Pipeline development. Foreword

Transcription

1 Foreword 05 Pipeline development plan Pipeline networks form the infrastructure backbone for transporting large volumes of liquid petroleum and gas. The networks play a strategic role in the logistical supply chain to ensure security of supply to inland markets, in a cost-effective, efficient and environmentally sustainable manner. Global economic trends require pipeline infrastructure to provide capacity ahead of demand, while allowing sufficient flexibility to adapt to change. South Africa has a strong emerging market with its major business hub situated 600 kilometres away from the coastline. Appropriate long-term planning for pipeline and associated infrastructure is therefore fundamental to support South Africa s progressive long-term economic growth, while taking advantage of market opportunities, providing equitable access to participate and lowering the cost of logistics in South Africa. A key planning goal in the petroleum and gas environment is to align planning initiatives with National Government, the oil and gas industry and other key stakeholders, particularly in providing diverse and sustainable energy sources. Ms Sharla Pillay Chief Executive: Transnet Pipelines 222 LTPF 2014 LTPF

2 1. INTRODUCTION Table OF contents 1. INTRODUCTION Planning goals Key issues Regulatory framework Pipeline network LIQUID PETROLEUM AND GAS DEMAND National refined fuel demand Crude oil pipeline demand Refined fuel pipeline demand Gas pipeline demand PIPELINE DEVELOPMENT PLANS Development scenarios New Multi-product Pipeline (MPP24) Refined fuel pipeline network Crude oil pipeline Gas pipeline Potential new pipelines TERMINAL STORAGE FACILITIES MPP24 accumulator terminals Privately-owned terminals Liquid fuels terminal opportunities in South Africa NEW EMERGING TECHNOLOGIES Engine efficiency Emerging technologies in pipelines Biofuels INVESTMENT OVERVIEW Transnet Pipelines seven-year investment plan Transnet Pipelines seven to 30-year investment Pipeline and terminal opportunities in South Africa 257 This chapter of the Long-term Planning Framework (LTPF) summarises the national pipeline development plans for South Africa, comprising the pipelines owned and operated by Transnet and pipelines owned and operated by other entities (private terminal operators, oil companies and freight logistics operators). The LTPF provides a national overview of the liquid petroleum and gas requirements of South Africa. The overview is aligned to the National Energy Security Master Plan, other related master plans and falls within the prescribed Regulatory Framework. Liquid petroleum includes crude oil and refined fuels. Refined fuels transported in pipelines in South Africa include petrol, diesel and jet fuel. Natural gas and methane-rich gas are also transported in pipelines. Included in this section are the key pipeline planning goals used to generate the long-term pipeline plans, an analysis of the current pipeline trends and related issues, and an overview of the national pipeline network. The summarised liquid petroleum and gas demand forecast for the next 30 years is shown. Following the demand forecast, the pipeline and terminal storage development plans to meet the demand for South Africa are described. The pipeline development plan concludes with an assessment of new emerging technologies that may impact on the proposed development plan, followed by an overview of the planned pipeline and terminal investments over both a seven and 30-year period in South Africa. Transnet s current New Multi-product Pipeline (NMPP) project consists of a collection of sub-projects, of which the major investments include a 24 inch Multiproduct Pipeline (MPP24) and accumulator terminals at the coast in Durban and inland at Jameson Park in Gauteng. In addition, the NMPP project includes two 16 inch pipelines (from Kendal to Waltloo and Jameson Park to Alrode) to enhance the capability of the existing northern pipeline distribution network. The new MPP24 is now complete, and will be referred to as the MPP24 going forward. The LTPF considers two scenarios for pipeline development in South African over the next 30 years, to support the proposed Mthombo oil refinery at the Port of Ngqura. Two pipeline scenarios considered for transporting project Mthombo s refined fuel to the hinterland are as follows: Scenario 1: Transport refined fuel via proposed Ngqura to Gauteng pipeline (NGP); and Scenario 2: Ship refined fuel from Ngqura to Durban and then transport via the MPP24 to Gauteng. 1.1 Planning goals The following general planning goals were used to inform the development of South Africa s long-term pipeline and terminal plans: Follow a common user principle in developing an integrated liquid fuels supply system; Meet the market demand and provide equitable access and capacity for all parties that want to participate in the oil and gas business sector; Provide a logical range of facilities to meet local as well as hinterland demand and avoid duplication of investment; Review capital investment, minimising regret investments across the oil and gas sector to meet the long-term national demand for liquid fuels; Facilitate security of supply objectives of the Department of Energy, comply with the Petroleum Pipeline Act and the Gas Act; Align with the planning initiatives of local, provincial, national Government and other key stakeholders; Improve infrastructural and operational efficiencies and reduce transport and logistics costs; Review existing storage and back-of-port logistics areas to increase capacity; Integrate and align pipeline with port and oil terminal capacity planning; Align pipeline and terminal development planning with trends in oil and gas logistics; Maintain the flexibility to respond to changing technological and economic conditions; and Respond to environmental opportunities and constraints in a sustainable manner. 1.2 Key issues The key issues that influence long-term pipeline and terminal planning have been identified as: Government s Clean Fuels 2 Programme and the impact on security of supply; Product specifications vs pipeline specifications; Slow-down in local economy and lower fuel demand; Worldwide trend towards greater specialisation, centralisation and economies of scale; Implementation of new refining capacity and strategic reserves (stocks); Developments of alternative routes by landlocked countries; Restructuring of logistics networks, and improvement in dealing with capacity constraints at terminals and intermodal transport links; Transport and handling of alternative forms of energy, such as liquid natural gas (LNG), natural gas (NG) and compressed natural gas (CNG); The need for sustainability in developing infrastructure solutions, as well as increased stakeholder engagement on key issues; and The award of leases by Transnet National Ports Authority (TNPA) in the existing Durban port and impact on the rationalisation of the oil industry infrastructure in Island View and the proposed new Durban Dig-out Port (DDOP). 224 LTPF 2014 LTPF

3 1. Introduction (continued) 1.3 Regulatory framework The regulatory framework within which pipelines for liquid fuels and gas operate in South Africa is depicted below. Figure 1: South African regulatory framework Department of Energy Petroleum Pipelines Act (Act No 60 of 2003) Petroleum Products Act (Act No 120 of 1977) Gas Act (Act No 48 of 2001) National Energy Regulatory Act (Act No 40 of 2004) South African Regulatory Framework Pipelines environment Department of Environmental Affairs National Environmental Management Act (Act No 107 of 1998) National Environmental Management: Biodiversity Act (Act No 10 of 2004) National Environmental Management: Protected Areas Act (Act No 57 of 2003) National Environmental Management: Air Quality Act (Act No 39 of 2004) Department of Labour Occupational Health and Safety Act (Act No 85 of 1983) Department of Safety and Security National Key Points Act (Act No 102 of 1980) The National Energy Regulator of South Africa (NERSA) regulates pipelines within the ambit of the Petroleum Pipelines Act and the Gas Act as well as associated regulations; thus NERSA functions as: Gas Regulator in terms of the Gas Act; Petroleum Pipeline Regulator under the Petroleum Pipelines Act; Regulator and overseer of all of Transnet Pipeline s activities; and Authority on Transnet Pipelines tariffs based on the allowable revenue principle. 1.4 Pipeline network National pipeline network The following diagram illustrates the existing national pipeline network as well as potential future new pipelines within South Africa, including non-transnet-owned pipelines. Figure 2: National pipeline network National pipelines network Non-Transnet pipeline network Chevron crude pipeline An existing 16 inch, 108km pipeline runs from the Strategic Fuel Fund (SFF) tank farm in Saldanha Bay to the Chevron refinery in Milnerton, Cape Town. Other pipelines exist between the refinery and the Cape Town harbour. These include a 26 inch, 13km crude pipeline, a 10 inch heavy fuel oil line and a 12 inch, 13km multi-product (white oil) pipeline (bi-directional). Rompco gas pipeline Rompco, a fully owned subsidiary of Sasol, owns a natural gas pipeline from Mozambique to South Africa. Gas has been supplied through the pipeline 865km from the Pande and Temane fields in Mozambique to Secunda since March The gas from Mozambique is marketed in Gauteng and KwaZulu-Natal, primarily for industrial use. PetroSA offshore gas pipeline A 450mm diameter, 85km gas pipeline from the offshore FA Platform to the onshore gas-to-liquids (GTL) refinery in Mossel Bay. PetroSA offshore condensate pipeline A 200mm diameter, 85km condensate pipeline from the offshore FA Platform to the onshore gas-to-liquids refinery plant in Mossel Bay. Ngqura to Gauteng pipeline (NGP) (proposed) A New Multi-product Pipeline is proposed to supply liquid fuel from the proposed Mthombo refinery in Ngqura to Gauteng. The pipeline is estimated to be 1 000km long and have a design flow rate of 1 500m 3 per hour. Petroline (proposed) Petroline RSA (Pty) Ltd together with Petroline SARLS.A.R.L (Mozambican) are shareholders of Transnet s pipelines network Transnet s pipelines network Transnet pipeline network The following diagram depicts Transnet s existing pipeline network within South Africa: Figure 3: Transnet s pipeline network Petroline Holdings, the company that will operate the pipeline from Maputo to Kendal. Petroline has a 25-year licence to construct and operate a 16 inch pipeline with a capacity of 3,5 billion litres per annum. West Coast gas pipeline (proposed) The West Coast gas pipeline system is envisaged to potentially connect the Kudu and Ibhubesi gas fields off the coast of southern Namibia to a potential future national South African gas pipeline system. This system will consist of various pipelines from the offshore gas fields, south to Cape Town and possibly to Mossel Bay and Port Elizabeth and east to Gauteng. An alternative route similar to NGP from the Eastern Cape could link into Gauteng and provide a transmission system for shale gas. A spur to East London could also be considered. Mossel Bay liquefied natural gas imports (proposed) South Africa s national oil company PetroSA has engaged a contractor to do a feasibility study, as well as the front-end engineering design (Feed) study into a proposed LNG import facility at Mossel Bay, in the Western Cape. The facility would enable PetroSA to import LNG to supplement gas reserves at the company s GTL refinery. The supply of LNG to other potential off-takers, such as electricity producers, is considered crucial to the success of the project. PetroSA s project Ikhwezi was designed to extend the life of the GTL refinery for six years up to Further development of other gas prospects near to the F-O field could potentially sustain the life of the refinery until Transnet s pipelines pipelines Refined fuels pipeline network Refined fuels pipeline network Durban Alrode (Gauteng) Durban Alrode (Gauteng) Inland distribution network Current Inland capacity distribution 4,5blpa network NMPP24 Current adds capacity 26 blpa 4,5blpa at full expansion Crude oil pipeline NMPP24 adds 26 blpa at full expansion Durban Natref Crude oil pipeline Current capacity 5,3blpa Avtur Durban pipeline Natref Natref Current Airport capacity (ORTIA) 5,3blpa Current capacity 1,2blpa Avtur pipeline Methane-rich gas pipeline Natref Airport (ORTIA) Secunda Durban Current capacity capacity 23MGJ 1,2blpa Other Methane-rich pipelines gas pipeline Ngqura-Gauteng pipeline Secunda Durban Additional 15blpa capacity from 2018 could delay Current part capacity of the MPP24 23MGJ Phase pa 2 from 2014 to 2035, and subsequent phases Other pipelines Maputo-Gauteng pipeline Ngqura-Gauteng pipeline Private-sector (Petroline) pipeline Construction Additional not 15blpa yet started capacity from 2018 could delay part of the MPP24 Phase 2 from 2014 to 2035, and subsequent phases 226 LTPF 2014 Maputo-Gauteng pipeline LTPF Private-sector (Petroline) pipeline Construction not yet started

