Security of supply

    Security of supply of petroleum products

    Security of supply refers to the development of supply chain solutions to South Africa’s liquid fuels supply challenges, management of liquid fuels demand and emergency response as identified in government’s 2007 Energy Security Master Plan. During the apartheid era, liquid fuels were tightly regulated and subject to much secrecy. With the advent of democracy and the lifting of sanctions, the industry has become open and state ownership has declined.

    The Competition Commission’s decision to grant the Fuels Industry Association of South Africa and its members an exemption from some of the prohibitions outlined in the Competition Act will help improve security of liquid fuels supply, reduce the threat of supply disruptions and facilitate multilateral logistics deliberations. In order to secure future security of supply, it is necessary for the relevant parties to plan together and jointly implement infrastructural improvements such as reconfiguration of refining facilities to enable the production of Clean Fuels II to meet emissions standards and improve South Africa’s global competitiveness.

    24 inch multi-product pipeline
    The 24 inch diameter multi-product pipeline (MPP) constructed by Transnet Pipelines became operational in January 2012, with the commissioning of the 555 kilometre trunk line between Durban and Jameson Park. There are three pump stations, situated at Tweni, in Durban; at Hilltop, near Pietermartizburg and at Mnambithi, near Ladysmith. Currently the pipeline only conveys diesel but once the project is fully completed it will transport petrol, diesel and jet fuel. Movements in the rand-based elements (internal factors) are subject to government control. They comprise adjustments in taxes and levies, transport costs, wholesale margins, retail margins and service costs. The overriding rationale of the control of prices and margins should be to ensure that the various stakeholders in the industry earn fair returns. The returns should be sufficient to encourage the needed investment in the industry, while not being such as to represent over-reward.

    Fast facts about the multi-product pipeline:

    • The 555km, 24 inch pipeline runs between Durban and Jameson Park, south of Johannesburg.
    • It will replace the 12 inch Durban to Johannesburg Pipeline which was built in 1965.
    • It has a price tag of R23.4 billion.
    • Refined fuel products will be transported at a rate of about three million litres an hour.
    • Capacity of the line will be 26.7 billion litres of fuel a year.
    • It is expected to be active for the next 80 years.

    National strategic fuel stocks policy

    The Draft Strategic Stocks Petroleum Policy and Draft Strategic Stocks Implementation Plan were published by the DOE for public comment in 2013. Both the policy and plan are published in terms of section 17 of the National Energy Act of 2008. The policy sets out the framework for the storage of fuel stocks by both government and oil companies. It aims to ensure uninterrupted supply of petroleum products throughout South Africa by providing adequate strategic stocks and infrastructure such as storage facilities and pipeline capacity. Strategic stocks are to be used during declared emergencies and the Minister of Energy has the power to decide when a shortage of fuel and oil is at such a level to warrant an emergency.

    20-year liquid fuels infrastructure roadmap project

    The Department of Energy is developing the 20-year liquid fuels infrastructure roadmap to ensure continued security of supply of liquid fuels to enable South Africa’s growth and development. The roadmap will also assist in determining the capabilities and capacity for local refining, storage, handling and logistics. The Fuels Industry Association of South Africa commented on the draft strategic stocks petroleum policy and draft strategic stocks implementation plan. A stakeholders’ consultation workshop was held to discuss comments on the draft strategic stocks petroleum policy and draft strategic stocks implementation plan. The Fuels Industry Association of South Africa is awaiting the finalisation of the policy by government.

    Refinery performance audit project

    The refinery performance audit project is a small part of the 20-year liquid fuels infrastructure roadmap project. The audit seeks to establish the existing refineries reliability, availability and capacities. The audit of the refineries was completed by the DOE and indicated the need for increased investment in the refineries. The facts gained from the audit will serve to inform the Liquid Fuels Infrastructure Roadmap. Member companies have submitted their feedback regarding the refinery performance project to the DOE.

    Feedstock and products import facilities risk mitigation plan

    The Fuels Industry Association of South Africa has identified the following risks to the fuel supply chain:

    • Single buoy mooring (SBM) and related infrastructure outage
    • Cape Town berth and pipeline constraints impacting on security of supply
    • Avtur pipeline/Natref shutdown could lead to an OR Tambo International Airport jet fuel supply risk
    • Refinery outage (more than one refinery outage at the same time)
    • Limited/poor imports infrastructure in Cape Town and Durban (gas risk)

    The risk mitigation plan of the identified risks is in progress and the work is being done by the security of supply committee together with relevant stakeholders.