with Marcel van de Kar, Managing Director, Vopak South Africa Development (pty) Ltd
With over 400 years of experience and a global footprint, Vopak is recognized as a leader in its field. What does the competitive landscape in South Africa look like?
In South Africa, Vopak has one terminal in Durban. Our main competitor is Island View Storage (IVS), who is roughly 7 times bigger than we are in the country. However, we are working on several studies for significant expansion in South Africa, which could decrease this competitive gap in the coming years.
Durban is quite a strategic location for South Africa. In your view, what role does this port play within the oil trading scene?
The role of the Port of Durban is crucial. South Africa is developing and the country’s middle class is growing. This is generating an increase in energy consumption which in turn creates a strong need for petroleum products, mainly diesel and petrol. While there is local production, an important part will always need to be imported too.
According to our market analysis, these imports will also grow in the future. In order to import more products, the infrastructure will need to be adapted which is where Durban comes into play. The inland area around Gauteng and KZN together consume roughly 70% of the clean petroleum products, which needs to be supplied through both refineries and imports.
Landing the cargoes requires infrastructure which is currently severely limited and congested. For this reason, Transnet Pipelines has built the New Multi Product Pipeline (NMPP). The feeding of this line will be crucial and at Vopak we are looking to support the market with more open and independent infrastructure in Durban to support the inland energy supply.
Was the commissioning of the NMPP a significant change?
Our terminal has historically been used for chemical storage, which is still a strong market hosting stable product flow and strong customers. It is however a market that increases slowly, while the petroleum side is developing much more rapidly. This is why we are studying the opportunity to build more tanks in Durban, to eventually achieve a 50/50 balance between chemicals and petroleum products.
In our interview with the CEO of the TNPA, Mr. Tau Morwe has indeed identified congestion as a challenge in the Port of Durban. What significant changes do you expect to see happening beyond Vopak’s own investments?
I fully support the investment plan that the TNPA has laid out. They have refurbished Berth 6, are now working on Berths 2 & 5 and will continue with the other Berths too. The approval process for these investments has taken some time, but I am pleased to see the current commitment of the TNPA to liquid bulk facilities.
The congestion of the port can be found both on the marine and the land side, where trucking also remains a real issue today, particularly on Bayhead Road. But also on this side, the port is investing while the Transnet Pipelines’ NMPP will take away quite a few of these trucks.
Looking at your customer base, who really pulls your demand today?
Historically, we mainly had big chemical companies as key customers. With the creation of more storage for petroleum products, oil companies come into play as well. We already have good contacts with the International oil Companies and the National Oil Company (NOC).
It is a specific challenge in South Africa to get the BEE parties more involved in the supply of product. All aspects of the chain have to fit at the same moment. Our role is limited, as we are an independent player that can work with everyone in the market, whether it is an IOC, an NOC, a trader or a local party.
Safety is key to your operations, but what does a customer really look for in this sense?
The way we do business worldwide is based on our safety fundamentals. These are the leading values that define safety in our daily operations. Moreover, it is not something ready-made that only needs to be implemented; it is an ongoing process from day-to-day. We have a lot of Key Performance Indicators (KPIs) that focus on both process and personnel safety. Many of our competitors have traditionally focused on the latter, but looking at some of the big incidents that have happened in the world in the last decade, more focus is needed on process safety.
We have significantly invested in our Durban facilities to implement automatic level guages, alarm systems, automatic shutdown systems, etc. You always need to take the human factor into account when designing such systems. Whether this is in South Africa, Europe or Asia, we will work according to the same best practices. As a global company, we can source our talent from elsewhere to ensure that these standards are met.
Another important aspect for us is to be able to meet the environmental and health standards. We are in a long-term business where we build terminals for 40 to 50 years. You have to maintain good relations with the community, authorities and the government. As long as you inform people well, explain what you do and do it in a responsible manner, you can live together. At the end of the day, people also need this energy for their daily use and to develop the country, which is why stakeholder management is so important.
Have you had some challenges with the public opinion particular to the South African context?
There have been some accidents in the area in the past, fortunately not at our facilities. We started a community forum consisting of a group of companies that meet on a 6-weekly basis. Through this forum we have an open dialogue with communities and authorities. This is valuable for all involved.
To what extent is it a challenge for you to attract and retain the best people here?
