Mozambique–South Africa petroleum pipeline project

19th August 2011

By: Lindiwe Molekoa

  

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Name and Location
Mozambique-South Africa petroleum pipeline project.

Project Description
The project will involve the construction of a 16 inch, 380 km liquid petroleum pipeline from the Ressano Garcia/Komatipoort area, on the Mozambique/South Africa border to Kendal, in the district municipality of Ehlanzeni, in Mpumalanga.

The pipeline is planned to have a maximum capacity of 3.5-billion litres a year.

It will run from an existing coastal fuel-storage facility at Matola harbour, in Mozambique, through the Nelspruit area, in Mpumalanga, where storage facilities including a 10 000 m3 storage tank for petrol and a 20 000 m3 storage tank for diesel will be constructed, complete with rail-and-road offloading infrastructure.

It will then continue to Kendal, where it will potentially join the current Transnet Pipelines petroleum pipeline network, for inland distribution of the petroleum product. Other storage facilities envisaged include a total of ten storage tanks, with a combined capacity of 125 000 m3 for petrol and diesel at Kendal, as well as interface handling utilities and a road tanker loading facility, the details of which are subject to approval by the National Energy Regulator of South Africa (Nersa), before construction begins.

Facilities and infrastructure is being put in place to make available an interim rail tanker service from Maputo to customers in South Africa, pending construction of the pipeline. An extensive delivery service will be provided by rail from the facilities at Nelspruit (Alkmaar) and Kendal when the pipeline is in operation.

The pipeline is intended to ease congestion at the Durban harbour.

Value
The project will cost an estimated R6-billion.

Duration
The duration of the licence to complete construction of the licensed facilities was 36 months from the date of issue, which was March 29, 2007.

However, construction has not started, owing to delays in obtaining positive and final authorisation from all relevant environmental authorities.

To date, the licencee has only received a record of decision (RoD) for the pipeline. The RoD is now the subject of an appeal. The RoDs for the proposed storage facilities are yet to be received, and may also be the subject of further appeals.

Client
Petroline RSA will implement the project in a 50:50 joint venture with Petroline SARL of Mozambique.

Petroline RSA has four main shareholders – the Women in Oil and Energy South Africa (Woesa) Consortium, Gigajoule International, Petróleos de Moçambique (Petromoc) and Companhia de Desenvolvimento de Petróleo Moçambique.

Key Contracts and Suppliers
Nersa (construction licence); VGI Consulting Engineers (technical design); Nature & Business Alliance Africa (South African environmental-impact assessment (EIA) processes, the land servitude acquisition process, and the public consultation process); MDALA (environmental authority); SRK Consulting (South African independent EIA practitioner); Matrix PR & Communications Consultants (South African public consultation process as part of the EIA processes); Impacto Projectos e Estudos Ambientais (EIA consultant for both Mozambican EIAs); CFM (refurbishment and upgrading of the Matola oil terminal); the Department of Environmental Affairs (DEA) (South Africa) and Ministério para a Coordenação da Acção Ambiental (Micoa) (Mozambique) (EIA reviews).

Latest Developments
August 2011

According to Business Day, private petroleum pipelines company Petroline has decelerated its plans to build its Mozambique-South Africa pipeline, citing concerns that Transnet is getting favourable treatment from the government.

Petroline director Pinky Moabi has confirmed that the project in on hold, pending discussions with the government.

On the other hand, Nersa has reported that the project is ‘virtually’ on hold and that Petroline has, as required by the licence conditions, informed the regulator of the delays.

Petroline’s decision to put the project on hold is regarded as a setback for private-sector investment in petroleum-related infrastructure. It is also considered a blow to plans to introduce competition in the petroleum pipeline industry, which is currently dominated by Transnet Pipelines, a subsidiary of Transnet. On commissioning, the pipeline is expected to reduce Transnet’s monopoly, as well as enhance security of fuel supply to South Africa’s inland provinces of Gauteng, Mpumalanga, the Free State and the North West.

