EPCM is appointed to provide RBIDZ and KZNEDTEA with consultancy services to conduct a feasibility study to determine the viability of establishing an oil and gas hub in the port of Richards Bay, South Africa. The government of South Africa is strongly implementing the development of oil and gas infrastructure to meet our growing energy demand and driving the industry towards cleaner sustainable energy resources. The KZN Department of Economic Development, Tourism and Environmental Affairs is funding the study.
EPCM identified key investment opportunities for RBIDZ in alignment with government strategies and policies:
- Industry and Situation Analysis: Identified potential key competitor supply markets for natural gas, crude oil and white (petroleum) products, based on a literature review on pricing tariffs, exploration, production, timeframes and uncontracted volumes for new and existing markets. Both a PESTEL and SWOT Analyses were conducted to identify both internal and external critical impacts, opportunities, strength, threats and risks relating to the hub. Mitigating strategies for both the threats and the risks were identified and detailed.
- Market Analysis: Assessed the Market Demand, both in Sub-Saharan Africa and the Local demand, primarily on research and simulations as well as telephonic interviews and engagements for Africa and the East Coast Corridor, focusing on South Africa and the Richards Bay area.
- Infrastructure Assessment: – Accessing the existing and planned infrastructure within Richards Bay was vital to determine the feasibility of establishing the Oil and Gas Hub within Richards Bay. The infrastructure in Richards Bay will support the Oil and Gas Hub through transportation, distribution, communication and will provide the required utilities for the Hub. The aim of the assessment was to establish a baseline regarding the planned and existing infrastructure, and to highlight the required infrastructure to be upgraded, for the following networks:
- Richards Bay Port Network
- Road Network
- Rail Network
- Oil and Gas Pipeline Network
- Electrical Transmission Network
- Communication Network
- Municipal Water and Sanitation Network
- Airport Network
- Regulatory Framework Assessment: Conducted a legal framework review on the industry for the feasibility study, considering various applicable acts and legislations. The legislation was divided into legislation that applies to gas, power and petroleum. The regulatory framework also provided an overview of the national, provincial/regional and local bi-laws.
- Value Chain and Opportunity Identification Analysis: Analyzed the existing oil and gas value chain, in an effort to identify possible opportunities that will result from a hub in Richards Bay, including:
- Oil and Gas Sector Value Chain – Defined the upstream, midstream and downstream oil and gas value chain in South Africa. Identified analysed and prioritised oil and gas value chain opportunities for Richards Bay in the short-, medium- and long-term.
- Richards Bay Oil and Gas Hub Services and Products – Investigated services and products that could potentially be provided to the value chain opportunities. The services and products were divided into oil and gas specialist, specialists, non-specialists and supply chain services. Typical specialisation oil and gas services and products to be provided by specialised oil and gas companies that will potentially be located within the hub were identified.
- Market Penetration Strategy – Potential markets, including specific export markets were identified and six strategies were explained to successful penetrate a market. Furthermore, the value proposition of establishing an oil and gas hub in Richards Bay was clearly outline.
- Catalytic Projects – Catalytic projects that could potentially add value to the oil and gas initiative were identified for both local and regional projects.
- Richards Bay, One-Stop-Shop – Assessed the One Stop Shop in KwaZulu-Natal (KZN) and explained and listed the benefits and services offered by the One Stop Shop to support the hub.
- Key Requirement for Success – Key requirements to realise the identified opportunities were identified and analysed. The key requirements were divided into the following categories; government, business community, labour force and general society.
- Site Assessment and Broad Infrastructural Plan: Developed a Site Selection Process and Site Selection Criteria to identify the most suitable site for the oil and gas opportunities. Based on the abovementioned process and criteria the sites shown in the below figure reduced to three possible sites.
The three sites were assessed in detail considering among other the following:
- Development sensitivity
- Geotechnical constraints
- Groundwater sensitivity
- Air quality constraints
- Biodiversity occurrence
- Wet land occurrence
- Proximity to site from:
- Road network
- Rail network
- Electrical network
- Water sources/treatments
- Richards Bay Port
- Residential areas
- High-Level EIA: Provided the potential environmental risks, time frames and associated costs regarding the Environmental Impact Assessment and the required licenses, etc. Mitigating strategies were offered for all potential spheres, human, animal, land, sea, air, etc.
- Socio-Economic Impact Assessment: Identified and quantified the socio-economic benefits of the oil and gas hub.
- Labour Market Assessment:
- Labour Market Dynamics – Investigated the labour market dynamics both nationally and provincially to establish a baseline of the labour force.
- Job Creation – Estimated the number of jobs expected to be created by the oil and gas hub opportunities for short-, medium- and long-term, including employment multipliers.
- Current Skills Gap and Future Skills Development – Evaluated the current skills gaps in the oil and gas industry and estimated the required scarce skills. Listed the accredited institutions to offer and close the scarce skills gaps.
- Financial and Economic Assessment: Assessed the financial viability and sustainably including pricing tariffs and project phasing, including:
- Forecasted and modelled the project’s financials including among other; NPV, financial ratios, break even analysis, cost benefit analysis.
- Assessed thorough costing/investment required to create the hub, developed a funding proposal, undertook a financial risk assessment and management
- Calculated estimated Foreign Direct Investment/private sector investment required.
- Undertook a thorough assessment of whether or not the project is affordable taking into account governments economic resources and whether or not the return on investment would be sufficient.
- Implementation Plan (Roadmap development): Developed a clear and comprehensive implementation plan with; clear timelines, deliverables and milestones, implementation agents, roles and responsibilities, budgets, key performance indicators and key intervention actions required to develop and operationalize the RBIDZ Oil and Gas Hub, thoroughly sequentially stipulating action items.
Richards Bay Industrial Development Zone (RBIDZ) and KZN EDTEA
Richards Bay, South Africa