Sasol CEO SA: Jet Fuel Stock Levels Must Rise After Natref Incident

• Sasol CEO Simon Baloyi urged South African jet fuel suppliers to increase stock levels following a production outage at the Natref refinery.
• The incident prompted airlines to make backup plans and led to an emergency meeting involving the Department of Energy and industry associations.
• Baloyi expressed surprise at low inventory levels given global geopolitical instability and the inherent unreliability of operational plants.
• The Department of Mineral and Petroleum Resources proposed in July that national fuel reserves cover 60 days of demand, with licensed wholesalers and importers mandated to hold 21 days of inventory.
• Vitol Group’s Vivo Energy is investing $130 million in a 300,000 cubic meter fuel tank project in Durban, scheduled for completion next year.

The Department of Mineral and Petroleum Resources has proposed new regulations that would mandate significantly higher fuel reserves, requiring licensed wholesalers and importers to maintain 21 days of inventory.

South African jet fuel suppliers are being urged to maintain more robust stock levels following a recent production disruption at Sasol's Natref refinery. Sasol Chief Executive Officer Simon Baloyi emphasized the critical need for increased reserves, particularly in light of the incident last week that prompted airlines to activate contingency plans. While Natref has implemented measures to address unit issues, reducing the likelihood of a significant jet fuel shortage at Johannesburg's OR Tambo International Airport – the nation's busiest aviation hub – Baloyi stressed that suppliers should be better prepared for such eventualities.

The refinery's operational challenges led to an emergency meeting convened by the Department of Energy. This gathering included representatives from the airport and the Fuels Industry Association of South Africa, underscoring the immediate concern over potential supply interruptions. Baloyi, speaking in an interview on Tuesday, expressed his astonishment at the insufficient inventory levels held by suppliers, especially considering the volatile global geopolitical landscape, which has seen oil prices and physical supply impacted by events like the Iran war.

He highlighted the inherent unpredictability of industrial operations, stating that plants are subject to fluctuations in their operational status. The ongoing Iran war has already compelled South Africa and other African nations, heavily reliant on fuel imports, to seek out alternative supply sources. This broader context further accentuates the necessity for enhanced inventory levels to mitigate the risk of future fuel shortages across the continent.

In response to persistent supply vulnerabilities, the Department of Mineral and Petroleum Resources put forward a significant proposal in July aimed at bolstering South Africa's strategic fuel reserves. The proposed framework suggests that national reserves should be sufficient to cover 60 days of demand. Under this plan, approximately two-thirds of these mandated reserves would consist of crude oil, with the remaining portion comprising refined oil products.

A key component of this regulatory initiative is the requirement for licensed wholesalers and importers to maintain a minimum of 21 days of inventory. This measure is designed to create a more resilient fuel supply chain, reducing the nation's susceptibility to sudden disruptions in production or international supply. The proposed regulations signal a shift towards more stringent oversight of fuel stock levels, particularly for critical sectors like aviation.

The imperative for higher inventory levels extends beyond immediate operational disruptions, reflecting a strategic need to enhance South Africa's overall fuel security. The challenges posed by global events, such as the Iran war, have underscored the vulnerability of nations dependent on imported fuel, compelling them to diversify and strengthen their domestic supply resilience. This broader context reinforces the urgency behind calls for more robust stock management practices among local suppliers.

Efforts to bolster fuel infrastructure are already underway, with Vitol Group’s Vivo Energy investing $130 million in the construction of new fuel tanks in Durban. This project, which commenced prior to the outbreak of the war, is situated at a former refinery site in the eastern port city. The new facility is designed to provide 300,000 cubic meters of storage capacity and is slated for completion in the third quarter of the upcoming year, representing a tangible step towards increasing the nation's fuel storage capabilities.

This article signals potential regulatory changes regarding mandatory fuel inventory levels for South African jet fuel suppliers and wholesalers, requiring compliance officers to monitor the Department of Mineral and Petroleum Resources' proposals for 21-day reserves. It also highlights critical supply chain resilience risks for airlines and logistics companies, prompting a review of contingency plans and supplier contracts.

Source: Reporting based on recent industry insights.