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Briefing to the Joint Energy and Transport Portfolio Committee

Recent Jet Fuel shortages at OR Tambo International Airport

(ORTIA)

13 October 2009

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Introduction• In early August below average stock levels

were reported at ORTIA*• The reasons for the low stock levels was a

culmination of issues • Although supply resumed to normal, recovery

to normal stock levels was slow• In response to this the Minister of Energy

established a task team to not only investigate the reasons for the shortage but also put in place a plan to mitigate against possible disruptions going forward, more especially during the WC2010

*On worst day stock levels were at 2.1 days

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Mandate

To investigate the jet fuels shortages that occurred at ORTIA in August 2009 and to ensure that appropriate measures are in place to avoid a similar occurrence in future, especially during the 2010 FIFA World Cup South Africa.To develop a consolidated supply and logistics plan for all motor fuels (jet, petrol and diesel) during the period of the WC2010

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Role Players• Core Team

– Department of Energy (Convener and coordination)– South African Petroleum Industry Association (SAPIA)

member companies– Transnet Divisions– Airports Company South Africa (ACSA)

• Other Stakeholders– Non-ACSA airports (To be included in core team)– The Board of Airline Representatives of South Africa

(BARSA)– Airlines Association of South Africa (AASA)– Petroleum Retailers Alignment Forum (PRAF)– Department of Transport– Department of Trade and Industry (Competition

Commission)

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Scope• In Scope

– Motor Fuels (Jet, Petrol and Diesel)– All WC2010 Primary airports (ACSA and non-ACSA)– All WC2010 Secondary airports (*Military airports will not

currently be used for additional refuelling of passenger aircraft)

– All host cities• Out of Scope

– All other liquid fuel products i.e. Liquefied Petroleum Gas (LPG), Illuminating Paraffin (IP)

– Planning for BLNS* countries• However current supply arrangements should be honoured

should not be negatively impacted as a result of the WC2010• Additional volumes required by these countries during

WC2010 to be factored in in determination of exports during the period

*Botswana, Lesotho, Namibia and Swaziland

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Objectives• Establish the root cause for the reduction of jet fuel

stock levels at ORTIA • Develop a consolidated 2010 FIFA World Cup South

Africa fuel logistics and supply plan (for all petroleum products) for the industry

• Identify and put in place measures to alleviate key constraints and risks throughout the liquid fuels supply chain

• Develop a consolidated emergency response plan including communication protocol

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Objectives• Determine and clearly define roles and

responsibilities of key participants in the liquid fuels supply chain to ensure a coordinated and transparent communication mechanism

• Make input into broader 2010 FIFA World Cup South Africa issues to the team led by the Deputy President of the Republic

• Identify agreement(s) or practice(s) that would require exemption in terms of section 10(1) of the Competition Act for the implementation of the 2010 FIFA World Cup South Africa fuel logistics and supply plan and initiate a process to apply for an exemption with the Competition Commission as a matter of priority

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Progress to Date• Bilaterals between Department and individual role players

– Articulation of key issues leading up to shortages at ORTIA

– Obtain various viewpoints of high risk areas and reasons thereof

– To obtain an understanding of the key operations of the liquid fuels supply and logistics chain and identify areas that may cause disruptions to the supply of fuel during the World Cup

– Sharing of plans and/or projections that various industry participants had or where in the process of putting in place

– Discussions of possible mitigation actions that could be considered to minimise/alleviate disruptions

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Progress to Date• Inception WC2010 Task Team Meeting

– Role of various players and possible mechanisms of addressing some of the key issues

– Key actions that need to take place– Finalisation of the Terms of Reference

• Identification of level of planning required at each level

• Participation in various forums to ensure alignment of planning processes and provide feedback on related aspects– Aviation Sub Sector Task Team (ASSTT) - (Chaired by

DOT)– Airlines Working Group (Working Group of ASSTT)

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Current Possible Supply to ORTIA

22,600

10,800

DedicatedPipeline

Rail

CoastalPipeline

33,400

PER WEEK PER MONTH

133,600

5,000 - 10,000

138,600 - 143,600

*Volumes are approximate figures and are shown in m3

*Average weekly demand is ~32 000m3

*Peak weekly demand during WC2010 is ~52 000m3

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Dedicated Pipeline• Dedicated pipeline for jet fuel to ORTIA• ~70% of ORTIA volume• Current Capacity per week ~22,600m3

• Maximum operational capacity per week ~25,000m3

• Bulk of volume supplied to ORTIA is based on committed customer orders

• Cannot supply volumes over and above maximum operational capacity

• Cannot limit flow from dedicated pipeline as this may have knock-on effect on other product which needs to be manufactured at the inland refinery

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RAIL CAPACITYCurrent:• 204 Rail Tank Cars (RTCs) in operation • Average # of RTCs per block train is 32• Offloading of 32 RTCs requires 2 shunts*• Operating 6 days a week• Average volume per week - ~11,136m3

Planned:• Upgrade # of RTCs to 280• Average # of RTCs per block train (38 to 40)• Offloading of more than 32 RTCs requires 3 shunts**• Operating 7 days a week• Maximum volume per week - 16, 240m3 (based on 40

RTCs per block train)

*An average of 16 RTCs can be offloaded in 1 shunt** Requires additional evening shift for offloading and lights to be installed to allow offloading at night