The delay is also seen as a setback for black economic-empowerment (BEE), as Woesa is a BEE company and a Petroline shareholder.

Meanwhile, Petroline has reported that it will not invest more funds in the project until it has finalised its discussions with the departments of energy and public enterprises. The company would not be drawn on the reasons for the decision, with Moabi only willing to say that “It has to do with the structuring of the petroleum tariffs”.

According to Department of Energy spokesperson Thandiwe Maimane, Petroline approached the department late last year regarding the project, citing concerns over what it considered the State’s unfair treatment and “anticompetitive behaviour of the State”, relating to two events, namely the partial funding of Transnet’s New multiproduct pipeline from the fuel levy, and the Transnet tariff determination for 2010/11, with particular reference to the tariff structuring proposal by Nersa.

Earlier this year, Nersa granted Transnet a 59.9% increase in revenue for its petroleum pipeline system.

Petroline was among the companies that raised concern about the licencing of a petroleum pipeline system and argued that this will only strengthen Transnet’s natural monopoly.

February 2011
Petroline, in a written letter to Nersa, has raised concerns regarding Transnet’s petroleum pipeline tariff application for the 2011/12 financial year, which was submitted to Nersa On October 1, 2010. Transnet applied for a 69% increase in its allowable revenue for the period between April 1, 2011 and March 31, 2012, for its petroleum pipeline system. Nersa has since provisionally granted Transnet a 59.8% increase, equivalent to R1.9-billion.

Petroline’s primary concern relates to the cross subsidisation inherent in the application, as well as the apparent inclusion of cost of works in progress. According to Petroline, approval of the tariff in its current form will jeopardise the efforts of new entrants into the petroleum market through unfair competitive practices, which can be construed as an abuse of Transnet’s natural monopoly.

Transnet has responded by saying that there is no legal requirement that a single tariff be set for all customers across all pipelines, and that the law does not prevent Nersa from setting tariffs for its petroleum pipeline network on the basis of the costs for that system being viewed as a whole.

March 2010
On March 25, 2010, Nersa approved the amendments to the conditions of the licence granted to Petroline on March 29, 2007, to build its petroleum pipeline system from Mozambique to South Africa.

January 2010
SRK Consulting has completed the EIA for the South African portion of the pipeline system, and the final EIA report has been compiled and submitted to the DEA for consideration.

The final scoping report for the Nelspruit area storage facility is available, as well as the draft EIA report for the Kendal area storage facility.

The final documents for the Mozambique portion of the pipeline have been submitted to Micoa for review.

December 2008
The three South African EIAs are taking longer than expected and the project schedule has been put under pressure as a result. Substantial headway has been made with the cooperation of the Department of Environmental Affairs and Forestry and the new streamlined procedures that are being put into place to deal with the EIAs. Barring unforeseen circumstances, the final RoD for all the EIAs will be received by April 2009.

The Mozambique depot environmental-impact report (EIR) has been approved by Micoa, while the EIR for the pipeline portion in Mozambique is expected shortly.

July 2008
Despite delays to the start of construction, Petroline is still hoping to deliver its crucial petroleum products pipeline from Maputo to Nelspruit around the time of the 2010 FIFA World Cup. The company had previously hoped for construction to start by winter this year.

The company is still working to secure environmental approval, on which the company reports that it has made "very good progress", and is putting in effort to prepare for a swift start to construction once it has the final authorisations.

Further, the company is working very hard behind the scenes to ensure that it can put the project out to tender soon after final approvals. The company has also been doing a lot of work on securing long-lead items.

May 2008
Petroline Holdings has released the final scoping report of its two-phase EIA for the building of a petroleum fuels storage tank farm in Kendal, in Mpumalanga.

The report is available for review by interested and affected parties (IAPs) until the end of this month.

The key concerns highlighted in the report include the risks the proposed development poses to health and safety, owing to the flammable and explosive nature of the petroleum. The potential effects on the quality of surface and groundwater are also of concern to IAPs.

