B Sonjica: World Liquid Petroleum Gas Forum

24 October 2007

World LPGas Association Chairperson, Mr Low Greenberg
World LPGas Managing Director, James Rockall
The Market Development Director for World LPGas Association, Mr Michael
Kelly
World Bank and United Nations Development Programme (UNDP) senior officials
present
Chairperson of the Southern African LPGas Association, Mr Mpumi Gaba
Representatives of oil and gas companies
Distinguished guests
Ladies and gentlemen

It is an honour for me to welcome you to this premier global conference the
20th World Liquid Petroleum Gas Forum held in South Africa for the first time.
The theme "LPGas for African Development" is quite appropriate given the
challenges that Africa currently faces with regard to alleviation of energy
poverty. Africa is home to 14 percent of the world population. Africa is rich
in energy minerals and resources, with coal in southern Africa, oil and gas in
north, west and central Africa.

Africa has seven percent of the world oil resources. We produce ten percent
of total world output, but only consume four percent of the world's total
annual consumption. Our continent has enough oil and gas resources to trade
among its member countries, and then to export the remainder. Africa only
consumes six percent of the world's electrical energy with a per capita of 0,6
MWh versus a world average of 2,6 MWh. Low electricity access is clearly
demonstrated by the fact that only 37,8 percent of the population has access to
electricity in Africa and of these, 68 percent is in the urban areas. This
clearly leaves Africa as a dark continent despite the fact that we boast huge
resources of energy minerals.

Colleagues, ladies and gentlemen, energy consumption and economic growth are
inextricably linked as energy is fundamental to the socio-economic development
of our continent. It is also an imperative that we come up with innovative
solutions to address the challenges of energy poverty in Africa. Energy and
poverty are also inextricably linked. There is a growing consensus that energy
is central to reducing poverty and hunger, improving health and improving the
lives of women and children generally. Sustainable development will only happen
when energy poverty is tackled and the environment is protected. Crucial to
both is the expansion of clean, affordable and accessible energy. LPGas can
play that role.

Poor people spend up to a third of their salaries on energy, mostly for
cooking and heating. Women, in particular devote a considerable amount of time
collecting, processing and using traditional fuel for cooking. In rural
sub-Saharan Africa, many women carry 20 kilograms of fuel wood an average for
5km every day. This is time that could be spent on child care, education,
socialising and also generating income.

The theme of the conference is appropriate as it addresses a major challenge
and a paradox, poverty in the midst of plenty rich in resources and yet poor in
their use. The issues confronting the energy sector in general are those of
security of supply and volatility of prices in Africa we have the additional
challenge to ensure that energy industries are able to contribute to broader
economic growth and poverty reduction. LPGas is linked to crude oil and its
price volatility.

The price of LPGas, especially in South Africa is very high. The majority of
the poor cannot afford LPGas. This is a major barrier to access this clean
energy carrier. Most rural households do not have easy access to this product.
I understand that the conference is also addressing this challenge and I hope
that recommendations will be made to guide those countries that are currently
promoting LPGas consumption on this thorny issue of pricing. Despite the price
limitation, does LPGas have a market share in Africa? The answer is certainly
yes, especially in South Africa and Southern Africa. This region alone has in
excess of 400 million people. A significant percentage of these are not grid
connected. The economic growth in the region is positive and energy demand is
higher than supply creating opportunities for energy carriers such as
LPGas.

Currently, South Africa produces over 410 000 tons of this commodity a year.
The total sales of the product generate turnover of close to R2 billon. LPGas
consumption has been growing at an average of four percent over the past few
years. South African LPGas consumers include commercial, industrial and
households. LPGas Energy Service can also be used by low income households in
both rural and urban areas in South Africa.

South African consumption of LPGas has increased over the past few years
reducing the reserve margins. Today I am informed that in winter especially,
South Africa experiences structural shortages in LPGas supply. This is not an
acceptable situation if we want to promote meaningfully the consumption of this
energy carrier. Security of supply is critical and needs to be addressed by
industry. It is critical that the international companies involved in the
sector provide finance to invest in infrastructure developments which will
facilitate and ensure security of supply of LPGas in the country.