4 1. Introduction (continued) 2. LIQUID PETROLEUM AND GAS DEMAND Durban to Johannesburg pipeline (DJP) During the 1960s the existing railway lines from Durban and Mozambique did not have sufficient capacity to meet the demand of the Gauteng hinterland for refined petroleum products. By 1965 a multi-product 12 inch pipeline, generally known as the DJP, was constructed. The pipeline has reached the end of its technical and economic life and is currently being replaced by a new 24 inch Multi-product Pipeline, the MPP24. The DJP is currently utilised for transporting petrol from Durban to the inland network, and both petrol and diesel to Ladysmith, Bethlehem and Kroonstad. This will continue until the MPP24 is ready to transport multiproducts from 2015 upon completion of the accumulator terminals. The DJP can transport jet fuel to OR Tambo International Airport (ORTIA) if required, but it is not currently part of the normal operational pattern, however, the option is available for strategic security of supply purposes. The current operating capacity of the DJP is 3,72 billion litres per annum. Decommissioning of the pipeline is planned when the MPP24 becomes fully operational. Methane-rich gas pipeline A second 16 inch refined multi-product pipeline, from Durban to Witwatersrand (DWP) followed in 1973, but the subsequent construction of the Secunda coal-toliquids refinery rendered the pipeline underutilised. In 1995 a section of the pipeline was reconfigured to convey methane-rich gas from Secunda to Durban, via Empangeni, known as the Lilly line. The Lilly line carries methane-rich gas from Secunda to Durban with off-take points at Newcastle, Empangeni/ Richards Bay and Durban area. The maximum capacity of the pipeline is 23 million gigajoules (MGJ) per year. It is expected that demand will exceed the line s capacity in the early 2020s. New 24 inch Multi-product Pipeline The new MPP24 includes the Durban to Jameson Park trunk line, from where it ties into the inland network at the Jameson Park Terminal near Heidelberg. The new pipeline debottlenecking and upgrades to the inland network have been completed and the network is currently fully operational. Additional pipelines implemented as part of the overall NMPP project included a 16 inch multi-product pipeline from Kendal to Waltloo and a 16 inch multi-product pipeline from Jameson Park to Alrode. Currently the MPP24 trunk line is used to transport 500 ppm diesel from Durban to Jameson Park. Petrol will be introduced into the MPP24 trunk line in 2015 when the Coastal (TM1) and Jameson Park (TM2) terminals are commissioned enabling the pipeline to carry multiple product grades. The MPP24 is designed to transport jet fuel from Durban to Jameson Park from where it will be transported by an existing 16 inch pipeline via Alrode and into a section of the current DJP to ORTIA. A future dedicated jet fuel line is planned from Jameson Park to ORTIA. Jet fuel will be introduced into the MPP24 when a technically feasible solution is found to address Clean Fuels 2 product quality issues and when inland jet fuel demand is sufficient. Current capacity to supply jet fuel to ORTIA by rail and the dedicated jet fuel pipeline from Sasolburg to ORTIA are expected to be insufficient from 2019 onwards. The management of jet fuel in the MPP24 requires special attention due to strict quality management requirements. The proposed operating philosophy will require re-batching and quality certification at TM2 before transfer to ORTIA. The current installed capacity of the MPP24 trunk line is 8,76 billion litres per annum. Jet fuel pipeline (Avtur) The aviation turbine fuel is a commodity known as Avtur or jet fuel. The current dedicated pipeline (94km) transports jet fuel from the Natref refinery in Sasolburg to ORTIA east of Johannesburg. The demand on the dedicated jet fuel pipeline is dependent on the production at Natref (supplemented by synthetic jet fuel from Secunda) rather than demand at ORTIA. The line is currently operated at close to its maximum capacity and will continue to run at its maximum operating capacity into the foreseeable future. The installed capacity of the pipeline is 1,3 billion litres per annum. Crude oil pipeline (COP) The COP was commissioned in 1971 to transport crude oil from Durban to the inland crude refinery Natref in Sasolburg, as well as to the used coal mines in Ogies (Kendal node) as part of the then strategic reserves. A reconfiguration of the 18 inch crude and 16 inch DWP systems were done with the introduction of methanerich gas. The reconfigured COP consists of a 16 inch section and an 18 inch section. Capacity was increased during 2002, triggered by the Natref refinery capacity expansion, by adding five en-route (booster) pump stations, which gave the pipeline sufficient capacity to meet current and anticipated future demand. With the introduction of the Clean Fuels 1 programme, Natref s refining capability was effectively reduced resulting in unused capacity of approximately 100m 3 per hour in the COP. With the introduction of the Clean Fuels 2 programme, currently promulgated to be introduced in July 2017, it is expected that Natref would increase production to nameplate capacity and the COP would again operate at design capacity. The current installed capacity of the COP is 7,3 billion litres per annum. 2.1 National Refined fuel demand The following table and graph shows the Southern African refined fuel demand for petrol, diesel and jet fuel for the 30-year planning period supplied from South Africa. Non-pipeline products, eg bitumen, LPG, illuminating paraffin and fuel oil are shown under the heading Other. The demand includes South Africa, Botswana, Lesotho, Namibia, Swaziland and exports to markets in southern Africa. National liquid fuel demand The total liquid fuel demand volumes for South African domestic consumption of petrol, diesel and jet fuel are projected to grow from 26 billion litres per annum in 2013 to 69 billion litres per annum by The graph on the left below shows the demand per fuel type for the period 2014 to From the graph below it is evident that the market for diesel is growing while the petrol market remains relatively constant. Table 1: South Africa and cross-border refined fuel demand, by fuel type (billion litres per annum) Liquid fuel products Jet 2,6 2,6 2,7 2,8 2,6 2,8 2,9 3,1 3,9 4,9 Diesel 13,6 14,2 14,8 15,5 16,2 16,9 17,7 20,2 31,9 52,5 Petrol 13,5 13,6 13,7 13,8 14,0 14,1 14,2 14,6 16,0 17,6 Other 4,5 4,5 4,5 4,5 4,7 4,6 4,5 4,6 4,8 5,1 Total 34,1 34,9 35,7 36,6 37,5 38,4 39,4 42,5 56,6 80,1 Annual growth 2,8% 2,3% 2,3% 2,4% 2,4% 2,5% 2,5% 2,6% 3,1% 3,7% The graph on the right below shows the liquid fuel demand (including other products) for South Africa and non-south African supplied from or via South Africa for the period 2014 to Figure 4: South Africa and cross-border refined fuel demand, by fuel type South Africa and cross-border fuel demand, by fuel type Diesel Petrol Jet Other South Africa versus cross-border fuel demand Non-SA Demand SA Demand The inland demand area is defined as per the following figure and tables. Each of the demand enclaves are linked to a demand point being part of the existing oil industry depot infrastructure. 228 LTPF 2014 LTPF

5 2. LIQUID PETROLEUM AND GAS DEMAND (continued) Inland and coastal demand areas Durban - Sasolburg 5,3 5,5 5,7 5,4 5,5 5,4 5,7 5,3 5,4 5 Saldanha Bay - Cape Town 4,8 4,8 4,8 4,8 4,8 4,8 4,8 4,8 4,8 4 Total Crude Pipelines 10,1 10,3 10,5 10,2 10,4 10,2 10,5 10,1 10,2 10 Annual Growth 3,5% 1,7% 2,6% -3,3% 1,6% -1, 2,6% -4, 1,2% 0,5% billion litres per annum Figure 5: Inland and coastal demand areas Figure 6: Crude pipeline demand Refined fuel pipeline demand The coastal demand area is shown for clarity. Significantly, Botswana and Lesotho form part of the inland demand area, while Namibia and Swaziland are within the coastal demand areas. Botswana, Lesotho, Swaziland and Namibia are all members of the South African Customs Union. Botswana has indicated a change in policy direction to diversify supply and source fuel via Mozambique and Namibia to improve their security of supply. The impact in the medium-term could see supply from South Africa to Botswana reduced to less than 6 demand. Overland exports to northern territories are typically to Zambia, Zimbabwe and Democratic Republic of the Congo. Table 2: Crude oil pipeline supply and demand 2014 to Crude oil pipeline demand The table below indicates the long-term forecasted inland crude demand. The COP from Durban to Sasolburg supplies Natref, the inland refinery owned by Sasol and Total. It is not expected that the shareholders will increase the refinery capacity beyond its current nameplate design of 108,7bpd as part of the Clean Fuels 2 (CF2) programme. The current implementation date for CF2 is July The ability to achieve this date is compromised due to the funding mechanism for the CF2 programme not being finalised by Government. The oil industry requires approximately five years from investment decision to implement the changes at their refineries. 2.3 Refined fuel pipeline demand National demand forecast The table and graph below indicate the national demand forecast for petrol, diesel and jet fuel in billion litres per annum for the period 2014 to The national liquid fuel demand forecast is shown in the table. Table 3: South Africa refined fuel: Petrol, diesel and jet fuel demand Liquid fuel products Jet 2,51 2,57 2,86 3,19 3,57 3,99 4,48 4,81 Diesel 11,91 12,47 15,67 19,75 25,02 31,92 41,15 48,24 Petrol 12,27 12,36 12,86 13,38 13,93 14,52 15,15 15,55 Total 26,69 27,40 31,39 36,32 42,52 50,43 60,79 68,60 Annual growth 3,3% 2,7% 2,9% 3,1% 3,4% 3,7% 4,1% 4,3% Billion litres per annum. Figure 7: South Africa refined fuel: Petrol, diesel and jet fuel demand Crude oil pipeline Durban Sasolburg 5,3 5,5 5,7 5,4 5,5 5,4 5,7 5,3 5,4 5,5 Saldanha Bay Cape Town 4,8 4,8 4,8 4,8 4,8 4,8 4,8 4,8 4,8 4,8 Total crude pipelines 10,1 10,3 10,5 10,2 10,4 10,2 10,5 10,1 10,2 10,3 Billion litres per annum. For the crude oil pipeline from Saldanha Bay to Cape Town, it is assumed that the Chevron refinery will maintain production at current installed capacity for the planning period. The utilisation of the Chevron crude pipeline from Saldanha Bay will therefore remain constant at current capacity. 230 LTPF 2014 LTPF

