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South Africa's PetroSA aims to make a final investment decision (FID) by April on a project designed to support the resumption of production at the mothballed gas-to-liquids (GTL) refinery in Mossel Bay, following receipt of Cabinet's backing for its controversial selection of Russia's GazpromBank Africa as the project's investment partner.

The endorsement was made at a special meeting held on December 8, where Cabinet received an update on progress regarding the reinstatement of the GTL refinery, which has been in care and maintenance since November 2020, following the failure of the $1-billion Project Ikhwezi to replenish the refinery's dwindling supply of indigenous offshore gas.

Cabinet was also updated on the process followed by the Central Energy Fund, PetroSA's State-owned holding company, to secure a partner with the "requisite technical and financial resources" to return the refinery to full operation on a risk-sharing basis.

The selection of GazpromBank Africa arose after PetroSA issued a request for proposals in January from potential partners that could offer a turnkey solution, including funding and feedstock security, to refurbish, modify and upgrade the decommissioned facility.

In late November, investigative publication amaBhungane revealed that, while 20 companies submitted bids, the evaluation criteria employed by PetroSA resulted in all but GazpromBank Africa being disqualified. This, despite concerns raised internally about the threat of sanctions, given that the US and the European Union had imposed sanctions on Russia after its invasion of Ukraine in early 2022.

Cabinet spokesperson Khumbudzo Ntshavheni dismissed arguments that the partnership could posed a secondary sanctions risk, noting various exemptions in place, while highlighting that several other countries, including Brics bloc countries, had ongoing energy trade activities with Russian companies.

In a separate briefing, PetroSA acting COO Sesakho Magadla reported that an independent legal opinion had been obtained, which concluded the sanctions risk to be low, owing to the fact that primary sanctions affected companies and individuals from those countries that had imposed the restrictions, while no secondary sanctions had, to date, been imposed on other countries.

Magadla also suggested that "critical energy security", along with food and medicines, had been exempted from the sanctions.

"This project falls within that description, because it is also critical for South Africa's energy security," she asserted.

The tie-up with a Russian company could, however, have implications for PetroSA's plans to cooperate with TotalEnergies, of France, on the international energy group's Brulpadda and Luiperd fields, offshore the South African coast.

However, PetroSA indicated that progress had slowed primarily because of pricing issues, with first gas only expected after 2030.

"We cannot be sitting idle and waiting for 2030 while our plant is rotting," Magadla added.

Ntshavheni noted that the partnership with GazpromBank Africa remained dependent on the FID decision, which would itself be informed by the outcome of a joint bankable business case.

PetroSA is optimistic of reaching FID with GazpromBank Africa on what has been reported to be a R3.7-billion project during the first quarter of the 2024 calendar year.

The company expects to achieve financial close by the end of the second quarter, after which it expects engineering and construction to be implemented over an 18-month period.

PetroSA acting CEO Sandisiwe Ncemane argued that the reinstatement of the project would support security of fuel supply in the Eastern, Northern and Western Cape provinces in a context of declining domestic refining capacity.

The company also argued that reinstating the GTL refinery as soon as possible would help prevent the asset, which it values at $2.85-billion, from further decay.

However, it acknowledged that significant investment would be required to restart production...

Eskom generation head Bheki Nxumalo has indicated that an extended outage at Koeberg Unit 2, which begins on December 11, is currently expected to continue until September 2024, increasing the prospect of both Koeberg units being out of service simultaneously from late July next year.

Nxumalo provided an update on the outage schedule during a briefing on the implementation of the Energy Action Plan, at which it was confirmed that Unit 1 had been ramped up to 924 MW by December 10.

This, following the unit's much-delayed outage, during which its three steam generators were replaced. Unit 2's steam generators will be replaced during the outage starting on December 11.

The replacement forms a key part of Eskom's application to the National Nuclear Regulator (NNR) for authorisation to operate Koeberg's two pressurised water reactors for a further 20 years, after their 40-year licence expires.