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Coastal Pipeline (DJP)• Multiproduct pipeline from Coastal Refineries to inland market – shared

pipeline with other products (Petrol and Diesel)• Able to deliver significant volumes at a time (Between 5 and 10

million litres at a time)• However introduction of jet fuel into DJP negatively impacts on

throughput capability for other products (Petrol and Diesel)– Displacement of other products– Not able to optimally use Drag Reducing Agent (DRA) when jet in pipeline

• Lead time for stock to be usable longer than other Mode of Transport (MOTs)– Primarily due to recertification and settlement process once at

ORTIA– Storage tanks for DJP receipts need to emptied out and become

“offline” when product from DJP arrives– In the case of high demand this may lead to below average stock

levels during that period

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ORTIA – CONSTRAINTS/RISKSLimited Storage Capacity• Due to limited storage capacity at ORTIA certain storage tanks are

reserved for delivery from DJP. Rail cannot decant additional fuel into storage tanks when delivery is expected from DJP

Dedicated Inland Pipeline running at maximum operational capacity• Volumes limited by current inland pipeline operating capacity • Cannot limit flow from dedicated pipeline as this may have knock-on

effect on other product manufactured at Inland RefineryLong Lead Times on DJP and “negative” impact of Jet Fuel on other

Products• Sufficient time required for recertification and settlement to avoid

contamination• DJP is multiproduct and should only be used for jet to meet additional

demand and in the case of an emergencySlow Recovery from Low Stock Levels• Once stock levels drop below a certain value it is very difficult to

recover because of limited infrastructure and throughput

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Actual Stock Levels

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Actual Stock

Sales

*Based on figures provided by ORTAFS

The impact if a disruption occurs is that once stock levels fall, recovery is slow if only the dedicated pipeline and rail are depended upon

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Coastal Pipeline

Coastal Jet pipe line

-

2,000

4,000

6,000

8,000

10,000

12,000

Week28

Week29

Week30

Week31

Week32

Week33

Week34

Week35

Week36

Week37

Week38

Week39

Week40

Week41

Coastal Jet pipe line

*Based on figures provided by ORTAFS

DJP was used to bring back stock levels to normal. The planning for pipeline during the WC2010 is critical to meet shortfalls and as a contingency

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Recommendations for WC2010STORAGE• Consider additional/temporary storage tanks at ORTIA during WC2010• ACSA constructing two new storage tanks• Transnet Freight Rail (TFR) has indicated that some RTCs can be used as

storage facilities during the WC2010. The exact quantities still to be determined

• Scheduling between DJP and Rail is critical to ensure optimal volumes are supplied by each mode of transport (MOT)

• 4 to 6 week forecasting of deliveries will enable all relevant role-players to plan better

LOGISTICS• Dedicated Inland Pipeline to ORTIA to continue supplying up to maximum

capacity• Balance of demand (i.e. Coastal orders) to be split between Rail and DJP• Rail will need to determine offsets by DJP and schedule/calculate # of RTCs

per block train accordingly to ensure delivery of total volumes as planned• Coordination with suppliers to ensure that adequate volumes per each MOT

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Recommendations for WC2010Coastal Pipeline (DJP)• Weekly delivery (~10 mil) during WC2010 • To be used as backup to other two MOTs• Communication plan and coordination when delivery is scheduled on

DJP• Monthly delivery (5.5mil) (before period of WC2010) to ensure

maintenance and to establish clear communication mechanisms

RAIL• The only MOT where throughput for jet fuel can be increased

without negatively impacting on other products is RAIL• It is critical that all RTCs (280) be brought into operation as planned• Additional shunt to be introduced to enable 40 RTCs to be offloaded• Deliveries to take place 7 days a week

– Engagement and commitment is also required from other role players who are impacted upon by introduction of additional shunt and 7-day operation

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Recommendations for WC2010PLANNING AND COORDINATION• Role of the Airport Operators for consolidation and coordination of

operations at airports will be critical• 4 to 6 week forecasts and daily monitoring of deviations from plans

so that corrective action can be taken• Urgent need for a risk/contingency plan to be put in place• Existing crisis management plans to be expanded upon to ensure

that all key role players are part of the plan and have input into the plan

• Clear lines of communication and a communication protocol need to be put in place

– Scenarios of different eventualities and how they will be managed– Centralised and consolidated information where all role players have

access to monitor daily demand, stock levels, etc.• Planning for all WC2010 primary airports, not just ORTIA• Planning to include petrol and diesel and not only focus on jet fuel

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Key Role Players• DOE

– Centralised role of coordination and oversight at a high-level (non-operational)

• ACSA– Projections of demand during WC2010– Maintenance and monitoring of actual versus planned demand and

stock levels• Airport Operators

– Consolidation of jet fuel supply plans by individual companies– Monitoring of day to day operations and deviations from plans– Timeous notification of relevant role players when actual volumes

deviate from planned volumes– Effective and efficient management of stock levels and product

deliveries

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Key Role Players• Suppliers

– Supply individual plans to airport operators timeously– Ensure that planned volumes are supplied and obtain feedback on

deviations in projected demand versus actual demand• Transnet Freight Rail

– Coordinate and plan for volumes onto rail to ensure all supply plans are met

– Communicate and plan when orders cannot be met or delivered • Transnet Pipelines

– Coordinate and plan for volumes into pipelines to ensure all supply plans are met

• Transnet National Ports Authority– Coordination and scheduling of cargo at the Ports

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THANK YOU