6 Refined fuel pipeline LIQUID PETROLEUM AND GAS DEMAND (continued) DJP 3,5 3,6 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 MPP24 3,1 3,1 6,0 6,1 6,8 3,3 3,2 3,2 2,9 6,3 19,7 NGP 0,0 0,0 0,0 0,0 0,0 4,6 5,3 5,7 7,9 12,9 11,2 Total 6,7 6,7 6,0 6,1 6,8 7,9 8,5 8,9 10,8 19,2 30,9 The growth in petrol consumption is expected to be less Inland refined fuel supply and demand forecast Figure 9: Refined fuel pipeline demand: Scenario 1 with NGP than 1% per annum over the period, while diesel growth The following table indicates the inland supply and is anticipated to be in the 4% to 5% range. Jet fuel demand for refined fuels for the 30-year period 2013 to consumption remains lower than 2,5% for the period Inland demand includes volumes to Lesotho and Botswana, but excludes over border exports. billion litres Total inland demand Annual growth (%) 3,2 2,7 2,8 3,1 3,3 3,7 3,9 4,5 3,9 Supply from Supply Inland from Refineries inland refineries per annum Table 4: Inland refined fuel supply and 2014 demand forecast 2015 ( to 2043) 2025 Total Inland Demand Billion litres per annum Annual Growth ,2% ,7% ,8% ,1% ,3% ,7% ,9% ,5% 3,9% Ngqura-Gauteng (NGP) Supply Secunda from coast Durban-Gauteng (MPP24) Supply from coast by road Natref Supply from coast by rail Durban-Johannesburg (DJP) Supply from coast by pipeline Supply from Total Coast supply to inland Supply from Coast by Road The Supply following from graph Coast shows by Rail the supply required to satisfy the inland demand The inland production is supplemented by Refined fuel pipeline demand product from the coast, transported by road, rail and pipelines. The pipeline supply consists of the Durban-Johannesburg Pipeline Supply (DJP), from Coast MPP24 by and Pipeline or the NGP Scenario 2 with coastal shipping Figure 8: Inland refined fuel supply and demand forecast (2014 to 2043) Total Supply to Inland Inland refined fuels supply and demand forecast The following table shows the various pipeline utilisations for the period 2014 to 2043 for scenario 2 based on the forecasted demand requirements. Table 6: Refined fuel pipeline demand: Scenario 2 with coastal shipping Refined fuel pipeline Refined fuel pipeline DJP DJP 3,5 3,6 3,6 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 MPP24 MPP24 3,1 6,0 6,1 8,2 8,5 10,5 19,0 30,6 NGP 3,1 3,1 0,0 6,0 6,1 6,8 7,6 8,2 8,5 10,5 19,0 30,6 NGP Total 0,0 0,0 6,7 0,06,0 0,06,1 0,0 6,8 0,0 7,6 8,2 0,0 8,50,0 10,50,0 19,0 0,030,6 0,0 Total Billion litres per annum. 6,7 6,7 6,0 6,1 6,8 7,6 8,2 8,5 10,5 19,0 30,6 Figure 10: Refined fuel pipeline demand: Scenario 2 with coastal shipping 35 The following table shows pipeline utilisation for period 2014 to 2043 for scenario 1 based on the forecasted demand requirements. Table 5: Refined fuel pipeline demand: Scenario 1 with NGP Refined fuel pipeline DJP 3,6 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 MPP24 3,1 6,0 6,1 6,8 3,3 3,2 3,2 2,9 6,3 19,7 NGP 0,0 0,0 0,0 0,0 4,6 5,3 5,7 7,9 12,9 11,2 Total 6,7 6,0 6,1 6,8 7,9 8,5 8,9 10,8 19,2 30,9 Billion litres per annum Ngqura-Gauteng (NGP) Durban-Gauteng (MPP24) Durban-Johannesburg (DJP) LTPF 2014 LTPF

7 2. LIQUID PETROLEUM AND GAS DEMAND (continued) Table: Gas pipeline demand Gas Pipeline Offshore-Mossel Bay (NG) 1486, Secunda - Durban (MH4) 320, Temane-Secunda (NG) 2351, Total Gas Pipelines ,4 4376,2 4527,0 Annual Growth 0,3% 0,3% 0,4% 0, 0,2% 0,2% 0,2% 0,2% 0,3% 0,4% Million Cubic Meters p.a. Jet fuel demand The table below indicates the inland jet fuel supply and demand for the 30-year period in billion litres per annum. The various jet fuel supply sources are shown separately and consist of supplies from Natref (Sasolburg) in the dedicated jet fuel pipeline to ORTIA, the supply ex-coast by rail and road, and the demand requirement to be supplemented in the MMP24. The current demand forecast indicates that beyond 2019 the current rail and dedicated Sasolburg pipeline capacity will need to be supplemented to service the inland jet demand. This additional capacity can be supplied by the MPP24, but can be done by either increasing the rail block trains in the short term. It is envisaged that the jet fuel in the MPP24 quality issue will be resolved by the Clean Fuels 2 introductory date of Figure 11: Gas pipeline demand (billion litres per annum) Table 7: Jet fuel supply and demand for inland area for the period 2014 to 2043 Billion litres per annum Jet fuel demand 1,9 1,94 1,98 2,03 2,07 2,12 2,16 2,21 2,26 2,81 3,53 3,61 Demand growth (%) 2,7 2,2 2,2 2,2 2,2 2,2 2,2 2,2 2,2 2,2 2,3 2,3 Jet fuel logistics capacity 2,15 2,15 2,15 7,41 7,41 7,41 7,41 7,41 7,41 7,41 7,41 7,41 Sasolburg- Ortia avtur line 1,31 1,31 1,31 1,31 1,31 1,31 1,31 1,31 1,31 1,31 1,31 1,31 Durban-Ortia rail 0,83 0,83 0,83 0,83 0,83 0,83 0,83 0,83 0,83 0,83 0,83 0,83 Road 0,01 0,01 0,01 0,01 0,01 0,01 0,01 0,01 0,01 0,01 0,01 0,01 MPP24- Jameson Park-Ortia 5,26 5,26 5,26 5,26 5,26 5,26 5,26 5,26 5,26 The South African gas market is currently small in relation to other energy sources. It does, however, have the potential for significant growth if commercially viable gas discoveries are developed. 2.4 Gas pipeline demand The following table indicates the gas demand in the pipelines to supply the various markets in South Africa: Table 8: Gas pipeline demand Gas pipeline Offshore-Mossel Bay (NG) Secunda-Durban (MH4) Temane-Secunda (NG) Total gas pipelines , , ,0 Annual growth (%) 0,3 0,3 0,4 0,0 0,2 0,2 0,2 0,2 0,3 0,4 Million cubic meters pa. The Offshore-Mossel Bay pipeline supplies the GTL refinery in Mossel Bay, the Lilly line (Secunda to Durban) supplies various industrial users and the Temane- Secunda pipeline supplies natural gas feedstock to the Sasol plants in Secunda and Sasolburg and to industrial users as an energy carrier. Sasol currently delivers more than 120 million giga joules (MGJ) per annum of natural gas or methane-rich gas to customers in Gauteng, Free State, KwaZulu-Natal and Mpumalanga. 234 LTPF 2014 LTPF

