The Port Authority describes Durban as the premier trade gateway for regional trade. However, the storage facilities in Durban are not adequate to meet growing inflows and outflows of both petroleum and chemical products in the region.

Durban port has been congested for some time, and a significant number of the bulk tanks that were used for base oils previously have been converted to fuel tanks, said Samer Akram, director of operations for Unichem South Africa. Very little in the form of infrastructure upgrades for bulk storage tanks has been done in the recent past. This is more than likely a lack of budgeting from the government and a reluctance to spend on infrastructure improvement.

Growth Drivers

There are basically three types of terminals including hub, import/export and industrial, Sibusiso Zulu, commercial manager for Vopak South Africa, told LubesnGreases in an interview at the ICIS African Base Oils and Lubricants Conference in Johannesburg. Vopak operates a hub terminal in Durban that serves as a vital link for incoming and outgoing flows of global oil and chemicals. In his presentation, Zulu identified the major growth drivers for bulk storage in South Africa as mining, manufacturing, agriculture, automotive, tourism and construction, as well as a growing meddle class.

However, he said that base oil importers face one of the most daunting challenges in securing access to berths in Durban. He noted that base oil dealers do not have a dedicated berth in the port but, rather, use common user lines that require cleaning prior to offloading and produce excessive waste. Zulu noted that while other players in the oil and gas sector have three dedicated berths, base oil companies have none, a factor he considers unfavourable to the base oil market in South Africa.

Unichems Akram agreed that there is a need for a dedicated berth for base oil importers. Dedicated berth facilities are the norm in almost all other transhipment ports. Durbans port should be one of the most competitive southern hemisphere transhipment ports, but without the necessary infrastructure, it remains an end-of-line port.

Lubabalo Bethela, business development manager for Orbichem South Africa, said that very few ports offer dedicated berths. Each company has berth lines for each berth, which lead to their respective land tanks. All are common-user berths in Durban, he said.

Zulu said the use of common lines by base oils importers poses a challenge because each time they want to use the line, it has to be washed because of different chemicals that are not compatible. Akram agreed, stressing that one of the key concerns with regard to liquid bulk storage is the potential for product contamination because of the common lines infrastructure at Durban.

Akram also told LubesnGreases, Due to the lack of liquid bulk tanks for base oils, many service providers have leased tanks that were previously used for molasses and other products. This can and does lead to contamination and compromises product integrity.

Zulu attributed the inability of base oil dealers to secure a dedicated berth at the Durban port to lack of a united front among importers in the country. He described some base oil importers as cowboys that import base oil volumes that exceed the capacity of available storage facilities. This practice results in significant revenue losses.

For instance, Zulu said, some importers rent storage tanks with a capacity of 3 million liters but bring in vessels containing 6 million liters of base oil, even when they know that storage tanks cannot expand. They can offload only 3 million liters, and the remaining 3 million liters is left in the vessel. The vessel then must pull out into the open sea and wait while the importer transports the product from the tank to create space for the remaining base oil. They lose money as a consequence of this bad planning.

Zulu emphasized that base oil importers who engage in these cowboy practices face the consequences of zero profit because demurrage costs U.S. $1,000 per hour. If the agreement is that the vessel stays with the importer for three days to offload and it takes five days, then the importer must pay charges of $48,000.

Zulu said other constraints in the market include a shortage of tanks for bulk storage; lack of installations to handle products needing special handling (for example, high-viscosity lubricants that require heating in a low flash environment); and a shortage of tubes to legally dispose of waste, thereby increasing demurrage.

A Way Forward

Zulu proposed that base oil importers establish Service Level Agreements (SLAs) with storage companies to mitigate undue delay. SLAs are critical for formalizing expectations about services between customers and providers. Without them, customers may assume that everything will be delivered and available at a 100 percent level all the time.

Very little can be done about poor service when there is no definition of what good service is. Objectives should be set that describe key items, and both parties should commit to a mutually acceptable means of verifying compliance with objectives and agree on actions that must take place when exceptions occur. Zulu contended that SLAs between base oil importers and storage companies will help ensure that vessels are not delayed and extra charges are not incurred.

On the other hand, Akram noted that with limited liquid bulk storage capabilities and upgrades planned for completion in 2025 and beyond, the constraints on base oil players in South Africa will be significant. However, he pointed out flexitanks and isotanks are the future of base oil storage in the country.

Flexitanks are constructed from plastic and provide liquid-tight tanks for transporting nonhazardous bulk cargo. Isotanks are large stainless steel pressure vessels held within a 20-foot ISO frame that are used to transport and store bulk liquids. The majority of base oils are now available for supply from traders in flexitanks or isotanks, which allows the concept of door-to-door delivery to be marketed competitively, said Akram.

Challenges

Zulu identified the availability of land as the biggest challenge facing the bulk storage market in South Africa. For us to grow, we have to demolish older, smaller tanks and build bigger tanks in the same space. We demolished 10 million liters of small tanks and are building about 65 million liters of storage in one area. On another site, we demolished 24 million liters of small tanks and are building 68 million liters of storage on the same spot.

Orbichems Bethela agreed,
The major problem in South Africa is the availability of land storage tanks. Most of the additional investment in storage has already been made available to the larger fuel players. South Africa has become a net importer of fuel, and all additional capacity has been earmarked for fuel.

However, Zulu said Vopak South Africa is investing R1.14 billion to construct a 130 million liter storage facility in the Durban port to ease the constraints in the bulk storage market.