As things stand, the licences for both units will expire on July 21, 2024; the same date on which Eskom currently intends removing Unit 1 for another 200-day-plus outage to conduct compulsory works in line with a ten-year maintenance cycle, including crucial containment building leak tests.

However, Eskom has indicated to Engineering News in response to an enquiry that, for operational reasons, it would "definitely like to shift the start of the next outage on Unit 1".

Such a move would be dependent, however, on a "positive Long-Term Operation (LTO) decision by the NNR".

The NNR is currently conducting a public participation process on the LTO Safety Case, which was submitted by Eskom in June 2022, and will host three sets of public hearings in February ahead of a final decision in July.

Eskom has also applied to the NNR to have the unit 1 and 2 licences separated to reflect the fact that Unit 2 entered into commercial operation on November 9, 1985; more than a year after Unit 1, on July 21, 1984.

The NNR has completed a review of the decoupling, including an assessment of some components shared by both units, such as the seismic bearings and cables, and its board will make a decision before the end of January.

Should the decoupling approval be followed by an LTO approval, Eskom might be able to shift the 200-day-plus maintenance out, presumably until after Unit 2 resumes production with its three new steam generators.

Should the decoupling and LTO be refused, both units will be out of service from July 21.

Nxumalo expressed confidence in the case Eskom had made for the separation of the licences and indicated that a positive decision could provide it with some operational flexibility should the LTO also be approved.

He added that, by July 21, Unit 1 would have been in operation for just over seven months, meaning that there would be scope for it to continue operating should an NNR LTO authorisation be in hand.

"But we don't want to preempt issues at this stage.

"The first thing that we must work on is to get that approval for the life-extension of Koeberg," Nxumalo said.

Eskom told Engineering News separately that, based on the reviews performed and international experience, it "remains optimistic that the NNR will issue the licence for LTO".

"As long as this is received prior to the date specified in the current licence then it is unlikely that both units will be out of service at the same time."

Nevertheless, both units will still have to undergo the mandatory 10-year maintenance tests in the coming two years, with the tests on Unit 1 having been carried out previously in 2015 and on Unit 2 in 2016.

Therefore, even if Eskom can avoid having both units out simultaneously from July 21, 2024, there will still be long periods, from now until 2026, when only one unit will be producing at any given point.

This has been the case for the whole of 2023, which has been South Africa's most disrupted year for loadshedding, both with regards to the number of days affected and the level of intensity, with Stage 6 having been declared on several occas...

Electricity Minister Kgosientsho Ramokgopa reports that Cabinet has approved the release of an updated Integrated Resource Plan (IRP) for public comment and also confirms that the document contains a revised decommissioning schedule for Eskom's aged coal power stations when compared with the prevailing IRP2019 edition.

The IRP update was approved during a special Cabinet meeting last week, held after the executive was unable to finalise several matters on November 29, the date that was meant to serve as its final meeting of 2023.

The special meeting also approved the appointment of Dan Marokane as Eskom's new CEO, following what has been a protracted and fraught process initiated almost a year ago after André de Ruyter resigned on December 14, 2022.

Ramokgopa said the draft IRP update, which was yet to be formally published by Mineral Resources and Energy Minister Gwede Mantashe, included two time horizons; an immediate horizon to 2030 and a longer-term horizon.

He said the document included an explanation of the decision to extend the life of certain coal stations, which was itself based on modelling conducted using the Plexos energy modeling tool.

No specifics were provided regarding the new demand and technology cost assumptions used in the updated document, or the nature of the proposed mix of new generation sources outlined for introduction over the two horizons.

Ramokgopa said the details would be provided once the document was officially released for public comment by Mantashe, who is a strong advocate of the continued used of coal and the introduction of gas to power.

No timeframe for the release was provided and no indication was given as to the nature of the public participation process and whether it would include public hearings.

Ramokgopa, however, urged stakeholders to study the document when it was formally released and to provide comment.

