Investigating an effective supply chain for a refinery in a regulated petroleum sector

Abstract

Currently, refined petroleum products are manufactured by six refineries in South Africa. The supply of refined petroleum products is supplemented by imports of refined petroleum products. These refined petroleum products are transported by pipeline, rail, road, sea and a combination thereof to depots across the country. These products are then distributed directly to commercial customers through points of resale in the form of retail service stations. The challenge is that the storage facilities and distribution networks in South Africa are currently utilised to its full capacity. There is a need to expand current storage infrastructure or to erect new storage facilities to facilitate imports. Durban Port that currently handles 70% of the country’s crude oil and 40% of refined products is also utilised to its full capacity. The investigated problem pertains to the limited storage and transport capacity available for the distribution of petroleum products in the country. The interview protocol, which was based on the literature reviewed, was used for compiling the primary data for the case study. Selected findings revealed that the respondents perceived that storage capacity is the most significant constraint militating against adequate supply by the supply chain. The findings also indicated that the respondents were of the opinion that transport rates and routes (cost of logistics) are the greatest contributor to the prices of products. As a result, there appears to be a major scope for improvement in terms of the usage of pipelines and rails for the movement of petroleum products.