South African Business 2018 edition

TRANSNET PIPELINES

TRANSNET PIPELINES MULTI-PRODUCT PIPELINE: Enabling South Africa's Future Transnet Pipelines owns, operates and maintains a 3 800km network of high pressure underground petroleum and gas pipelines. Established in 1965, the company plays a strategic role in the supply of petroleum products to South Africa's economic hub in Gouteng. To ensure security of supply, a new 24-inch Multi-Product Pipeline (MPP) was constructed and commissioned in 2012. Lennie Moodley, Chief Executive ofTransnet Pipelines, discusses the latest milestone in the MPP project. Is the Multi-Product Pipeline working to expectations? Yes, since it was brought into operation in January 2012 it has transported over 18 billion litres of diesel. We have now successfully brought it into multi-product operation. In addition to transporting two grades of diesel (D50 and D500) we are now transporting 93 and 95 unleaded petrol as well as jet fuel. Can you put a figure on the number of road trips (or number of tankers) that have been reduced because of the introduction of the Multi-Product Pipeline? Not directly as all modes of transport are required to service the market, pipelines are ideal for large volumes and long distance, whilst road and rail service other areas. We can however say that if we did not have the Multi-Product Pipeline you would need an additional 1 ODO road tankers per day between Durban and Gauteng. What are current volumes of throughput in the various categories? The capacity of the line is 1 080 cubic metres per hour and the average throughput is approximately 115 million litres per week. The volume split per product depends on weekly market demand and varies from week to week. Is TPL on target with regard to these volumes? The volumes are slightly behind target, but this is reflective of the lower demand in the market due to the slowdown of the economy. From a capacity and operational point of view TPL is able to meet the demand required by its customers. And the balance sheet? Pipelines is currently forecast to exceed financial targets in the 2017 /18 year: • Revenue of R4.2bn • EBITDA margin of 74% • Return on assets of 6.7% • Asset base of R36bn excluding capital work in progress • Cash generated from operations of R3.l bn Please tell us about your journey to the CEO's desk? What was your first job at TPL? Was there a moment/ event where you thought, "Yes, pipelines is where I want to be"? My journey started in Transnet Pipelines in 2002 as an Executive Business Manager in charge of operations and has evolved through various roles since then. From the onset I knew this is where I want to be and approached each day with enthusiasm and determination. Pipelines is a fascinating. complex and challenging environment. In 2002, Transnet Pipelines, then known as Petronet, transmitted 334 million m 3 of gas and 13.8 billion litres of fuel and our revenue was R719 million. In comparison to the previous year. we have transported 17 billion litres of fuel and our revenue was R4 285 million. I have aspirations of growing the company even further, with specific focus on diversification into the liquefied natural gas (LNG) market and expanding our footprint into Africa. Do you feel that your stint in Operations gives you an especially good perspective on the complexities of the business? Yes, it provides good insight into the operational and technical aspects of the business. It also provided great understanding into the various roleplayers in the market segment and the number of challenges faced by the industry. Furthermore, it empowers me to challenge views and make informed decisions. How much success is TPL having in terms of applying the relatively new policy of diversifying revenue streams? Please expand on which are working best, and give examples (eg, training in Africa). Our initiatives to diversify our revenue streams are at an infancy. However we are confident that we will achieve our aspirations in the medium term. In addition to becoming a key player in the LNG market, Pipelines is also committed to operate and maintain pipelines, operate and maintain terminals in other African countries and provide pipeline-specific training to the oil and gas Industry.

How do you ensure security of supply? Our biggest challenge is to stay ahead of market demand and ensure efficient operations. We meet regularly with our customers to understand their market and needs and execute our plan accordingly, thus ensuring that their market demands are met and facilitating security of supply. We have pertinent KPls that we track to ensure our performance is in line with what the market requires. In addition to just the pipeline as a mode of transport, we also use rail, our Transnet Value CC initiative, whereby areas not serviced by pipelines are still serviced by rail; one such example is the supply of jet fuel to ORTIA, whereby both rail and pipeline is used. How do you protect pipes from corrosion? In addition to the pipeline being coated, we have an extensive cathodic protection programme in place that monitors and deals with stray currents thus preventing corrosion. We also do periodic "intelligent pig" investigations to check the integrity of the pipeline. What risk is involved for the environment through which pipelines pass? Pipelines by their nature are a safe, environmentally friendly mode of transport. The biggest threat is unauthorised third party activities, encroachments and attempted pilferage. In saying this, incidents do happen, however our track record to date is exemplary and we have an emergency response plan to react to any incident together with all stakeholders. Are you getting the rates you want from the National Energy Regulator of South Africa {NERSA}? Yes, the Regulator has an approved tariff methodology which we comply with that allows us a fair return on assets managed. Please outline TPL's skills development programmes? Most of our programmes are focussed on pipeline specific requirements both technical and operational. But we also have specific courses such as the "Women in Pipelines" course which we are now going to expand to all employees in Pipelines to equip them with skills that will allow them to grow personally and in their careers, with specific focus on diversity, finance management, self-esteem and leadership skills. Constructed according to international standards and best practices, the pipeline runs underground over 555km from Durban to Heidelberg. Developed to ensure security of fuel supply for the industrial heartland of our country, both now and into the future, the pipeline is currently transporting four types of fuel: Diesel 50, Diesel 500, ULP 93, and ULP 95. It can transport 1 million litres of fuel per hour, and with future investments this can increase to 3 million litres per hour. We're committed to fueling our country's economic hub for many decades to come. ,. 1RANSNEr ... pipelines www.transnetpipelines.net