Gas deal may cut Eskom’s R1bn bill

Suspect pours petrol over girlfriend.

Suspect pours petrol over girlfriend.

Australian-listed Sunbird Energy yesterday concluded a preliminary agreement to supply gas to Eskom that may lower the diesel bill that is currently a huge burden on the utility and its customers.

Financial close is expected within the current calender year and first gas is expected to be supplied in 2018. The project entails the supply of 30 billion cubic feet (Bcf) of gas from the Ibhubesi gas field 70km offshore South Africa’s West Coast to Eskom’s Ankerlig open-cycle gas turbine (OCGT) situated at Atlantis near Cape Town for 15 years.

Ibhubesi is a joint venture between Sunbird (76%) and PetroSA (24%).

Speaking in Johannesburg, Sunbird executive chairman Kerwin Rana said the project will lay a foundation for the development of an integrated gas economy on South Africa’s West Coast with significant job creation.

Ibhubesi forms part of the Orange which Basin has a prospective 22.5 trillion cubic feet (Tcf) of gas. One Tcf can fuel 1 000MW combined cycle gas turbine for about 20 years and provide power to a city of one million people for the same period, Rana said.

About R1.2 billion has been invested in Ibhubesi for exploration since 2000, Rana said. Overall further investment is estimated at between R15 billion and R20 billion and includes a 400km pipeline, an offshore gas platform, production wells to be drilled and an onshore gas processing facility.

The pipeline is planned between Ibhubesi and Atlantis, with a possible line into Saldanha to serve independent power producers and prospective industrial customers.

Funding still has to be finalised. Rana said Sunbird would be looking for partnerships with regard to the pipeline, further exploration and the commercialisation of the project. “With a binding gas supply agreement this is a very bankable project,” he said.

The environmental approval of the gas field has been granted and it has a gas production licence for 25 years, following a market development right that has just been extended to 2017. The environmental approval for the pipeline and gas platform is expected during this calendar year, Rana said.

The supply during the first phase of the project will be enough to run five out of the nine units at the 1 300MW Ankerlig. In the second phase it may be more and the price may drop, as the infrastructure will be paid for during the first phase, he said.

Rana could not give an indication of the cost reduction the conversion to gas will hold for Eskom, but he said it will be cheaper than buying diesel. Eskom has said it is paying more than R1 billion per month for diesel to keep the country’s lights on by running its Ankerlig and Gourikwa plants for up to 12 hours per day.

It exceeded its diesel budget in the current and previous financial year and was granted permission by national energy regulator Nersa to continue with the over-expenditure until the end of the current financial year. This is expected to be recovered from consumers through later tariff increases.

Rana said the aspiration is to set a rand-denominated tariff, but that will depend on whether funding can be found locally and the purchase of components from overseas.




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