He also welcomed the appointment of Marokane and said that his previous experience at Eskom meant he would be able to "hit the ground running" once he finally took up to post.

No firm date has been set, with Eskom having indicated that Marokane will join no later than March 31, 2024.

The Minister said having a permanent CEO would bring much-needed certainty.

HARD-STOP UNCERTAINTY

However, Romokgopa raised fresh uncertainty over whether the hard-stop date of December 31 would be enforced on those projects - procured under the much-delayed risk mitigation round and the fifth renewables bid window - that had, to date, failed to reach commercial close.

Both Mantashe and the Independent Power Producer Office insisted earlier in the month that the date would not be shifted, with the outstanding projects, including three powerships, continuing to absorb scarce grid connection capacity.

Nevertheless, Ramokgopa confirmed that there had been representations from certain bidders asking for an extension and that "in-house discussions" were under way on the matter.

"As I stand here, I cannot say with any degree of certainty that we will still stick to that date."

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) is calling on government to take urgent and decisive action to support the domestic steel sector following ArcelorMittal South Africa's (AMSA's) announcement that it intends winding down its long-products business.

In a statement, Seifsa warned of potentially dire economic and employment consequences should AMSA's Newcastle, Vereeniging and Emalahleni operations close, including the loss of up to 25 000 jobs in the steel value chain.

In a surprise announcement on November 28, AMSA indicated that 3 500 direct jobs were potentially at risk, including contractor jobs, should the longs operations be shut as intended.

"The long-steel products that are at risk feed into construction, heavy engineering, railways, the automotive sector, fasteners manufacturing, the mining sector and the structural steel sections required for the electricity transmission sector," Seifsa highlighted.

"The reach is vast, the consequences dire and the cost immeasurable."

Seifsa stressed that several downstream steel companies were dependent on long-steel products produced by AMSA, and noted that the automotive sector was already warning of adverse local-content implications.

"Logistics costs, including longer lead times and exchange-rate provisioning, are likely to add anything between 20% to 30% to the cost base and the domestic logistics challenges will only serve to compound onto this, rendering domestic manufacturing uncompetitive and infusing higher costs into the economy."

Seifsa called for "bold reforms" at a national and localised level to prevent these scenarios from playing out.

"All options, including Negotiated Price Agreements for electricity, special dispensation and dedicated rail capacity and a levelling of the playing field with regard to the uplifting of the scrap-metal ban and in the long-term exploring options for preferential pricing on iron-ore, amongst others, should be tabled and critically explored in a rational and collaborative fashion.

"Not to do so, would at best be irresponsible and at worse amount to economic suicide."

The federation, which represents 18 employer associations in the metals and engineering industries, with a combined membership of 1 300 companies that collectively employ about 170 000 people, said it stood ready to work with government "in averting an economic disaster of unimaginable proportions".

Engineering News editor Terence Creamer discusses the outlook for the Koeberg life-extension operation following significant delays and rising safety concerns.

The National Energy Regulator of South Africa (Nersa) reports that it registered a further 98 generation facilities - with a combined capacity of 908 MW and an investment value of R17.3-billion - during the second quarter of its 2023/24 financial year.

These registrations, which took place from July to September, raise to 1 185 the total number of generation facilities registered since 2018.

However, the pace of registrations accelerated markedly after a 2021 reform was made to Schedule 2 of the Electricity Regulation Act, lifting the licence-exemption cap from 1 MW to 100 MW. That cap was subsequently removed entirely to accelerate investment as power disruptions intensified.

In August, the National Energy Crisis Committee reported that, since the implementation of the regulatory changes, the pipeline of private sector generation projects had increased to over 100 projects representing more than 10 000 MW of capacity.

Projects registered with Nersa to date, meanwhile, have a combined capacity of 5 785 MW and an investment value of R111-billion and exclude the thousands of smaller installations that have been implemented by households and businesses in response to loadshedding.

Eskom has estimated that some 4 400 MW of behind-the-meter generation was installed between July 2022 and July 2023, mostly in the form of rooftop solar.

