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The Economic Role of the Oil and Gas industry in South Africa

The Economic Role of the Oil and Gas industry in South Africa. A presentation by Tony Twine: Econometrix – 7 June 2011. In this presentation:. The oil refining industry – adding value to imports They synthetic fuel industry – displacing imports

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The Economic Role of the Oil and Gas industry in South Africa

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  1. The Economic Role of the Oil and Gas industry in South Africa A presentation by Tony Twine: Econometrix – 7 June 2011

  2. In this presentation: • The oil refining industry – adding value to imports • They synthetic fuel industry – displacing imports • Future demands on refiners, synthesizers, distributors and retailers.  • The importance of crude oil beyond fuel and lubricants • The gas industry as we know it today and plans for the next few years • Manufactured and natural gas • Unconventional gas from the Karoo

  3. Installed Crude Oil Refining Capacities in South Africa (Bbl/Day) 1 Barrel of oil = 158.99 litres

  4. The Story of Synthetic Fuel in SA • Sasol Established in 1952 • Using Fisher-Tropsch process invented by Germans during WWII • Gasification of coal followed by liquefaction of this gas • Sasol 1 built at Sasolburg could produce up to 4% of National Petrol consumption by late 1970’s • 1978 – 81 saw construction of Sasol 2 and Sasol 3 plants at Secunda • Production Capacity elevated to 40% each of Petrol and Diesel, plus other fuel components and petro chemicals • 2005 saw pipeline from Northern Mozambique to Secunda, with gas displacing coal • Sasol started as a pure parastatal organisation, later partly privatised • Mosgas established during mid-1980’s, processing some gas condensate into Diesel • Initially also a parastatal, later to form part of PetroSA

  5. Completing the picture by adding Synthetic fuels (Bbl/Day)

  6. Price and Income elasticities of demand for Automotive Fuel • Petrol tends to be highly price inelastic, with a real price elasticity varying between -0.32 and -0.42 since 1985 • Diesel is even more price inelastic than petrol • Petrol is highly income elastic • Diesel is even more income elastic than is petrol

  7. Conceptual Production Column – Hydro Carbon Energy Resources Consumption Household Consumers Business Consumers Government Consumers Further Value Added Manufacturers Transporters Primary Producers First Round Value added Synthesizers Electricity Generators Refiners Primary Producers Coal Gas Oil

  8. Natural Gas – Some Basics • Natural gas is made up predominantly of methane • Is not the same as Liquefied Petroleum Gas (mainly propane and butane) • Is not the same as manufactured gas a.k.a. Town Gas • Natural gas and gas condensate has three main forms of delivery • Piped gas for industrial, commercial and domestic applications • Compressed gas for automotive and locomotive applications • Liquefied gas for long distance marine transportation • Natural gas has six main downstream applications • Electricity Generation • Heat generation for industrial, commercial, domestic applications • Automotive fuel • Gas to Liquid (GTL) conversion • Fertilizer production • Other petrochemical applications

  9. Natural Gas Resources • Conventional Natural Gas is found • As associated gas, in the company of crude oil • Un-associated Gas, not linked to crude oil reserves • Gas reserves are found • As conventional Gas in subterranean pocket or chambers • Trapped in shale deposits • Natural Gas is created by combined effects of • Deposits of vegetation • Moisture and bacteria • Heat and pressure

  10. Natural Gas – The South African Status Quo • Small Deposits of natural gas exploited off Southern Cape Coast • More Substantial fields being developed off West Coast of Northern Cape Province • Onshore fields in Northern Mozambique provide imported gas via 800km Sasol Pipeline • Predominant current uses • Sasol GTL process at Secunda • Petro SA GTL process at Mosselbay • Municipal gas distribution in Johannesburg • Some industrial use at points accessible to Sasol Pipeline • Applications under development • Open cycle turbine for electricity generation at Koeberg • Open cycle turbine for electricity generation at Mosselbay • Current exploration applications for • Unconventional gas in the Southern Karoo • Unconventional gas in the Free State and Northern Kwa-Zulu Natal • Off shore gas off North East Coast of Northern Kwa-Zulu Natal

  11. The Karoo Gas Project • Applications for unconventional gas exploration by Shell, Sasol, Falcon and Sunset • Elicited rapid and vociferous opposition – fear of the unknown? • If suspected 450 trillion cubic foot reserve can be proven, would be the 5th largest gas reserve ever explored.

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