The Industrial Development Corporation (IDC) has made about R5.1 billion available to develop liquid biofuels to support the production of 300 million litres of the greener fuels every year from 2016 on.
Standard Bank Corporate and Investment Banking’s advisory team told the portfolio committee on energy on Friday that it was initially estimated in 2007 that R3.2bn would be invested by the IDC and the Central Energy Fund into biofuel projects.
The project would explore feedstock such as maize, sugar cane, sorghum, soya beans and algae for fuels including bioethanol and biodiesel.
Sugar cane companies considering the option of using the crop for fuel have estimated that replacing 10 percent of the country’s liquid fuel supply with sugar-based bioethanol could create 110 000 jobs in the industry.
However, Nicholas Green, the head of oil and gas at the Standard Bank unit, said the challenge with this feedstock was that new crops had higher water requirements.
The debate about biofuel crops endangering food security made the use of maize questionable. If only surplus crops were used to produce fuel, it would not be economically sustainable as the availability of feedstock would not be guaranteed.
Demand for sorghum, on the other hand, had decreased over the years and the crop was drought resistant. Therefore the food versus fuel debate is less critical, making it a potential feedstock for ethanol.
The construction of a sorghum plant at Cradock, which will produce 90 million litres of bioethanol a year, is set to commence this year.
On biodiesel, Green said Sasol, Rhodes University and the Nelson Mandela Metropolitan University were doing research on using algae.
The bank’s advisory team said South Africa should take advantage of the increased gas and oil exploration in Africa and use the full extent of its gas resources, if natural gas was to become a strategic part of the energy plan, as the National Development Plan envisaged.
Green said gas processing facilities on the West Coast could reduce the country’s dependence on imported liquefied petroleum gas (LPG) and might be the answer to the current refinery constraints.
The proposed Ibhubesi independent power producer (IPP) on the West Coast would produce both LPG and condensate, a by-product generated in the gas refining process which could be transported to energy offtakers.
Green said LPG could be made available faster than electricity generation, in terms of infrastructure and at a substantially lower cost.
The gas would help in smoothing out energy supply by assisting Eskom with load management during seasonal demand changes.
The portfolio committee said these projects presented a plan B for South Africa, should the nuclear option not work out as part of the energy plan. It said the integrated energy plan needed to be decentralised from local power production and be open to opportunities presented by natural gas discoveries elsewhere in Africa.
Mozambique, for instance, has had major gas discoveries of approximately 160 trillion cubic feet. These discoveries position it as the tenth-largest gas exporte and fourth in terms of export potential for liquefied natural gas.