Leslie Naidoo, Commercial Manager Operations, Transnet Pipelines

FUTURE FUEL DISTRIBUTION STRATEGIES FOR SOUTHERN AFRICA

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FUTURE FUEL DISTRIBUTION STRATEGIES

FOR SOUTHERN AFRICA

How Road, Rail together with Pipelines can work together

to guarantee Security of Supply to Gauteng

Leslie Naidoo (Commercial Manager)

Transnet Pipelines

2 & 3 November 2011 Southern Sun O.R.Tambo, Kempton Park


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oOverview of Transnet Pipelines

oFuel Industry Overview

oTransnet Infrastructure to service the market

oHow Road , Rail and Pipelines can working together to

ensure Security of Supply

ORDER OF PRESENTATION


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Our core business is the bulk transportation of energy (energy carrier).

Turnover of about R2,0 billion/annum, EBITDA almost R1,5 billion.

About 600 (582) Employees; Head Office in Durban with depots and workshops scattered over five provinces of South Africa.

We own, maintain and operate 3800 km of high pressure, underground steel pipes supplying energy (petroleum and gas) to the economic heartland of our country. At any moment the SA Oil Industry has 450 million liters of fuel in our system.

We transport energy in the form of a variety of petroleum products such as petrol, diesel, crude oil and jet fuel as well as Gas through our pipelines and our clients are the Oil Companies of South Africa.

Primary (“First Choice”) mode of transport of our clients for Liquid Fuels

• Safe, bulk volumes, reliable, environmentally friendly carrier

Our pipelines are like arteries supplying energy to the eastern parts of our country and are key elements to ensure an appropriate supply of petroleum products to meet security of supply challenges.

Capacity constraints in our pipeline system could hamper economic growth in our country’s heartland. Present petroleum pipeline between Durban and Gauteng is operating at maximum capacity which is insufficient to meet demand.

TPL therefore plays a strategic but also commercial role in the petroleum and gas industries of South Africa and is the custodian of strategic pipeline infrastructure in the country.

AN OVERVIEW OF TPL


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UNDERGROUND PIPELINE (HERE WITH INTELLIGENT PIG IN LINE)


OVERVIEW OF TPL : TYPICAL INTAKE DEPOT : OUR DEPOT AT DURBAN AS EXAMPLE

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OVERVIEW OF TPL : TYPICAL PUMPSTATION ALONG PIPELINE ROUTE

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OVERVIEW OF TPL : TARLTON DEPOT : EXAMPLE OF A DELIVERY DEPOT

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We transport about 18 billion litres of the different petroleum fuel products on an annual basis. This equates to 850 road tankers per day for the refined products only – a 8,5km long train of tankers per day.

TPL transports about 50% of the SA refined product fuel requirements.

100% of the inland Natref Refinery’s crude oil requirements are transported through our crude oil pipeline.

Approximately 80% of O.R. Tambo International Airport’s jet fuel requirements are transported to the Airport through our pipelines.

Methane rich gas (MRG) supplied to industrial customers in Newcastle, Richards Bay and Durban areas, key in their drive to use cleaner energy.

AN OVERVIEW OF TPL … continued


0

5,000

10,000

15,000

20,000

25,000

30,000

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 LE 2011/12 BGT

Refined National Demand (Ml)Crude

OVERVIEW OF TPL: VOLUMES TRANSPORTED BY TPL OVER PAST 10 YEAR PERIOD COMPARED TO OVERALL DEMAND IN SOUTH AFRICA (MILLION LITRES (Ml))

Notes:Growth-pattern: GDP -1%. Continued steady growth.Pattern of change in overall demand before and after 2008 economic downturn Economic downturn had little effect on TPL’s volumes transported – system at capacity.Market share for TPL: Just above 50% ( as percentage of ) 10


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BACKGROUND – LIQUID FUELS INDUSTRY

• Demand : 60% inland, 40% coast.

• Supply : two inland refineries, four coastal refineries

• Currently demand is greater than supply : imports through Durban and Cape Town

• Primary distribution from supply points to depot network (pipe, rail (or combination), road)

• Secondary distribution from depot network to customers (road) 12


LIQUIDS FUEL INDUSTRY

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POINTS OF PRODUCTION AND SUPPLY INTO SYSTEM ZONE C AS AREA TO BE SUPPLIED NO FORCED BUT LOGIC (EXCHANGE) UPLIFTMENT FROM SECUNDA AND SASOL NATREF. INLAND PRODUCTION TO BED BUT INLAND PRODUCTION STATIC, GROWTH SUPPLIED EX COAST.

