Cape Town-based liquefied petroleum gas (LPG) company Avedia Energy on Tuesday confirmed plans to build and manage an LPG import terminal and handling facility at the Port of Saldanha, on South Africa's West Coast.

Construction of the import terminal was due to start in July, with an expected infrastructure spend of R300-million over the next three years.

The facility would provide an overall storage capacity of 8 000 t, boosting the existing import LPG storage capacity in South Africa by at least 80%. 

This would be the first dedicated LPG import facility on a 4 300 km shoreline stretching from Luanda, in Angola, to Richards Bay, on the KwaZulu-Natal coast, and would be the only LPG import storage facility in the Western Cape.

Avedia’s first LPG storage tanks were due to arrive at the Port of Saldanha in the last week of April and, following completion of the environmental-impact assessment, construction was expected to start in December.

The company had already secured the yearly import of 100 000 t of LPG from the Bonny River Terminal, in Nigeria, and was currently in discussions with a number of local industrial LPG consumers to determine the scope of their LPG requirements.

This 100 000 t import would see current LPG imports to South Africa increasing by about 50% a year, and would assist in ensuring a more consistent supply of gas to the local market, stated Avedia.
 

Supply Shortfall
Avedia Energy MD Atose Aguele said the company’s entry to the market in 2007, as well as the development of the facility, was directed at tackling the inadequacies of existing production and support infrastructure in South Africa and the wider Southern African region.

“The benefits of LPG as a viable, safe and clean fuel energy alternative have been well documented globally. But the uptake of LPG as a viable alternative in South Africa has largely been hampered by grave inadequacies in the LPG production and supply chain,” he said.

Despite the growth potential for LPG locally, and the call from the national Department of Energy on South Africans to diversify their energy resource mix in a bid to ensure secure and reliable energy supply, LPG remained a highly underused energy source in South Africa.

Currently, only around 3% of South Africans used LPG as an additional source of energy, which was low in comparison to other emerging economies.

“LPG has an enormous role to play in alleviating the burden on the already strapped South African electricity supply,” Aguele said.

“With soaring electricity and fuel costs, coupled with the negative impact on the environment of solid fuels, South Africans have no choice but to look to cheaper and more sustainable sources of energy.”

Avedia anticipated growth in the use of LPG of up to 50% in South Africa over the next five years – but only if the industry was able to successfully address the ongoing challenges and gain a reputation as a credible provider of a viable, alternative energy resource.

“The industry faces a classic catch-22 situation. Domestic and industrial demand for LPG is increasing rapidly as consumers and large industries desperately seek to move to more reliable and cost-effective energy alternatives.

“However, until such time that the industry is able to stabilise production and secure the perennial availability and distribution of the product, LPG is likely to remain an impractical – and expensive – alternative for most South African households and businesses,” he noted.

Erratic Production
The erratic supply of LPG was caused by several of factors, with the yearly output and expected decline in production from major producers perhaps the most significant contributor.

“LPG is produced by four crude oil refineries and two synthetic fuel refineries in South Africa – these facilities already operate at low utilisation rates and the production of LPG remains scant,” Aguele cautioned.

In the past six years, domestic demand had outstripped local production – most notably during winter months, with the import of LPG the only viable option to address the current shortfall.

South Africa currently consumed about 350 000 t/y of LPG, with some 30% attributed to the industrial sector, while yearly local production averaged around 300 000 t.

An additional 60 000 t was imported every year from the Arabian Gulf and West Africa through the Richards Bay and Port Elizabeth terminals.

Moreover, Aguele believed the existing LPG import, handling and transport infrastructure was highly inadequate.

“Holding capacity is insufficient and current transport and distribution solutions are uneconomical. The sophistication of the current LPG handling and distribution infrastructure simply does not lend itself to support sustained future growth,” he says.

Import Improvements

Aguele believed the growth in demand for LPG locally could only be supported through a steady import of LPG, considerable expansion to South Africa's LPG imports facilities and the roll-out of a sustainable and viable transport and distribution network.

“We estimate a required investment of some R5-billion across the entire local LPG infrastructure network over the next ten years to facilitate and support a sustainable LPG industry in South Africa,” he said.