17 OCTOBER 2001
Chairman
Fellow Ministers,
Honoured Guests,
Good morning and welcome to Cape Town especially those of you who have travelled far.
I am honoured to be here again with you in this conference where issues relating to the Africa upstream oil and gas industry will be, discussed and debated for the benefit investor and Africa and her peoples.
Our President, together with the leaders of the rest of the continent recently approved the Millennium Partnership for the New African Initiative. One of the aspirations of this programme is to accelerate the development of energy access in the region. Energy has been identified as a key component for economic growth of Africa. Oil and gas are key energy inputs and your industry has a significant role to play in the upliftment of our continent, which will result in the alleviation of poverty and improvement in quality of life for all.
Although Africa represents 13% of the world's population, it only consumes 3% of the total energy available thus reflecting the state of development of the continent. In 1997, five countries in Africa, that is Algeria, Egypt, Libya, Nigeria and South Africa accounted for 78% of the energy production in Africa. The benefits of ensuring universal access to energy in a continent starved of efficient clean and reliable sources of energy cannot be overestimated. Household energy in many parts of Africa is fuelled by biomass that is collected free of charge by household members, usually the woman and girl children. This practise is resulting in severe deforestation across Africa. Let the exploitation of the girl child who becomes a victim of child labour.
Many of the challenges of underdeveloped if not all, to a greater or lesser extent can be facilitated by the provision of an energy infrastructure. That is why the Energy Provision is key programme of the New African Initiative.
As the UN Secretary General stated in his Millennium report: African growth rates have lagged behind any other group of middle or low-income countries. Infrastructure requirements are enormous, particularly in the areas of energy supply and distribution and communications. Energy consumption per person is the lowest in the world". What has to be achieved in Africa in relation to Energy will define Africa's future.
Of the more than 722 million people in Africa, (1995 figures), 452 million live in rural areas. Very few of these rural people have access to any form of modern energy such as electricity. Access to liquids fuels across Africa is problematic. Few countries have progressed the furthest in supply of energy to rural areas by means of electrification; SA is one, but we all still have a long way to go. We have provided electricity to more than 70% of our people.
For SADC we have made great strides in pulling together a common power pool and a well functioning transmission grid, which connects Southern Africa and facilitate power trade.
We are ready for a common Electricity Regulator to be called Regional Electricity Regulating Agency (RERA). In Oil and Gas we have to be moving in that direction as well. A much better co-ordinated infrastructure for oil and Gas and standardization of products specifications, vehicles even possibly LPG appliances which remain expensive and therefore exclusive.
Within Africa, with few exceptions such as Angola, Nigeria and Equatorial Guinea, crude oil is the largest foreign exchange outflow. Accounting in most countries for in excess of 15% of the foreign exchange requirements. In South Africa we are in a similar situation. Our gold exports barely cover the costs of our fuel imports, oil makes up 15% of our foreign exchange expenditure.
Many African countries who are oil producers also have economies that are not diversified creating much dependency on oil or gas, in some cases the only export product.
Nevertheless indigenous fuel discoveries, no matter how small can play a significant role in balancing the foreign exchange equation and thus providing funds for economic growth, which should be used for diversifying the economies. Even though SA is largely a consumer nation we have an interest in the viability and stability of producer economies, greater price stability somewhere in and around lower 20s US$ a barrel as against swings of between 16 US$ and 30 US$ a barrel
The BP statistical review of world energy for 2001 paints a bleak picture. Of the world's total oil reserves of about 971 thousand million barrels only 75 thousand million or about 7.5 % are in Africa.
Not a dissimilar situation exists with gas, whereby of the worlds total proved reserves of about a 150 million Trillion cubic feet, only about 11 million trillion cubic feet or 7% are in Africa.
The majority of the world's proved oil reserves, some 65% are in the middle east, Similarly the majority of the worlds gas reserves, some 70%, are in the former soviet union and middle east.
The BP review gives an impression that although there was a significant increase in world oil reserves up until 1989, it would appear that reserves have plateaued since then. The same appears to be true of natural gas, that world reserves increased steadily until 1992, where after, the reserves appear to have plateaued.
This raises some questions for Africa; It could imply that future world reserves are going to be more difficult to locate and thus the supply will be more expensive, exacerbating the foreign exchange problem, or it could mean that due to unattractive investment regimes exploration companies like yourselves are not pursuing exploration as vigorously as in the past. The answer is probably a combination of the two. The challenge faces both consumer and producer African nations. I must add for those for those projects that are coming on stream we need to ensure that there are benefits for the affected communities. For us in SA that is a fundamental principle that we are to pursue with vigour.
Natural gas has a key role to play. It has for to long been flared as a waste fuel all across Africa, including South Africa. It is pleasing to see that across Africa flaring or the wasting of this valuable resource is being stopped and that projects are being proposed to develop these resources. I envisage a day, hopefully in our lifetime that we can seriously think about a pan-African gas network in not a dissimilar manner to our growing African electricity network. Some components of this are already being put in place with the West African Gas pipeline and our own Mozambique to South Africa gas pipeline. As a country that will host the 2002 UN conference on sustainable development we hope to put all these issues high on the world agenda. We do hope many of you will be at the summit.