However, the need for job creation and skills development in the area has also been pointed out.

All the identified issues will be investigated further during the detailed EIA phase.

Petroline Holdings has said that the assessment of project alternatives indicate that, based on the characteristics of the different sites, the site at Vlakfontein/Klipfontein has been identified as the preferred site for the fuels storage farm so far. The alternative site at Heuvelfontein will also be assessed during the detailed EIA phase.

April 2008
Petroline Holdings has released the final scoping report of its two-phase EIA to develop a liquid fuel storage depot in the Nelspruit area, in Mpumalanga.

February 2008
Petroline has announced that it has signed long-term petroleum product storage and transport agreements with customers for the full capacity of its pipeline. These agreed commitments have exceeded the target of three-million cubic metres a year that was set to proceed with the project.

The company has also reported that all other activities for the project remain on schedule.

December 2007
The first phase (scoping phase) of the EIA for the pipeline has been completed. The key issues identified during the scoping study include biophysical, health and safety, economic and social issues, infrastructure/services and hazards posed to the integrity of the pipeline.

Further, the cumulative impacts resulting from other developments already affecting landowners in the area, have been highlighted by the farming community in the Malelane districts and include the N4 freeway upgrade; the Sasol gas pipeline; the Snyman fence; and Telkom and Eskom power lines.

Several challenges have been highlighted in the scoping report to the routing of the pipeline through Schoemanskloof, including the proximity of the pipeline to the Elands river. These issues will be investigated and assessed further during the detailed assessment of the EIA.

The assessment of project routing alternatives and fatal flaws will be carried out at the start of the EIA process, and will take into account the outcomes of the scoping process.

The assessment of project alternatives has indicated that current and future market demand has determined the need for the project, and that there are no viable project process/activity or operation alternatives that can be used to meet the demand for petroleum in inland regions.

October 2007
Petroline has been awarded licences for the project execution in South Africa and a concession in Mozambique.

The project is progressing on schedule for completion at the end of 2009, and work on the required environmental studies and other regulatory requirements are under way.

Further, Petroline is in the process of concluding anchor offtake agreements with oil and trading companies. To ensure all licensed potential users have the opportunity to secure capacity, Petroline has requested that all such parties interested in long-term liquid petroleum storage and pipeline transport contracts notify them on their website http://www.petroline.co.za of such interest, for consideration before November 12, 2007.

On Budget and on Time?
There have been delays to the start of construction, with Nersa having reported in the Transnet 2011/12 draft tariff determination report that construction of Petroline’s pipeline has not yet started, owing to delays in obtaining positive and final authorisation from all relevant environmental authorities.

Contact Details for Project Information
Petroline RSA, tel +27 12 682 9120 or fax +27 12 665 1610.
Petromoc chief operating manager Eduardo Magalhães, tel +258 21 427 191/7 or fax +258 21 430 181/21.
DEA chief director of communications Albi Modise, tel +27 12 310 3123, fax +27 12 322 2476, cell +27 83 490 2871 or email AModise@environment.gov.za.
Impacto Projectos e Estudos Ambientais, tel +258 21 499636/7, fax +258 21 493019 or email impacto@impacto.co.mz.
Nersa, tel +27 12 401 4600 or fax +27 12 401 4700.
SRK Consulting (Johannesburg), tel +27 11 441 1111, fax +27 11 880 8086 or email johannesburg@srk.co.za; or senior environmental scientist Lyn Brown, email lbrown@srk.co.za; or principal environmental scientist Darryll Kilian, email dkilian@srk.co.za.
Gigajoule International, tel +27 12 682 9120 or fax +27 12 665 1610.
VGI Consulting Engineers, tel +27 12 682 9140, fax +27 12 665 1718 or email info@vgi.co.za.
Woesa, tel +27 11 880 7479, fax +27 11 880 7474 or email info@woesa.com.
 

 

 

Edited by Creamer Media Reporter

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