8 3. PIPELINE DEVELOPMENT PLANS 3.1 Development scenarios The proposed Mthombo oil refinery at the Port of Ngqura is a Government initiative motivated by concerns about Security of Supply (SoS) of liquid fuels, specifically: The Government requires 3 of South Africa s crude requirements to be sourced by non-international oil companies (IOCs); Concerns about South Africa s reduced crude oil refining capacity; and The need for a more involved national oil company (NOC) as an instrument of SoS. Two pipeline scenarios were developed for the LTPF to support the proposed Mthombo refinery in transporting refined fuel to the hinterland: Scenario 1: Transport refined fuel via proposed NGP; and Scenario 2: Ship refined fuel from Ngqura to Durban and then transport via the MPP24 to Gauteng. Scenario 1: Mthombo refinery with Ngqura to Gauteng pipeline This scenario envisages the building of a new pipeline from Ngqura to link into the current network at either Kroonstad or Jameson Park near Heidelberg, Gauteng. The new pipeline will be commissioned in the same year that the Mthombo refinery comes online. The assumption in this scenario is that the Mthombo refinery will be constructed and commissioned by It is currently envisaged that the Mthombo refinery will only be commissioned well into the 2020s. With the implementation of additional refining capacity South Africa will become a net exporter of liquid fuel for a significant period. This scenario has significant implications for the utilisation and capacity expansion plans of the MPP24 during the next 15 to 20 years. The implications for the MPP24 are, due to the under-utilisation of existing Total liquid fuels supply and demand forecast Figure 12: Total liquid fuels supply and demand forecast capacity for a period of time, that the pipeline tariffs will increase and the current capacity expansion plans would need to be adjusted accordingly. The building of the Ngqura pipeline does not impact on all of the future MPP24 investments. The investment in TM2 at Jameson Park will still be required to accommodate the increased demand. Consequently, only the investments in the additional MPP24 pump stations and TM1 (Island View) will be postponed. The timing of the investment decision and subsequent implementation of the new refinery will impact the investment plan of the MPP24. Scenario 2: Mthombo refinery with coastal shipping to Durban Scenario 2 does not include the proposed NGP. This scenario rather assumes that coastal shipping will be used to transport the refined fuel from the port of Ngqura to the port of Durban from where it will be transported in the MPP24 to Gauteng. This will require additional berth capacity at both Ngqura and Durban. The demand growth and CF2 refinery expansion assumptions remain for scenario 1. This scenario assumes the original design expansion plan for the MPP24 subject to demand growth fluctuations. Mthombo impact refined fuels imports Total liquid fuel volumes moved in and through South Africa are envisaged to grow from the current 34 billion litres to more than 82 billion litres by The graph below illustrates the supply and demand balance. The various demand curves are offset by local production and imports. With a delay in the implementation of Mthombo, the period of over supply would move out in time and oversupply will be reduced, as the market will be able to absorb more local production. 3.2 New Multi-Product Pipeline The South African economy depends on the secure supply of fuel into the inland region, where the demand for fuel based on the long-term forecast is growing from an expected 18,4 billion litres per annum in 2014 to approximately 49,1 billion litres per annum in The pipeline also needs to have sufficient spare capacity to service a major supply disruption from the Coal to Liquids (CTL) plants at Secunda. The MPP24 is replacing the 12 inch DJP and has a capacity of 8,7 billion litres per annum and at full capacity will be able to deliver 26,3 billion litres per annum. The MPP24 is aligned with the Energy Security Master Plan of the Department of Energy. The pipeline is 555km and the system consists of a trunk line and two accumulator terminals, one on either side of the pipeline, ie TM1 in Durban and TM2 at Jameson Park in Gauteng. The coastal terminal (TM1) will receive product from various suppliers in Durban from where it will be injected into the trunk line. The scheduling of the trunk line will be driven by the demand in the off-take areas, the maximisation of batch sizes and the minimisation of the interfaces between products. Table 8: Timing of MPP24 capacity expansion for the two scenarios The product is received in the inland accumulator terminal (TM2) at Jameson Park from where it is transported into various pipelines to final destination at oil industry storage depots. The inland terminal can also receive product from Natref (Sasolburg) and Sasol 2 and 3 (Secunda). In exceptional cases, products can bypass the inland terminal for direct delivery to industry storage facilities. For the first phase of the implementation, the MPP24 will have five pump stations one at TM1, three along the route and one at TM2. Adding additional pump stations to the system can increase capacity. The interface or intermix will be stored at Jameson Park accumulator terminal (TM2) until a batch can be scheduled to be transported by pipeline for processing at the refractionator at the Tarlton Depot. The MPP24 was constructed in accordance with best practice in the field of pipeline construction, reflecting the significant advances that have been made over the years in pipeline and construction technology. The following table show the MPP24 capacity expansion options for the two scenarios: Scenario 1: Scenario 2: Ngqura-Gauteng pipeline Coastal shipping to Durban MPP24 expansion year (billion litres pa) (billion litres pa) ,8 8, ,8 11, ,8 16, ,8 22, ,9 23, ,9 26, ,9 26, ,3 26,3 The key issues that will impact the timing of the expansions are: The inland market demand growth; The ability of the inland refineries to supply a minimum base load of fuel; The building of a new pipeline from the proposed Mthombo refinery which could delay part of the phase 2 expansion to the 2030 to 2035 period; and Security of supply considerations. It should be noted that based on the timing of the Mthombo refinery decision, only part or the full phase 2 expansion investments will be incurred (TM2 tanks will have to be built as well as the Kroonstad to Sasolburg pipeline leg). It is thus critical that the investment decisions be coordinated at a national level between the government entities involved. 236 LTPF 2014 LTPF

9 3. PIPELINE DEVELOPMENT PLANS (continued) NGP and MPP24 pipeline capacity utilisation for scenario 1 The following graph shows the utilisation of the MPP24 and NGP (scenario 1) and the impact on the timing of the planned MPP24 expansion phases. Figure 13: NGP and MPP24 pipeline capacity utilisation for scenario 1 The figure below shows the phased expansion of the MPP24 through time as product demand increases and supply is imported through Durban either from Mthombo or other sources (scenario 2). With the delay in the implementation of the Mthombo refinery now expected well post 2020, it is evident from the below graph that the MPP24 phase 2 expansion will be required before the refinery is built. This will put additional pressure on a no pipeline scenario for Mthombo as the MPP24 phase 2 will increase capacity to 11,9 billion litres per annum and as indicated in the figure above will be underutilised for at least 10 years until demand growth has caught up with installed capacity. Figure 14: MPP24 pipeline capacity utilisation for scenario 2 MPP24 pipeline capacity utilisation for scenario 2 The figure above shows the delayed expansion of the MPP24 as product is transported inland in the new NGP from the Mthombo refinery. During the period until the capacity of the NGP is reached, the MPP24 volume will show a steady decline where after it would pick up and take up the growth in the inland market. The following table shows the volumes transported in each of the pipelines for the 30-year planning period. Table 9: Liquid fuel pipeline utilisation DJP, MPP24 and Ngqura Billion litres per annum DJP Petrol 3,02 Diesel 0,57 MPP24 Petrol 2,57 2,58 2,71 1,94 1,92 1,91 1,86 1,69 2,44 Diesel 3,08 3,48 3,56 4,08 1,35 1,26 1,23 0,86 4,11 16,02 Jet 0,03 0,20 0,45 1,23 Total 6,67 6,05 6,14 6,80 3,28 3,18 3,17 2,91 6,25 19,69 Growth from the previous year (%) (2) (52) (3) 0 (2) 19 9 Coega pipeline Petrol 1,23 1,45 1,47 1,77 2,98 3,34 Diesel 3,24 3,67 4,01 5,90 9,48 7,41 Jet 0,17 0,21 0,22 0,20 0,49 0,41 Total 4,63 5,33 5,70 7,87 12,95 11,16 Growth from the previous year (%) (2) 3.3 Refined fuel pipeline network Network diagram The following two diagrams indicate the schematic layout of the pipeline system for 2014 and The key difference is the Refined fuel decommissioning pipeline network of the DJP. diagram for 2014 Refined fuel pipeline network diagram for 2020 Figure 15: Pipeline network diagram for 2014 and 2020: Scenerio 2 Rustenburg Tarlton Waltloo Langlaagte Klerksdorp Airport Sasolburg Kroonstad Alrode Coalbrook Witbank Kendal Jameson Park Secunda Rustenburg Tarlton Waltloo Langlaagte Airport Klerksdorp Sasolburg Kroonstad Alrode Coalbrook Witbank Kendal Jameson Park Secunda Bethlehem Bethlehem Ladysmith Ladysmith Durban Durban 2014 Pipeline system 2020 Pipeline system 238 LTPF 2014 LTPF

10 3. PIPELINE DEVELOPMENT PLANS (continued) Network utilisation Refined fuel pipeline utilisation for 2014 The following diagrams indicate the pipeline utilisation for the various liquid fuels pipelines in the network for 2014, 2034 and 2043 based on average monthly pipeline demand. Figure 16: Network utilisation for 2014 based on average monthly pipeline demand: Scenario 2 Refined fuel pipeline utilisation for 2043 Figure 18: Network utilisation for 2043 based on average monthly pipeline demand: Scenario 2 Waltloo Witbank Airport 9 Kendal Waltloo Witbank Rustenbur g 26% 19% 19% Tarlto n Klerksdorp Langlaagt e Airport 49% Sasolburg Kroonstad Bethlehem Ladysmith Durban %18 89% 71% 67% 100 % Alrode Coalbrook Refined fuel pipeline utilisation for % (petrol) 2 (diesel) 22% 15% Kendal 1% Jameson Park Secunda Note that in the 2034 diagram the MPP24 pipeline is running more that 8 of capacity and in 2043, the Jameson Park Kendal line section, Tarlton Rustenburg line section and the MPP24 exceed the installed capacity. Figure 17: Network utilisation for 2034 based on average monthly pipeline demand: Scenario % Rustenbur g Tarlto n Klerksdorp 48% 5 Langlaagt e 77% Sasolburg 3 Kroonstad Bethlehem Ladysmith Alrode Coalbrook 47% (petrol) 96% (diesel) 114 % Jameson Park Secunda MPP24 trunk line and Ngqura Pipeline capacity utilisation Scenario 1 and Scenario 2 Average Demand PIPELINE SECTION Durban % -59% 5 NMPP 36% 69% 78% 36% 25% 21% 15% 9% 1 17% 24% 31% 4 51% 61% 75% 6-79% 61% Coega Pipeline 61% 78% 6 75% 81% 86% 88% 87% 85% 84% 82% 79% 75% % Multi-product Pipeline >10 101% The Peak following Seasonal diagrams Demand indicate the pipeline utilisation through time (2014 to 2043) and show when the regional sections of the pipeline network become constrained. The average and peak seasonal demand is shown for the MPP24 (trunk line) and the PIPELINE SECTION utilisation for average demand in the eastern, western and northern sections of the pipeline system. Each pipeline section is MPP24 44% 81% 92% 42% 29% 23% 16% 9% 11% 2 28% 37% 48% 61% 74% 9 shown separately for the various network regions. Coega Pipeline 72% 93% 72% 9 97% 104% 105% 104% 101% 10 97% 93% 89% Figure 19: MPP24 trunk line and Ngqura pipeline capacity utilisation: Scenario 1 MPP24 trunk line and Ngqura Pipeline capacity utilisation Scenario 1 and Scenario 2 Average Demand PIPELINE SECTION % -59% 5 Average Demand MPP24 36% 69% 78% 93% 78% 75% 7 53% 58% 66% 72% 79% 87% 96% 105% 116% 6-79% 61% PIPELINE SECTION % -59% % NMPP 36% 69% 78% 36% 25% 21% 15% 9% 1 17% 24% 31% 4 51% 61% 75% 6-79% 61% Peak Seasonal Demand >10 ##### Coega Pipeline 61% 78% 6 75% 81% 86% 88% 87% 85% 84% 82% 79% 75% % PIPELINE SECTION >10 101% MPP24 44% 81% 92% 11 92% 88% 82% 63% 68% 78% 86% 94% 104% 115% 125% 139% Peak Seasonal Demand PIPELINE SECTION Regular pipeline expansions (additional pump stations and tanks) are scheduled for the MPP24 to alleviate any constraints MPP24 44% 81% 92% 42% 29% 23% 16% 9% 11% 2 28% 37% 48% 61% 74% 9 that might occur. The pipeline only becomes constrained for scenario 2 in 2042 and 2038 for the peak demand case. Coega Pipeline 72% 93% 72% 9 97% 104% 105% 104% 101% 10 97% 93% 89% Figure 20: MPP24 trunk line capacity utilisation: Scenario 2 Average Demand PIPELINE SECTION % -59% 5 MPP24 36% 69% 78% 93% 78% 75% 7 53% 58% 66% 72% 79% 87% 96% 105% 116% 6-79% 61% % Peak Seasonal Demand >10 ##### PIPELINE SECTION MPP24 44% 81% 92% 11 92% 88% 82% 63% 68% 78% 86% 94% 104% 115% 125% 139% 240 LTPF 2014 LTPF

