The pragmatics of energy exploration – HCI response

Reading this, it’s easy to conclude that the environmental activists so intent on permanently stopping seismic surveys off the Wild Coast may have failed to see the broader picture. Journalists are taught to get both sides of an argument and to view the bigger picture when analysing or reporting. It is not a formula protagonists like when emotions are involved but we generally know we’re getting it right when both sides attack us. This is no different. By urging those corporates – which have some empathy with Hosken Consolidated Investments (HCI) and activists and litigants in this crucially important contestation – to read the painstakingly compiled pragmatic argument below, we hope to encourage constructive debate that takes account of the wider South African picture: people’s economic wellbeing as well as their environment. There is always a balance to be struck and, in this matter, too many people seem to be falling off the beam. – Chris Bateman 

Issued by the board of HCI: 

It is growing clearer by the day that seismic surveys are not themselves the cause of the call to action. What has offended is the fact that such surveys are part of a programme of exploration for oil and gas resources.

Environmental activists have raised the most frightening concerns that the seismic surveys around the South African coastline will cause irreparable harm to coastal communities and marine life. The allegations include suggestions that whales will die or be beached as a result and that fishing stocks will be decimated to the detriment of local fishing communities.

The implicit criticism of HCI is that whatever its reasons for believing it important to explore for hydrocarbons, it appears indifferent to the environmental damage caused in the process. This is absolutely untrue.

As difficult as it is to be heard in such an intensely emotional argument that has a great tendency to simply slip into character assassination, we must state our disagreement with these attacks.

We believe the concerns about such surveys are greatly exaggerated. They have certainly not been demonstrated in other such surveys around our coast. There have been at least 35 3D surveys conducted offshore of South Africa and numerous 2D seismic surveys with zero reports of death, strandings or serious injury to marine mammals from exposure to sound from seismic surveys.

There have not been any reported declines in fishing catches, and whales continue to swim up and down our coast. Indeed, there remains no evidence that sound from properly mitigated seismic surveys has had any biologically significant impact on any marine populations in areas in which surveys have been conducted anywhere in the world, despite hundreds of such surveys having been conducted over decades.

What is the real debate?

The aggrieved parties have brought several interdict applications to stop seismic surveys. Yet nowhere in the lengthy affidavits filed in such litigation is there a single suggestion of any additional mitigation measure beyond commitments already made in conducting the survey, other than a suggestion such surveys should not be permitted to start in December, but should await January.

Those peddling fears of catastrophic damage to the coastline and its inhabitants will no doubt refuse to accept that the hype that they have stirred up is unfounded. Nevertheless, we submit it is growing clearer by the day that seismic surveys are not themselves the cause of the call to action. What has offended is the fact that such surveys are part of a programme of exploration for oil and gas resources.

This is not a debate about whether coastline communities were adequately consulted. It is not a debate about whether there are any further mitigation steps which should be taken beyond those seen as adequate in the territorial waters of every other country in the world for safely conducting seismic studies.

Shell
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This is a campaign to stop all exploration for oil and gas in South Africa. It is part of an international campaign protesting against the contribution of fossil fuels to the climate crisis of global warming. We do not take issue with the objectives of such campaigners. The sooner the world moves to carbon neutrality the better for us all.

Our difference is we do not accept the viability of the solution they offer South Africa. Vilifying everyone who is involved even in carefully mitigated exploration work does not hasten us to a carbon-neutral South Africa. It simply inhibits growth and renders us dependent on oil imports.

HCI’s history in relation to issues of global warming

HCI has been very caught up in the need to develop renewable energy. For over a decade we nurtured and developed a renewable energy company, Montauk Renewables, which focuses on extracting methane gas from landfills and animal waste. We protected it from being dismembered by its creditors when Lehman Brothers collapsed in 2008 and through the Trump presidency when RIN prices fell by 80% and more. For years we tried to find our way to provide its services to municipal rubbish dumps in South Africa, but we have failed miserably to date.

We unbundled the company to our shareholders when it was self-sufficient and have since had the pleasure of helping it develop into a company three or four times the size of HCI. Part of that development has been to embrace newly developing technology to process solid animal waste by pyrolysis rather than just relying on gas digestion.

We have invested in a concentrated solar plant in Upington which now provides 100MW of electricity into the grid. We have provided solar energy from the roofs of several shopping centres, convention centres and other buildings we have built. We have invested millions into upgrading our motor component factory, enabling it to press larger components that will be required in the manufacture of electric vehicles (EVs). We have likewise invested substantially into stitch-bond machinery which currently recycles more than 50 million plastic bottles a year into bags and waterproofing products.

Our bus company is the only one in South Africa to have invested in electric buses to test whether we can find a pathway from an exclusively diesel fleet over time by wheeling renewable power to our depots.

