SOUTH SUDAN 2004: A SURVEY OF THE HUMANITARIAN FUELS … · 2014. 10. 24. · South Sudan Fuel...

SOUTH SUDAN 2004: A SURVEY OF THE

HUMANITARIAN FUELS SITUATION AND PROSPECTS

This report was complied by UNJLC Fuel Consultants Iain Kinnear and John Levins during May 2004 and relates to conditions that existed at the time. Copies of this report are obtainable at www.unjlc.org, through the Office for the Co-ordination of Humanitarian Affairs (OCHA), OCHA Sudan Office, Opposite United States Embassy, Bill Prior Avenue, Off UN Avenue, Nairobi, KENYA, or through the offices of Operation Lifeline Sudan (OLS), Block J, UN Complex, UN Avenue, Gigiri, Nairobi, KENYA.

South Sudan Fuel Study Briefing, UNJLC Page 2

EXECUTIVE SUMMARY

The anticipated increase in humanitarian activities, coupled with the requirements of United Nations peacekeeping forces and increased agricultural, mining, oil exploration and commercial activities in South Sudan following the implementation of a peace agreement between the Government of Sudan and the Sudan People’s Liberation Movement/Army will place great strain on the ability of the existing fuel supply infrastructure to meet the needs of the region. The two main fuels required for operations in South Sudan are Jet A-1 aviation fuel and Diesel, otherwise known as automotive gasoil. All fuels for South Sudan as well as for Uganda, Rwanda, Burundi and parts of Tanzania and the Democratic Republic of Congo are imported through the Kenya port of Mombasa, and transported overland by pipeline, rail or truck, or a combination of these means. These transportation systems are barely adequate for the task. They are able to serve current needs for the region, but it is doubtful that they would be able to cope with a significant increase in demand. Although fuels are produced in indigenous northern Sudanese refineries from developed oilfields in the centre of Sudan, the capacity of these refineries may be insufficient to supply both the north and the south. In any event, it will be some time before north-south confidence is adequate to allow such supply. As such, the only source of supply for fuels for South Sudan for the foreseeable future will be through Mombasa. Presently, Kenya Government revenue regulations that prohibit export fuel from being transported by road tanker, in order to protect the Kenyan treasury from duty-free export fuel being diverted for domestic use. This greatly limits the logistical capacity for fuels required in South Sudan. Operations within South Sudan depend very heavily on drummed fuel supplies. The rising cost of steel used in the manufacture of these drums, together with the high cost of fuels, is causing significant increases in the cost of providing fuel to operations. The situation is further exacerbated by a very tight situation with respect to the number of drums in circulation required to keep the system functioning, particularly for aviation fuel. At an operational level, we recommend that the humanitarian community implement bulk fuel installations for aviation fuel at selected airfields, and that de-fuelling equipment be purchased for airfields within South Sudan capable of taking larger C-130 type aircraft, so that fuel may be downloaded to the these installations, so as to augment supply overland. This solution has the potential to both reduce the overall cost of fuels and to increase the availability of fuels. It should also improve air safety through better fuel quality assurance. We further recommend that the humanitarian community support the establishment of a voucher system for ground fuel supplies in South Sudan, whereby the fuels are provided by a contractor or contractors at bulk fuel installations at selected locations, in return for vouchers prepaid in Kenya or Uganda. At the strategic level, we recommend that an all-parties conference, bringing together the humanitarian community servicing South Sudan from Kenya, fuels industry representatives in Kenya, the Kenyan Government, the UN Department of Peacekeeping Operations, and perhaps Kenya Railways, Uganda Railways and Kenya Pipeline Company, be convened to address the current problems in the fuel supply infrastructure. A major topic of this conference should be the question of eliminating the Kenyan Government’s ban on using road transport for export fuels, whilst still providing protection for the Government’s revenue. On the development front, in the event that oilfields are discovered and developed to production in the south, we recommend that major donors give due consideration to financing the infrastructure and supplies necessary to introduce LPG cooking gas into South Sudan as an economically viable alternative to existing fuels.


