHO'S SKINNING THE PIPELINE CAT?

THE egg dancing around the sensible Cabinet decision to give Petronet (Transnet Pipelines) the go ahead to build a larger petroleum product pipeline from Durban, is something to see. But first thing to notice is that the price of the proposed line has now jumped from R9.5 billion to R11.5 billion -- if ever there was a signal to pull finger, this is it. Meanwhile, no doubt anxious to mend fences with the National Energy Regulator, the Director General of the Department of Minerals and Energy, DG Sandile Nogxina, has gone on record saying that the Transnet Pipeline did not exempt the company from following normal regulatory procedure, nor did it preclude the prospect of competing private-sector pipeline projects, Presumably, that means the iPayipi Pipeline can continue to go ahead. ( If they do so, they must have more money than sense).: “In no way does Cabinet’s decision exempt Petronet from following procedures as stipulated in the Act,” and that the State would welcome competition in the sector, Nogxina said. Cabinet took a policy decision in the “interest of security of supply”, he stated. Ja, well. That is clear as mud. The public hearing on the iPayipi proposal will now go ahead ( if they are crazy) the Nersa bureaucrats can feel self-important again, and everything in the garden will be lovely.

Famous last words?

Grain South Africa says bio-fuel will not compromise food security."Obviously there is a concern currently on the price of food, we have a shortage this year, but that is primarily because of the very serious drought situation. This is typical of a one-in-15 years type of drought and we must not let it concern us too much," said John Purchase of Grain SA. But, with the ethanol plant in Bothaville at a standstill..?

Once upon a time

ONCE upon a time, after World War ll, in fact, with the world economy booming, the oil companies were exceedingly short of skills. So, being practical, they simply hired the ex soldiers who had gained valuable experience supplying the Allies. Brigadiers became managers; sergeants were put in charge of oil depots; quartermaster clerks manned the back offices. It all worked swimmingly well, for years in fact. You see, getting petroleum from A to B, safely, on time, is a bit of a military operation. Sixty years on, everyone seems to think it is as easy as selling beans or rice ( as Spigot never tires of saying). Common sense tells us that petrol is dangerous stuff. A little bit more knowledge tells that not all petrol is the same. Some is "on spec" as they say. Some is not. Use poor quality stuff and beware your engine's fuel system. The same applies to LPG ( liquid petroleum gas). To put it bluntly it is highly dangerous stuff. Handled badly and the resultant explosion ( known as a blevy) makes TNT look tame. We should all be very, very concerned about safety in the LPG industry.

Jatropha bandwagon, rolls on

A Ukrainian company is reported to have bought Mozambican firm Inveragro and 11,000 hectares of land in a deal worth US$ 1 million to plant jatropha, the wonder plant that grows like hell and produces beans that contain a substitute diesel oil. Situated on a former cotton plantation, the plan is to employ 480 people. First harvest is expected in December (my, that is quick), with oil extraction scheduled to begin at the end of 2008. How curious that cotton did not work too well. Maybe the magic bean will.

And now, a new refinery in Mocambique -- perhaps

Thanks to the general perception that getting into the sub Saharan oil industry is a "licence to print money" (as they used to say of the television industry) it seems that not a day goes by without someone announcing a new mega project. First it was pipelines, now it is refineries. This time, Mocambique has "approved" the construction of a US $ 1.3 million refinery in Nampula. Who will build it, where the money will come from (let alone the people to run it) is not yet known. Why so shy chaps, Spigot wonders? Does anyone recall that Mossgas had to import welders from South Korea? Anyway, this time the target is Malawi, Zambia and Zimbabwe (Huh?)

DME 1; iPayipi 0

WELL, WELL, WELL Spigot was right. Could it be that someone in the Department of Minerals and Energy (DME) was listening? Probably not. But, at least, common sense has prevailed. That is how Spigot sees the decision by the Cabinet to override the increasingly self-important National Energy Regulator by giving Petronet the go-ahead for the desperately-needed petroleum products pipeline from Durban to the Reef. Let's hope the hilariously-named iPayipi Consortium has the sense to retire from a field best left ( on this occasion) to the State, rather than to a bunch of amateurs with no experience and little to commend them, apart from their having an eye for the main chance. Readers of Spigot will recall him saying that the quickest, simplest solution to the acute petroleum logistics bottleneck facing the Reef, would be for Petronet to bolt on a new bigger pipeline. It will avoid costly legal wrangles around servitudes, for one thing -- a factor that iPayipi's licence application to Nersa spent a great deal of words avoiding. Spigot has to mention that had Sasol not done a deal with Petronet a decade or so ago, to use one of the petroleum pipelines to send gas down to Natal, subverting its original purpose of pushing petroleum products up to the Reef, we would not be in the bind we are in now. So, as Nhlanhla Gumede, deputy director general of the DME, so aptly put it when asked how this would affect iPayipi:"It didn't work. Tough luck." Shame really, but then, at least all those family trusts proposed by the directors of the consortium, have not yet been registered.

Consider the humble gas bottle

HAS anyone noticed how friendly LPG suppliers are to each other?You hand in an Afrox bottle and you get your pick of other branded bottles -- Easigas, BP Gas, and so on. Sensible system really. Gas bottles circulate merrily and everyone is happy that the gas is sold. It's a bit like buying Coke in a Pepsi bottle. It all works remarkable well, considering that one gas supplier (Afrox) has about three quarters of the LPG market in South Africa at the moment. It works well as long as everyone plays fair. But, there have been times when a neat little game is played by gas suppliers -- they buy competitor-bottled LPG and then hang onto the cylinders. Only the big players can do this of course, but it is usually enough to drive the smaller companies out of business. It's a bit like Coke discounting in targeted areas to stop small mineral water suppliers taking a slice of the market. That wouldn't be happening now, would it? To LP gas, I mean.