The vulnerable points in South Africa’s fuel supply chain
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Refineries, road delivery, and the transport corridor from Durban to Gauteng seem to be most at risk.
The civil unrest besetting South Africa raises questions about the security of fuel supplies. What are the risks down the value chain – from supply to consumption? Without fuel to farm with or to bring food from the farms to the cities, hunger follows.
Oil companies and governments are usually awake to the strategic role played by liquid fuels and have special measures to protect supply and logistics. Much of South Africa’s measures are apartheid era hangovers that have eroded with time. Periodic risk assessments have been done, but many assumed a calm society. It seems there was inadequate attention given to the risks imposed by a broken social compact.
South Africa has always been heavily dependent on imported fuel. Its synthetic fuel (from coal) capability – developed during the apartheid era to overcome the oil sanctions imposed by the United Nations – accounts for the balance.
But the risk to imports seems low. The world is awash with oil and refined products . This is due to the slump in demand triggered by lockdowns to contain the spread of Covid-19. There seems little risk of global shortages, apart from the usual refinery fires and supply disruptions.
The OPEC cartel still tries to manipulate prices. At the same time they don’t want to strangle demand. In addition its power has been tempered by a massive increase in production by unconventional producers, such as the fracking industry, in the US. North America is now one of the world’s largest producers of oil.
This leaves frontline security risks to fuel supply in South Africa. Fears that the country would run out of fuel arose last week following an outbreak of looting and infrastructure destruction. Most of the destruction was centred in the country’s economic hub Gauteng and KwaZulu-Natal on the east coast and home to one of Africa’s largest harbours.
From the patterns of violence over the past week it appears that the threats to fuel supply are land based. They come from following types of groups:
The South African construction industry has been beset by local racketeering mafias armed with automatic weapons demanding “protection” money.
Small time thieves occasional looters, and weak or complicit policing. The institutional weakening of law and order that took place during the “state capture” period associated with President Jacob Zuma’s term of office, may have been a contributory factor.
The attacks that have taken place seem to have been made by one or more of these groups acting in concert – by design or by coincidence. Which groups are involved can depend on local conditions.
Who is, and who isn’t, doing the damage
The fact that certain groups managed to close the economic umbilical cord – the main road from South Africa’s largest port in Durban to its industrial heartland, Gauteng – for several days reveals some level of organisation and determination as well as the weakness of the authorities.
Most of South Africa’s fuel is delivered by ship. Unlike countries like Somalia and Nigeria, South Africa’s domestic mafias have not yet expanded into piracy.
Crude oil is delivered by very large vessels to the single buoy mooring off-shore Durban which is visible from shore.
But no nefarious groups have yet shown any marine proclivities. In addition, crude oil has no immediate local value given that it still needs refining. The single buoy mooring seems low risk for the time being.
What about the risks to refineries?
The immediate threat to a refinery is a workforce that cannot get to work and back. The next threat is posed by capacity. Refineries produce large volumes. If their downstream distribution network is obstructed, they have to close for fear of drowning in their own product.
This is what lay behind the decisions by Shell and BP to close their refinery in Durban last week.
South Africa also imports petroleum products, delivered by ship to the main ports Durban, Richards Bay and Cape Town, where it is discharged through loading facilities into nearby storage tanks in the harbour area.
Tight security is paramount. The recent looting of containers in Durban harbour doesn’t speak well of harbour security.
To steal that fuel you need at least one large truck. This wouldn’t be easy to sneak into a harbour, unless the security at the harbour gates is complicit. Most of this kind of theft has been more along the lines of fraud in the paperwork, such as false volumes, which the oil companies are continually countering.
From the storage depots the fuel is loaded onto road tankers for delivery to service stations and customers. This is where the fuel logistics chain is at its most vulnerable. To restock service stations in and around Durban, private security services have since late last week been escorting road tanker convoys with the law and order authorities unseen.
Road tankers are slow soft targets often moving through built up areas.
The rioting and insurrection in KwaZulu-Natal started with the torching of more than 20 trucks on the main road from Durban to the industrial heartland at the sleepy town of Mooi River. Attacks on trucks have happened repeatedly at this location for several years. It is inexplicable that law enforcement authorities appear to have done nothing about it.
It is such a glaring oversight that it prompts questions about, at best, utter ineptitude, or at worst, complicity.
A lot of people know about fuel’s explosive qualities and although there are those who might take a chance, stealing petroleum products is more the preserve of mafias. This was evident in the theft of several million litres from a pipeline at Van Reenen – some 270 kms from Durban – where several large road tankers were arranged to cart the fuel away.
The state-owned pipeline operator, Transnet Pipelines, has reported an “unprecedented increase” in incidents of pipeline theft in recent years.
The point is that arson attacks on fuel installations is literally sending money up in smoke, which even criminals don’t like. Not so, insurrectionists.
Inland there are further storage depots in the logistics chain. They are required by law to install certain protective measures. These appear to have either worked, or they haven’t been on the radar of those seeking to do damage.
From these depots fuel is road-hauled to service stations and retailed to motorists.
Because South African law prohibits motorists from filling their own vehicles, service stations normally have several pump attendants on hand and are well lit at night, making them relatively safe. In the current round of unrest many service station proprietors have locked up shop, making it difficult for thieves to access underground storage tanks.
South Africa will need to reassess its risk profiles at each link in its on-land fuel supply chain. Currently the most vulnerable seem to be the refineries, road delivery, and the transport corridor from Durban to Gauteng – both pipeline and road.The Conversation
Source: https://www.moneyweb.co.za/news/industry/the-vulnerable-points-in-south-africas-fuel-supply-chain/
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