Nersa reports that 92 of the registrations during the second quarter were for solar photovoltaic (PV) facilities, which make up 71% of the capacity registered. The balance comprises two solar PV projects with battery energy storage systems, two co-generators and two wind projects.

Regulator Member responsible for Electricity Regulation Nhlanhla Gumede commended the uptake in registrations, which he indicated had been processed by Nersa within an average of five working days. However, he recommended that future registration applications for generation facilities of variable energy sources be coupled with battery storage.

Sixty-eight of the generation facilities registered during the period are connected to the Eskom network and have a total capacity of 785 MW and an associated investment value of R14.8-billion. A total of 30 generation facilities are connected to the municipal distribution network, with a capacity of 27 MW and investment value of R2.5-billion.

The three provinces with the highest number of new registered generation facilities in the second quarter were Gauteng (19 projects for 11 MW), Western Cape (17 projects for 119 MW) and KwaZulu-Natal (15 projects for 7 MW). The top three provinces by capacity were the Free State (251 MW across 7 projects), North West (192 MW across 11 projects) and the Western Cape.

The 11 projects registered in the North West province during the period carried the highest investment value, at R5.8-billion. The average investment cost for the second quarter of the 2023/24 financial year is R19 000/kW, Nersa states.

Serious questions about the effectiveness and desirability of South Africa's prevailing scrap export ban have been raised in a new report, which calls for its immediate lifting unless evidence can be produced showing that the ban is having the desired effect of preventing infrastructure-related theft.

Published by XA Global Trade Advisors, the report follows hot on the heels of a decision by ArcelorMittal South Africa to wind down its long-products business, partly because its integrated mills are unable to compete with those electric-arc furnaces that have secured a significant raw material advantage as a result of the trade restrictions placed on scrap.

XA Global Trade Advisors CEO Donald MacKay argues that the combination of the price preference system, scrap export duties and the prevailing export ban have distorted the domestic steel value chain and have created financial risks that could have major implications for the State-owned Industrial Development Corporation (IDC) if unwound.

The report calculates that there are yearly value transfers of R4.5-billion from metals recyclers to the scrap-based mini-mills on the three-million tons of scrap being sold yearly.

It also estimates that the IDC has built up a R14-billion exposure to scrap-metal consuming sectors, which has created an incentive to sustain these transfers to companies that have become increasingly reliant on subsidised raw materials as electricity prices rise and infrastructure fails.

"The electricity price cannot be lowered and so all the pressure is applied to the scrap recycling sector," the report argues.

In response, the IDC told Engineering News that its exposure to steel-related companies stood at about R10-billion and was not confined to scrap-metal consuming firms.

"The rationale for the IDC support provided to mini-mills was to increase competition in the primary steel industry, improve economic inclusion, access to markets for small and medium enterprises and black industrialists, and to enhance competition in related products.

"The investment case also concerns market segmentation and the ability to comply with the market's requirements," the IDC stated.

It added that the mini-mills supplied a complementary range of "fit-for-purpose" commodity products which were mainly driven by competitive factors such as an ability to respond to the market in a short period of time at the right price.

"While several of the IDC's investee companies produce the standard commodity-type bar mill range, upgrades have also taken place over the years towards higher quality products and diversification," it added in response to questions.

The XA report also highlights a lack of data transparency since the initial ban on the export of ferrous and nonferrous scrap metal was imposed by the Department of Trade, Industry and Competition (dtic) on November 30, 2022, or following its six-month extension on July 31 this year.

MacKay says that, despite Promotion of Access to Information Act requests, no information has been released on the theft of infrastructure since the ban, with even Transnet's cable theft data, which had been published regularly on the State-owned utility's website, having been removed from the public domain.

Transparency, MacKay argues, is essential for assessing whether the ban's negative economic impacts are outweighed by the benefits.

"The secrecy around scrap metal policy has created fertile ground for lobbying and corrupt decisions," he adds.

