DEPARTMENT: PUBLIC ENTERPRISES
REPUBLIC OF SOUTH AFRICA
NATIONAL ASSEMBLY
QUESTION FOR WRITTEN REPLY
QUESTION NO.: 261
DATE OF PUBLICATION: 07 MARCH 2014
261. Mrs N W A Michael (DA) to ask the Minister of Public Enterprises:
Following the review on systemic failures of Transnetâs Multiproduct
Pipeline completed in 2011, (a) what are the reasons for the (i) cost
overruns and (ii) delay in three years of the project and (b) will this
review be tabled before Parliament? NW314E
Reply:
According to Transnet:
(a)(i) It should be noted that the so-called systematic failures referred
to in the review, relate to the cost and schedule overruns on the New
Multiproduct pipeline (NMPP) Project and not to the performance of the
completed assets.
It is important to highlight the fact that Transnetâs NMPP is a strategic
investment to secure the supply of petroleum products from the Coastal
terminals in Durban to the inland (predominantly Gauteng) market over the
long-term. The pipeline component of the NMPP system of assets is buried
underground over a distance of 717 kilometres. The 24 trunk-line (555km),
three 16 inland pipelines (162km), three trunk-line pump stations and two
trunk-line metering stations are operational.
The trunk-line was successfully commissioned in December 2011 and put into
operation in January 2012. Since being brought into operation, the NMPP has
functioned without incident and in accordance with its design, successfully
transported 5.2 billion litres of diesel up to the end of February 2014.
The completion of the construction work of the Coastal terminal (TM1) in
Durban and the Inland terminal (TM2) in Jameson Park is currently in
progress.
The following factors contributed to the cost and schedule overruns: The
increase in costs of the companyâs new pipeline between Durban and Gauteng
is attributed to the complexity of the project, which extends over long
distances, going through different terrains (49 main river crossings, 95 km
of major wet land crossings and 169 trenchless crossings) and subject to a
number of legislative and regulatory requirements.
Further factors were the number of individual properties involved,
negotiations with landowners and local community leaders, (servitudes
rather than expropriation) as well as industrial actions/unrest and the
resultant impact on productivity. These factors all impacted significantly
on the schedule and delivery.
The revised schedule and cost are attributed to the reasons mentioned above
as well as engineering and EIA-driven changes in scope, a construction
schedule that was too tight at the outset and significant increases to
commodity (steel) and equipment costs compared to original estimates. The
Transnet Board approved the revised cost estimates for the NMPP to R23.4
billion in November 2010. This approved amount has not changed since.
Transnet also acknowledged the shortcoming of the management setup within
Transnet Capital Projects. The lack of sufficient capacity and depth of
experience for the client overview of a megaproject of this complexity
resulted in an over-reliance on the EPCM contractor.
On the 29th November 2012, I announced that I had concluded the special
review of the cost and schedule variations, which had dogged the project
during its early stages. These were shared with Transnetâs Board and
management. The findings included the following factors which had a
detrimental impact on completion:
⢠The decision to terminate the main EPCM (Engineering Procurement and
Construction Management) contractor at the end of Front End Engineering
Design (FEED) stage.
⢠The re-assignment of the scope of work to a new EPCM contractor.
⢠The length of time it took to capture and validate the FEED
introduced significant delays to the execution schedule.
⢠The interface between the Ownerâs Team and the new EPCM contractor
introduced new risks, which were not appropriately mitigated.
⢠Failure to implement a design freeze after the FEED was approved and
signed off.
The main pipeline contractor performance, in terms of its ability to
execute, fell short on the following critical issues:
â Unsatisfactory safety performance
â Poor environmental compliance
â Insufficient quality controls
â Inadequate control and supervision
(a)(ii) See (a)(i) above.
(b) The delays in the project have already been discussed at various
Parliamentary committee meetings.