CONTENTS Page Executive Summary ..................................................................................................................... 2 Contents ........................................................................................................................................ 3 1. Scope and Aims .................................................................................................................... 4 2. Background and Assumptions .............................................................................................. 5 3. Fuel Supply ........................................................................................................................... 6 3.1 Overview .............................................................................................. 6 3.2 Mombasa: The Key Supply Source ..................................................... 6 3.3 Strategic Fuel Distribution: Pipeline, Rail and Road .......................... 7 3.4 Fuel Corridors into South Sudan: East and West ................................ 8 3.5 The Northern Option............................................................................ 9 4. Fuel Supply Bottlenecks: Existing and Potential ............................................................... 10 4.1 Capacity of Mombasa Refinery ......................................................... 10 4.2 The Kenya Pipeline............................................................................ 10 4.3 Rail Network Capacity: Kenya and Uganda ..................................... 10 4.4 The Road to Lokichokio .................................................................... 11 4.5 Adequacy of Number of Circulating Drums ..................................... 11 5. Aviation Fuel: A Special Case............................................................................................ 12 5.1 The Western Corridor ........................................................................ 12

5.2 The Eastern Corridor.......................................................................... 13 5.3 Logistical Recommendation for the Eastern Corridor ...................... 13 5.4 Airfields in Government of Sudan Held Areas of South Sudan ....... 14 5.5 Handling of Aviation Fuels and Recommendations ......................... 16 5.6 Reducing the Overall Cost of Aviation Fuels ................................... 16

6. Ground Fuels: Transport and Power Generation................................................................ 18 6.1 Diesel.................................................................................................. 18 6.2 Gasoline.............................................................................................. 19 6.3 Kerosene............................................................................................. 19 7. Fuel Dependencies .............................................................................................................. 20 7.1 Estimate of Demand........................................................................... 20 7.2 Proposed Voucher System ................................................................. 21 8. Effect of a Sudan Peacekeeping Mission ........................................................................... 22 8.1 Initial Stages....................................................................................... 22 8.2 Later Stages ........................................................................................ 23 8.3 Recommendation ............................................................................... 23 9. The Peace Agreement: Effect on Fuel Supply and Demand............................................. 24 9.1 Short Term.......................................................................................... 24 9.2 Medium to Long Term....................................................................... 24 10. LPG: A Developmental and Environmental Opportunity.................................................. 26 11. Summary of Major Recommendations............................................................................... 27 11.1 All-Parties Conference....................................................................... 27 11.2 Move to Bulk Supply of Aviation Fuels............................................ 27 11.3 Establishment of Containerised Fuel Stations................................... 27 Annex A: Fuel Supply Corridors into South Sudan .................................................................. 28 Annex B: Use of Bulk Facilities: The Economic Case ............................................................. 29


1. Scope and Aims The scope of this survey is to review and document the existing fuel logistics supply chain for members of the humanitarian community operating within the areas of South Sudan under the control of the SPLM/A1 and relevant contiguous areas in order to provide these agencies with a clear understanding of the logistics challenges arising from an expansion of humanitarian operations and the introduction of UN peacekeeping troops or monitors in Sudan subsequent to the implementation of the Peace Agreement between the Government of Sudan and the SPLM/A, and to identify ways in which the logistics co-ordination structure for fuels may be strengthened. “Agencies”, in this context, includes United Nations humanitarian agencies, associated international organizations and non-governmental organizations active in the region, whether or not they are members of Operation Lifeline Sudan, and non-governmental organizations active in the region. The survey was limited to South Sudan and neighbouring countries from where fuel supplies to South Sudan originate. It does not specifically address the fuel supply situation in or from the north, nor did the authors visit North Sudan. This will be addressed in a separate survey. Specific aims of the survey are to: • Clearly document the existing strategic supply chain for fuels serving humanitarian operations in South

Sudan, including potential and existing capacity limitations and bottlenecks, so as to provide the agencies with a clear understanding of the fuels logistics challenges arising from an expansion of humanitarian operations in South Sudan;

• Identify, if possible, practical ways in which capacity limitations and bottlenecks may be eliminated or

ameliorated; • Identify how the humanitarian community may be more effectively served for fuel logistics in the

foreseeable future, including improving the effectiveness of commercial arrangements, enhancing the logistics planning process of agencies, and further assisting them to optimise their logistics capabilities;

• Provide practical recommendation as to how a strengthened logistics coordination structure may be

developed; • Estimate, if possible, the fuel dependencies (user requirements) for humanitarian operations in South

Sudan; • Establish how consequences of the Peace Agreement, when implemented, may impact on those systems; • Identify, if possible, for the United Nations and the relevant civil authorities in South Sudan, ways in

which fuels can contribute to the development of the economy in South Sudan, with consequent reduction on dependency on humanitarian aid, together with achievement of the Millennium Development Goals.

