Select Committee on Economic Development
The petroleum industry in South Africa is to ask that it be exempted from current competition legislation so that adequate co-ordination and planning between key role players can take place to avoid future fuel shortages. The South African Petroleum Industry Association (SAPIA) presented feedback on the recent jet fuel shortages at OR Tambo airport and other problems facing the petroleum industry to the select committee on economic development in Parliament.
SAPIA consists of leading companies in the local petroleum industry including BP southern Africa, Chevron South Africa, Engen and Sasol, amongst others. Its primary aim is to represent the common interests of the petroleum industry and outline what contribution the industry is making to South Africa’s economic development.
Mr James Seutloadi, the SAPIA chairperson, provided detail on the contributory factors that led to the recent shortages. The airport currently receives supplies from a number of sources, namely, the Transnet refined products pipeline, the Avtur pipeline that originates from the Natref refinery and rail tankers emanating from various coastal refineries.
Presently, the airport has a combined storage capacity consisting of nine tanks with a total space of 46 500 cubic meters. Natref and the rail cars supply 22 500 cubic meters while multi-products pipeline delivers 24 000 cubic meters.
According to SAPIA, Chevron South Africa manages and operates petroleum facilities at the airport on behalf of a consortium consisting of BP, Chevron, Engen, Shell and Total.
SAPIA emphasised that co-operation between all role players was essential to ensure that adequate product was delivered and stored.
SAPIA provided a number of reasons as to why the shortage occurred. One factor was that the airport jet fuel terminal opened the month of July with a low opening stock holding due to production problems at an inland refinery. Adding fuel to the fire, so to speak, was the simultaneous logistical problems experienced by Transnet during July that intensified the shortage of stock.
The SAPIA report to the committee also stated that there had been a “cessation of joint supply planning due to Competition Act considerations leading to slower independent reactions.”
As a consequence of the combination of factors, the stock levels dropped from the normal five days of supply to only two.
SAPIA declared that the problems were rectified by means of increased supply from road and rail tankers.
SAPIA announced that it was preparing an exemption application pertaining to current competition legislation to prevent a similar event from reoccurring. Fuel shortages at the airport was a major concern at the best of times but would become particularly damaging during the 2010 Soccer World Cup.
The association was adamant that the exemption was vital to ensure that adequate planning and co-ordination could take place to ensure that the World Cup was a success.
Mr Seutloadi asserted that “an exemption is the only way to make a success out of the World Cup”. Apparently, companies are reluctant to co-operate without an exemption in place.
The association wanted interaction to be allowed to occur between the relevant role players that dealt with, inter alia, products supply, logistics planning and pipelines operations so that supply security could be maintained.
In response to the recent shortages, the minister of energy has appointed a supply task team to investigate what went wrong with a particular emphasis on the upcoming World Cup. Fuel shortages had the potential to cause serious harm to South Africa’s economy.
SAPIA urged the government to put the right conditions in place to foster investment in more pipelines and storage facilities to strengthen supply security.
SAPIA also outlined a number of short and long-term challenges facing the petroleum industry in general. Included in the list was the fallout from the current global economic crisis, economic regulation and legislation, skills shortage, infrastructure development, impact on future production levels due to environmental concerns and socio-economic issues such as crime and security and industry transformation.
Sabinet Cape Town Office
Post new comment