Public Enterprises Minister Malusi Gigaba.  PICTURE: ANTONIO MUCHAVE
Public Enterprises Minister Malusi Gigaba. PICTURE: ANTONIO MUCHAVE

THE first phase of the R23.4bn New Multi Product Pipeline (NMPP) between Durban and Gauteng will be completed within budget by December next year, a revised date following significant cost and time overruns.

The project — one of South Africa’s biggest infrastructure projects employing over 12,000 workers — involves a 555km pipeline to transport diesel, jet fuel and petrol from Durban to Gauteng.

The pipeline supplies 40% of the Gauteng fuel market, a percentage expected to rise to 65% in five years.

Public Enterprises Minister Malusi Gigaba late last week marked the start of the last stage of Phase 1 — the building of a terminal at Island View inside the Port of Durban — with the release of a special review of the cost and schedule variations that dogged the early part of the project.

In 2006, Phase 1 of the project was estimated to cost R9.5bn, but the cost tally is now at R23.4bn. There are further phases in the years ahead as demand for fuel rises in Gauteng.

The pipeline has, at half its capacity, already moved 2.2-billion litres of diesel since January, equal to 200 trucks per day transporting fuel over the period.

Mr Gigaba said the NMPP had 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.

The review found that a decision to terminate the main engineering and construction management contractor at the end of the initial design stage, had added to costs and the delays.

The time to reassign a new contractor, failure to implement a design freeze after the initial design was approved, changes to the terminal design, an unsatisfactory safety performance, poor environmental compliance, inadequate reporting and poor controls and supervision were among the other factors that had added to costs and delays.

Mr Gigaba said the government had learnt lessons from this project, and he had established a capital projects unit in his office to exercise oversight over all capital projects.

It was important that government maintain investment in new capacity and maintenance, so that it was not again faced with having to invest in projects due to capacity constraints on the economy, he said.

Project director Theunis Steenkamp said persistent rains in Durban resulted in delays of the equivalent of 41 work shifts since August 1 this year, as it was not possible to do welding in the rain.

He said some night shifts and Saturday and Sunday shifts had been introduced to catch up.

Transnet Capital Projects group executive Charl Moller said it expected the cost of the NMPP on a litre of fuel would peak at 32c per litre, and average 25c per litre over the longer term.

Mr Moller said this was relatively low considering the pipeline was expected to last 75 years, and the current transport cost of fuel was 22c per litre, out of a total price of petrol at around R12 per litre.