The continuous progression of South Africa’s industrial development zones (IDZs) and special economic zones (SEZs) as well as the implementation of associated legislation are crucial for the sustainable growth of the energy sector, says supply chain specialist Bidvest Panalpina Logistics (BPL) oil and gas head Jen Byrne.
She states that, if the planned and ongoing developments in the Richards Bay, Saldanha Bay and Coega IDZs were to be finalised, it would enable the oil and gas industry to compete on an international level.
“The completion of critical projects would increase the industry’s appeal to the international market,” she explains. “Such projects include the establishment of a SEZ and tank farm at Coega, the completion of a multipurpose terminal and offshore supply base at Saldanha, and the advancement of the gas exploration and gas-to-power projects in Richards Bay.”
Moreover, Byrne believes that efforts to eradicate prolonged overly complex administrative processes – in conjunction with the duty-free benefits available in the IDZs – will provide additional incentives for the international market.
These developments are critical, specifically because of the downturn in oil prices, mostly owing to strategic oversupply worldwide and diminished demand from strategic oil buying countries, she notes.
Also, many companies have resorted to cutting back on project spending as a result of the weakened oil price, says Byrne, indicating that, while controlled spending is necessary, forward planning and adjusting strategically to the new oil price is a must. Predicting the oil price long term is difficult.
“During the late 90s and early 2000s, the oil price was about $30/bl. Between 2005 and 2008, it reached $140/bl. The recession caused the oil price to drop below $50/bl, but by 2012, it had recovered to $120/bl,” she recalls, adding that economists predict a turn- around within the next two to five years and companies need to take advantage
BPL’s oil and gas division is making significant inroads in product development and expanding its service offering by providing complete practical solutions, such as the introduction of hub and sub-hub solutions to supply clients even when isolated.
Moreover, BPL’s capital projects division, which caters for the renewable- and alternative-energy sector, intends to increase its market share by promoting and improving relations with European renewable-energy companies, which often participate and bid for projects in the country’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).
BLP capital projects head Sandro Godinho explains that BPL was involved in the De Aar and Droogfontein photovoltaic solar farm projects that were selected as part of the first round of the REIPPPP. The Northern Cape projects, which produce a combined 100 MW, were completed in May 2014. BPL has also transported equipment to Eskom’s 1 335 MW Ingula hydro power project, handling shipments from origin to on-site delivery.
Additionally, BPL supplies bunkers at various nuclear sites and intends to increase its involvement in the nuclear sector.
Godinho has observed that, lately, suppliers have attempted to bypass the middle man and avoid the use of logistics companies to reduce costs. He notes, however, that this strategy is flawed, as it does not take into account that suppliers would then need to provide skills training and/or appoint additional drivers and dock workers as well as staff with customs experience to ensure that the company remains compliant.
He points out that supply chain companies like BPL add value while enhancing savings in the long term.
There is a drive and willingness from government and industry globally to increase growth in the renewable- and alternative-energy sectors, Godinho asserts. While there has been a definite decrease in investment in Europe, which could possibly be attributed to a lack of space, the European region has an installed capacity for more than 50 GW of solar power and 96 GW of wind power, according to the World Energy Council.
Godinho comments that America is investing and expanding consistently, but that the real growth is in Africa and Asia – especially China and India – and that the majority of suppliers for African, Chinese and Asian projects are based in Europe.
He explains that the growth in renewables in Africa over the past five years is partially accounted for by the large population and an increase in urbanisation: “As African countries continue to develop, the need for utilities to increase their power capacity will continue to grow.”
Godinho says, although interest in renewable energy is definitely on the increase, one of the main challenges that BPL has to contend with is the economic downturn in various countries, especially in South Africa. He expects that investment will slow down and that projects will be delayed, but adds that BPL will continue to secure more clients because of its service offering and experience.
“While the economic climate is cause for concern and the oil price has affected ongoing and planned projects, we are not overly worried. We prefer to stick to our core business and what we excel in,” he concludes.
BPL will be exhibiting at the Africa Energy Indaba, which will be held at the Sandton Convention Centre from February 16 to 17.