FUEL PRODUCT SUPPLY ADEQUATE - THE MARKET WORKS

UNCLAS PRETORIA 000215 SIPDIS C O R R E C T E D C O P Y (ADDING SENSITIVE CAPTION) SIPDIS SENSITIVE STATE PLEASE PASS USAID STATE PLEASE PASS USGS DEPT FOR AF/S, ISN, EEB/ESC AND CBA DOE FOR T.SPERL, G.PERSON, A.BIENAWSKI, M.SCOTT, L.PARKER E.O. 12958: N/A TAGS: ENRG EPET EMIN SENV MGMT SF SUBJECT: FUEL PRODUCT SUPPLY ADEQUATE - THE MARKET WORKS REF: A) Pretoria 168 B) Pretoria 132 and previous ¶1. (SBU) SUMMARY: Some observers have predicted potential shortfalls in the diesel fuel market as some South Africans respond to the electricity crisis by purchasing generators (Refs and Septel). All fuel product providers and analysts spoken to note that the market is functioning and providing adequate diesel and other fuel products from Sasol, pipeline, rail, and road. They do not anticipate any shortages in the foreseeable future. End Summary. ¶2. (SBU) Shell's Fuel Marketing Manager - Africa told Energy Officer South Africa's inland market for diesel and refined product was "tight", but the market was functioning, so he did not forecast any shortfalls in fuel products in the foreseeable future. He described the market as follows: i) 60 percent or 10.5 billion liters per annum: inland refining (Sasol Segunda and Sasol/Total Natref) ii) 40 percent from the coast, of which: - - pipeline - estimated 4.2 billion liters per annum - - rail - estimated 1.5 billion liters per annum - - road - estimated 1.5 billion liters per annum He said the inland supply situation is likely to remain tight until 2010 when a second, larger pipeline from Durban to Gauteng comes on stream. However, the market functions well, so that - if needed - additional trucks can come from the coast. In addition, tight refinery capacity can be supplemented by imported refined product as needed. (Note: Shell thought that South Africa is currently importing refined product, but other sources said that was not the case.) ¶3. (SBU) The Shell representative said that Shell was in the process of acquiring generators for its service stations. He did not foresee any shortfall in supply as individuals and companies install generators, absent major installations by mines, but this is unlikely because it is not economic for mine production. Mines use back-up diesel generators only for emergency evacuation or ventilation. ¶4. (SBU) Representatives of the South Africa Petroleum Industry Association (SAPIA),Caltex, and the Department of Mines and Energy confirmed to Energy Specialist that the diesel and fuel product market is tight, but functioning adequately, so they also did not foresee any shortages. Sasol's refineries are skewed for producing gasoline, rather than diesel, but they emphasized that adequate diesel can always be brought in by the diverse conveyances. Refineries are identified as critical by Eskom and the SAG and they generate significant electricity for their own operations. South Africa is still exporting some refined product to neighboring countries as the supply chain is described as very much integrated. ¶5. (SBU) COMMENT: The Embassy is considering the use of generators as electricity back-up at residences. Industry marketers do not foresee diesel availability as a problem in Gauteng and the rest of the country. The Shell official also recommended consideration of battery back-up, because disruptions are typically only two hours, Qbattery back-up, because disruptions are typically only two hours, and this solution might be cheaper, less disruptive (noise/fumes), and sufficient to run core requirements, like security features. TEITELBAUM