The Chairperson of NERSA, Ms Khuzwayo and other board members
Former Chairperson, Mr Collin Matjila
I am honoured to be with you at a time when the new board is settling and we bid farewell to the outgoing members of the regulator. I must start by thanking the members that are leaving Mr Matjila, Ms Mokgatle, Ms Makhathini and Professor Singh for a job well done and the ability to shoulder the responsibility of regulating the energy sector on behalf of the country.
I understand that we are a developing economy characterised by dualism in the economy. We have a developed and underdeveloped part of the same economy which creates tension in regulation and the decisions you have to make as regulators. Taking up a responsibility to manage the energy sector under this condition was not an easy task.
To you the outgoing Chair, Mr Matjila and your team, I sincerely express my gratitude for a job well done. Your achievements stand out. You have spear headed the two new licenses for the petroleum pipelines. These were issued and I am made to understand that the Transnet multi product pipeline is due for completion this year. In the area of gas, numerous licenses have been issued and there are more license applications in the pipeline.
This is a clear indication of the growth the gas sector and your regulation will go a long way in facilitating the much needed energy mix. As for electricity, the country has experienced challenges and you have managed these in an innovative way.
In August 2007 Cabinet approved the energy security master plan-liquid fuels, which seeks to, in the short to medium term, resolve the infrastructural challenges in the petroleum supply chain as highlighted in the Moerane Commission report and subsequent interventions by the department and relevant stakeholders. The infrastructural challenges include constraints at the ports, inadequate storage capacity, as well as inefficiencies in the rail transportation of liquid fuels.
Further, the requirement to ensure adequate inter-modal transportation exists to move liquid fuels from Durban to Johannesburg, considering that the pipeline linking this corridor is operating at full capacity. In liquid fuels sector, I urge you the regulators to facilitate the implementation of the energy security master plan-liquid fuels.
Security of supply is our major mandate as a collective. It is important that in your implementation of policy through your rules and regulations, you ensure that you do not compromise security of supply for the country. As the new board, I urge you to pay attention to this sector and ensure that you promote investment in the ports and storage facilities part of the liquid fuels value chain. I understand that the Transnet pipeline is nearing completion and this will solve the transportation of the liquid fuels.
With regard to gas, I need to draw your attention to the fact that internationally, gas is gaining prominence as an energy carrier of choice and the fuel of the 21st century. Gas is clean, abundant and cost competitive compared to other energy carriers. Technological advances in the sector have enhanced the use of gas. Commercialisation of large, previously stranded gas reserves has improved the opportunities for gas globally. This coupled with market liberalisation dating from the mid-1980s has contributed to the increase in gas trade. Gas is environmentally friendly as it has lower greenhouse gas emissions, lower sulphur and nitrogen emissions.
Trade in gas has recently increased because of the ability to trade gas to far away markets. The liquefied natural gas business has led to linking up gas deposits to distant markets through such technologies as liquefaction and re-gasification facilities. This should enable South Africa a distant market from natural gas sources to introduce and use gas at a scale hitherto unanticipated.
I expect that you as the regulators, you will be able to revolutionise the gas industry and foster the increased use of gas in the South African energy mix in line with the government mandate of security of energy supply and diversity of supply. I understand that development of the gas sector is a chicken and egg situation.
For instance, gas explorers would like to see gas markets that they can sell into before they invest large sums in the risky search for gas reserves. Gas transporters want to see certainty of gas supply, clear investment rules and viable gas customers before they invest in high cost pipeline infrastructure. Gas customers want to see long-term and preferably competing gas supplies.
In South Africa our additional challenge has been that gas has to compete with other primary energy sources. I am sure you will agree it is not an easy challenge! You are expected to break this quagmire and facilitate the much needed investment in the gas sector. Government recognises that the existing gas market is relatively small and immature but is likely to grow rapidly. However, we need to do more and encourage more gas investments to alleviate energy poverty. NERSA and the Department of Energy need to work together to develop the desired sustainable gas industry in South Africa.
As the new board assumes its mandate, it is imperative that we all move from a premise that comprehends that this is a caring, responsive and interactive government whose initiatives are informed by the quest to achieve social justice. The current electricity tariff application processes (public hearings) which are characterised by contestations from various interest groups; demonstrate the significance with which the South African public attach to this process.
The fundamental task of the regulator in this instance is to apply its mind objectively. The Energy Regulator has a responsibility to both the customer and the utility; it must maintain a balance between sustainability of the utility and affordability for customers mainly the poorer households, especially given the government’s commitment to making electricity available to all its inhabitants.
Stakeholders here today know their relationship and how they interface with the regulator and I will not talk much about that. 2010 is on us; let us make South Africa proud. Remember Football Friday, wear Bafana Bafana jersey. Buy your tickets and buy also for your best performing officials.
On a serious note please ring the bell on whatever might embarrass South Africa during this prestigious event. We really need “all hands on deck”.
I thank you.
Issued by: Department of Energy
25 January 2010
