South Africa-based black-owned infrastructure and service provider Mining, Oil and Gas Services (Mogs), through its joint venture (JV) with Oiltanking Grindrod Calulo, is in the process of applying to the National Energy Regulator of South Africa (Nersa) for its tariff for its crude oil blending and storage facility in Saldanha Bay, in the Western Cape.

Mogs CEO Lucas Ndala reports that, when completed, the site will comprise 12 concrete storage tanks, each with a capacity of about 1.1-million barrels, which will cater for the local crude oil market, including producers, traders and refineries.

The project, which will cost about R2-billion, has received environmental approval and a construction licence from Nersa and is expected to break ground in the second or third quarter of next year.

The first four tanks will be installed 18 months after breaking ground, with the remaining eight tanks due to be installed in two legs at six-month intervals. The facility should take about 36 months to complete.

Once the first four tanks are installed, the JV can start storing and blending crude oil. The concrete tanks will be installed in a modular format, which means that products from one tank can be pumped into another to help facilitate the blending process.

Ndala explains that the concrete tanks are dome shaped, allowing for the maximum amount of crude oil stored to be extracted.

Specially designed nozzles will be used in the tanks to facilitate the blending process. “We approached technical experts to simulate different blending techniques, the types of nozzles and the flows we would need to properly blend the crude oil. The flow helps retain the particular characteristics of the crude oil and, as it is a hydrocarbon that produces gas, a specific way of circulating the oil in the tank had to be established.”

Mogs has partnered with JV company Oiltanking Grindrod Calulo to develop the project, as it has the technical skills to help establish this type of facility.

Oiltanking comprises independent petrochemicals storage company Oiltanking, petrochemicals supply chain and logistics company Calulo and JSE-listed freight logistics and shipping service provider Grindrod.

Ndala explains that Saldanha Bay was selected, owing to its location, which means Mogs can take advantage of the crude oil being shipped from South America and West Africa, which passes the Western Cape before being delivered to Eastern markets.

“With the US becoming a net exporter of crude oil, we saw this as an opportunity for a local player to offer a storage and blending facility. The Saldanha Bay port was selected, as it can accommodate large carriers and has the existing infrastructure, owing to the Strategic Fuel Fund Association’s facility there, which mitigated the need to establish new infrastructure.”

Ndala adds that Saldanha Bay could potentially become a significant oil and gas import and export terminal in the long term.

Companies using the storage facility will be charged a set fee for every barrel of crude oil stored and for using the blending services.

He explains that the Saldanha facility will be able to store and blend heavier crude oil from South America with lighter crude oil, commonly found in West Africa. The two crude oils can be blended to provide a specific crude blend, according to client specifications.

Oil & Gas Infrastructure
Ndala tells Mining Weekly that Mogs’ business strategy is to build and own infrastructure and to lease it out to industry players on a long-term basis.

Mogs can construct storage facilities and pipelines for refined products and crude oil. Most of the pipelines the company is developing are for refined products.

Mogs is also aiming to capitalise on the need for gas infrastructure in Africa, especially in the construction of gas pipelines to energy utilities.

“Having assessed the oil and gas market in Africa, there are no dedicated infrastructure providers that will enable producers – who might not have the capital resources available to build the necessary infrastructure, but would like to take advantage of the demand for oil- and gas-based products – to participate in this developing sector,” says Ndala.

He adds that oil and gas infrastructure is normally owned by commodity traders, which enables them to control the market, hampering the market’s ability to access cheaper fuel for end-users.

“We feel that the infrastructure role of Mogs is a vital one, which could unlock the economic potential of the continent,” Ndala concludes.