11 3. PIPELINE DEVELOPMENT PLANS (continued) Refined products (average and peak demand) Eastern network Refined products (average and peak demand) Eastern Eastern network The eastern network comprises pipelines running from Secunda to Jameson Park, to Kendal node and onto Waltloo and Witbank. Refined Figure 21: Products Eastern network Eastern Network refined products (average demand) 1% -59% % 61% % Pipeline Section Design Capacity Utilisation - Average Demand Refined Products Eastern Network 1% -59% > % 6-79% 61% PIPELINE SECTION % Secunda-Kendal Pipeline Section Design (20") Capacity Utilisation - Average Demand 25% 25% 25% 22% 22% 21% 21% % 2 19% 19% >10 18% 18% 101% 17% Secunda-Kendal PIPELINE SECTION (12") 15% % % % % Jameson Secunda-Kendal Park-Kendal (20") 14% 25% 16% 25% 2 25% 3 22% 37% 22% 46% 21% 5 21% 57% 2 63% % 77% 2 87% 19% 97% 19% 97% 18% 12 18% 126% 17% Secunda-Jameson Secunda-Kendal (12") Park 5% 15% 14% 13% 9% 5% Kendal Jameson Waltloo 31% 33% 36% 38% 41% 44% 47% 5 54% 59% 59% 69% 75% 76% 79% 97% Park-Kendal 14% 16% % 46% 5 57% 63% 7 77% 87% 97% 97% % Kendal-Witbank 23% 21% 23% 28% 32% 36% 39% 43% 47% 5 55% 6 67% 74% 82% 9 Secunda-Jameson Park 5% Kendal Waltloo 31% 33% 36% 38% 41% 44% 47% 5 54% 59% 59% 69% 75% 76% 79% 97% Kendal-Witbank 23% 21% 23% 28% 32% 36% 39% 43% 47% 5 55% 6 67% 74% 82% 9 1% -59% 5 Refined Products Eastern Network 6-79% 61% % -59% 85% 5 Pipeline Section Design Capacity Utilisation - Peak Demand >10 101% Refined Products Eastern Network 6-79% 61% PIPELINE SECTION % Secunda-Kendal Pipeline Section Design (20") Capacity Utilisation 27% 27% - Peak 27% Demand 24% 24% 23% 23% 22% 22% 21% 22% 2 21% 19% > % 101% Secunda-Kendal PIPELINE SECTION (12") 19% 17% 16% 11% 6% 12% 8% Jameson Secunda-Kendal Park-Kendal 17% 2 25% 36% 45% 56% 61% 69% 76% 79% 94% 99% 117% 131% 146% 154% (20") 27% 27% 27% 24% 24% 23% 23% 22% 22% 21% 22% 2 21% 19% 2 18% Secunda-Jameson Park 5% Secunda-Kendal (12") 19% 17% 16% 11% 6% 12% 8% Kendal Jameson Waltloo 36% 39% 41% 44% 47% 51% 55% 59% 64% 69% 75% 76% 79% 97% 99% 99% Park-Kendal 17% 2 25% 36% 45% 56% 61% 69% 76% 79% 94% 99% 117% 131% 146% 154% Kendal-Witbank Secunda-Jameson Park 27% 5% 26% 28% 33% 39% 43% 47% 51% 56% 61% 66% 73% 82% Kendal Waltloo 36% 39% 41% 44% 47% 51% 55% 59% 64% 69% 75% 76% 79% 97% 99% 99% The Kendal-Witbank eastern network will only experience capacity constraints towards % 26% 28% 33% 39% 43% 47% 51% 56% 61% 66% 73% 82% Western network Refined products (average and peak demand) Western Refined products network (average and peak demand) Western network The western network comprises pipelines running from Natref in Sasolburg to Jameson Park, south to Kroonstad and west to Klerksdorp. It also includes the dedicated Avtur pipeline. Figure 22: Western network refined products (average demand) 1% -59% 5 Refined Products Western Network 6 1% -59% -79% 61% 5 Refined Products Western Network % 85% 61% Pipeline Section Design Capacity Utilisation - Average Demand > % 85% Pipeline Section Design Capacity Utilisation - Average Demand PIPELINE SECTION > % 2043 Natref-Kroonstad PIPELINE SECTION % % % % % % % % % % % % % % Natref-Klerksdorp Natref-Kroonstad 48% 5 22% 51% 22% 53% 15% 54% 15% 55% 15% 57% 16% 59% 16% 61% 17% 62% 17% 64% 18% 66% 19% 69% 19% 71% 2 74% 21% 77% 22% Natref-Ortia Natref-Klerksdorp (Avtur) 85% 48% 85% 5 85% 51% 85% 53% 85% 54% 85% 55% 85% 57% 85% 59% 85% 61% 85% 62% 85% 64% 85% 66% 85% 69% 85% 71% 85% 74% 85% 77% Natref-Jameson Natref-Ortia (Avtur) Park 12% 85% 33% 85% 31% 85% 34% 85% 3 85% 38% 85% 25% 85% 16% 85% 2 85% 16% 85% 15% 85% 19% 85% 16% 85% 15% 85% 18% 85% 15% 85% Natref-Jameson Park-Natref 12% 33% 31% 34% 3 38% 25% 16% 3% 2 3% 17% 16% 18% 15% 19% 2 16% 21% 15% 22% 18% 23% 15% Jameson Park-Natref 3% 3% 17% 18% 19% 2 21% 22% 23% Refined products (average and peak demand) Northern network Refined products (average and peak demand) Northern network Northern network The northern network comprises the pipeline running from Jameson Park though the Alrode node to Rustenburg and OR Tambo International Airport (ORTIA). 1% -59% 5 Figure 23: Northern network refined products (average demand) Refined Products Northern Network 6-79% 61% % -59% 85% 5 Pipeline Section Design Capacity Utilisation - Average Demand >10 101% Refined Products Northern Network 6-79% 61% PIPELINE SECTION % Jameson Pipeline Section Park-Ortio Design (Jet) Capacity Utilisation - Average Demand 4% 6% 7% 9% 11% 13% 16% 18% 2 23% >10 25% 28% 31% 101% Jameson Park-Alrode (Petrol) 3% 36% 36% 37% 38% 39% 39% 4 41% 42% 43% 43% 44% 45% 46% 47% PIPELINE SECTION Jameson Park-Alrode (Diesel) 19% 21% 23% 26% 28% 32% 35% 39% 44% 49% 55% 61% 68% 77% 86% 96% Jameson Park-Ortio (Jet) 4% 6% 7% 9% 11% 13% 16% 18% 2 23% 25% 28% 31% Alrode Langlaagte 19% 19% 19% 2 22% 23% 25% 27% 29% 31% 33% 35% 38% 42% 46% 5 Jameson Park-Alrode (Petrol) 3% 36% 36% 37% 38% 39% 39% 4 41% 42% 43% 43% 44% 45% 46% 47% Langlaagte Tarlton 19% 18% 18% 19% 21% 22% 24% 26% 27% 29% 32% 34% 37% 4 44% 48% Jameson Park-Alrode (Diesel) 19% 21% 23% 26% 28% 32% 35% 39% 44% 49% 55% 61% 68% 77% 86% 96% Tarlton Rustenburg 24% 27% 3 33% 37% 41% 45% 51% 56% 62% 69% 78% 87% 98% 109% 124% Alrode Langlaagte 19% 19% 19% 2 22% 23% 25% 27% 29% 31% 33% 35% 38% 42% 46% 5 Langlaagte Tarlton 19% 18% 18% 19% 21% 22% 24% 26% 27% 29% 32% 34% 37% 4 44% 48% Tarlton Rustenburg 24% 27% 3 33% 37% 41% 45% 51% 56% 62% 69% 78% 87% 98% 109% 124% 1% -59% 5 Refined Products Northern Network 6-79% 61% % Pipeline Section Design Capacity Utilisation - Peak Demand 1% -59% > % Refined Products Northern Network 6-79% 61% PIPELINE SECTION % Jameson Pipeline Section Park-Ortia Design (Jet) Capacity Utilisation - Peak Demand 5% 7% 9% 11% 13% 16% 18% 21% 24% 27% > % 37% 101% Jameson Park-Alrode (Petrol) 3% % 41% 42% 43% 44% 45% 46% 47% 47% 48% 5 51% 52% PIPELINE SECTION Jameson Park-Alrode (Diesel) 24% 26% 28% 32% 35% 39% 44% 49% 54% 61% 67% 76% 85% 95% 106% 119% Jameson Park-Ortia (Jet) 5% 7% 9% 11% 13% 16% 18% 21% 24% 27% 3 33% 37% Alrode Langlaagte 21% 22% 22% 24% 25% 27% 29% 31% 34% 36% 39% 42% 45% 5 55% 6 Jameson Park-Alrode (Petrol) 3% % 41% 42% 43% 44% 45% 46% 47% 47% 48% 5 51% 52% Langlaagte Tarlton 22% 21% 21% 23% 24% 26% 28% 3 32% 35% 38% 41% 44% 48% 52% 57% Jameson Park-Alrode (Diesel) 24% 26% 28% 32% 35% 39% 44% 49% 54% 61% 67% 76% 85% 95% 106% 119% Tarlton Rustenburg 28% 32% 35% 39% 44% 49% 54% 6 67% 75% 83% 94% 105% 118% 132% 15 Alrode Langlaagte 21% 22% 22% 24% 25% 27% 29% 31% 34% 36% 39% 42% 45% 5 55% 6 The Langlaagte northern Tarlton network has sufficient 22% 21% capacity 21% until 23% 2035, 24% where 26% 28% after 3 the Tarlton-Rustenburg 32% 35% 38% 41% section 44% 48% requires 52% additional 57% capacity. Tarlton Rustenburg 28% 32% 35% 39% 44% 49% 54% 6 67% 75% 83% 94% 105% 118% 132% 15 Jet Fuel Pipeline schematic layout for 2014 and 2020 Jet fuel pipeline The following diagrams indicate the schematic layout and capacity of the jet fuel pipelines inland for 2013 and Note the addition of the dedicated jet fuel pipeline from Jameson Park to ORTIA to supplement jet fuel supply by pipeline from the coast. Figure 24: Jet fuel pipeline schematic layout for 2014 and % -59% 5 Refined Products Western Network 6 1% -59% -79% 61% 5 Refined Products Western Network % 85% 61% Pipeline Section Design Capacity Utilisation - Peak Demand > % 85% Pipeline Section Design Capacity Utilisation - Peak Demand >10 101% PIPELINE SECTION Natref-Kroonstad PIPELINE SECTION % % % % % % % % % % % % % % Natref-Klerksdorp Natref-Kroonstad 57% 59% 26% 6 26% 62% 17% 64% 18% 66% 18% 68% 19% 7 19% 72% 2 74% 21% 76% 22% 79% 22% 82% 23% 85% 25% 88% 26% 92% 27% Natref-Ortia Natref-Klerksdorp (Avtur) 85% 57% 85% 59% 85% 6 85% 62% 85% 64% 85% 66% 85% 68% 85% 7 85% 72% 85% 74% 85% 76% 85% 79% 85% 82% 85% 85% 88% 85% 92% Natref-Jameson Natref-Ortia (Avtur) Park 14% 85% 38% 85% 36% 85% 4 85% 34% 85% 45% 85% 28% 85% 18% 85% 21% 85% 18% 85% 17% 85% 2 85% 17% 85% 16% 85% 2 85% 16% 85% Natref-Jameson Park-Natref 14% 38% 36% 4 34% 45% 28% 18% 4% 21% 4% 21% 18% 22% 17% 23% 2 24% 17% 26% 16% 27% 2 29% 16% Jameson Park-Natref 4% 4% 21% 22% 23% 24% 26% 27% 29% The western network will not experience capacity constraints for the 30-year period. 242 LTPF 2014 LTPF

