Public Enterprises Minister
Malusi Gigaba and Transnet
CEO Brian Molefe were in the
firing line last week as they
celebrated the last stage of
Phase 1 in the development of
Transnet’s new multi-product
pipeline (NMPP) project, and
the construction of the coastal
terminal, TM1.
The two told a media group
in Durban that they were there
to celebrate the “within budget
and “on-schedule” completion
of the pipeline.
Scheduled for completion
in December 2013, TM1
(together with TM2
in Jameson Park, near
Heidelberg, Gauteng) will
see the pipeline finally able
to carry all grades of petrol,
diesel and jet fuel, and making
it a full multi-product facility.
But what they really meant
was they were celebrating the
completion to a new budget
and a new schedule.
The progress of the
pipeline project has met
with considerable complaint
as it has been fraught with
on-going cost escalations and
delays.
The original budget for the
project leapt up by 146.3% –
from R9.5 billion in 2006 to
R23.4 billion now.
Also, full completion
was originally estimated
for the first quarter of 2011
but was eventually delayed
until December 31, 2013 –
although it has partly been
operational. Diesel first
started to flow through the
NMPP from Durban to
Heidelberg for the first time
on Wednesday, January 11.
According to Molefe at the
time, the diesel took a week
to travel the 555km from the
Durban port to the Jameson
Park inland terminal in
Heidelberg, at a speed of 6kph
to 7kph. “We are now able to
concurrently run the Durban
to Johannesburg pipeline and
the NMPP with petroleum
products that will see some
three million litres per hour….
flowing between Durban and
Johannesburg every week,” he
told reporters.
But it will be another year
before the NMPP lives up to
its full name of multi-product.
The increases have also had
an impact on pipeline tariffs
as costs for the infrastructure
are recouped. In March, the
National Energy Regulator
(NER) announced a 22%
increase in the pipeline tariff,
which was expected to cause
a 4c per litre hike in the petrol
price.
But once the whole cost of
the NMPP is included in the
tariff what will the result be?
FTW asked this question of
Charl Moller, former head of
Transnet Pipelines and now
group executive in charge of
Transnet Capital Projects.
The current transportation
factor (of the pipeline) – for
which the NER is responsible
– is 22 cents per litre, he said.
“Obviously, the more
throughput that goes through
the pipeline, the lower the
tariff will be,” Moller added.
“Our model shows that it will
peak at 34c/l, 12c/l over the
current amount.
“But, in the long-term –
when 3 million litre/hour, or
26 billion l/annum are running
– we believe it will stabilise at
25c/l.”
The other part of Transnet’s
calculations related to the cost
of transporting through the
pipeline versus the cost of road
transport.
“To compete,” said Moller,
“we’ve got to be 40% cheaper
than road transport.”
Achieving this, he added,
has seen Transnet Pipelines
combining with the specialised
pipeline unit at Transnet
Freight Rail (TFR).
“This combination should
smooth out the effects of tariff
price hikes,” he told FTW.
But, Moller stressed, the
whole life of the pipeline –
70+ years – has to be taken
into account. “To do the real
sums, they must be done over
this whole lifeline.”
Molefe also tried what can
only be termed an abstract
factor when excusing the fuel
price increases effected by the
pipeline.
You must also take into
account the fact that the
pipeline is environmentally
friendly, he told FTW. The
price increase is, therefore,
justified by the fact that the
pipeline is conserving the
environment, and reducing the
damage to the ozone layer.
When FTW accused him
of being “ethereal” in his
argument, and pointed out
that a transporter who was
struggling to survive or a
motorist who was faced with
ever-increasing costs, was
not going to say that he was
paying X cents more per litre,
but helping Transnet to be
green, so it was OK – Molefe
still stuck to his guns.
But minister Gigaba
did admit that he had been
seriously disturbed by the
rising costs and time delays.
This, he told FTW, had
prompted the launch of an
independent review of the
project.
This review included three
independent reports on the
governance, engineering and
project management aspects
of the pipeline, as well as an
independent legal opinion.
CAPTION
Malusi Gigaba ... celebrating last stage of Phase 1 in the development of
Transnet’s new multi-product pipeline.
