Dept urges action on fuel security

20 June 2008

A senior official from the Department of Minerals and Energy has urged members of Parliament to approve the construction of a new multi-product pipeline between Durban and Gauteng province in order to avoid future liquid fuel shortages in the country.

The department has also recommended to Cabinet several changes to improve South Africa’s capacity for streamlining its oil demand, which could involve costs of up to R1-billion – much of which would have to be carried by the fuel industry.

Addressing the media in Cape Town this week, deputy director-general for hydrocarbons and energy planning in the department, Nhlanhla Gumede, warned that the costs to the economy would be far higher if the recommendations were not implemented, as South Africa could end up facing a liquid fuels shortage.

He pointed out that by 2025, South Africa’s energy demands were likely to have doubled, with the country importing far more than it currently produces. The country had run out of surplus refining capacity by the end of 2006, he told Parliament.

Fuel reserves

Outlining a number of factors placing pressure on supply ahead of the completion of a new pipeline from Durban to Gauteng by 2010, Gumede said South Africa currently had capacity for only about eight to 10 days’ of fuel storage.

In the case of airlines, the storage times were even shorter, with OR Tambo International Airport, for instance, having only five days’ of storage capacity. The international best practice standard is 30 days’ of stored fuel supply.

Proposed solutions to this tight supply situation include enforcing obligatory stock holding levels in the airline industry, with every “customer group” being made to pay for its own stock holding.

If nothing is done about the current situation, road freight would be severely over-utilised, said Gumede, outlining a scenario by 2010 where road tankers carrying fuel from the port of Durban to the country’s industrial heartland of Gauteng would be at the rate of more than 10 an hour.

By the third quarter of 2009, South Africa would not be able to supply inland demand unless major changes were made, he said.

The new pipeline being laid between Durban and Gauteng will have an initial capacity of 1 100 cubic metres of fuel per hour, rising to about 3 000 cubic meters of fuel per hour by 2025, when all pump stations along the Durban-Gauteng route are completed.

Improving rail freight

However, the rail system would have be to be improved in the meanwhile to ensure security of supply, with a proposal for a consolidation of the network by using, for instance, block trains as well as route substitution.

The turnaround time for a container travelling from Durban to Johannesburg and back is currently around 14 days, said Gumede, adding that this needed to be reduced to four days, with an ideal of two days over the longer term.

The country currently had “no choice” but to reduce this turnaround time down to four days at the most, he said, adding that investments in infrastructure such as rail sidings would have to be made to make this possible, with the additional costs to be carried by the oil industry.

Other solutions

Other changes would also be needed, such as increased overtime and weekend work, while the government would need to examine the question of a more efficient rail system in the light of the country’s competition law.

Outlining other possible solutions to refining capacity, Gumede said that while South Africa had a substantial capacity to manufacture coal-to-liquid fuels, a new coal-to-liquid plant – such as those operated by Sasol – would be needed every three to four years to supply 85 000 barrels of fuel per day.

The Department of Minerals and Energy has also recommended that at least 30% of the country’s petroleum products be made from indigenous raw materials, be it from gas-to-liquid technology, biofuels or coal-to-liquid technology.

In the meantime, the approval and implementation of the Multi-Product Pipeline Project was “a matter of urgency”, Gumede told members of Parliament.

Source: BuaNews