The survey was conducted over a two week period in May 2004 by a two-man team who visited Nairobi, the OLS base at Lokichokio in north-west Kenya, and South Sudan. It may be complemented in due course by a survey of the fuel logistics situation in the north, and how this may affect humanitarian operations in the south. 1 Sudanese People’s Liberation Movement/Army


2. Background and Assumptions The reliable supply of hydrocarbon fuels, particularly aviation fuel and Diesel, is essential to the continued success of humanitarian operations in South Sudan. During the past two decades, participating agencies and commercial fuel suppliers have established effective fuel supply logistics chains into the area through Kenya and Uganda. In general, although there have been problems, these long-standing systems adequately serve existing needs. The conflict has prevented supply of much cheaper fuel from indigenous Sudanese refineries in the north to the south. Fuel for South Sudan is sourced principally from Mombasa, either from the Kenya Refineries Company installation located there or from Middle Eastern imports. It is then transported through north-west Kenya into south-east Sudan (or used in north-west Kenya for humanitarian flight operations over and into South Sudan based there), and through north-western Uganda into the lower south-west of Sudan. See Annex A for overview of fuel supply corridors into South Sudan. However, a new and more complex situation is expected to evolve as a result of the implementation of the peace agreement signed between the Government of Sudan and the SPLM/A. Additional activities involving sophisticated logistics arrangements will develop. These will probably include the deployment of a UN peace-monitoring or peace-keeping mission with very heavy aviation fuel requirements and greatly increased humanitarian operations in all sectors, particularly the repatriation of displaced persons and refugees. Demand for fuel will also increase as a result of greater economic activity in the area through road-building, infrastructure development and tourism; greater trade between the region and neighbouring countries; oil and gas exploration, development and eventually production; and other extractive industries such as gold and diamond mining. The immense agricultural potential of key parts of South Sudan may also start to be realized, creating a demand for fuel and other hydrocarbon-based products for crop growing and transportation to market. In time, the differential in fuel prices between the north and south, with fuel presently costing signif-icantly less in the north (where it is refined from crude oil produced by Sudan’s own oilfields) may dictate that fuels will be supplied almost exclusively from the north. However, it may be a number of years before north-south confid-ence or refining capacity in the north is sufficient to allow this. Developments over this period, such as the discovery and exploitation of hydrocarbon resources or development of an indigenous refining industry in the south, or in neighbouring countries, could change these dynamics considerably as the south seeks to establish its economic independence from the north.

South Sudan, with border areas of Kenya and Uganda


3. Fuel Supply 3.1 Overview Sudan, as a country, is potentially self-sufficient in fuels. Crude oil production from oilfields in the centre of the country was brought onstream in substantial quantities in the late 1990’s with the development of a crude pipeline to the north. Much of this oil is exported through Port Sudan but a substantial amount is refined into petroleum products in the country’s three refineries, all located in the north, at Khartoum, El-Obeid and Port Sudan. In the south, although Government of Sudan-controlled garrison towns such as Juba, Wau and Malakal are supplied with fuel from these northern refineries, generally by air, Nile barge and occasionally by road in small quantities, none of this fuel is available to humanitarian operations outside these towns. Accordingly, all fuel requirements for areas not controlled by the Government must be met from the neighbouring countries of Kenya and Uganda. There is little, if any, supply from Ethiopia, Chad, the Central African Republic or Democratic Republic of Congo owing to difficult to the topography (in the case of Ethiopia) and the prevailing political, security or fuel supply situation in these countries. 3.2 Mombasa: The Key Supply Source Kenya’s port city of Mombasa is the only major source of supply for all of East Africa. This encompasses not only Kenya itself but Uganda, Rwanda, Burundi, parts of Tanzania and the Democratic Republic of Congo, and SPLM/A-controlled areas of South Sudan. Virtually all of Uganda’s fuel needs, in addition to re-exports into South Sudan, originate from Kenya. The two sources of supply in Mombasa are: • production from a Shell-operated refinery2, owned equally by the

