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Jan 23, 2008

Experts warn SA could face ‘huge’ liquid fuel shortage

Listen to IDC chief economist Lumkile Mondi discussing a potential liquid fuel supply shortage
© Reuse this If the economy continues growing at 4%-plus a year then inland residents in areas like Africa's economic powerhouse, Gauteng, should start getting worried about a looming "huge" liquid fuel supply shortage, experts warned on Wednesday.

There would be massive shortages of petroleum products by as early as 2010, Industrial Development Corporation chief economist Lumkile Mondi said.

Johannesburg-based Econometrix economist Tony Twine said that, at current growth rates, "yes, we should start getting concerned" about petrol and diesel supply to the hinterland.

Should these predictions prove true, it would be yet another blow to business and residents, adding to the power-supply woes that have been plaguing the country.

Areas around South Africa have experienced intensified power cuts over the past fortnight, and Eskom, which supplies 95% of the country's power, said that it would struggle to meet demand until around 2012.

This was also increasing diesel and petrol consumption, as businesses and residents scrambled to buy generators. Twine pointed out that traffic lights without electricity were causing large-scale congestion on the roads, which increased motorists' petrol consumption.

South African Petroleum industry Association (Sapia), constituted by the country's biggest liquid fuel suppliers, however, does not believe there is any reason to panic.

CEO Connel Ngcukana told Engineering News Online that the association was aware of growing demand, and that it had put in place plans to accommodate this.

For example, it was working with State-owned logistics firm Transnet to boost throughput of petroleum products at the country's ports. Technological improvements also increased the throughput of Transnet's petroleum pipeline network.

It was also looking to optimise the rail transport of liquid petroleum product.

"Only once all these measures have been exhausted, will we put more trucks on the road," Ngcukana said. "We will be able to meet demand."

He stated that the current growth in demand was some 4,5% yearly.

However, Mondi said that inland petrol and diesel supply would be a "huge challenge". "We are worried already."

He pointed out that South Africa had been importing refined products for the past two years.

"There is a need for us to move very quickly in making sure that we have got enough storage capacity, and that we build new refining capacity, or we'll be stuck as we are in the electricity sector," Mondi asserted.

He went on to urge government to deregulate the liquid fuels and gas sector, which he argued would help mitigate supply shortages.

New pipelines

Meanwhile, Transnet was planning on constructing a new R11,2-billion multiproducts pipeline between Durban and Gauteng, which it had hoped to begin building in the first quarter this year, but had not yet submitted the environmental-impact report for the inland network to the authorities.

Spokesperson John Dludlu said in an email that this would take place during the first three months of this year.

It was unclear as to when the utility would start work on the pipeline, and it could not confirm the timeframe when Engineering News Online queried this.

“Transnet has always made it clear that, in order to meet the scheduled operation of the pipeline by 2010, we should start construction by the end of March 2008," it said in a statement. "This is on condition all the necessary regulatory processes are completed and governance approvals are obtained."

"However, we believe that all the parties involved appreciate the urgency of the matter,” the firm added.

Privately-owned Petroline, which was building a pipeline between Mozambique, Nelspruit, and Gauteng, however, was on track to complete construction by the end of 2009.

Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online
© Reuse this Comment Guidelines (150 word limit)
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