The dtic told Engineering News it would study the report but did not want to comment so close to the closing date for comments on whether or not to extend the ban.

"All comments received by the closing date will be carefully considered by Minister Ebrahim Patel before a decision is taken.

"The Minister will consider all inputs and will carefully weigh the impact of the scrap and waste-metal ban on the steel value-chain against the substantial damage done to infrastructure and the associated disruptions to bus...

South African independent power producer the SOLA Group has started construction on a pioneering 195 MW solar photovoltaic (PV) plant in the Free State, which will wheel and sell clean electricity across the country to multiple buyers eager to decarbonised their operations.

The R2.8-billion project has already secured an initial three multinational anchor offtakers, but SOLA has reserved a significant portion of the project's energy for flexible, short-term power purchase agreements with a wide range of customers.

SOLA says it plans to sign up interested buyers for the uncontracted power from mid-2024, with delivery of electricity scheduled for mid-2025.

CEO Dom Wills notes that the initiative is in line with reforms under way in the South African electricity market, which are facilitating the creation of competition among electricity suppliers.

"In this sense, SOLA is pioneering the first steps toward a more flexible and efficient electricity system and makes use of the existing Eskom wheeling framework to bring choice and flexibility to South African businesses," Wills adds.

Eskom is currently piloting a virtual wheeling platform that will, from 2024 onwards, allow for one or more generators to transact with multiple customers that have disbursed operational footprints, including ones located in municipal distribution areas.

SOLA, which has a 15-year track record in the renewable energy market, has already entered into wheeling arrangements with large private customers, including Tronox Mineral Sands, which will buy electricity from plants developed in the North West province.

Those two 100 MW projects were the first to be registered by the National Energy Regulator of South Africa in 2022 following an amendment of Schedule 2 of the Electricity Regulation Act allowing for such projects to proceed without a licence and to wheel electricity through the grid.

The latest 195 MW project represents the fourth utility-scale renewable wheeling project closed by SOLA in the past 15 months, with the group's wheeling projects under construction currently standing at 581 MW.

SOLA says that by mid-2025, its fleet will generate 1.34 terawatt-hours annually, or enough to power nearly 500 000 homes.

Independent power producer (IPP) Red Rocket reports that it has signed up customers for 500 MW of the 2 000 MW of capacity it aims to deploy over the coming three years as part of an innovative scheme designed to provide multiple private offtakers with renewable electricity as from 2026.

In recent weeks, the company has been running a national advertising campaign inviting potential customers to make contact regarding its intention to sell "affordable, renewable energy to businesses".

Red Rocket says the 2 000 MW forms part of a broader hybrid portfolio comprising 2 800 MW of wind and 1 500 MW of solar photovoltaic that has been fully permitted and has received cost estimate letters for grid access from Eskom.

The projects are not yet registered with the National Energy Regulator of South Africa, with such registration to be undertaken only once a critical mass of customers has been secured.

The power purchase agreement contracts will vary based on the arrangements with the specific offtaker, with pricing determined by the length of the contract, wheeling costs and whether the contract is 'take or pay' or 'take and pay'.

"The objective is to produce the first electricity at the end of 2026, with the full 2 000 MW operational by the end of 2027.

"This is the first phase of the full development, consisting of over 4 000 MW," the company, which is headed by Matteo Brambilla, tells Engineering News.

The first phase of the project will produce about 5 500 GWh of renewable electricity yearly.

The investment value for the initial 2 000 MW is estimated at R70-billion, including self-build grid upgrades, and Red Rocket says it will be fully funded through a project finance scheme.

The initiative is in response to regulatory changes that have made it possible to wheel renewable electricity through the grid and is also aligned with the virtual wheeling framework that is being developed by Eskom and which will be implemented at scale in 2024.

The framework, which has been piloted by Eskom and Vodacom, incorporates the principle of revenue neutrality for Eskom and municipal distributors, which is seen as critical for unlocking virtual wheeling. However, Eskom has indicated that it intends excluding those municipalities whose accounts reflect long-standing arrear debt.

