PETROLINE, the company building a petroleum products pipeline from Mozambique to Gauteng, said on Friday the commissioning of the pipeline had been moved from the third quarter of next year to early 2011.

The delay will keep the country's inland market vulnerable to possible fuel shortages for longer. The market, which includes the country's economic hub of Gauteng, relies on Transnet's existing pipeline infrastructure.

The Transnet pipeline from Durban to Gauteng is running at capacity, hence the urgent need for investment in new pipeline capacity in order to ensure security of fuel supply.

Transnet is building SA's other pipeline, the R12,7bn new multi-product pipeline, also from Durban to Gauteng.

In March 2007, the National Energy Regulator of SA (Nersa) granted Petroline a license to construct a pipeline between Matola harbour in Mozambique and Kendal in Mpumalanga. The pipeline will be joined into the Transnet pipeline network at Kendal.

The pipeline -- meant to, among others, ease congestion at Durban harbor -- was due to be commissioned in the third quarter of next year.

But Petroline project co-ordinator Peet de Pontes said on Friday the project would be delayed and was now due to be commissioned early in 2011. De Pontes attributed the delay to the global financial turmoil and plans to increase the amount of fuel the pipeline would be allowed to carry.

The project includes a liquid fuel storage depot in Nelspruit. The storage facility will be made up of petrol storage tanks, diesel storage tanks, interface handling and road and rail offloading facilities.

De Pontes said in light of environmental concerns, the company had moved the depot's location to another site, and this had also contributed to the delay. "In the environmental assessment we have gone much further than is required by legislation to ensure consultations. That has contributed to the delay." He said the company intended to apply to Nersa "in the next few weeks" for an increase in the amount of fuel the pipeline would carry. At the moment it is licensed for 3.5 billion liters a year. "We want this to increase to 5.9 billion liters a year," De Pontes said.

The pipeline has capacity to carry 6 billion liters a year, but the company had decided to increase the amount of fuel because of overwhelming interest from customers.

There was a strong case for construction of the pipeline.

"Pipeline is the safest way to transport fuel. If this pipeline is not built, a truck carrying fuel will leave either Durban or Maputo every six minutes every day in order to satisfy demand for fuel inland," De Pontes said.

He said the company had appointed engineering group Engineering & Project Company, a subsidiary of Aveng , to manage the project.

De Pontes said the group hoped to benefit from the global economic downturn, which has seen some capital projects around the world either put on hold or cancelled.

This is in line with the assessment of other companies that expect to see their project costs fall as a result of softer demand for key components, for example.

National oil and gas group PetroSA has already seen the costs of its 400,000-barrel-a-day refinery in Coega, near Port Elizabeth, fall as much as 25%.

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