However, CEO Maria Ramos acknowledged that mitigation strategies would have to be implemented to keep the inland of South Africa ‘wet', owing to the fact that growing demand was having to be increasingly supplemented by imports.

Given the September 2010 commissioning plan, the new infrastructure would also not be completed in time for the start of the FIFA World Cup, which kicks off in June, and when inland fuel demand was expected to experience something of a peak.

But news of a firm construction schedule for the pipeline also came amidst growing security-of-supply fears, particularly in light of the fast-rising demand for diesel, which was not only finding its way into South Africa's growing diesel-vehicle fleet, but also into stationary power generators - units were being deployed particularly as a safeguard against business losses associated with the prevailing electricity load shedding.

South African diesel demand totalled 9,7-billion litres in 2007, compared with 8,7-billion litres in 2006, and 8,1-billion litres in 2005, and was anticipated to continue to grow.

Speaking at a media briefing at the Carlton Centre on Wednesday, Ramos reported that the front-end engineering design for the pipeline had been completed and the orders had been placed for both the 16-inch and the 24-inch pipelines.

The environmental approvals for the inland portion of the network was expected imminently, which would open the way for the construction of the 16-inch lines as from August.

The construction contract was scheduled to be placed in May.

Envisaged was a new 535-km 24-inch pipeline as well as a 170-km 16-inch lines, four pump stations, a coastal and inland terminal and a new operating systems.

Ramos stressed that Transnet Pipelines had been working with the liquid-fuel industry, as well as the Department of Minerals and Energy, on a "range of mitigating strategies" for the interim period while the pipelines were being built.

One of these remedies included the introduction of drag-reducing agents to improve the efficiency of the existing pipeline network, which was already operating at full capacity. Also being interrogated, were rail-based transportation solutions, including the purchase of specialised wagons to move fuel inland.

TARIFF CERTAINTY STILL OUTSTANDING
Also outstanding, was the attainment of certainty from the National Energy Regulator of South Africa (Nersa) as to whether Transnet could effectively pre-fund the project through a steady increase in pipeline tariffs.

"This is still an outstanding issue," Ramos stated, adding that she felt it was desirable to avoid a step change in prices once the new pipeline was operational.

Last year, Transnet made public its strong disagreement with Nersa's decision not to grant its pipelines unit a requested 5,6% tariff increase. It also warned that Nersa's decision could have negative consequences for the new pipeline, as it placed strain on its viability.

But given the urgency of the project, Transnet had subsequently sanctioned the development, while continuing to engage with the regulator.

"We have made a number of submissions to the regulator. Obviously, the ideal way . . . is to smooth out tariffs rather than have a step change in four years time, when the pipeline comes into operation," Ramos explained.

"My view would be that, not just from a company point of view, but from and economic point of view, the smoothing out of tariffs is a more sensible approach than a big step change. But that remains an issue that needs to be resolved."

Transnet Pipelines, previously known as Petronet, had received a licence to construct from Nersa, and once the project was completed it would have a capacity of 1 000 m3/h, expandable to 3 000 m3/h. Current capacity sat at just 520 m3/h.

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