Deloitte Study - South African Oil Supply Chain Will Be "Significantly Constrainted" By 2008

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There are signs that an SA-first approach could be coalescing around the formation of the fuel supply strategic task team. This was established by the government in March last year, with membership from all the main industry players and the minerals and energy department. One of the first things it did was to commission Deloitte to conduct an independent study of the problems facing the industry. This was completed and its findings presented to the department and the minister in December. It is still being digested.

What Deloitte and the earlier Moerane report said was alarming. By next year, the supply chain will be “significantly constrained”. Without investment in manufacturing in southern Africa, the amount of imports will need to “escalate dramatically”. The existing infrastructure is “unable to support the requirements for increased imports in the short term and will need to be upgraded”.

For security of supply inland and for SA as a whole over the next 15 years, the construction of an adequately sized pipeline is the priority investment. To support the pipeline there needs to be depot infrastructure investments including tankage, receiving and loading, an adequately sized crude oil facility on the coast and an inland coal-to-liquid plant.

In addition, Deloitte said that the regulatory framework must provide a climate facilitating the “significant capital expenditure” needed. Significantly, the report noted that “poor returns are not attractive to investment” and that, despite this, the oil industry had continued to invest about R2bn-R3bn a year in the South African economy.

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http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A461968