MARKET DEMAND

IN AREA

(Billion liters/a)

TOTAL FOR 2012/13

16,9

SUPPLIED FROM

7,9 5,0 4,0

NMPP-LINE (2,9 bl/a)DJP-LINE (2,9 bl/a) (with DRA’s)5,8 bl/a (Refined products)

DURBANPRODUCTION

TOTALSASOL

NATREFAT COALBROOK

SECUNDA (Sasol)(Refined)

Refined equivalent

CRUDE

Rail and Road: 2

,1 bl / a

(1,9 bl / a

Rail; 0,2 b

l / a Road)

SAPREF

ENREF

IMPORT THROUGH PORT OF DURBAN

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Note : Values are indicative / order of magnitude volumes in billion litres per annum

INLAND DEMAND – INLAND SUPPLY= SHORTFALL EX DURBAN

INLAND DEMAND

PRIMARY LOGISTICS OVERVIEW

• Pipeline from Durban, Sasolburg, Secunda to inland depots; Alrode, Langlaagte, Waltloo, Tarlton, Rustenburg, Witbank, Ortia in Gauteng

• On road and on rail from pipeline depots to road/rail depots, as well as road/rail direct from source to final depot

• DJP pipeline constrained - road and rail from Durban, East London, Port Elizabeth and Maputo to inland

• NMPP pipeline to start operations in 2012 – pipeline constraint from Durban removed 14


PRIMARY LOGISTICS OVERVIEW

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PPT-1741

INDIANOCEAN

LADYSMITH

BETHLEHEM

VOLKSRUST

NEWCASTLEKROONSTAD

KLERKSDORP

WITBANKKENDAL

WALTLOO

SECUNDA

STANDERTON

ALRODE

COALBROOKSASOLBURG

TARLTON

LESOTHO

NATAL

FREE

STATE

GAUTENG

N

RUSTENBURG

NORTH - WESTMPUMALANGA

KWAZULU /

AIRPORT

VRYHEID

RICHARDS BAY

AFRICA

VAN REENEN

EMPANGENI

JAMESON

DURBAN

PARK

CAPE TOWN

DURBAN

GAUTENG

SOUTH AFRICA RICHARDS BAY

LESOTHO

SECUNDA

REFINED PRODUCTSCRUDE OILGASAVTUR

FUTURE NMPP PIPELINES

PRETORIA WEST

SCHEMATIC MAP OF TPL’S EXISTING NETWORK ALSO INDICATING THE ROUTE AND POSITION OF THE NEW MULTI-PRODUCTS PIPELINE (NMPP)

FUTURE FUEL DISTRIBUTION STRATEGIES FOR SOUTHERN AFRICASCHEMATIC MAP OF TPL INFRASTRUCTURE TO SERVICE MARKET : WITH FULL NMPP SYSTEM CONFIGURATION FROM 2014 TO 2020 IN RELATION TO THE PRESENT NETWORK (GAS INCLUDED)

INDIANOCEAN

LADYSMITH

BETHLEHEM

VOLKSRUST

NEWCASTLEKROONSTAD

KLERKSDORP

WITBANKKENDAL

WALTLOO

SECUNDA

STANDERTON

ALRODE

COALBROOKSASOLBURG

TARLTON

LESOTHO

NATAL

FREE

STATE

GAUTENG

N

RUSTENBURG

NORTH - WESTMPUMALANGA

KWAZULU /

AIRPORT

VRYHEID

RICHARDS BAY

AFRICA

VAN REENEN

EMPANGENI

JAMESON

DURBAN

PARK

CAPE TOWN

DURBAN

GAUTENG

SOUTH AFRICA RICHARDS BAY

LESOTHO

SECUNDA

REFINED PRODUCTS

CRUDE OIL

GAS

AVTUR

FUTURE NMPP PIPELINES

PPT-1741

PRETORIA WEST

NMPP TERMINALS

RAIL NETWORK

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RAIL NETWORK

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SECURITY OF SUPPLY – PIPELINE CONSTRAINED

• The DJP Pipeline has been constrained from 2006 , and this is expected to continue until the introduction of NMPP capacity in 2012.

• During this time pipe, road and rail initiatives together have helped to keep Gauteng and the inland “wet” (supplied with petroleum products):

• Refined Products in crude pipeline

• Drag reducing agents (DRA’s) in pipeline

• Combined industry block trains (e.g. Energy Express from Durban to Nelspruit)

• Increased Jet fuel block trains from Durban to ORTIA

• Rail routes from Port Elizabeth and East London to Bloemfontein and Kimberley

• Additional road volumes from Durban to the inland

• As the pipeline is constrained, and rail also has finite capability, the use of road transport in this time period increased significantly.

