South Africa needs to unlock its energy potential

May 14, 2006 02:00 AM

by Kuseni Dlamini

Energy security is one of the greatest national, regional and global challenges of our time. Oil prices have more than doubled over the past three years due to a combination of factors within and beyond the borders of oil-exporting nations.
Since Winston Churchill, the then first lord of the admiralty, made a historic decision to shift the power source for the Royal Navy from coal to oil just before the First World War, the world has, from time to time, faced an energy panic of sorts.

Energy security concerns are not confined to oil, as power blackouts in different parts of the world -- from Cape Town and Johannesburg to the east and west coasts of the US, to Europe, Russia and to chronic electricity shortages in China and India and other parts of the developing world -- continue to place the issue of energy insecurity centre stage.
Last year the world was shocked when hurricanes Katrina and Rita launched a triple energy blow that simultaneously disrupted supplies ofoil, gas and electricity.

Energy is not only the key but indispensable to growth and development. Securing reliable sources of supply should be a national strategic imperative. That is why a robust strategic response underpinned by an informed understanding of the magnitude of the challenge is needed.
Significant investments in research and development aimed at ensuring long-term energy independence and security are key to South Africa’s global competitiveness and domestic national development.

Fuel-price increases will continue unabated as the geopolitical situation in the Middle East continues to deteriorate. This should be a cause for concern for business, government and consumers alike, not least because fuel increases affect everyone’s pocket.
The successful pursuit of accelerated and shared growth in South Africa hinges largely on sustainable supplies of energy at cost-effective prices. However, this is becoming difficult to expect or guarantee within the context of the global economic climate, marked as it is by increasing energy insecurity that is largely underpinned by high economic growth rates over the past 10 years in developing countries.

As recently as 1993, China moved from being energy independent to being an importer of 3-mm barrels of oil a day -- about half of its total daily consumption. The global demand for oil has increased by 7-mm bpd since 2000 and China accounts for 30 % of that increase.
Energy security is becoming, as indeed it must, a key feature of the global security conversation. But why?

Lord John Browne, CEO of BP, has argued that indications are that the factors driving the increase in the oil price are not about to disappear, which means that concerns over future supply -- the main concern driving oil price increases -- remain.
However, he noted that the irony of the current surge in the oil price is not that supply is falling short of demand (as there is no current shortage of oil), but that there are market fears or perceptions that due to the levels of instability in oil-producing countries, this is likely to be the case. So one of the key challenges and opportunities might be to reassure the market that oil supplies would not be threatened regardless of the situation in Iran, Nigeria and other unstable parts of the oil-producing world.

In South Africa the petrol price is set to increase over the next few weeks, and motorists must prepare themselves for a petrol price of more than R6/l. In the US the price of fuel has risen to more than $ 0,70/l (about R4,20), and in the UK it is about £ 0,96/l (more than R10). What needs to be done?
During the oil crisis of the early 1970s, Brazil started exploring the use of ethanol as an alternative source of energy. Today about 40 % of Brazilian cars use ethanol. The US is exploring ethanol as an option as part of its push to diversify its sources of energy. South Africa can and must move in the same direction. This would unlock further growth opportunities in the sugar industry and create jobs and prosperity for generations.

Second, coal provides a reliable source of energy for South Africa. Already providing at least 90 % of domestic electricity requirements, coal can be further leveraged, as Sasol has done and is doing to maximise its share of the oil and petroleum market.
South Africa has what it takes to be energy independent or self-sufficient. What is required is appropriate research and development investment to unlock this country’s immense energy potential -- not only to cater for domestic needs but also to increase our share of the booming global energy market.

Dlamini is an executive member of the Richards Bay Coal Terminal.

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