Kenyan Government and four international oil companies; and • imports of refined products, principally from the Arabian Gulf. The Mombasa refinery is the only significant installation of its type on the East African coast between Port Sudan and South Africa, processing about 60,000 barrels (about 10 million litres) per day of imported crude. Overall, this is sufficient for Kenya’s needs, although it provides only about 60% of certain major high-end fuels such as gasoline, Diesel and aviation fuel. Accordingly, the fuel supply for South Sudan is provided almost exclusively by imports that transit Kenya, or Kenya and Uganda. Mombasa possesses significant storage capacity with the combined tankage of the refinery, Kenya Pipeline Company, international and local oil companies’ depots, and the Kipevu refined products import terminal. There is little or no risk of a supply bottleneck to humanitarian operations because of storage constraints at Mombasa. Major increases in demand can be addressed with relative ease given the proximity of major refineries in the Arabian Gulf and on the eastern coast of the Red Sea, and numerous cargos at sea. Bottlenecks are more likely to occur further down the supply chain with the huge increase in volumes and throughput connected with humanitarian operations in Sudan and the Democratic Republic of Congo. Until relatively recently, a smaller refinery was operational in Dar-es-Salaam in neighbouring Tanzania but refining operations were closed down as they were not economically viable. The facility can still be used for storage and fuel importation but given the additional distances that would have to be traversed to move fuels from Tanzania via Kenya or Uganda into South Sudan, and the lack of effective transportation infrastructure, Tanzania is not considered a viable alternative or complementary source of supply.

2 Government of Kenya 50%, Shell (operator) 17%, Caltex 17%, BP 16%


3. Fuel Supply (cont’d) 3.3 Strategic Distribution: Pipeline, Rail and Road There are three main modes of distribution for fuel products transiting Kenya to South Sudan: a pipeline within Kenya run by the government-owned Kenya Pipeline Company (KPC); the Kenyan and Ugandan rail systems, also controlled by the respective governments; and road transport. (a) The Kenya Pipeline The KPC pipeline runs north-west from Mombasa 450 kms to Nairobi and then a further 270 km beyond to Eldoret. At Nkura, about 150 km north-west of Nairobi, it branches off west to the Lake Victoria port of Kisumu. The original 14” section of the pipeline, from Mombasa to Nairobi, was commissioned in 1978. According to KPC, this section has a capacity of 10.5 million litres per day, or 320 million litres per month. The sections beyond Nairobi, largely 8” but reducing to 6” in the latter stages, were commissioned in 1994 and are rated by KPC at a capacity of 3.8 million litres per day, or 117 million litres per month. The Mombasa-Nairobi segment of the pipeline carries all fuels that would be required for humanitarian operations in South Sudan, including Jet A-1, gasoline, Diesel and kerosene. Beyond Nairobi, it carries only gasoline, Diesel and kerosene as there is insufficient capacity in the Nairobi-Eldoret segment of the pipeline to cope with the demand for all four fuels. Jet A-1 is stored at Nairobi’s Jomo Kenyatta International Airport and then trucked north and west. KPC has extensive storage facilities at Mombasa, Nairobi, Nakuru, Eldoret and Kisumu. These facilities serve to provide an important buffer for pipeline system failures.

* Aviation fuel includes six million litres at Moi Inter-national Airport at Mombasa, and 48 million litres at Jomo Kenyatta International Airport, Nairobi.

From Eldoret, fuel is distributed by truck for local consumption; west into Uganda by truck and rail, usually destined for the Kampala/Entebbe area; or north by truck to Lokichokio, about 30 kms south of the Kenyan border with Sudan, to TOTAL and Caltex bulk storage facilities. Most exports to Uganda pass through the Eldoret terminal of the pipeline, with a lesser proportion supplied from the Kisumu terminal. In late 2000, the governments of Kenya and Uganda reportedly formalised plans for a 16,500 bpd (2.6 million litres per day) extension of the oil pipeline from Eldoret to Kampala to serve markets west of Kenya. Re-exports from Uganda could serve parts of western South Sudan. The four-year construction schedule has yet to commence. Any extension that may be built will not be commissioned in time to be of assistance to humanitarian operations in South Sudan. The efficiency and effectiveness of the pipeline and the distribution networks beyond the terminals have been a continuing cause for concern regionally. Disruptions such as equipment failure and labour disputes regularly cause fuel shortages in East Africa, particularly Uganda. KPC is believed to be under pressure to upgrade the capacity of the pipeline by installing additional pumps and improving existing ones. Significantly, the main section of the pipeline, running from Mombasa to Nairobi - originally built with an estimated life of 15 years, but now still operating after 26 years - is nearing the end of its economic life. Its condition precludes the increase in pressure that would be necessary to meet greater throughput. KPC is also struggling with governance failures, major defalcation of funds, and an inability to finance capital and major maintenance works.

