South Africa imports around two-thirds of its liquid fuels. The government’s strategy regarding security of liquid fuel supply assumes that sufficient crude oil imports will be both available and affordable in the foreseeable future.
The emphasis has been on ensuring that adequate quantities of refined products are available to meet rising demand, especially in the economic heartland of Gauteng.
Hence Transnet’s new multi-product pipeline from Durban and PetroSA’s proposed new 400 000-barrels-a-day refinery at Coega (although the logistical questions about transporting products to distant markets remain unanswered).
However, these assumptions are out of alignment with mounting scientific evidence on the depletion of finite global oil resources and the empirical phenomenon termed “peak oil”.
Historical data show that in countless individual oil fields and in large regions such as Europe and North America, oil production has risen to a maximum rate — a peak — and then declined as reserves are depleted. It is inevitable that global oil production will, at some point, peak and decline irreversibly — economic and geopolitical factors will influence the exact timing by a few years, at most.
A comprehensive survey of a large body of academic research and industry reports on peak oil published last October by the United Kingdom’s Energy Research Centre concluded that “there is a significant risk of a peak before 2020”.
This year’s Gulf of Mexico oil spill disaster highlighted the fact that most of the world’s easily accessible oil has already been exploited and the frontier for new oil exploration and extraction has moved into technically challenging, costly and risky areas. This trend clearly signals that the era of cheap oil is over, as the International Energy Agency has acknowledged.
Meanwhile, demand for oil is growing very rapidly in many developing economies — most notably China and India. Consumption has also been rising steadily in many of the oil exporting countries that subsidise domestic fuel. As a partial result, total world oil exports have been falling since 2005 — a major factor underlying the subsequent upward trend in international oil prices.
In the face of heavy global dependence on oil — especially for transport — looming supply constraints are set to produce a serious oil crunch.
The UK Industry Taskforce on Peak Oil and Energy Security stated in a recent report that, “We must plan for a world in which oil prices are likely to be both higher and more volatile and where oil price shocks have the potential to destabilise economic, political and social activity.”
South Africa’s experience demonstrates that rising fuel prices lead to higher prices of food and many other goods and services, creating hardship, especially for the poor.
A seminal report commissioned by the United States department of energy in 2005 warned that mitigating actions needed to be implemented at least 10 years before the global oil peak, to avoid the most serious economic and social dislocations.
Within the global oil context, therefore, the primary goal of liquid fuel security in South Africa should be to reduce reliance on imported crude and refined oil. This can be approached in two ways: by developing alternative domestic sources of supply, and by managing demand.
On the supply side, exploration for new offshore oil fields is continuing, but banking on substantial discoveries would be imprudent. If they did materialise, oil flows would be realised only after several years and would likely be sold at import parity prices.
A second option, under consideration for some time, is for Sasol to build another coal-to-liquids plant adjacent to the Waterberg coal field.
Such a project faces major obstacles in terms of water scarcity and pollution concerns — not least carbon dioxide emissions.
Third, as the Department of Energy has recognised, the potential of biofuels is severely circumscribed by the country’s limited arable land and water resources.
Given the supply-side constraints on liquid fuels, more attention should be given to the demand side.
Since more than three-quarters of the country’s oil is consumed by the transport sector, this is where the major conservation initiatives should take place.
There are many feasible options for curtailing unnecessary fuel use and raising efficiency. These include reducing road speed limits, improving traffic management systems, raising vehicle fuel-efficiency standards (as the government has begun to do), encouraging car-pooling (by the introduction of dedicated lanes, for instance) and awareness programmes to promote efficient driver behaviour.
There also needs to be much greater expenditure on public transport systems, especially considering that about half South Africa’s population already lacks access to motorised transport.
Integrated rapid transit systems under development in Johannesburg and Cape Town are positive developments that need to be expanded and accelerated. And South Africa’s long-neglected rail system is in dire need of refurbishment and capacity additions, prioritising major freight corridors.
Liquid energy has for too long been taken for granted in this country. It is time for it to be treated as seriously as electricity — before another crisis engulfs us.
Jeremy Wakeford is chairperson of the Association for the Study of Peak Oil South Africa