I would like to touch on some of the key issues on the SA situation. Jack Holliday, chief executive of our Petroleum Agency will be giving you more detail tomorrow.
On the upstream side, substantial progress has been made with the separation of the commercial and regulatory roles and the establishment of the Petroleum Agency. We are proud of the work that the Agency has done in opening up South Africa to international exploration companies. It has not only established itself in South Africa, but also internationally, where it is recognised for the high quality of technical work and posters, which can be viewed upstairs.
The Agency's role in promoting oil and gas exploration will be further enhanced with the publication before the end of November of the new "Minerals and Petroleum Development Bill". We have taken note of all of the comments and suggestions received by your industry and together with the Agency have complied a new draft, which we believe will ensure that South Africa remains investor friendly. We thank you for your contribution and to those of you who made inputs also to the Gas Regulator Bill.
On the public sector side plans are rapidly reaching finalisation for the merger of the state exploration and production company, Soekor, and the gas to liquid fuels facility, Mossgas and SFF into a single integrated oil and gas exploration, production, refining and trading company, to be called "PetroGSA". This has been a long complicated process, establishing common financial frameworks, converting non-taxing paying entities into tax paying entities, developing sound business plans and bringing it all together. I am pleased to say that I believe South Africa will be proud of the final product.
On the licensing side, I am pleased to advise that the Agency has recently passed to my department two new exploration leases for approval. This will bring to seven the number of exploration licenses in operation offshore our coast. I remain very proud and optimistic about the progress made by Mvelaphanda and Forrest oil on Ibhubesi Gas Project.
On the natural gas side, you may remember that last year we reported that South African government, Mozambique Government and Sasol had entered into a basis of agreement for a gas pipeline between our two countries. I am pleased to say that Cabinet and the Sasol board have recently approved the definitive agreement. My department is presently finalising discussions with Saol and Mozambique regarding the construction of this pipeline. Government's interest in the pipeline will be held by iGas, a newly formed subsidiary of CEF, established by government to facilitate and promote the development of gas.
I have no doubt that once this gas from the Pande and Tename gas fields in Mozambique arrives in South Africa, that the economic benefits for the entire region will be immense and will go some way to addressing the problems of the region I referred to earlier.
My department is already turning its attention to the Western parts of south Africa and addressing the issue of bring natural gas into the western cape from the gas fields offshore Namibia and our own west coast. Many possibilities such as power generation, mineral beneficiation, industrial usage and also as a feedstock for Mossgas are being evaluated.
Cabinet has recently approved that our newly formed PetroSA take a lead in these investigations. Again the introduction of an environmental, user-friendly energy into our energy mix will enhance the opportunities for economic growth for the entire region.
To facilitate the development of gas my department recently had approved through the national assembly the Gas Act. The purpose of the Act is to establish a gas regulator for the downstream sector and thus to provide a clear playing field and rules of the game for transmission lines and distribution networks.
A number of new bills such as the petroleum pipelines bill have also been recently published to facilitate the private ownership and development of petroleum pipelines, thus facilitating investment in our industry.
The exciting progress being made by the oil majors under the liquid fuel Black Economic Empowerment (BEE) charter; which includes offering 25% of their Equity to BEE is part of changing the profile and regulatory landscape of the industry. The charter also covers procurement from BEE. In that regard we need to develop capacity for effective BEE supplies who must have the capacity to supply anywhere else in African and the world.
Skills are essential for the growth of our industry across Africa. In South Africa the Petroleum Agency has established the Upstream Training Trust with the objectives of providing funds for educational bridging projects designed to encourage young learners to become scientists and engineers. In addition the Trust provides funds to tertiary institutions for deserving students studying in fields related to our industry. In addition to this a number of important training opportunities have been established, the Trust, together with CEF and Energy Africa, fund the "South African Petroleum Geosciences Programme". This is a joint programme between the three universities of the western cape, namely University of Cape Town, University of Western Cape and University of Stellenbosch to provide both undergraduate and post graduate studies in petroleum geology and geophysics. This is a first for South Africa and 40 students at various levels in the course will be completing their first year shortly.
Much needs to be done in training and skills development and I implore all of our corporate investors across Africa to assist in developing our people. With skilled people Africa has the ability to develop into a giant market.
Chair, I am also pleased to announce that South Africa has submitted a bid to host the World Petroleum Congress in 2005 on the African continent with the full support of all of our SADC neighbours. As a result of the tremendous support received by the members of the World Petroleum Congress, we are the only bidder. As with the Olympics, an executive board delegation will be visiting South Africa to evaluate our facilities, however we are confident that we can do Africa, the WPC and industry proud.
We request that you all guide your respective national committees to support us on behalf of Africa and assist in marketing, supporting and promoting the World Petroleum Congress 2005 for Africa.
Chairperson
Ladies and gentlemen I have touched on many aspects of our industry. Africa needs energy to grow, with out your support, advise, technology and funds it will not be able to achieve this. I hope your deliberations here in Cape Town will lead to ideas and suggestions with which we as governments can build on to support African growth.
God Bless
Thank You.