12 Jet fuel pipeline capacity utilisation 3. PIPELINE DEVELOPMENT PLANS (continued) Jet fuel pipeline capacity utilisation Figure 25: Jet fuel pipeline capacity utilisation 2014 to 2043 The following diagram indicates the jet fuel pipeline utilisation for the 2014, 2024, 2034 and 2043: Figure 26: Jet fuel pipeline utilisation 2014 to 2043 Pipeline utilisation map 2014 Pipeline utilisation map 2024 The introduction of biofuels in 2015 will require mitigating measures to ensure that there is no cross contamination of jet fuel with fatty acid methyl ester (FAME) when transported in MPP24. The building of a jet fuel pipeline to supply the King Shaka International Airport (KSIA) at La Mercy in Durban should be investigated in future when demand increases to warrant the capital investment. Current demand at the airport is low and jet fuel is supplied by road tankers. 3.4 Crude oil pipeline The diagram below indicates the crude oil pipeline system. Although the section from Vrede to Secunda was part of the original system to Ogies (near Kendal) it is currently not in service. The various line sections, diameters and flow rates are shown in the adjacent table. Figure 28: Crude oil pipeline schematic and pipeline information Crude oil pipeline schematic and utilisation map Crude oil pipeline schematic and utilisation map The current dedicated jet fuel pipeline from Sasolburg will continue to be run at full capacity for the 30-year planning period with increased volumes through time in the MPP24. A key issue for the transport of jet fuel in the MPP24 is the compliance to the CF2 product specification. Jet fuel has high sulphur content and hence a technical solution needs to be found within the next two years to transport jet fuel and very low sulphur (10ppm) refined products in the MPP24. The below figure depicts the options to manage the impact on jet fuel to ORTIA. Option to manage jet fuel from Durban to ORTIA Figure 27: Option to manage jet fuel from Durban to ORTIA Option for managing jet fuel ex coast into ORTIA Options for managing jet fuel ex coast into ORTIA Transport jet Jet in MPP24 in and and find find a solution for quality before CF2 else move to to Rail (clean-up issues 2. thereafter...) Use DJP until CF2 or end of life date whichever is earlier and then move back to rail or MPP24 if 2. Use quality DJP until solution CF2 or found. end of life date whichever is earlier and then move back to rail or MPP24 if quality solution found. MPP JET in MPP24 until CF Find solution Jet in MPP24 1% -59% 5 The capacity utilisation map below indicates that sufficient capacity exists in the system for the 30-year planning period. PIPELINE SECTION % 61% Fynland-Newcastle Figure 29: 71% Crude 67% oil 74% pipeline 73% capacity 74% 72% utilisation 74% 73% map 74% 74% 74% 74% 74% 74% 74% % Newcastle-Coalbrook 71% 67% 74% 73% 74% 72% 74% 73% 74% 74% 74% 74% 74% 74% 74% >10 101% 1% -59% 5 PIPELINE SECTION % 61% Fynland-Newcastle 71% 67% 74% 73% 74% 72% 74% 73% 74% 74% 74% 74% 74% 74% 74% % Newcastle-Coalbrook 71% 67% 74% 73% 74% 72% 74% 73% 74% 74% 74% 74% 74% 74% 74% >10 101% 3.5 Gas pipeline Sasol s natural gas is supplied via the 865km ROMPCO natural gas transmission pipeline from the Pande and Temane Gas Field in Mozambique, to Sasol s plants in Secunda and Sasolburg. The pipeline is 5 owned by Sasol, 25% by the South African Government (CEF) and the other 25% by the Mozambique Government. During 2010, construction of a new compressor station was completed at Komatipoort on the border of Mozambique and South Africa. The new station increases capacity by approximately 7MGJ per annum. In 2012 Sasol applied for tariffs for an additional 27MGJ per annum to be delivered to customers. The ramp up to 147MGJ will be done over a seven-year period. RAIL DJP Maintain minimum rail capability JET in DJP for three to four years max Move back to rail DJP Life End or if in MPP24 if Sulphur quality issue not resolved Impact loading, shunting at Coast and discharge at ORTIA 244 LTPF 2014 LTPF

13 3. PIPELINE DEVELOPMENT PLANS (continued) pipeline utilisation Transnet s gas pipeline The following schematic indicates the Lilly line sections and utilisation through time. Figure 30: Lilly line utilisation for period 2014 to 2043 Schematic layout and utilisation map of proposed NGP Figure 32: Schematic layout of NGP Lilly gas pipeline utilisation Figure: Pipeline utilisation map of NGP Table 10: Volume split between MPP24 and NGP: Scenario 1 Billion litres per annum Petrol 2,57 2,58 2,71 1,94 1,92 1,91 1,86 1,69 2,44 MPP24 Diesel 3,08 3,48 3,56 4,08 1,35 1,36 1,23 0,86 4,11 16,02 Jet 0,03 0,20 0,45 1,23 Total 3,08 6,05 6,14 6,80 3,28 3,18 3,17 2,91 6,25 19,69 Growth from the previous year (2%) 1 2% 11% (52%) (3%) (2%) 19% 9% Proposed NGP: Volume split between MPP24 and NGP: scenario 1 Pipeline capacity utilisation for MPP24 and NGP Petrol 1,23 1,45 1,47 1,77 2,98 3,34 Coega Pipeline Diesel 3,24 3,67 4,01 5,90 9,48 7,41 Jet 0,17 0,21 0,22 0,20 0,49 0,41 Total 4,63 5,33 5,70 7,87 12,95 11,16 From the forecast it is evident that the section between Secunda and Newcastle will become constrained towards % -59% 5 Figure 31: Lilly pipeline capacity utilisation 2014 to 2043 (average demand) y - Durban 34% 36% 39% 41% 43% 46% 48% 5 53% 55% 58% 61% 64% 67% 71% 6-79% 61% Richards Bay 57% 61% 65% 69% 72% 76% 8 84% 88% 92% 97% 102% 107% 113% 118% % SECTION % -59% 5 ewcastle Richards 7 Bay - Durban 75% 8 85% 34% 89% 36% 94% 39% 98% 41% 103% 43% 109% 46% 48% 114% % 126% 55% 58% 132% 61% 139% 64% 146% 67% 71% > % 101% 61% Newcastle-Richards Bay 57% 61% 65% 69% 72% 76% 8 84% 88% 92% 97% 102% 107% 113% 118% % Secunda-Newcastle 7 75% 8 85% 89% 94% 98% 103% 109% 114% % 132% 139% 146% >10 101% Growth from the previous year 15% 7% 5% 1% (2%) The table above indicates the anticipated split in volumes transported between the MPP24 and proposed Ngqura pipeline. As per the demand forecast, the Ngqura pipeline is required by 2018, though it is anticipated to be completed later with the delay in the implementation of Mthombo. The building of the Ngqura pipeline would postpone the expansion plans for the MPP24 line and reduce the need to invest in additional berth capacity for liquid fuels at Ngqura and Durban. The figure below illustrates the utilisation for both the MPP24 and NGP pipelines, for scenario 1. Figure 33: Pipeline capacity utilisation for MPP24 and NGP (average demand) 3.6 Potential new pipelines Ngqura to Gauteng pipeline (scenario 1) The Ngqura to Gauteng pipeline assumes that a 288TBD Mthombo refinery will be built in the Coega IDZ in 2018 and that the refinery capacity will be expanded to 360TBD in The 16 inch pipeline will transport product from the Mthombo refinery, inland. The pipeline will deliver product to Bloemfontein and Kroonstad along the way. The pipeline will tie into the Jameson Park terminal from where product will be distributed to other depots in the inland network. The schematic below shows the impact that utilisation of the 288TBD Mthombo refinery and the Ngqura pipeline will have on current infrastructure by % -59% 5 PIPELINE SECTION % 61% NMPP 36% 69% 78% 36% 25% 21% 15% 9% 1 17% 24% 31% 4 51% 61% 75% % Coega Pipeline 61% 78% 6 75% 81% 86% 88% 87% 85% 84% 82% 79% 75% >10 101% Maputo to Gauteng pipeline NERSA awarded a licence on 29 March 2007 to Petroline to construct a 12 inch liquid fuels pipeline from Mozambique to Kendal via Nelspruit and to build a petroleum storage facility at Nelspruit. The proposed pipeline is approximately 400km long with 80km being in Mozambique. The section from the border to Nelspruit is approximately 110km. The pipeline will originate from Matola bulk terminal in the Port of Maputo. The design capacity of the pipeline is 3,5 billion litres per annum. The pipeline licence has been extended to 25 years. The project was delayed due to the extraordinary time to acquire environmental approvals. The construction of the pipeline has not started and given the introduction of the MPP24, it is not foreseen that it would be built in the near future. 246 LTPF 2014 LTPF

