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.