Sunrise Energy's R1bn LPG storage facility to boost energy security, downstream competition

Sunrise Energy's R1.02-billion open-access liquefied petroleum gas (LPG) import and storage terminal, in Saldanha Bay, in the Western Cape, will enable the import of LPG in large quantities, boosting regional energy security and increasing downstream competition.

The facility, which is Africa's largest open-access LPG import terminal was launched on Tuesday. It was built to advance the development of the oil and gas sector in the province. 

The facility is a public–private partnership between Mining, Oil & Gas Services (Mogs) and the Industrial Development Corporation (IDC).

Sunrise Energy is 60% owned by Mogs, with the IDC holding a 31% stake and another company, ilitha, holding 9%. Royal Bafokeng Holdings owns 51% of Mogs, with the balance being held by the Public Investment Corporation (PIC).

Economic Development Minister Ebrahim Patel said the launch of Sunrise Energy consolidated the West Coast’s role as South Africa’s energy corridor.

“The 140 km corridor contains the most diversified energy mix in the country, including petroleum, gas, renewables, oil and nuclear energy,” he noted.

He added that the facility would provide a R1-billion boost to the country’s economy, noting that it created economic opportunities to distribute gas to end-users.

Also speaking at the launch, Energy Minister Mmamoloko Kubayi said energy was a key driver of South Africa’s economic growth.

“The sustainability of the country’s energy supply includes a diversified energy mix. For cooking and space heating, the efficiency of LPG is unrivalled,” she said.

She pointed out that energy in sustainable quantities and at affordable prices was crucial in contributing to job creation and poverty eradication.

“Access to energy is critical to markets for economic growth. Having realised the benefits of LPG, it should be promoted on the same level as other energy sources,” she said.

PIC corporate affairs head Deon Botha said the investment in Sunrise Energy was a significant PIC contribution to energy security and inclusive economic growth.

“It is part of our impact investing programme,” he noted, adding that energy ranked high in the PIC’s economic infrastructure investment programme.

“We believe that meaningful economic growth can only be achieved when there is enough energy to keep it going,” he said.

Speaking to the media during a tour of the facility, Sunrise Energy CEO Pieter Coetzee said LPG had the potential to displace 1.2 GW of electricity during peak hours.

“LPG could help transform South Africa’s energy space into a more favourable mix. LPG is between 20% and 50% more cost effective than electricity for light commercial and domestic thermal applications,” he said. 

In April, South Africa’s Competition Commission released a report based on its market inquiry into the domestic LPG sector.

In the report, the commission stressed the need for more LPG import capacity to enable greater competition in the LPG industry.

“Sunrise operates an open-access model, enabling the entry of new participants in the LPG industry, increasing competition,” said Coetzee.

He stressed that the facility would not own or trade LPG products, but would facilitate the provision of LPG to the market at competitive pricing and maximum tariffs set and regulated by the National Energy Regulator of South Africa.

He added that South Africa was expected to experience significant growth in gas demand, with LPG being the only viable non-pipeline distributable gas for light industrial, commercial and domestic use.

“The removal of supply constraints will result in a demand-driven market, creating growth opportunities,” he said.

With a throughput capacity of 200 000 metric tons of LPG per year, the import and storage facility will provide alternative, safer energy, allowing for cheaper, cleaner alternatives.

“In recent years, the Western Cape has experienced shortages amounting to half of its monthly 11 000 t peak demand for LPG. This new terminal’s import capacity will substantially address this shortfall,” he added.

PARTNERSHIPS
In addition to advancing industrialisation efforts in the sector, Sunrise has invested in an on-site black-owned LPG bottling facility, Kusile Gas, which will create local employment and small-business opportunities in underserved areas.
 
“Sunrise Energy aims to strengthen the country’s broad-based transformation objectives through sound partnerships,” Botha said.

Coetzee, meanwhile, noted that Sunrise was in negotiations with State-owned Transnet to build a R50-million railway line that would open up the market for LPG in the Free State, Namibia, Botswana and Mozambique.

“The railway line will hopefully be up and running by 2018,” he said.