IDZ in the balance for Saldanha Bay & the West Coast

March 14, 2013 by: admin

THE information document that accompanies the official application for designation and operator permit for the Saldanha Bay Industrial Development Zone (IDZ) information document makes a compelling ‘on-paper’ case for a West Coast oil and gas and marine repair engineering and logistics services couples.

But there are very real risks and threats.

In January public comment on the document was closed, and now it is a matter of time before government shows its enthusiasm (or lack thereof) for the project.

The biggest selling point of a West Coast IDZ naturally is the contention that 25 000 new jobs will be created in an economically impoverished region.

But the document also touts some big numbers in terms of economic value creation.

Essentially the IDZ proposes a hub that services the needs of the upstream exploration and production service companies’ operating in oil and gas fields in sub Saharan Africa. Envisaged services include logistics, repairs and maintenance and fabrication activities.

Aside from the obvious geographic advantage in proximity to African oil fields, Saldanha Bay – the document argues – is an ideal location for the development of the Oil & Gas and Marine Repair cluster because of the level of greenfield land available (and already zoned for industrial purposes) as well as the depth of the port.

In addition, the port has existing infrastructure and there is already activity at surrounding Multi Purpose Terminals (MPT). The four berths in the MPT can handle oil rigs, large container ships and Cape size vessels.

Perhaps the most important plus point for a specialised West Coast IDZ is Africa’s growing contribution to global oil and gas production.

The IDZ document shows that the number of rigs off West Africa increased from 63 to 72 within one year from October 2010. In that period, utilisation rates increased from 71% to nearly 81% which – although it is a short term spurt – might point to increasing activity.

The document also estimates that the total number of rigs off the western African coastline (including Angola) is between 80 and 100 at present. It is further estimated that these active rigs off the western coast of Africa could increase to between 100 and 120 by 2016. There are currently also four known rigs off the eastern coast of Africa.

That would bring the total number of rigs off of Africa’s coast line that is deemed accessible to Saldanha Bay to 84. This is a conservative estimate, and excludes additional exploration activity expected to follow from the recent potential finds of oil off the coast of Namibia and gas off the coast of Mozambique.

The document points out that each year a significant number of rigs move past the Cape of Good Hope en-route to a new operational location or seeking maintenance and repair services. The number of these rigs was estimated at 120 in 2011 alone.

The pay-off line in the document is an estimate that – assuming a capability of servicing three rigs at a time – the IDZ could generate annual foreign earned revenues of as much as R3.4bn for Saldanha Bay in its fifth year of operation.

But the document does also outline some very real threats to the viability of the Saldanha Bay IDZ.

Chief amongst these is that SA currently has limited experience in off-shore oil and gas activities as well as limited qualified and skilled labour to meet specific standards within the Oil & Gas and Marine Repair cluster.

Other issues that could be a hinder to an IDZ initiative include underdeveloped physical infrastructure (like dedicated quays, docking facilities and utilities), high port tariffs, vague and limited financial/fiscal incentives and bureaucracy.

Neighbouring countries could also develop off-shore supply base and marine repair facilities (most notably Walvis Bay and Luanda as well as the Onne Port in Nigeria). There is also a chance that East Africa’s oil and gas development could lead to a development of a supply hub for the industry.

 

Source http://www.cbn.co.za

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