Pipeline cost spiral to raise fuel prices

2010-12-13 00:00

JOHANNESBURG — Next year motorists can expect to pay up to 30c/litre more for fuel as a result of the cost increases of Transnet’s new fuel pipeline being built between Durban and Gauteng.

The amount includes a 5c/litre levy, which is a direct result of the project’s costs having increased by 51% over the past year.

Transnet has also submitted an application to the National Energy Regulator (Nersa) to increase the pipeline’s tariffs by 128% next year, which economists reckon could add a further 25c/litre to the fuel price.

This increase, which could be introduced on April 1, 2011, is needed to help finance the new pipeline.

On Wednesday Transnet announced that the cost of this pipeline has gone up by 51% to R23,4 billion.

The previous cost estimate was announced ten months earlier on March 10 when Transnet said the pipeline would cost R15,5 billion.

Dr Rod Crompton, Nersa’s pipeline specialist, said Transnet’s initial tender for building the pipeline in 2006 had been R7 billion.

This means that the cost of the project over four years has ballooned by 234%.

Investment Solutions economist Chris Hart said he is convinced that the original Transnet cost estimates had been very flawed.

Hart said the cost increases will increase the price of fuel and impede economic growth. A pipeline should reduce the costs of transporting fuel inland.

The types of tariffs that Trans- net now requires would mean that companies would transport their supply by road.

Hart said that he believed that the licence that Transnet had received from Nersa in 2007 to build the pipeline should be taken away from the parastatal.

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