Petrol and diesel imports to surge

DURBAN – South Africa will import about 1,2 billion litres of diesel, petrol and other refined petroleum products this year to meet demand from motorists and industry that local refineries cannot satisfy.

The rising demand for fuel has raised concern about the capacity of ports to handle significantly larger volumes of refined product and the ability to move fuel inland. Colin McClelland, the director of the SA Petroleum Industry Association, said on Friday: “Refineries in South Africa, when all operating at full capacity, can meet local demand for refined petroleum products.But all growth in the market going forward will have to be met through imports.”South Africa used 24,4 billion litres of refined product last year, with diesel growing fastest, by 7,3 per cent to 8,7 billion litres.Petroleum demand is forecast to grow by 5 per cent this year to about 25,6 billion litres, driven by the rising number of vehicles as well as industrial activity and power generation.If fuel demand does grow by 5 per cent this year, South Africa would have to import 1,2 billion litres of refined product.South Africa’s energy industry has not kept pace with economic growth, which means there is now a shortage of fuel refining and electricity generating capacity.According to the department of minerals and energy’s Digest of South African Energy Statistics 2006, gross domestic product grew 39,9 per cent between 1993 and 2004.Primary energy supply during this period increased by 33,6 per cent, including coal, crude oil, gas, nuclear, hydro and renewable energy.Econometrix economist Tony Twine said there were 8,4 million vehicles on the road at the end of last year.This was forecast to rise to 12 million in 2011.Fuel demand depended on how busy each vehicle was.”If the economy is still showing strong growth, then these vehicles will be working harder and using more fuel,” Twine said.McClelland said: “The biggest capacity issue we have is moving product inland.”Transnet plans to build a new R9,5 billion pipeline between Durban and Gauteng, but this will only be operational by 2010.”That is a long way away,” McClelland said.Currently about 1 billion litres of fuel is transported by road.McClelland said the second main constraint was ports.Imported crude oil is piped in through offshore facilities, but refined product is discharged at ports.”We will have sufficient capacity at ports if imports are phased.But it is an issue we need to look at,” McClelland said.”We imported a huge amount of refined fuel in the third quarter last year, which showed we could cope.But this volume will grow.”The situation is not yet dire.Alan Olivier, the chief executive of Grindrod, which operates tankers, said: “Generally, there is enough tank capacity at Durban port, but there have been times when tankers have to wait for storage space.”Diesel demand will also be driven by Eskom’s two new peaking plants in the Western Cape.These plants, which will operate on diesel from the end of May, will be used as emergency back-ups able to generate up to 1 050 megawatts.McClelland said the diesel demand from these plants could be up to 500 million litres a year, depending on utilisation.”This is very significant in the overall picture and will mean more imports,” he said.South Africa’s six refineries have already struggled to meet local demand.Rising consumption means that the scheduled shut downs of refineries for between four and six weeks each year, which are required for maintenance, put a strain on supply.Previously, shut downs did not affect supply as there was surplus capacity.McClelland said shut downs were done between February and November because of building industry holidays in December.This meant that for 60 percent of the 10-month period at least one refinery would not be operating, he said.Refineries said their shut downs were co-ordinated to ensure adequate supply and because the same maintenance contractors were used by all refineries, due to the specialist nature of work.Business ReportColin McClelland, the director of the SA Petroleum Industry Association, said on Friday: “Refineries in South Africa, when all operating at full capacity, can meet local demand for refined petroleum products.But all growth in the market going forward will have to be met through imports.”South Africa used 24,4 billion litres of refined product last year, with diesel growing fastest, by 7,3 per cent to 8,7 billion litres.Petroleum demand is forecast to grow by 5 per cent this year to about 25,6 billion litres, driven by the rising number of vehicles as well as industrial activity and power generation.If fuel demand does grow by 5 per cent this year, South Africa would have to import 1,2 billion litres of refined product.South Africa’s energy industry has not kept pace with economic growth, which means there is now a shortage of fuel refining and electricity generating capacity.According to the department of minerals and energy’s Digest of South African Energy Statistics 2006, gross domestic product grew 39,9 per cent between 1993 and 2004.Primary energy supply during this period increased by 33,6 per cent, including coal, crude oil, gas, nuclear, hydro and renewable energy.Econometrix economist Tony Twine said there were 8,4 million vehicles on the road at the end of last year.This was forecast to rise to 12 million in 2011.Fuel demand depended on how busy each vehicle was.”If the economy is still showing strong growth, then these vehicles will be working harder and using more fuel,” Twine said.McClelland said: “The biggest capacity issue we have is moving product inland.”Transnet plans to build a new R9,5 billion pipeline between Durban and Gauteng, but this will only be operational by 2010.”That is a long way away,” McClelland said.Currently about 1 billion litres of fuel is transported by road.McClelland said the second main constraint was ports.Imported crude oil is piped in through offshore facilities, but refined product is discharged at ports.”We will have sufficient capacity at ports if imports are phased.But it is an issue we need to look at,” McClelland said.”We imported a huge amount of refined fuel in the third quarter last year, which showed we could cope.But this volume will grow.”The situation is not yet dire.Alan Olivier, the chief executive of Grindrod, which operates tankers, said: “Generally, there is enough tank capacity at Durban port, but there have been times when tankers have to wait for storage space.”Diesel demand will also be driven by Eskom’s two new peaking plants in the Western Cape.These plants, which will operate on diesel from the end of May, will be used as emergency back-ups able to generate up to 1 050 megawatts.McClelland said the diesel demand from these plants could be up to 500 million litres a year, depending on utilisation.”This is very significant in the overall picture and will mean more imports,” he said.South Africa’s six refineries have already struggled to meet local demand.Rising consumption means that the scheduled shut downs of refineries for between four and six weeks each year, which are required for maintenance, put a strain on supply.Previously, shut downs did not affect supply as there was surplus capacity.McClelland said shut downs were done between February and November because of building industry holidays in December.This meant that for 60 percent of the 10-month period at least one refinery would not be operating, he said.Refineries said their shut downs were co-ordinated to ensure adequate supply and because the same maintenance contractors were used by all refineries, due to the specialist nature of work.Business Report