Estimated Kenya Pipeline Company Storage Capacities by Location, x 1000 litres Product Mombasa Nairobi Nakuru Eldoret Kisumu Total Gasoline 59,873 32,169 9,526 12,260 10,900 124,728 Diesel 112,329 30,732 14,848 20,724 18,186 196,819 Kerosene - 21,454 2,480 4,146 4,738 32,818 Aviation Fuel * 114,374 51,575 - 1,848 1,800 169,597


3. Fuel Supply (cont’d) 3.3 Strategic Distribution: Pipeline, Rail and Road (cont’d) (b) Rail Kenya Railways Corporation (KRC), another parastatal, operates about 2,600 km of track within Kenya, mainly from Mombasa through Nairobi to the Ugandan border, and several inland points. The network in Kenya does not extend more than 50 km beyond Eldoret so there are no rail links to the main entry point into eastern South Sudan at Lokichokio. Under Kenyan revenue law, all oil exports must be carried by rail within Kenya. Accordingly, all bulk and drummed fuel destined for re-export into western South Sudan, from Mombasa via Uganda, is carried to Uganda by rail. The railways are critical to the transport of humanitarian aid in the region. In order to assist KRC in carrying World Food Programme humanitarian cargoes destined for the Great Lakes Region – 50% of which are transported by rail from Mombasa - WFP has provided KRC with technical assistance and equipment. KRC has estimated that an extension of the network from Eldoret to Lokichokio would cost US$345 million. There are no firm plans in place to construct this extension. (c) Road With the Kenyan fuel pipeline and rail network terminating at the Ugandan border or Eldoret, the only option for strategic fuel transportation within Kenya into eastern South Sudan from Eldoret is by road to Lokichokio, 450 km to the north. WFP are currently funding emergency repairs to keys sections and bridges on this road. For strategic fuel distribution into western South Sudan via Uganda, a combination of rail and road links allow fuel to be transported with relative ease from the Kenyan border to the triborder areas of Uganda, Sudan and Democratic Republic of Congo at Koboko and then onto the Ugandan border town of Kaya, leading to Yei, Yambio and Rumbek within Sudan. The roads within Uganda providing access to the triborder area are thought to be generally good, and less susceptible to damage from the rainy season than the Eldoret-Lokichokio road within Kenya. 3.4 Fuel Corridors into South Sudan: East and West The eastern fuel corridor into South Sudan is served by Lokichokio in north-west Kenya; the western corridor is served from Koboko and Kaya in north-west Uganda. Few, if any, humanitarian operations in eastern South Sudan are served from Ethiopia; none in the west are served from the Democratic Republic of Congo. Although South Sudan’s main town of Juba is connected by road to northern Uganda, no humanitarian corridors will run from there until the Peace Agreement is implemented and the road demined. There is some overlap in the corridors, particularly from the east to west. As Lokichokio is the base for Operation Lifeline Sudan, most humanitarian flights into both eastern and western South Sudan operate from there. Aircraft flying from Lokichokio in the east may be refueled at airstrips in western South Sudan by fuel supplied through the western corridor.


