Nuclear Africa 2014

Rob AdamNIASA

Contents

• Global situation

• Local situation

• Perspectives of industry

• 2014.

Global situation

Political fallout

Source: WNA (2013)Source: WNA (2013)

Expensive upgrades

Source: WNA (2013)Source: WNA (2013)

Financial challenges

Source: WNA (2013)Source: WNA (2013)

Positive developments

Source: WNA (2013)Source: WNA (2013)

Nuclear drivers

Source: WNA (2013)Source: WNA (2013)

New build map

Source: WNA (2013)Source: WNA (2013)

Future plans

Source: WNA (2013)Source: WNA (2013)

Local situation

•• President now chairs (NEC)2

• New Minister of Energy

• BRICS dynamic

• Mozambican offshore gas

• Karoo shale gas

What has changed over the past 2 years?

1313

BRICS dynamics

•• SA is an enthusiastic new member

• All other BRICS countries have nuclear (and space!) programmes.

• Shifts in relations with Western countries as a result of African geopolitics.

• SA – Russia trade levels currently low

• China has several nuclear offerings

1414

Recoverable East African gas reserves

Source: D. Ledesma, “East Africa Gas – Potential for Export”, 2013.Source: D. Ledesma, “East Africa Gas – Potential for Export”, 2013.

Trillion cubic feetTrillion cubic feet

1515

Is East African gas a baseload option?

No problem really. Much longer pipelines reliably deliver gas to much larger markets.

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• In 2009 Sasol was a major player but has been overtaken by Anadarko (USA) and ENI (Italy).

• Cost of development of LNG train is $US 12 – 20 bn.

Australian offshore platform will cost $US 50 – 60 bn.• Mozambique GDP = $US14 bn, Tanzania GDP = $US 28 bn. Pressure will therefore be put on these governments to trade equity for operational contributions.

• The conclusion is that these resources will not be controlled by Africa.

Who will own the value chain?

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Energy security? Conflict returns to Mozambique after 21 years

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Initial shale gas success in the US was driven by 9 enablers

•• Good understanding of a large high quality resource base.

• Ease of land accumulation.

• Water availability and lenient environmental regulations.

• Clear policy and fiscal regime.

• Availability of capital.

• Technology evolution and aggressive risk appetite.

• Sustained periods of high gas prices.

• Some available pipeline infrastructure.

• Developed oilfield service support network.

Source: McKinsey (2013)Source: McKinsey (2013)

1919

Shale gas development typically follows five phases.

Source: McKinsey (2013)Source: McKinsey (2013)

2020

But it takes 1000 – 1500 wells for a basin to be proven.

South African has significant resources

Source: McKinsey (2013)Source: McKinsey (2013)

2121Source: McKinsey (2013)Source: McKinsey (2013)

Cost of extraction ($US6 per MMBtu is the ceiling)

2222

Fracked landscape in Wyoming

Perspectives of industry

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Hindsight and foresight• SA Industry has spent several hundred million rand since

2007 preparing for the new nuclear build.

• It’s been a little like training for the Olympics when the date is unknown. There is a danger, on the one hand, of peaking too soon, and losing key people as the process is delayed. There is a danger, on the other hand, of being unprepared.

• Preparation is not just technical, it is financial too.

There are implications for how industry prepares itself.

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BOO, EPCM, EPC…??

Will procurement go in two phases and choose the tech partner first and then

allocate localization?

Different strategies are appropriate depending on the answer to this question.

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Guarantees and bonds

• In order to bid for new build contracts, companies will need to put financial guarantees in place:

– Parent company guarantees are typically 30% of the project value– Performance bonds are typically 10%

• On a R150 billion project, with 40% localization, this amounts to R24 billion.

• The market capitalization of the entire South African construction industry is less than R50 billion.

• Government will set a high bar for localization. Will it incentivize by instructing Eskom to reduce the bond requirements for local components of bids?

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2014

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2014• There is a new urgency in government regarding the

nuclear procurement process.

• It will be managed this time to maximize localization. This is different from the 2007 emphasis. Many of us here in this room can congratulate ourselves on a successful campaign in this regard!

• We are much more prepared than we were 7 years ago. The Eastern Cape province sees this as a massive opportunity.

• Emphasis must also be placed on the human resource pipeline

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HR requirements to build 9600MW

• At the height of the 9600 MW construction programme we will need:

– 1620 engineers– 1770 technicians– 180 scientists– 220 project managers– 30 planners– 200 instructors– 440 security staff– 22650 artisans– 750 other skilled staff

Thank You