We have invested in developing patented technology to accelerate the development of next-generation lithium batteries using palladium as a catalyst. Improving the efficiency of batteries is the central constraint limiting reliance on wind and solar-driven energy solutions to provide base electricity. Batteries are also the costliest component of EVs and the most limiting feature inhibiting their further development.

We have done all these things because we are alive to the urgent need for the world to move to greener technologies to limit global warming and plastic pollution.

Hard facts of life in SA

Nevertheless, we live in a world where it is not possible to ignore the realities of our country’s total dependence on fossil fuels, mainly coal for its base electricity and oil for its transport and petrochemical industries.

In all scenarios projecting the future mix of our energy sources by 2050, fossil fuels will still make up a large percentage of our country’s needs. The expected growth of our economy over that period means that even though the percentage of the energy mix that is based on coal is radically reduced, the actual volumes used will decline far more slowly.

Our country’s plan for 2050 is to grow renewable energy from currently providing about 5GW to providing 58GW of capacity. This is an absolutely massive transformation over the next 30 years. If one considers the fact that people build wind plants on the windiest locations first, growing this sector gets more challenging as one moves to secondary sites. Likewise, solar only operates for a third of the day, so installed capacity does not generate the same amount of electricity as a similar-sized fossil fuel power station over a 24-hour period. Even if we achieve this plan in full, renewable energy will make up less than half of the country’s needs.

Coal-fired power stations are planned to drop from providing over 80% of our current power to only 11.6%. While we will use far less coal, we will still have a third of the capacity of current coal-fired power stations in operation in 2050. Many coal mines and the jobs they provide will disappear. Those that remain will be only those that can meet the highest standards in relation to calorific value, sulphur and ash content, but such mines will still exist. We all hope renewables will provide as many jobs as are lost in closing coal-fired power stations, but they will be closed any way, according to the plan.

Importantly, the shift from coal is more pressing than the shift from oil and gas. It is irrefutable that gas-fired power stations are more energy efficient than coal-fired stations. Combined cycle turbine plants can achieve more than double the energy efficiency of a coal plant and can be switched on and off as required. They have peaking capacity that can fill the shortage of energy created when the wind dies down or it is a cloudy day. Gas is also much cleaner than coal as it lacks the sulphur dioxide and nitrogen oxide emissions of coal, let alone the high carbon footprint of transporting heavy quantities of coal.

In our country’s efforts to rapidly move away from coal, gas is a key transitional part of the transformation of the country’s energy mix. It is the heart of the capacity to generate base electricity essential to stabilise the whole grid. The national plan for 2050 is to have 27% of the energy for our national grid provided by combined cycle and open cycle gas turbines. HCI didn’t make this plan, but we do believe significant reliance on gas-fired power over the next 30 years is completely unavoidable.

Refusal to develop our own gas fields will render us absolutely dependent on importing gas, primarily through a proposed 2,600km pipeline from northern Mozambique to Richards Bay. Much of the route is politically unstable and is likely to be regularly disrupted, apart from the gas costing at least 20% more than locally produced gas.

Currently, we import about 500,000 barrels of crude oil a day into South Africa at a cost of more than R200-billion a year. This is not projected to decrease significantly over the next couple of decades despite hoped-for speed in the adoption of EVs. Without being negative about EVs, the fact is we are absolutely at the beginning of the transition in SA. Only 92 were sold last year. We are relying on the government to resolve load shedding, to roll out charging stations across the country and to throw in the sorts of tax breaks that incentivise other countries to convert, all of which is unlikely to see the majority of cars in South Africa being fully electric much before 2050, and the number of vehicles will have doubled by then.

Some people may believe the most important social contribution they can make is to inhibit oil exploration in South Africa, but their success will not end our demand for oil. It will simply leave us completely dependent on importing it at huge cost to our foreign reserves.

South Africa cannot afford to import oil and gas indefinitely

South Africa is a country with debt exceeding 80% of GDP. It devotes a quarter of all taxes currently collected to meeting interest payments on past debt. It has more people on state grants than there are employed.

The state’s carry in local oil and gas finds will save the country nothing less than R40-billion per year if we become self-sufficient in meeting our own needs, and this number will be exceeded if one includes additional taxes generated by such development. If one adds the benefit of the huge foreign investment into the country together with all the economic activity generated thereby, the number will increase even more significantly.

It is true we need to focus on developing the alternatives as rapidly as we can. HCI has not been a laggard in this regard. Nor will it be in the future. Nevertheless, insisting on total dependence on imports for oil and gas consumed in South Africa over the next 30 years, at huge additional cost, will make South Africans a lot poorer than they should be. Aspiring to be the only country in the world that sits on valuable resources it needs, but refuses to develop, is a luxury we simply cannot afford.

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