3. Fuel Supply (cont’d) 3.4 Fuel Corridors into South Sudan: East and West (cont’d) (a) The Eastern Fuel Corridor: Via Kenya All fuels delivered for humanitarian operations into the eastern part of South Sudan emanate from Lokichokio. Fuels arrive there in bulk, are drummed in commercial facilities with adequate quality controls, particularly for aviation fuel, and flown into the area served by Lokichokio. (b) The Western Fuel Corridor: Via Uganda The western fuel corridor is more complex as the area served by it is more populous, and all fuels delivered through it must first transit Uganda from Kenya. From the Ugandan border towns of Koboko and Kaya, fuels are generally trucked by contractors to the Sudanese crossroads town of Yei, 80 km from the border, west to Maridi and Yambio, and north to Mundri, Rumbek and even beyond. Rumbek is, in effect, the hub for fuel distribution within western South Sudan with drums distributed by road or by air, depending on accessibility and distance, to the various airfields in the region. Presently, with the exception of Yei and towns held by the Government of Sudan, there are no known major bulk fuel facilities in South Sudan. As such, for air safety and quality assurance purposes, all aviation fuel passing through the western corridor is drummed and sealed, usually in Kenya. We noted increased movement towards bulk fuel transportation for ground fuels, but in the main drums are being used. Fuel may also be flown into the west, particularly to Rumbek, from Lokichokio. 3.5 The Northern Option Presently, without the implementation of the Peace Agreement and establishment of confidence between the parties, it is not practicable for fuels to be delivered in a structured manner from the north of Sudan to the south. It must be noted, however, that fuel prices in the north are considerably lower than in the south, and that, subject to dredging and port preparation, and the establishment of offloading and storage facilities, the Nile River and its tributaries in South Sudan provide a ready-made logistical path for cost-effective delivery of fuels. In time, it is reasonable to expect that these factors will lead to fuel supplies presently entering South Sudan from Kenya and Uganda being replaced by supplies from the north, perhaps even with fuel exports from Sudan into Uganda and Kenya. It is understood that some smuggling of cheaper fuels from the north to the south is already occurring, but not in a structured or significant way.


4. Fuel Supply Bottlenecks: Existing and Potential 4.1 Capacity of Mombasa Refinery In world terms, the Mombasa refinery is a relatively old, medium-sized installation. Originally commissioned in 1954, it has a “nameplate” capacity of about 90,000 barrels per day (bpd) of crude oil, but presently processes only about 60,000 bpd. Despite considerable expenditure on upgrading and automation since 1997, the generation of technology utilized means that it produces, in relative terms, less high-end fuels than more modern refineries. Its viability is maintained only by the Government of Kenya’s requirement that all major fuel suppliers in Kenya process at least 70% of their local product requirements through the refinery, depending on their market share, instead of importing refined products directly. The refinery’s main constraint on increasing output is that it presently meets all Kenyan domestic requirements for heavy fuel oil (HFO). This product, used for power generation, accounts for about a third of the refinery’s output. If overall production were increased to produce more high-end fuels, the refinery would also have to produce greater quantities of HFO, generating a surplus that it could not sell. This would adversely affect its already tenuous economic viability. One solution to this constraint is to further upgrade and revamp the refinery so that a greater proportion of total output is high-end fuels, holding steady the absolute quantity of low grade HFO. However this would take several years to implement. A second solution would be to use lighter crude oil feedstock but the refinery is already using a high proportion of this. It is impractical in the short to medium term for the Mombasa refinery to economically increase production to meet a significant increase in demand. Virtually all additional requirements in South Sudan resulting from increased humanitarian operations or peacekeeping operations, if supplied from Kenya, will depend on imports of refined products, most likely from Abu Dhabi or elsewhere in the Arabian Gulf. Fortunately, the import capacity of Mombasa appears to be sufficient to accommodate a significant increase in demand. Sudan’s own refineries, all located in the north, appear to have insufficient capacity to meet both increased demand from the north as a result of the implementation of the Peace Agreement, and increased demand from the south. 4.2 The Kenya Pipeline A potential bottleneck lies in the sufficiency and efficiency of the Kenya Pipeline Company pipeline to Eldoret. At present, although maintenance is reported to be poor, the pipeline seems able to cope with demand. Relatively good storage capacity at the inland pipeline terminals provides a buffer against operational disruptions. However, the situation is very tight. Industry sources suggest that it can move 420,000 litres of fuel per hour, peaking at 430,000 litres per hour, from Mombasa to Nairobi, but Nairobi’s own needs alone require a rate of 500,000 litres per hour. This does not include requirements of towns and cities further along the line from Nairobi. We understand that there are eight pumping stations on the line but only four of them are being operated because of concerns about the pipeline integrity. Operating more pumping stations would increase pressure in the pipeline to a potentially dangerous level. The pipeline is a weak link in the logistics chain. It needs to be upgraded significantly or alternate means of fuel transportation established if the risk of a failure in strategic delivery capacity is to be reduced to an acceptable level.


