R4bn for SA, Mozambique pipeline

13 April 2007

A South African and a Mozambican company are to construct a R4-billion liquid petroleum pipeline between the two countries, reducing South Africa’s reliance on Durban harbour and offering some hope that inland fuel prices might drop in the long term.

The National Energy Regulator of South Africa (Nersa) has issued a licence to build the pipeline from Maputo to Kendal in Gauteng, via Nelspruit, to Petroline RSA. They will build the pipeline jointly with Petroline SARL of Mozambique.

Nersa agreed with the option to build the pipeline from Mozambique, instead of a larger 24-inch line from Durban to Johannesburg, because it would be cheaper. Detailed design and environmental impact assessments for the project, already approved by the two countries, are currently under way.

According to Petroline RSA director Pinky Moabi, construction will start at the end of the year and the pipeline should be fully operational by the end of 2009.

“We hope that fuel prices will drop in Mpumalanga and some parts of Gauteng, because we will be getting fuel directly from the coast of Mozambique, and we know that fuel prices are lower on the coast than in inland cities,” Moabi said.

According to Petroline, the pipeline will carry 3.5-billion litres of fuel a year and supply 25% of the fuel demand in Mpumalanga and Gauteng.

The pipeline will run from an existing coastal fuel storage depot at Matola Harbour in Mozambique to Nelspruit, where an inland depot will be built, complete with rail and road loading infrastructure.

Absa economist Chris Hart told BuaNews that the pipeline’s effect on prices would in all probability be felt in the long term. “The pipeline is unlikely to have an effect on fuel prices in the shorter term as the consumers would have to pay for it,” Hart said. However, the pipeline “might cut costs to a certain extent in the main market in the long run.

“Currently, about two thirds of South Africa’s fuel is imported,” Hart added. “There is refinery capacity shortage in the country.”

The licence to build the pipeline went to Petroline ahead of state-owned Petronet, which Nersa spokesperson Nhlanhla Cebekhulu put down to Petroline’s strong empowerment credentials.

Source: BuaNews