14 Proposed Maputo to Gauteng pipeline 3. PIPELINE DEVELOPMENT PLANS (continued) 4. TERMINAL STORAGE FACILITIES Figure 34: Proposed Maputo to Gauteng pipeline The petroleum storage facility at Nelspruit will have a capacity of m 3 : m 3 for petrol and m 3 for diesel. Despatch from the facility will be by road and rail. The despatch gantries will be capable of handling 1,5 billion litres of product per annum. On 30 January 2008, the regulator approved an increase in the pipeline diameter to 16 inches, as well as the construction of storage, intermix and accumulator tanks at Kendal. This was approved on the basis that the capacity is maintained at 3,5 billion litres per annum. 4.1 MPP24 accumulator terminals The function of the accumulator terminals is to decouple the MPP24 from the upstream supply and downstream demand variations and thus enable Transnet Pipelines to optimise the batching of product and minimise intermixture generation. The Island View Terminal (TM1) in the Port of Durban functions as an accumulator of supplies from various sources, such as refineries and import facilities located in Durban. The Jameson Park Terminal (TM2) in Gauteng accumulates product from the MPP24 and Inland Suppliers (eg Secunda and Natref) and facilitates the supply of product into the inland network linked to the oil industry depots. This requires complex integrated system planning and scheduling capability to enable the system to perform optimally for a given capacity investment. Construction of TM1 at Island View in and tank configuration Construction of TM1 at Island View in and tank configuration Durban Figure 35: Construction of TM1 at Island View in Durban and tank configuration Being an integral part of the MPP24 system, the accumulator terminals are currently being constructed and TM1 should be commissioned and completed by April 2015 and TM2 by October The initial configuration of the terminal TM2 at Jameson Park will consist of 10 product tanks for petrol, diesel and jet fuel. Durban Terminal 1: Island View in the Port of Durban The initial configuration of the terminal (TM1) at Island View in Port of Durban will consist of 10 product tanks for petrol, diesel and jet fuel as indicated in the table below. It is important to note that the capacity of the individual tanks will differ from that at Jameson Park. The total installed capacity will be m Tank capacity m³ ULSD 1 LSD 3 ULP 95 1 ULP 93 3 Jet 2 Total number of tanks 2 8 Total volume m³ 2014 Tank capacity m³ ULSD 1 LSD 3 ULP 95 1 ULP 93 3 Jet 2 Total number of tanks 2 8 TM1 Expansion programme 2012 to 2030 Total volume m³ The planned capacity of the terminal by 2043 is m 3 excluding any capacity to provide for product import capability in Durban. The figure below depicts the planned expansion programme for the Island View accumulator terminal (TM1). As existing leases expire in the areas adjacent to the terminal, it would be expanded to meet the planned capacity indicated in the figure below. Figure 36: TM1 Expansion programme 2012 to ULP93 LSD ULP JET A1 ULSD LTPF 2014 LTPF

15 4. TERMINAL STORAGE FACILITIES (continued) The table below indicates the current expansion plans of TM1 through to From the table additional tanks would be required beyond 2036 to meet the capacity requirements. For the period up to 2036, sufficient installed capacity is available to meet the peak demand requirements. Table 11: Island View accumulator terminal TM1 tank capacity utilisation for period 2013 to Tank capacity m 3 ( 000) , , , , , Tanks for average demand Tanks available for peak demand Total planned tanks Tanks available for peak demand Capacity utilised for average demand Capacity available for peak demand Total planned capacity Construction of TM2 at Jameson Park and tank configuration Spare capacity % Terminal 2: Jameson Park in Gauteng The total installed capacity will be m 3. The design made provision for two grades of petrol and two grades of diesel. With the implementation of the CF2 programme only one grade of diesel (10ppm sulphur) will be required. Figure 37: Construction of TM2 at Jameson Park and tank configuration Table 12: Jameson Park accumulator terminal TM2 tank capacity utilisation for period 2013 to Tank capacity m 3 ( 000) Tanks for average demand Tanks available for peak demand Total planned tanks Tanks available for peak demand Capacity utilised for average demand Capacity available for peak demand Total planned capacity Spare capacity % Privately-owned terminals The large commercial liquid fuels terminal storage facilities in South Africa are mainly owned and operated by oil majors including Sasol. These facilities are either linked to refineries, pipelines or ports. Independent terminal operators have entered the liquid fuels market to provide storage and handling facilities to new entrants. As South Africa is short of refined product, large volumes of product need to be imported via our ports. The following table indicates forecasted imports into key regional ports for the period 2014 to 2043 for scenario 1 NGP. Table 13: Import forecast of refined fuels into southern Africa for period 2014 to 2043 (Scenario 1) Billion litres per annum Port Cape Town Durban Maputo Walvis Bay Total Tank capacity m³ ULSD 1 LSD 3 ULP 95 1 ULP 93 3 Jet 2 Total number of tanks 2 8 Total volume m³ The current infrastructure in the ports is mainly owned by oil majors thus making it difficult for third parties to import unless the oil majors have uncommitted capacity and such capacity comes at market rates as approved by NERSA. The key South African port for the import of product is Durban with smaller volumes into Cape Town, Maputo, Mossel Bay and Walvis Bay. Coastal shipping arrangements deliver fuel to industry storage facilities in Port Elizabeth and East London with fuel oil being shipped to Richards Bay. Tanks are essential for refineries to enable them to move product or components across the berth either as an import for blending, final distribution or export of final products or components. The storage facilities act as a buffer in the distribution system and also provide adequate cover for disruptions in the supply chain during normal business operations. The logical flow diagram below depicts the berths in the Port of Durban, the national oil refineries, transmission and feeder pipelines, major tank farms and storage depots. VOPAK and IVS are privately owned (though not by the oil majors), while the TM1 terminal (Durban), the TM2 terminal (Gauteng) and the Tarlton depot (northern network) are owned by Transnet. The Airports Company of South Africa (ACSA) owns the jet fuel facilities at ORTIA. The site has been designed to expand to m 3 by The table below indicates the number of tanks and volumes in TM2 required over time to meet the average monthly forecasted demand and additional capacity required to meet the peak demand requirements for the period. For the period 2016 to 2020, additional capacity will be required at TM2 to meet peak demand. For all other periods sufficient capacity would be available to meet the peak demand requirements. The above planning numbers assume jet fuel will be transported in the MPP LTPF 2014 LTPF

16 4. TERMINAL STORAGE FACILITIES (continued) Durban Gauteng MPP24 pipeline coastal supply and inland terminal network Figure 38: Durban Gauteng MPP24 pipeline coastal supply and inland terminal network RUSTENBURG TARLTON LANGLAAGTE DJP WALTLOO JET FUEL LINE ALRODE OR TAMBO INTERNATIONAL ALRODE NODE EMAHALENI KENDAL NODE TM2 JAMESONPARK GAUTENG SECUNDA REFINERY The need to develop an independent import and storage facility in Durban that is linked to the pipeline system, is important for the effective and efficient operation of the liquid fuels market in South Africa. Such an import terminal would always be needed as the country would always need to import fuels, specifically during planned shutdowns and refinery turnarounds. The current development around the DDOP can be the catalyst to review the back of port operations at Island View to provide such facilities. It is important that leases for land allocated in the port be put on hold until a master plan for liquid fuel and gas has been developed for Durban. The recent draft strategic fuel reserves implementation plan issued by the Department of Energy will impact the need for storage terminals for final product and crude oil. This provides an opportunity for the development of mega-terminals to achieve economies of scale and open the market for independent terminal operators. Key Issues to consider in the development of Master Plan for liquid bulk in Durban Figure 40: Key issues to consider in the development of master plan for liquid bulk in Durban Legend 3 rd Party Oil Industry Transnet KLERKSDORP NATREF REFINERY KROONSTAD MPP24 NATCOS crude tanks S PORT OF DURBAN BERTH BERTH BERTH 9 6, 7, 8 5 Loading and Handling Infrastructure ENREF REFINERY ENREF IV SAPREF IV TOTAL IV TM1 ISLAND VIEW DURBAN S VOPAK IVS SAPREF REFINERY Lack of sufficient storage capacity at the end of the pipeline network; ie at delivery locations, can severely impact pipeline capacity. The storage depots form an integral part of the pipeline system. Figure 39: Island view back of port oil storage infrastructure NATCOS IV Island view back of port oil storage infrastructure Consider Sapref expansion and operating options Engen options Maintain pipelines to feed NMPP New pipelines to dug out port SBM relocate to new position Independent terminal operators and logistics companies are currently seriously investigating entering the liquid fuels terminal market in South Africa. NERSA has awarded a construction licence to an international terminal operator for a terminal next to the current MPP24 inland accumulator terminal at Jameson Park. Independent terminal operators have also been awarded licences to expand their facilities in Island View to service the oil industry. 4.3 Liquid fuels terminal opportunities in South Africa The following opportunities exist and should be investigated in more detail: Development of a fuel import terminal in Durban; Development of strategic stock storage facilities in conjunction with private sector entities; and Integration of the current oil industry pipeline depots into the pipeline system. The investments for certain of the above opportunities are shown in the investment overview section. 252 LTPF 2014 LTPF

