1. Nuclear Africa 2014 Rob Adam NIASA

2. Contents Global situation Local situation Perspectives of industry 2014.

3. Global situation

4. Political fallout Source: WNA (2013)

5. Expensive upgrades Source: WNA (2013)

6. Financial challenges Source: WNA (2013)

7. Positive developments Source: WNA (2013)

8. Nuclear drivers Source: WNA (2013)

9. New build map Source: WNA (2013)

10. Future plans Source: WNA (2013)

11. Local situation

12. 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?

13. 13 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

14. 14 Recoverable East African gas reserves Source: D. Ledesma, “East Africa Gas – Potential for Export”, 2013. Trillion cubic feet

15. 15 Is East African gas a baseload option? No problem really. Much longer pipelines reliably deliver gas to much larger markets.

16. 16 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?

17. 17 Energy security? Conflict returns to Mozambique after 21 years

18. 18 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)

19. 19 Shale gas development typically follows five phases. Source: McKinsey (2013)

20. 20 But it takes 1000 – 1500 wells for a basin to be proven. South African has significant resources Source: McKinsey (2013)

21. 21 Source: McKinsey (2013) Cost of extraction ($US6 per MMBtu is the ceiling)

22. 22 Fracked landscape in Wyoming

23. Perspectives of industry

24. 24 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.

25. There are implications for how industry prepares itself. 25 BOO, EPCM, EPC…??

26. 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. 26

27. 27 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?

28. 28 2014

29. 29 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

30. 30 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

31. Thank You