Move over, energy and food crises

By Eleanor Momberg

The South African fuel industry is facing a crisis that is going to make Eskom's problems look like a picnic, the Fuel Retailers' Association (FRA) says.

This is because the pipelines used to get fuel from refineries along the coast to inland distribution points are crumbling and refineries past their lifespan are unable to cope with increasing demands.

Imported fuel has to be transported by road, because of the dire state of the pipelines, and the inability of the country's rail network to deliver.

"Nobody is building stockpiles, which is something we need as demands increase," says Peter Morgan, the director of the FRA.

He says South Africa has imported fuel for years because the country's refineries are unable to make enough for local needs.

Once the petrol or diesel is imported, the ability to transport it inland is limited "because the pipelines cannot cope, the rail system cannot cope".

Also unable to cope with the large volumes demanded by motorists and industry through fuel retailers are the tanker companies, which run hundreds of tankers from refineries to petrol stations every day.

Morgan says one of the most serious problems is that there are no strategic fuel supplies in South Africa. The country's refineries are already working to full capacity and any power outage, fire or other failure in the system will lead to shortages.

When refineries shut down for maintenance, for example, they usually are able to supply clients through an inter-refinery exchange system.

While South Africa has crude oil available, there is no ready-made fuel to eliminate shortages.

"We need 90 days of fresh product available. At the moment we have none," says Morgan.

Fuel retailers are at present "sitting and holding thumbs" that there will be no breakdowns at refineries - including load-shedding - because this will result in an almost immediate fuel shortage, worse than that experienced by motorists last year.

He wants the public to become more involved in the debate about pricing and strategic stocks and for the government and the fuel industry to allow anyone who wants to stockpile fuel for sale to retailers and motorists in times of crisis.

"Why can't motorists invest in strategic stocks? Why can't the service station owner invest in strategic stocks?" he asked. Morgan also questions the validity of claims that the "environment is not right" for the petrol industry to invest in infrastructure expansion and upgrades.

"Why has there been no preplanning within the industry? Why did they not anticipate this?

The retailer is footing the bill, and he has to face the motorist who gets upset when supplies run out. In terms of the contractual agreements, the wholesaler pays no compensation for anything that goes wrong at the filling station. So he does not feel it where it hurts the most - in the pocket," says Morgan.

The fuel strategic supply task team, set up by the government after the 2005 fuel crisis, stated in its report that the liquid fuels supply chain would be significantly constrained by 2008.

The report shows that for security of supply over the next 15 years, construction of an adequately sized pipeline is a priority investment. To support this, depot infrastructure investments, including tankage, receiving and loading facilities, will also be needed.

Connel Ngcukana, the director of the South African Petroleum Industry Association, says: "People are working day and night to ensure infrastructure is upgraded."

But he will give no guarantees that fuel will not be in short supply.

• This article was originally published on page 3 of The Sunday Independent on April 27, 2008