NOT AN OFFICIAL UNCTAD RECORD

1. NOT AN OFFICIAL UNCTAD RECORD 11th African Oil and Gas, Trade and Finance Conference & Exhibition23rd – 25th May 2007 Nairobi KenyaSustainable and safe distribution of refined oil products in Africapresented byPatrick Obath24th May 2007

2. Overview • Introduction • Scene setting • Pipeline • Rail • Water • Road our experience • Recommendations • Conclusion

3. Introduction • Pipeline • Globally the most preferred mode for primary distribution • Few countries in Africa have well developed pipeline systems for transportation of refined products to key consumer centres. • Rail • The next preferred mode, available in many countries but in various states of disrepair • Run from coast to hinterland with very few arteries offering little effective distribution opportunities from main trade routes. • Road • Most widely used distribution mode in Africa • Road quality, vehicle standards and economic operating environments makes it a challenge to operate a sustainable and safe distribution network. • Presentation will identify challenges in each mode of distribution and propose actions for sustainability and safety focussing on road transport as the best opportunity for gaining quick wins.

4. Scene setting • Africa has a network of • over 2,5000,000 kilometres of road • 75,000 kilometres of rail. • Four major rivers of just over 18,000 kilometres in length around 6,000 kilometres are navigable. • less than 10,000 kilometres of white oil pipelines concentrated mainly in Nigeria and South Africa. Other countries with significant white oil pipelines are Sudan, Kenya and Egypt. • A third of African countries • are landlocked, tiny economies. • host 40 percent of the population • Share boundaries with, on average, four other countries, whose policies and infrastructure have spill over consequences on each other.

5. Pipeline Challenges • High capital cost, but safest and most cost effective. • In last 50 years, most fatal incidents in Africa • worst accident in Jesse, Niger delta, 1998. 1200 people killed from a pipeline blast. • Pipelines are in way leaves either with individual land owners or state areas. Main pipeline challenges are: • Ensuring integrity of the pressure envelope • This leaves them accessible to mischief. Security of the pipeline is seen as the responsibility of the pipeline owner. A breach of the pipeline that releases product is considered an opportunity by the local residents • In situ monitoring systems will lead to early warning of breaches of the pressure envelope, but public will endanger themselves trying to recover product

6. Rail Challenges • Rail transport of petroleum products widespread • Most operations are state controlled. Little investment in rolling stock for petroleum products. • Sustainable and safe use of rail is compromised by: • Slow speed of trains • Accessibility of rail lines to the public • Ease of access to loading and unloading locations on rail tank cars • Less than optimum maintenance of rolling stock • Limited networks • Unattractive tariffs • Emergency response preparedness

7. Water challenges • Water transportionof petroleum products minimal in Africa: • Mainly done on the rivers Nile, Zaire and the Niger • Some transportation onlakes Tanganyika and Victoria. • Zambezi, Orange, Limpopo, Senegal have very short navigable lengths and do not make any contribution to petroleum transportation. • Sustainable and safe water transport has challenges of: • Sufficient volume to maximize utilization • Tariffs that attract investment • Barge or ship construction to acceptable environmental and admiralty standards • Reliable navigational aids, both on board and on the waterways • Emergency response preparedness

8. Road Challenges • Is over 95% of transported distance between the point of refining or port of entry and the final destination. • Less than 10% of 2,500,000 kilometres of road is paved • Roads concentrated in urban areas, around coastal ports or on trade routes established during colonial times. • Sustainable and safe transportation challenged by : • Each maintenance $ sacrificed increases vehicle operation cost by US$ 2 – 3. • Africa’s road fatality share is three times as large as its share of motor vehicles (350 deaths per 10,000 vehicles vs 2.3 in industrialised countries). • Vehicle standards vary across countries. • Enforcement of driving regulations varies across the continent • Tariff and regulatory differences along common supply routes especially for landlocked countries • Higher than national HIV/AIDS prevalence on transit corridors. • Response to commercial environments

9. Our experience 1 • Safety initiatives implemented whilst ensuring sustainable contracts for logistics contractors. Highlights for road: • Trucks brought into fleet conforming to ADR regulations whilst increasing carrying capacity but meeting axle load limitations across distribution corridor • Leveraging of cost elements • Truck tyre management • Insurance premiums • Working capital pooling • Proactive engagement with all stakeholders including transport contractors, industry, governments and communities on the delivery routes on infrastructure challenges and safety awareness.

10. Our experience 2 • Highlights for road (cont’d): • Management systems put into place to ensure: • Proper maintenance of trucks • Driver behaviour change through monitoring of journeys • Journey management plans • Strict management of working hours and patterns • Equitable terms of service for drivers • Coaching and Reward schemes • Drive to Live • Hearts and minds • Driver and contractor leagues • Joint HIV/AIDS management programmes with transport contractors and along logistics corridor.

11. Our experience 3 • For rail the following highlights: • Rail risk assessments carried out jointly with operators. • Loss reduction opportunities and mitigation options identified. • Remedial action plans agreed and quantified in terms of returns to the operators. • Joint monitoring implemented. • For pipeline and water transportation, currently examining opportunities for sustainability and safety with operators focussing on: • Loss tracking to curb theft and reduce costs • Mitigation opportunities with communities around pipelines and with water transport regulators.

12. Recommended Actions 1 • Government and regional level: • Harmonise customs tariffs and tax and collect duties at first port of entry across common trade countries to minimise transit times at borders. • Adopt common transportation standards along transit corridors and also in common trade countries focusing on truck standards and operational practices. • Coordinated inter country programmes on transportation safety with emphasis on road and rail safety. • Investment in infrastructure improvement and timely and cost effective maintenance • Common programmes for management of HIV/AIDS along transit corridors. • Increase rail utilisation by improving infrastructure and adding rolling stock to reduce pressure on roads and safety and environmental exposure

13. Recommended Actions 2 • Industry level : • Strict application of national and international transport regulations especially in respect of safety in vehicle construction and operations. • Country and regional collaboration to develop and adopt cost effective operational standards • Intolerance to non conformance • Drive Public Private Partnerships to establish regulations to govern sustainable practices • Adopt common industry standards such as • Basic hardware (adoption of ADR specifications) • Mandatory fitting and use of seat belts • minimum driver standards – qualifications , training (on hazardous products), retraining, • etc

14. Conclusion • Governments, the oil industry as well as private and public stakeholders all have a part in causing and maintaining sustainable and safe systems for the distribution of refined products in Africa. • Focus should be on setting the right frameworks and legislation through extensive consultation on what is “best for Africa” followed by implementation and then compliance assurance. • Where this has been done, there has been a significant reduction in fatalities and the cost of doing business has been reduced.