"Virtual wheeling is an important component of these projects, as it enables these types of transactions to occur.

"Traditional wheeling severely impacted the geographic areas to which we could deliver the electrons, as only a few municipalities have wheeling frameworks in place," Red Rocket says.

Therefore, no additional regulatory changes are required before the scheme can be launched, as the lifting of the generation cap has enabled private-sector offtakers to transact directly with IPPs.

"The solution that Red Rocket is proposing is viable under the current electricity regulations and legislation."

However, Red Rocket says a simplification of the wheeling/trading framework could accelerate its roll-out.

The latest full Blue and No Drop, and the Green Drop Progress Report, released by the Department of Water and Sanitation (DWS) on Tuesday, shows the deterioration of South Africa's drinking water quality, wastewater management performance and water losses and nonrevenue water.

The Blue and No Drop Reports indicate that there is has been a decline in drinking water quality and an increase in non-revenue water since the last reports were issued in 2014. The Green Drop Progress Assessment Report also indicates a deterioration in the performance of municipal wastewater treatment systems.

The full Blue Drop Report, assessing the quality of South Africa's drinking water from July 1, 2021, to June 30, 2022, shows that while South Africa's drinking water quality is generally good in the major metropolitan areas, there has been a regression in drinking water quality since 2014.

Of the 958 water supply systems (WSS) in each of the 144 water services authorities (WSAs) across South Africa, only 26, or 3%, scored more than 95% and qualified for the Blue Drop Certification, compared with the 44 WSS, or 4%, which were awarded the Blue Drop status in 2014.

According to the report, 277, or 29% of systems located in 62 WSAs, are in a critical state of performance, a deterioration from the 174 WSS' in 33 WSAs that were found to be in a critical state in 2014.

Overall, 85% of drinking water systems were in an "average or better" infrastructure condition.

Of the 151 systems physically assessed, 3% were found to be in a critical infrastructural condition; 12% in a poor infrastructural condition; 49% in an average infrastructural condition; 31% in good condition; and 5% in an excellent condition.

This indicated that non-infrastructure factors such as a lack of skilled staff or a lack of proper process controls are as important as infrastructure condition as contributors to poor performance, said DWS director-general Dr Sean Phillips.

Unpacking the results, he pointed out that assessment found that Gauteng, which has the highest percentage, at 62%, of drinking water systems with excellent or good performance, has the lowest shortfalls of qualified staff.

Comparatively, the Northern Cape, which has the highest percentage, at 87%, of drinking water systems with poor or critical performance, a significant deterioration on the 48% recorded in 2014, has the highest shortfalls of qualified staff.

"Based on water quality tests carried out by municipalities themselves during the 2021/22 municipal financial year, 54% of water supply systems achieved excellent or good microbiological water quality compliance and 46% achieved poor or bad microbiological water quality compliance," he continued.

In 2014, 5% of water supply systems achieved poor or bad microbiological water quality compliance.

Further, in terms of chemical water quality compliance, 76% of systems achieved excellent or good, while 24% of systems were unacceptable, compared with 15% in 2014.

Phillips assured that DWS has sent noncompliance letters to the municipalities with systems which scored poorly or badly in terms of drinking water quality in the 2023 Blue Drop Report, requiring the municipalities to inform their residents should they still have poor or bad compliance.

During the audit period, 14 WSAs did not report water quality data - or provide any other evidence that they have been testing their water quality - to the DWS, with noncompliance notices issued to those municipalities, instructing them to issue advisory notices to their residents that their water might not be safe to drink if it has not been properly tested.

"Some of these WSAs indicated that they are in the process of appointing laboratories, others commenced with sampling, and others provided evidence of testing and achieving drinking water quality, and where necessary these WSAs did issue advisory notices," Phillips commented.

Meanwhile, the No Drop Report, which assesses the status of water losses and nonrevenue water, a...