LPGas can provide households with their energy needs; it is considered one
of the most versatile fuels which can be used for cooking, heating and
lighting. LPGas is portable, clean, accessible, efficient and convenient. LPGas
is a suitable replacement for other harmful fuels, therefore can improve the
health of many poor people affected by indoor pollution. It reduces emissions
that contribute to greenhouse effects, reduces deforestation and eliminate time
and labour for gathering biomass.

Another major challenge is the cost of LPGas appliances especially cylinders
utilised in this sector. The value chain and management systems within the
sector also add to the cost of LPGas. These constitute a major cost and barrier
to switch from more traditional forms of energy to LPGas. In an environment
where the potential clients of LPGas are financially constrained, it is
important that the value chain of LPGas be reviewed to optimise efficiency with
the intention of minimising the cost of packaging and distribution of the
product.

Although the LPGas market has been growing in the country, the market share
of the product is still small due to the issue of accessibility and
affordability. As an industry it is important to develop and unlock the
potential of this product in Africa and unleash economic growth potential of
the continent. LPGas as an energy carrier in Africa has been accepted by
households, industrial and commercial consumers. The challenge is how best to
grow the market.

This requires appropriately resourced and efficiently coordinated national
and regional as well as continental institutions to develop and implement
bankable projects in this sector. This is the role of the private sector. The
private sector needs to invest in LPGas logistical infrastructure, in the
associated industry to produce appliances, and an appropriate marketing and
distribution structure that will minimise the cost of LPGas.

I am informed that in Africa there are no or very few companies involved in
production of LPGas cylinders and related appliances such as LPGas stoves and
heaters. This is not acceptable. Industry should review this status quo. It is
critical that as we develop LPGas markets in Africa, the industry generates
positive spin offs to the greater economy through development of related
industries. This is a challenge that I leave to you captains of the
industry.

As governments, we also have a role to play in promoting the development of
the LPGas sector so that it can assist in the reduction of energy poverty.
Governments need to develop regulatory policies promoting and creating an
enabling environment that supports in general the power sector in Africa and
LPGas projects in particular. Collectively government and the private sector
will ensure that energy in Africa and LPGas in particular is used to develop
the continent through secure, affordable, accessible and reliable supply, and
collectively with other energy sector role-players contribute to the fight
against energy poverty and poverty in general which is crippling the continent.
I am confident that the wealth of the information that will be shared during
this conference will make a significant contribution to the LPGas sector
globally, in developing countries and more so in Africa.

Collectively through public private partnerships, we will make our
contribution towards achieving the millennium development goals by 2014. As
energy stakeholders, we have a role to play and we can make a difference and a
good difference too through fuelling economic development. Lastly ladies and
gentlemen, I want to remind you that the time to invest in Africa is now. The
region has become a major player in the energy sector. It is entirely within
your grasp to strategically align yourselves with Africa to promote and fuel
economic empowerment and development of the continent. The time is now, the
place is Africa and the future is African. Join Africans to reach their dream.
Only a joint initiative will unlock the true economic value of Africa.

The African continent and the South African government thank the World LPG
Association for bringing this conference to Africa and especially for
dedicating a session to discuss issues that are central to African development.
The Liquefied Petroleum Gas Association of Southern African has played a role
to attract this prestigious conference and I thank you together with all the
partners who assisted in hosting this event. To all delegates present here, all
South Africans and I extend to you a warm welcome to Cape Town, the mother city
of South Africa, enjoy its hospitality.

I thank you.

Enquiries:
Sputnik Ratau
Media Liaison Officer: Ministry
Department of Minerals and Energy
Tel.: 012 317 8291
Fax: 012 322 8699
Cell: 082 521 9614
E-mail: sputnik.ratau@dme.gov.za

Issued by: Department of Minerals and Energy
24 October 2007