Logistics aspects of pipeline transport in the supply of petroleum products

Abstract

The commercial transportation of crude oil and petroleum products by pipeline is receiving increased attention in South Africa. Transnet Pipeline Transport has recently obtained permission from the National Energy Regulator of South Africa (Nersa) to construct and operate a new petroleum products pipeline of 60 cm diameter from Durban to Gauteng. At an operating speed of 10 km/h the proposed 60 cm Transnet pipeline would be able to deliver 3,54 million litres of petroleum product per hour. This is equivalent to 89 deliveries per hour using road tank vehicles with an average carrying capacity of 40 000 litres of fuel per vehicle. This pipeline throughput is also equivalent to two trains departing per hour, each consisting of 42 petroleum tank wagons with an average carrying capacity of 42 500 litres of fuel per wagon. Considering that such road trucks and rail wagons return empty to the upstream refineries in Durban, it is clear that there is no tenable long-term alternative to pipeline transport:

• pipeline transport is substantially cheaper than road and rail transport;
• pipeline transport is much safer than rail and especially road transport; and
• pipeline transport frees up alternative road and rail transport capacity.

Pipeline transport is a non-containerised bulk mode of transport for the carriage of suitable liquids (for example, petroleum commodities, which include crude oil, refined fuel products and liquid petro-chemicals), gas, slurrified coal and certain water-suspended ores and minerals. InSouth Africa, petroleum products account for the majority of commercial pipeline traffic, followed by crude oil and natural gas. There are three basic types of petroleum pipeline transport systems:

1. Gathering pipeline systems
2. Crude oil trunk pipeline systems
3. Refined products pipeline systems

Collectively, these systems provide a continuous link between extraction, processing, distribution, and wholesalers’ depots in areas of consumption. The following activities are involved in the flow of goods between place of origin and place of consumption or application:

1. Demand forecasting,
2. Facility site selection,
3. Procurement,
4. Materials handling,
5. Packaging,
6. Warehouse management,
7. Inventory management,
8. Order processing,
9. Logistics communications,
10. Transport,
11. Reverse logistics.

Because cost is incurred without adding value each time goods are handled (activity 4) at a terminal or storage facility, a primary logistics objective is to eliminate handling wherever possible. With the carriage of crude oil and petroleum products by pipeline this objective is fully met. Commodity intake, haulage, and discharge are combined in one process, usually a remote-controlled operation. Pipeline transport is a non-containerised bulk mode of transport thereby obviating the need for packaging (activity 5) and returning empty containers. Pipelines provide a direct and long-term link between these origins and destinations. If necessary a continuous service can be provided with no need for a return trip or a reverse pumping process (activity 11).The elimination of handling, packaging and reverse logistics activities contribute substantially to the high measure of economies of scale that pipeline transport enjoys. The article provides adscription of each of the eleven logistics activities in the context of pipeline transport. Effective logistics service is a prerequisite to help ensure that customers receive the required products at the desired quality and quantity, where and when needed. The most pertinent determinants of logistics service performance are

1. suitability,
2. accessibility,
3. goods security,
4. transit time,
5. reliability and
6. flexibility.

The article offers a discussion of the extent to which pipeline transport conforms to each of these measures of effectiveness.