Expansion delay foils SA’s 2004 coal export plan

12th September 2003 By: Luxolo Tyali

The delay in the Richards Bay Coal Terminal’s (RBCT) phase five expansion from 72-million t/y to 82-million t/y, also known as the South Dunes Coal Terminal (SDCT) project, has resulted in South African coal exports languishing.

It has also created delays in the launching of some coal brownfields projects, as it is tied up closely with producers’ access to export infrastructure.

Minerals Bureau chief mineral economist Xavier Prevost believes the expansion is long overdue and the longer the delay the more crippling its effect on the South African export market.

“Even though it seems there can be a solution to the cause of the delay, the ten- million tons that could have been exported through SDCT will not reach export markets before the end of 2005,” says Prevost.

This means South Africa’s plans to export 84-million tons a year by next year cannot be realised, he states.

The RBCT expansion plan, which was announced in 2000, has seen a number of delays due to disagreements between the different parties involved, including transport utility Transnet, the National Ports Authority (NPA), and RBCT.

It is understood that the delay centres around the land lease agreement and the memorandum of understanding that had been signed by stake- holders in the project.

The disagreement stems from common-user capacity and throughputs, with Transnet requesting four-million tons of capacity, as opposed to the one-million tons that was offered by the RBCT at the onset of the project.

Another hurdle is believed to centre around RBCT’s intention to continue with existing land lease rates and agreements with NPA, while the ports authority and Transnet want to renegotiate.

Prevost is optimistic that there may be an under-standing between the parties in the near future, since it seems most of the major hurdles have been overcome by the new RBCT proposal, meaning the expansion may go ahead.

However, the industry will have to wait for another two years before construction is completed, Prevost notes.

With black economic empowerment (BEE) companies and junior entrepreneurs still looking to establish themselves in the export market, the delay could not have come at a worse time.

“This is probably the worst thing that ever happened to these companies, because the extra ten-million tons would have been crucial for their growth,” Prevost states.

In spite of the one- million-ton capacity that has been set aside by the RBCT on its existing structure to accommodate BEE companies, Prevost maintains that the access of export infrastructure for independent or smaller producers remains one of the most important challenges facing the coal industry in South Africa.

The RBCT consortium has agreed that, during the next three years, the exports of empowerment companies through the terminal will increase.

In effect, this means those companies that have been exporting through the terminal before will have to decrease their exports slightly.

“The problem is that we will not be able to increase RBCT’s capacity to make it accommodate more, but we can only improve its use in the meantime, as we await the much-needed expansion,” Prevost reiterates.

Future access to potential economically viable coal reserves is also still a major challenge to the industry, with empowerment entrepreneurs still actively seeking exploitable coal reserves and infrastructure to make their export bids viable. Prevost says existing high-quality reserves are not accessible to empowerment companies because they are in the hands of big companies.

He notes, however, that negotiations with these companies to release unused reserves to empowerment companies have been successful thus far, and some of the main producers have decided to divest themselves of their nonessential reserve blocks.

Lack of information on available reserves also adds to the problem.

The Coaltech 2020 research programme has released a list of some available reserves in the Witbank area, but Prevost believes the list does not contain sufficient quality reserve tonnage that can be used.

He stresses the importance of cooperation between government and the industry overcoming the problems facing the coal industry.

“If the government and the industry work together, coal’s place as South Africa’s cheapest and main energy source will remain unchallenged for a long time,” Prevost says.