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Diesel is an important fuel source in South Africa, as it is widely used in the transport, agricultural and mining sectors. However, it has also become a critical fuel for Eskom, households and power generation companies to mitigate the economic costs of prolonged load shedding – leading experts to worry that the country’s fuel supply chain is under pressure.
According to City Press, the reason for concern is the massive increase in diesel consumption by Eskom, the lack of fuel storage facilities and refineries in operation, as well as the fact that South Africa imports almost all of its fuel.
Industry feedback indicated that diesel supplies were under pressure, the paper said.
Eskom has bought 37% more diesel over the past nine months to keep its open-cycle gas turbines (OCGTs) running than in the same period of the previous financial year – buying around 722 million liters of diesel in Q3 2022 compared to 526.3 million liters in 2021, City Press announced.
The company’s OCGTs are designed to operate only during periods of peak energy demand when conventional coal-fired stations cannot handle the excess.
This sharp increase in diesel usage has led to Eskom announcing that it will run out of diesel in November 2022.
Adding to the problem is that South Africa is a net fuel importer – importing 90% of our crude oil – leaving the country vulnerable to global market fluctuations and potential supply chain disruptions, Royale Energi Group chairman Mpho Dipela said.
The situation is aggravated by many closed refineries in the country. Currently, only Sasol’s refineries are operating.
South Africa also struggles with inadequate diesel storage and distribution infrastructure. There have been shortages at gas stations due to a lack of storage capacity and problems with the distribution network, including damaged pipelines and port bottlenecks over the past few months.
The Association of Liquid Fuel Wholesalers announced in October that fuel rationing could be introduced at the local level due to insufficient strategic fuel reserves and processing capacity.
Eskom recently received a significant bailout from PetroSA in the form of 50 million liters of diesel for maintenance of open cycle gas turbines (OCGTs). However, energy analyst Clyde Mallinson of Virtual Energy and Power said this would not last long.
On Friday (December 16), Eskom rolled back load shedding to stage 6, saying the escalation was necessitated by the failure of 8 generating units overnight and an over-reliance on open-cycle gas turbines and pumped storage generation that is rapidly depleting their reserves.
This is already a sign of how far 50 million liters of diesel will go. Elektroprivreda also requested R19.5 billion for the purchase of more diesel. However, the response from the Treasury was negative.
National Treasury said on December 8 that it is aware of the impact of Eskom’s diesel shortage on the country, but Eskom has not applied through the budget process for money to buy diesel, and simply does not have the money.
However, due to the importance of Eskom’s use of its OCGT to mitigate worsening load shedding, Treasury said discussions with the public utilities department and the power utility to find a solution were continuing.
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