4. Fuel Supply Bottlenecks: Existing and Potential (cont’d) 4.3 Rail Network Capacity: Kenya and Uganda As with the KPC pipeline, the combined rail networks of Kenya and Uganda are in need of investment, upgrading and proper maintenance. Kenya Railways Corporation regularly experiences operational difficulties, including poor locomotive and wagon availability. Cargo transit time from Mombasa to Kampala, connecting with Uganda railways, can be up to two weeks. Kenya Railways is understood to have only seventy 35,000-litre fuel wagons; Uganda Railways is thought to have about 110 for a combined fuel carrying capacity of 6.48 million litres. Allowing for an average transit time for a wagon between Mombasa and Kampala, the combined railway systems can carry a maximum of about 13 million litres per month. 4.4 The Road to Lokichokio The major bottleneck for the eastern corridor is the road from Eldoret to Lokichokio, in particular the major section of the route that lies north of Kitale. This road may become very difficult to negotiate in the May-October rainy season. Bridges in particular are crucial bottlenecks. In mid-2003, the base for humanitarian operations into South Sudan had to be temporarily relocated to Eldoret from Lokichokio for this reason, greatly increasing the cost of operations. Although international donors are contributing to road construction inside Sudan, the Government of Kenya is responsible for maintaining this road. WFP is carrying out repairs at its own cost to keep the route open. 4.5 Adequacy of Number of Circulating Drums A further potential bottleneck is the quantities of 200-litre fuel drums in the logistics system, exacerbated by the increasing price of steel from which these drums are made. A certain critical minimum number of drums are required to be circulating in the supply system to keep it functioning. This critical minimum number cannot be precisely determined but companies operating in the region suggest that the actual number of drums in the system is close to it, and could easily fall below the critical figure if the supply of drums is interrupted. At present, given the relatively modest quantities required at most remote locations, 200-litre drums are essential within South Sudan. For aviation fuel in particular, they ensure the fuel quality. Drums should not be re-used for aviation fuel, thus requiring a constant re-injection of new drums into the system. Although purchasers of drummed fuel of all types may return the empty drums to the supplier for a refund of about a quarter of the price paid for them, exclusive of fuel, the cost of transporting the drums out of South Sudan for recycling often discourages them from doing so. If demand for fuel increases significantly, it will be difficult to introduce sufficient quantities of new drums into the system quickly enough to keep it functioning effectively. With high world steel prices, these drums will remain in short supply for the foreseeable future. A partial solution to this potential bottleneck may be the installation of bulk fuel facilities, particularly for aviation fuel, at several key airfields within South Sudan. If such facilities are installed, it would be a relatively simple matter to install the smaller bulk fuel facilities generally required for ground fuels. This would reduce the overall number of drums required to keep the system functioning (thus reducing the critical minimum number) and allowing greater utilization of those drums already in the system for ground fuels, and reduce the need for new aviation fuel drums to be injected into the system.


5. Aviation Fuel: A Special Case Aviation fuel, Jet A-1, comprises a significant part of the total fuel requirement and is the one where fuel quality is the most critical. The main user of Jet A-1 is WFP. With small, relatively low-flying aircraft, water in this fuel presents less of a risk. However, with larger, higher flying aircraft, water in the fuel may freeze at higher, colder altitudes, causing engine failure. As discussed above, the difficult terrain in South Sudan and the current state of the roads make it necessary to utilise 200-litre drums. These must be specially sealed and time and expiry dated, to ensure product quality. The drums are currently filled and sealed in Mombasa. Two separate systems are in operation for the two logistics corridors into South Sudan. The key towns are Rumbek for the west and Lokichokio for the east. 5.1 The Western Corridor The aviation fuel supply chain to Rumbek starts with the contractor filling the drums at an approved facility in Mombasa. The drums are then transported by rail, as required by the Kenya Revenue Authority, to Kampala. From there they are transported by road to Rumbek, usually via Kaya when there is a small warehouse that holds a form of bonded stock to support the operation. The fuel is handed over to WFP in Rumbek. Tainted and damaged drums are rejected at destination as chips of epoxy inside the drum can contaminate the fuel. The Rumbek airstrip is critical to operations in the area, with the runway soon to be extended to accommodate C-130 type aircraft. As part of that project, a new fuel farm is being constructed to meet the requirements of WFP Air Services. The certification and handling of the aviation fuels is a skilled task and not one that WFP should assume, being outside its core business. The construction and operation of fuel farms should be undertaken by a qualified contracting company with key safeguards built into the contract. Commissioning and certification of the new site should be supervised by an Authorised Person (Petroleum). It is also recommended that a monitor vessel3 is used as part of the fuel delivery system. This would ensure that any water or impurities dissolved in the fuel or gathered in the system are not transferred to the aircraft.

