BuaNews (Tshwane)
Shaun Benton
18 June 2008
Cape Town — The Department of Minerals and Energy has recommended to Cabinet changes to improve South Africa's capacity for streamlining its oil demand which may lead to costs of up to R1 billion, much of which would need to be borne by industry.
Deputy Director-General for Hydrocarbons and Energy Planning in the department, Nhlanhla Gumede on Wednesday mentioned this figure to reporters after briefing Members of Parliament about the recommended changes contained in the energy master plan.
However, Mr Gumede said that the costs to the economy could be far higher if the recommendations were not implemented, and warned that South Africa could face shortages of liquid fuel if infrastructure was not boosted.
By 2025, South Africa's energy demands would likely have doubled, said Mr Gumede, with the country importing far more than it produces.
Already, the country, as of the middle to the close of 2006, has run out of refining capacity, the DME official told members of Parliament's Portfolio Committee on Minerals and Energy.
Outlining a number of factors placing pressure on supply ahead of the completion of a new pipeline from Durban to Gauteng by 2010, Mr Gumede said that currently, the country has capacity only for about eight to ten days of fuel storage.
In the case of airlines, the storage times are even shorter. The Oliver Tambo International Airport has, for instance, only five days of storage capacity, while 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, he said.
If nothing is done about the current situation, road freight would be severely over-utilised, said Mr 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 are made, he said.
In the meantime, the new pipeline being laid between Durban and Gauteng - with initial capacity of 1100 cubic metres of fuel per hour - would be expected to alleviate the situation.
By 2025, when all the pump stations along the Durban-Gauteng route are completed, the pipeline would have the capacity to carry about 3000 cubic metres of fuel per hour, the official said.
However, the rail system would 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 Mr Gumede, adding that this needs to be boosted to four days, with an ideal of two days over the longer term.
The country currently has "no choice" but to reduce this turnaround time down to four days at the most, he said.
Investments in infrastructure such as rail sidings would have to be made to make this possible, he said, adding that the additional costs would need to be carried by the oil industry.
Other changes would also be needed, such as increased overtime and weekend work, while 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, Mr Gumede said that, while South Africa has 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.
In the recommendations, the DME has stated that at least 30 percent 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 is a matter of urgency, Mr Gumede told MPs.
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