17 5. NEW EMERGING TECHNOLOGIES 5.1 Engine efficiency Engine technology Fuel demand will continue to be impacted by improvements in engine technology with diesel being recognised to be significantly (>5) more energy efficient than petrol engines. Sales of diesel passenger vehicles still battle with perceptual issues concerning noise and pollution and with the increases in price of diesel relative to petrol the current cost of ownership is equitable. Petrol engine developers employ as many of the diesel technologies as possible, eg direct injection, increased combustion pressures, etc. Turbo technology and energy recovery systems (ERS) boost petrol engine performance, leading to reduced fuel consumption, eg Formula One 2014 expect racing cars to complete races with 38% less fuel than in Hybrid technology Hybrid electric vehicles (HEV) are becoming prevalent in North America and Europe about twice as efficient as normal piston/cylinder vehicles. In the United States HEVs are expected to save 350mpg per annum per vehicle. Plug-in hybrid electric vehicles (PHEV) have become commercially attractive. They can generate more electricity than they consume and can feed excess energy back into the grid. They require overnight charging but charge cycles are getting shorter and batteries better. The aim in the United States is to have fuel capacity for passenger vehicles to be 300 miles per day; Tesla (high performance car) can drive 220 miles per day between charges. A variety of scenarios of low carbon electricity generation coupled with PHEVs are being configured for the United States. Fuel cells are not yet viable for commercial use in transportation vehicles. Fuel cells running on hydrogen, methanol and microbial organics are being considered. The storage of hydrogen (energy medium) is a challenge at this stage, but a variety of technologies is being investigated. Service stations with hydrogen supply are still a rare sight in California. Fuel flex cars are becoming popular in the United States (±7 million currently) engines can accommodate not only petrol, but also 85% ethanol blends. All the above new technologies will reduce the consumption of liquid fuels per unit distance travelled in future. Petrol engine efficiency combined with energy recovery systems would appear to be improving at a faster rate than developments in diesel technology. Developments in aviation The improvement in aircraft design and engine technology, turbine and reciprocating, will impact demand for jet fuel and Avgas. Light aircraft engine manufacturers are introducing diesel options using jet fuel (kerosene) to replace high octane gasoline engines. The replacement of old aircraft with new fuel efficient models will reduce fuel consumption over the next decade. Greater reductions in fuel consumption will be achieved through radical new designs ie incorporating blended wing concepts, estimated to reduce fuel consumption per seat by up to 38%. The Airbus future design concept envisage longer and slimmer wings better glide through the skies, as the flow of air over the wing surface reduces drag and in turn, improves fuel efficiency. The introduction of new lightweight smart materials sense the load they are under, making for a lighter aircraft that draws less fuel and curbs emissions. Engines will be more reliable, quieter and fuel-efficient. The positioning of the engines, at the rear and semi-embedded, fully optimises the aircraft for lower fuel burn. 5.2 Emerging technologies in pipelines Developments in energy, slurry and capsule pipeline technology are focussing on the reduction in the cost of transporting pipeline materials, as well as increasing the durability and reducing the corrosion potential by the introduction of new internal and external lining materials (eg fibre). Polyethylene materials also enhance seismic strength of pipelines and perform better with underground deformation stresses. Reduced implementation risks and construction costs are also emerging through improved construction techniques. Trenchless pipelines are significantly cheaper to install and maintain, as well as allowing easy accessibility for emergency repairs. A reduction in pumping costs is also being pursued by using drag and turbulence reducing additive materials such as polyox and guar gum. The preference is for water soluble materials that can be safely used in pipelines. Thermoplastics, such as polyox water-soluble resins, are readily calendared, extruded, injection moulded, or cast. Sheets and films of these materials are heat-sealable and can be oriented to develop high strength. Films are inherently flexible, tough and resistant to most oils and greases. These resins are compatible with many natural and synthetic polymers. Such materials can be cured in place in pipelines. New leak detection technologies that rely on acoustic tests, infrared and radar equipment can detect and map leaks underground. Geographic Information Systems provide satellite mapping of stress and strain on existing structures to give early warning of catastrophic failure. These technologies will reduce costs to rehabilitate underground pipelines. Compressor and pump efficiency can be improved through various new initiatives. Turbochargers, waste heat recovery and high pressure fuel injection for engines that drive pumping systems are expected to dominate new designs in future. This continually reduces the energy requirements. The introduction of pump-out slots on impeller wear rings and rotating throat sleeves can prevent solids contained in liquids to accumulate at wear rings and in stuffing boxes. Although pump-out slots result in increased internal recirculation and reduces initial efficiency, it has been shown to reduce efficiency decreases of 4% after a few years to only 0,5%. The use of multi-fuel pumping systems and compressors that can run on both liquid fuels and natural gas, as well as on mixtures of liquid fuel and gas, may generate reliable power from fuel off the well. Engines for pumping systems and compressors that can burn either crude oil or associated gas or combinations thereof are also becoming available. This enhances the capability to run such systems under remote control with a continuous fuel supply from the product that is being transported. Management system refinements can be constantly introduced to optimise best efficiency point utilisation of pumps and compressors, thereby minimising the energy required to transport liquids and gases. 5.3 Biofuels A draft position paper on the South African biofuels regulatory framework was published in January The reference feedstock will be grain sorghum for bioethanol and soya beans for biodiesel production. Maize will be excluded as feedstock. Mandatory blending of bioethanol into petrol and biodiesel into diesel is set for 1 October Allowable ethanol blends of 2% to 1 (volumetric) will depend on the oxygenate volatility specifications of the blended petrol. Diesel blends of 5% to 10 biodiesel will be allowed. No settlement has been reached on the pricing framework. However, incentives such as a 5 rebate on the general fuel levy for biodiesel, manufacturers and a fuel tax exemption for bioethanol producers has been insufficient to lure investments in the biofuels sector. A 15% return on investment (ROA) is considered suitable for stakeholders. Licences have been issued to four producers with total indicated capacity of 208 million litres of bioethanol (from sorghum and sugarcane) and 458 million litres of biodiesel (from soya beans). Estimates of new direct and indirect jobs that will be created are quoted in public. It is widely accepted that the biofuels drive in South Africa is not to support the green initiatives or to supplement fossil fuel production capacity, but to stimulate the second tier economy, ie creation of jobs for the poor. A key issue for pipelines operators is the possible contamination of jet fuel by fatty acid methyl ester (FAME) in multi-product pipelines that contain biodiesel. Current international jet fuel specifications do not allow any FAME in jet fuel. The industry is investigating the negative impact of any FAME in jet fuel. The United States of America military specification allows for maximum of 5ppm of FAME. The pipeline shippers would want to pump at least a B5 grade of biodiesel in the pipeline. The FAME cross-contamination with jet fuel will result in larger volumes of intermix (kerosene and diesel) which will have to be reprocessed into usable fuels as it cannot be blended away due to the high sulphur content. 254 LTPF 2014 LTPF

18 6. INVESTMENT OVERVIEW 6.1 Transnet Pipelines seven-year investment plan The table below indicates the seven-year Corporate Plan for Transnet Pipelines (unescalated). The major investment items include the completion of phase 1 of the MPP24 and the expansion of the system post 2018, which includes additional tankage at TM1 and TM2, increase in flow rate and replacement of current pipeline to Kroonstad and jet fuel line from Jameson Park to ORTIA. Transnet pipelines 7 year investment plan The MPP24 phase 2 expansion will be impacted on by the timing of the Mthombo refinery, if scenario 1 is implemented, being the NGP. All costs are high level unescalated estimates in millions of rands. (millions) Figure 41: Transnet YEARPipelines 2013 seven-year 2014 investment 2015 plan TOTAL TRANSNET (Million) PIPELINES year 7 YEAR PLAN Total MPP24 Phase 1 R R R R 281 R 129 R Transnet Pipelines seven-year plan MPP24 MPP24 Phase Phase 2 1 R3 107 R1 505 R281R 321 R129R 961 R 961 R 905 R R5 022 Changes MPP24 to Phase TM1 2 R 16 R 43 R321 R961 R961 R905 R 59R3 147 Changes to TM1 R 43 R43 Total R R R R 324 R 450 R 961 R 961 R 905 R Total R3 107 R1 505 R324 R 450 R961 R961 R905 R8 212 Scenario 2: Mthombo refinery with coastal shipping to Durban The investment summary below indicates the expenditure for the scenario where the Ngqura to Gauteng pipeline is not built, and the refined fuel from the Mthombo refinery is transported via coastal shipping to Durban and into the MPP24. The expenditure includes the expansion of the MPP24 to full capacity, by adding various pump stations and auxiliary equipment to the system and additional accumulator tanks at TM1 and TM2. The capital cost is based on the original MPP24 design basis. All costs are high level unescalated estimates in millions of rands. Figure 43: Investment Scenario 2: Mthombo refinery with coastal shipping to Durban Investment Scenario 2: Mthombo refinery with coastal shipping to Durban (Million) (millions) year YEAR TOTAL Total TRANSNET Transnet Pipeline PIPELINE seven- 7 TO to 30-year YEAR PLAN - Mthombo shipping case plan Mthombo shipping case MPP24 Phase 2 R R 967 R 646 R 341 R MPP24 Phase 2 R1 285 R967 R646 R341 R3 239 MPP24 MPP24 Phase Phase 3 R R2 150 R2 R MPP24 Phase 4 R 10 R R10 R MPP24 Phase 5 R 12 R R12 R Total R R1 285 R 967 R967 R 646 R646R 341 R341 R R2 150 R 10 R R 12 R R R0 0 R R00 R27 R Transnet Pipelines seven to 30-year investment Scenario 1: Mthombo refinery with Ngqura to Gauteng pipeline The investment summary below indicates the expenditure for the scenario where the Ngqura to Gauteng pipeline is to be built to serve the proposed Mthombo refinery. The expenditure includes the expansion of the MPP24 up to full capacity by adding Investment Scenario 1: Mthombo refinery with NGP various pump stations and auxiliary equipment to the system and additional accumulator tanks at TM1 and TM2, with the implementation of phases 3 to 5 post All costs are high level unescalated estimates in millions of rands. Figure 42: Investment scenario 1: Mthombo refinery with NGP (Million) (millions) year YEAR TOTAL Total TRANSNET Transnet Pipeline PIPELINE seven- 7 TO to year YEAR PLAN Mthombo Case with NGP MPP24 plan Mthombo Phase 2 case with NGP R R R6 387 R MPP24 Phase 3 R R MPP24 Phase 3 R2 150 R MPP24 Phase 4 R R MPP24 Phase R R MPP24 Phase 5 R 12 R R 12 R Total Total R 0 R 0 R0 R 0 R0 R 0 R0 R 0 R0 R R R R R R0 R6 387 R R R R Pipeline and terminal opportunities in South Africa The investment summary below indicates the various opportunities within South Africa for additional pipelines and terminal storage facilities. The major areas of impact will be the implementation of the Government s security of supply strategy, such as the building of the new crude oil refinery in Coega IDZ. The Ngqura to Gauteng pipeline assumptions include: 1 000km, 16 inch pipeline at a capacity of 1 500m 3 /hr. The strategic reserves volume assumptions include: 1,1 billion litres of storage for strategic reserves, split by 0,75 billion litres inland and 0,35 billion litres at the coast, and excludes additional crude oil storage facilities. Other developments that will impact on the liquid fuels industry include the proposed Durban Dig-out Port (DDOP), possible changes in the Island View storage complex, the repositioning of the Durban crude oil import SBM and the development of an independent import facility for the South African fuel market (assumed storage capacity m 3 ). There are opportunities for LNG development, such as in the Eastern Cape for power generation and feed to PetroSA facilities in Mossel Bay, as well as for imports into Richards Bay or Saldanha Bay. All cost figures are high level estimates in millions of rands (unescalted). 256 LTPF 2014 LTPF

19 6. INVESTMENT OVERVIEW (continued) Pipeline and terminal storage opportunities in South Africa Figure 44: Pipeline and terminal storage opportunities in South Africa (Million) year Total Other RSA pipeline and terminal opportunities (millions) YEAR Total OTHER Inland RSA liquid PIPELINE fuel strategic AND TERMINAL reserves OPPORTUNITIES R2 R9 Coastal liquid fuel strategic reserves Coastal storage Liquid Fuel Strategic Reserves Storage R529 R529 R529 R529 R1 R R1 R R1 059 R1 059 R4 235R4 235 storage Inland Liquid Fuel Strategic Reserves Storage R1 134 R1 134 R1 134 R1 134 R2 269 R2 269 R2 269 R2 269 R R LNG LNG Terminal terminal and and Regas regas Facility facility (2(two train) train) R5 130 R6 R R11 400R Coega Coega Pipeline pipeline Only only (1000km/16") inch) R2 929 R5 857 R5 R R R Durban Durban Import import Terminal terminal R762 R762 R653 R653 R2 178R2 178 SBM SBM Re-position reposition R2 R2 500 R2 R R5 000R5 000 Total Total R0 R1 R R R R9 R R3 328 R3 328 R0 R R LTPF 2014