One of the challenges in South Africa is to find people with the key critical competences for our industry. There are people with the right competences, but there aren’t enough of them. We often hire people that we fully need to train ourselves through an extensive program at our own training facilities. It happens of course that some of these people move to other companies afterwards, but we have a good company culture to retain them as well.
What can you tell a new recruit about this company culture?
Our company culture is built on the values upon which we conduct business, such as integrity, improvement, and professionalism. If you can identify yourself with these values, Vopak is a very nice company to work for. We have an open-door policy at the company and an almost family-like culture. Aspects such as ownership and commitment are extremely important.
Security of energy supply remains one of the key concerns to South Africa’s Minister of Energy Dipuo Peters. In your view, what are some of the key aspects that remain to be addressed?
It is very important to have a larger buffer in the country. One of the key issues at the moment is that filling stations go dry as soon as a refinery ends up in trouble.
Our contribution is that we are studying on a storage facility in Lesedi to the south-east of Johannesburg, where we would be able to load trucks from. We see the need for an open and independent distribution facility, as well as a buffer and strategic storage facility. It will assist in preventing a shutdown of the economy in case of hiccups in the system.
Beyond operational issues and mechanical defects that can occur, strategic storage is also important from a political perspective. We believe that a new terminal in Gauteng can contribute to all these different aspects.
Does this also mean that you enjoyed full support of the government?
The government and the Department of Energy are fully supporting this initiative. You still need to follow the different authorities and steps of a project, which can be challenging. You have to identify the market, have the investments approved and go through a range of processes with the different authorities. It would help a lot if the government would assist investors in infrastructure to achieve a smoother process.
A particular aspect of Vopak in South Africa is also the fact that you have partnered with a black economic empowered (BEE) company, Reatile Group. How important was this within the growth story?
If you want to invest in a country, you need to have a good feeling and understanding, as well as good links with businesses and the different stakeholders. With Reatile, we met all these objectives. The fact that the Reatile Group was also well informed and well connected to our business was very important to us. We both bring value to the table into our discussions on future market developments. The BEE scorecard is one thing, but connections with the people, authorities and businesses is the real added value.
Everyone today talks about the East of Africa as well as the potential development of LNG terminals. Is this going to change the Southern African energy situation?
The ideal way forward for South Africa and this region would be to create great LNG hubs or landing terminals to import LNG. Vopak has an LNG facility in Mexico and has just built a new facility in Rotterdam in the Netherlands. We therefore know how it works.
The challenge for South Africa is how to get the gas into the country: the development of inland infrastructure. At Richards Bay, the third big project we are working on, we will also allow storage for LPG. LPG is an easier step into the direction of an increased gas usage. More and more families are moving from paraffin to LPG for their cooking, which is a move that can be increasingly observed in the emerging markets and is something that needs to be stimulated even more in South Africa.
One of the main issues of not being able to get more LPG as an energy source lies in the import facilities. At the moment, South Africa has only a few of such facilities. As a result, we have included LPG as one of the pillars in our Richards Bay project.
You indeed also need an inland gas market. Is the industry ready for such change to create the demand?
I think that the demand is there and that the market is developing. Further development is currently blocked by the supply of more products. If we can increase this supply further, I do see the market growing too, especially in view of the current electricity tariffs.
Looking ahead now, what will Vopak South Africa ideally look like in 5 years from now?
In our opinion it would be good for South Africa to have more open access buffer storage and a healthier tension between supply and demand, which would effectively mean that there is sufficient product allocated in South Africa. For Vopak we see a demand from out of the market to expand our terminal in Durban and the establishment of new storage capacity in south-east of Johannesburg. Furthermore we get requests for independent storage capacity in Richards Bay for chemicals that we now store in Durban as well as petroleum products and LPG.
If you look at the world map of terminals, Vopak now has terminals in 81 different locations, yet our Durban terminal is the only dot on the African map. There is strong support from our global management to work on feasibility studies to make these projects work.
Isn’t it slow for a global leader to only have one dot in Africa?
Yes and no. It depends on how we look at markets and market developments. When we go to a place we go there for the long term. Our current worldwide growth plan is enormous and we are working intensely to grow extensively in the coming years. Personally, I am working very hard to obtain more of this growth from South Africa as well as the rest of the African continent.
Thank you! Would you have a last message for our readers?
The country needs more infrastructure to supply in its energy needs. As Vopak, we are ready to play our independent role and hope to get all the parties around the table to achieve a better security of supply.