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SA: Statement by Transnet, South African rail, port and pipeline company, on celebrating progress in the development of Transnet’s New Multi-Product Pipeline (29/11/2012)

29th November 2012


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Public Enterprises Minister, Malusi Gigaba, today marked the last stage of phase 1 in the development of Transnet’s New Multi-Product Pipeline (NMPP) project – the construction of the coastal terminal – TM1 – at Island View in the Port of Durban. Scheduled for completion in December 2013, TM1 together with TM2 in Jameson Park, near Heidelberg Gauteng, will enable the pipeline to carry all grades of petrol, diesel and jet fuel, making it a full multi-product facility.

The TM1 phase of the project includes:

·        10 accumulator tanks for the different products (capacity of 20 000 cubic meters or 20 million litres)

·        metering and proving facility to verify quantities of products and quality control

·        Control building - the nerve centre of the terminal

·        3 terminal mainline pumps to drive product up the line (volumes can be increased as demand rises)

·        Effluent treatment facility to manage spillage and contamination.

Transnet successfully completed and began operating the 16-inch network in May 2011, while the 24-inch trunk line between Durban and Gauteng has been operational since January this year. In addition, the company has completed all construction of the three pump stations at Tweni in Durban, Hilltop near Pietermaritzburg and Mnambithi Pump Station near Ladysmith.  In total, all 712 km of the pipeline network is complete and commissioned.

Speaking at the TM1 construction site, the Minister said the project faced significant challenges in its early stages, including lack of capacity and in-house expertise, which led to an over-reliance on contractors; an overly ambitious timeline; and an underestimated budget. However, he was confident that the project would be a world-class, high-spec, and uniquely South African infrastructure investment for generations to come.

Minister Gigaba also announced that he had concluded the special review of the cost and schedule variations, which had dogged the project during its early stages. These were shared with Transnet’s Board and management. The findings included the following factors which had a detrimental impact on cost and schedule:

  • The decision to terminate the main EPCM (Engineering Procurement and Construction Management) contractor at the end of the Front End Engineering Design (FEED) stage;
  • The reassignment of the scope of work to a new EPCM contractor;
  • The length of time it took to capture and validate the FEED introduced significant delays to the execution schedule;
  • The interface between the Owner’s Team and the new EPCM contractor introduced new risks, which were not appropriately mitigated;
  • Failure to implement a design freeze after the FEED was approved and signed off;
  • The main pipeline contractor performance, in terms of its ability to execute, fell short on the following critical issues:

Ø Unsatisfactory safety performance

Ø Poor environmental compliance

Ø Insufficient quality controls

Ø Inadequate control and supervision

Ø Poor reporting

  • The relocation of the Inland Terminal impacted the pump stations design and layout configurations; and
  • There were major design changes to the Inland Terminal following the acceptance of FEED.

Commenting on the findings, the Minister said there were significant lessons learnt through the exercise. These lessons would be documented and shared across all projects of similar size and complexity in the country. He said the Shareholder was confident in Transnet’s ability to address the shortcomings.

Some of the measures the company took included establishing the NMPP Governance Steering Committee - a sub-committee of Transnet’s Exco chaired by the Group Chief Executive. Its mandate is to oversee all aspects of the project and enhance accountability through regular reporting to the Board of Directors and Shareholder.

In addition, the Group Chief Executive appointed Mr Charl Moller, an experienced pipelines and civil engineer, as Group Executive in charge of Transnet Capital Projects – moving him from Transnet Pipelines. He has a specific mandate to deliver the project within Board approved timelines and budget.

The NMPP is a key strategic investment for South Africa that will ensure the security of supply of petroleum products to the inland region – the country’s economic hub. Once complete, the NMPP will have capacity to carry five products: 95 and 93 unleaded petrol, 500 and 50 PPM diesel, and jet fuel. This will be done safely, cost effectively, and in an environmentally friendly manner, Minister Gigaba concluded. 

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