• Road transport has advantages in terms of time to introduce new capacity, speed/flexibility in responding to market requirements, and reliability. However, there are also disadvantages in terms of cost, safety, road degradation, and environmental impacts (carbon footprint). 18


SECURITY OF SUPPLY

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SECURITY OF SUPPLY – PIPELINE UNCONSTRAINED

• The introduction of NMPP capacity in 2012 will remove the Durban to Inland pipeline capacity constraint

• There will still be a role for the different modes of transport in ensuring security of supply. However, the roles should be different than during times of constrained pipeline capacity

• The following could be viewed as a desirable scenario from 2012 onwards :

PIPELINE

• Maximise pipeline volumes :

• Economical

• Safe

• Reliable

• Low environmental impact

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SECURITY OF SUPPLY

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RAIL

• Complement pipeline transport rather than compete with pipeline

• Focus on strategic routes such as

• Jet fuel block trains Durban to ORTIA : keep the rail route open as a strategic alternative to pipeline

• Block trains from Durban to Waltloo : large rail off loading facilities recently constructed at Waltloo, well placed in the Gauteng market, provides a strategic alternative to pipeline

• Service depots which are coming off the pipeline : Ladysmith and Bethlehem

• Focus on long haul and large volume railing from pipeline terminals and inland refineries :

• Tarlton to Botswana

• Sasolburg and Secunda to Zimbabwe, Zambia, DRC

• Continue and maximise current on-railing opportunities from pipeline terminals :

• Kroonstad to Bloemfontein and Kimberley

• Waltloo to Polokwane and Mokopane

• Explore new on-railing opportunities from pipeline terminals

• Maximise routes where pipeline is not available such as :

• Maputo to Nelspruit and Matsapha

• Cape Town/Mossel Bay/Port Elizabeth to Northern Cape

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SECURITY OF SUPPLY

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ROAD

• Minimise long haul road transport :

• Expensive

• Road degradation

• Environmental impact

• Safety concerns

• Focus on secondary delivery from depot to customer, not primary distribution. There is no realistic alternative to road in this regard

• Focus on short distance, low volume routes where rail is uneconomical

• Focus on routes where rail is not possible e.g jet fuel from refineries to airports in Cape Town, Durban, Port Elizabeth, George, Bloemfontein, etc

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SECURITY OF SUPPLY

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EXAMPLE OF MIXED MODES ENSURING SECURITY OF SUPPLY :WC2010 AIRPORTS

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1

ORTIA COMPLEX (ACSA)1

ORTAFS2

ENREF REFINERYEngen

DURBAN COMPLEX

ENREF

SAPREF

RAIL LOADING

Rail Off Loading

NATREF REFINERYSasol, Total

BERTHS (5,6,7,8,9)IMPORTS

DJP

12" PIPELINE (M

ULTI)

6" Jet Pipeline

Dedicated Jet feed to ORTIA

Total requirement

33Ml/w

Requirement11Ml/w

Swing Supply to ensure Transnet meets average

requirements over period of month

Requirement22Ml/w

Presently 10Ml/mth

SAPREF REFINERYBP, Shell

1 Airports Company South Africa 2 O R Tambo Airports Fuel Supply

ORTIA :

• Pipe ex Natref – maximum throughput

• Rail ex Durban – increased volumes to cater for remainder of demand

• Pipe ex Durban – No jet fuel in DJP to allow for additional petrol and diesel volumes

OTHER AIRPORTS :

• La Mercy Durban, Cape Town, Lanseria, George, Bloemfontein, Nelspruit, Polokwane, Pilanesburg, etc

• Additional volumes supplied by Road

RESULT :

• No stockouts during WC2010


EXAMPLE OF MIXED MODES : ENSURING SECURITY OF SUPPLY WC2010 AIRPORTS

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Source(e.g. Durban)

Primary Depot(e.g. Kroonstad, Waltloo)

Secondary Depot(e.g. Bloemfontein)

End Consumer

Pipe

Rail

Road

Rail

Road

Rail

Road

Road

Road

Primary Distribution

Secondary Distribution

PRIMARY AND SECONDARY DISTRIBUTION

Road

PRIMARY DISTRIBUTION: Bulk volumes by pipe, ship and block trainSECONDARY DISTRIBUTION: Single parcel delivery to final customer

Road


To have Security of Supply in Gauteng, all aspects of the supply chain have to work effectively and efficiently …..

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-Product-Infrastructure-Resources

CLOSING REMARKS


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THANK THANK YOUYOU


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SOME RISKS AND ITS IMPACT

Leslie Naidoo, Commercial Manager Operations, Transnet Pipelines

Business

overview of tpl

inland nmpp pipeline

pipeline depots

pipeline system

crude oil pipeline

underground pipeline

pipeline constraint

pipeline route