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Radical changes ahead in oil and gas industry – Experts

Climate change policies, green investment and changes in consumer behaviour are beginning to bite and are expected to have a major impact on oil consumption throughout the world, a special seminar on the future of oil and gas has heard.

“The collapse in the price of oil and the failure of the market to recover has caused shock. This has led to questions being asked and beliefs and business models being challenged,” said Institution of Chemical Engineers (IChemE) EnergyCentre chairperson Stefaan Simons.

Electric cars are expected to spark one of the greatest shifts.

“It’s quite possible that we are even underestimating what we could have in eight to ten years from now,” suggested infrastructure and regulatory economist Grove Steyn.

“Electric vehicles will move from being an exotic luxury item to becoming the workhorse of the economy. It’s likely to happen within the next ten years and have an enormous impact on our industry,” he added.

South African National Energy Association secretary general Dave Wright said South Africa was expected to be slower on the uptake than some developed countries.

“We must take into account the average age of vehicles in South Africa is around 11 to 13 years old, so the transition to electric vehicles will take some time.”

The seminar was held jointly by IChemE and the University of Cape Town’s (UCT’s) Chemical Engineering department to look into the long-term future of oil and gas.

It also explored the dampening effect the move to electric cars may have on oil refineries.

Some experts suggested that South Africa should rule out the idea of a new refinery.

“There is no economic case for building an additional refineryin South Africa. It’s not going to work,” commented Steyn. “We would be competing with large global refineries and high-quality product is available all over the world.”

Instead, he said, imports would be more cost-effective and that South Africa needed to invest more in storageinfrastructure.

Wright suggested oil refineries in Africa focus more on marketing and selling their crude oil on the African continent, where there may be greater opportunity.

“If they want to stay in business, they should look to sell crude in Africa.”

South Africa is also expected to follow the trend in the Europeand the UK where consumers have largely turned their backs on diesel.

“Diesel is under attack in Europe and the UK. They’re focused on phasing out diesel engines and making diesel fuel very expensive. It’s difficult to buy diesel cars. We’ll see that shrinking somewhat,” said Simons.

South African Oil and Gas Alliance CEO Niall Driver said he would be watching closely to see if the liquefied natural gas(LNG)-to-power procurement programme will be signed by the Energy Minister this year.

“This is an opportunity to showcase to the world that we can do really big projects in South Africa. The importation of LNGthrough Richards Bay, Coega and Saldanha could drive large-scale development around ports.”

Participants in the seminar also called for greater clarity in regulatory and policy frameworks.

The workshop forms part of a global discourse, with earlier workshops held in the UK, Australia, Malaysia and Singapore.

UCT Chemical Engineering department environmental and process systems engineering director Harro von Blottnitz, meanwhile, said the seminar was vital in defining a joint vision for the domestic oil and gas industry.

“While there has been robust public and professional discussion about challenges in the electricity, and now watersector, there is very little understanding of vulnerability to possible acute disturbances in the transport and fuels sector.

“Given that our largest import bill and the second largest contribution to our nation’s carbon footprint comes from transport, we see much scope for radical thinking about techno-economic transformation in this sector,” he said. Creamer Media.

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