We recommend the following independent testing authority:

SGA Kenya Limited Parklands Road Rank Xerox House Ph: 254 (020) 375 1811 - 8 Westlands Fax: 254 (020) 374 1468 00200 Nairobi www.sgs.com We further recommend that WFP Air Services purchase aircraft de-fuelling equipment to enable the downloading of fuel from C-130’s and larger aircraft when they deliver a high-volume/ low-weight cargo. This would be a cost-effective method of supplementing fuel stocks at remote airfields by having the aircraft carry more fuel than required for the sortie, and download the excess. This operation is a simple but does require trained personnel. Sources for this equipment are: Cobham Fluid Systems GKN Aerospace Holland Way FPT Industries Blandford, Dorset DT11 7BJ Airport Road, UNITED KINGDOM Portsmouth, Hants PO3 5PE UNITED KINGDOM [email protected] [email protected] www.cobhamfluidsystems.com

3 A monitor vessel is a filter system that shuts down automatically when the filter detects water in the system, thereby protecting the integrity of the fuels.


5. Aviation Fuel: A Special Case (cont’d) 5.2 The Eastern Corridor Supply of aviation fuel to Lokichokio starts with fuel refined in or imported into Mombasa being pumped through the Kenya Pipeline Company pipeline to Nairobi. Aviation fuel is then transported by road tanker from Nairobi to Lokichokio where it is either delivered direct to aircraft by a refueller vehicle or processed in licensed Caltex and TOTAL drum-filling facilities. The drums are inspected after filling, and then sealed with a certified date of expiry one year from the date of sealing. Fuels at the storage sites are independently tested and verified by batch. The May-October rainy season greatly increases the need for air support operations in South Sudan. During this period, up to five C-130’s or similar capacity aircraft operate out of Lokichokio in addition to other smaller aircraft. Outside the rainy season, only two C-130’s may be used. Each C-130 sortie may use up to four tonnes of fuel. The rainy season will press the already stretched logistics line that suffers on a regular basis from flood damage on the connecting road and pipeline limitations. There have been several occasions when the lack of fuel has effected air operations. Storage at the airfield has been increased recently but there is generally less than two weeks supply in stock. This should perhaps be increased by around 20%. Clauses in contracts with suppliers penalise them for non-availability of fuel but it would appear that the companies invoke force majeure, citing the weather and road damage, to avoid these. It is clear that there are measures the suppliers could take to mitigate these problems. It is perhaps time to take a harder line with them and on the interpretation of force majeure. 5.3 Logistical Recommendations for the Eastern Corridor The increase in development in South Sudan consequent on the implementation of the peace accord will see a subsequent increase in the activities of the UN Agencies, IO’s and NGO’s. This will initially increase the pressure on the delivery of fuels forward to the internal air “hubs”, before adequate ground routes can be developed. During the rainy season, it would be sensible for WFP or its contractors to adopt a system for delivery of fuels by air. There are several systems available, mostly military. For C-130/AN-12 type aircraft, the use of a special bladder with internal baffles to negate the destabilizing effect of sloshing in flight is available. These systems will deliver around 6,000 US gallons (about 22,750 litres) per sortie. A similar quantity could be extracted from the tanks of such aircraft on landing, giving a total delivery per sortie of around 12,000 US gallons (about 45,500 litres), equivalent to more than one large road tanker. The rising world price of steel owing to a global shortage caused by rapid economic growth in China will have a serious knock-on effect on the cost of drums and will force movement toward more efficient systems of transportation and storage. The price of an empty drum empty in late April was US$26. By May, that had risen to US$32. The return price (i.e. the refund to customers when they return an empty drum) is around US$7.20. Oil company TOTAL advises that they receive no drums back from their customers and they do not have an effective cleaning plant. Furthermore, the cost of transporting empty drums renders this operation uneconomical for customers. Aviation drums are usually re-used for other fuels such as Diesel in an attempt to extend their usage. However the thin skin of modern aviation fuel drums does not support a long life cycle. The increase in activities demanding aviation fuels will further drive the change from drums - that have served past operations well - to bulk installations. For example, WFP alone uses around 1500 drums per month. The non-recoverable cost is thus $37,200 to $48,000 per month. Further explanation is given at Annex B, Use of Bulk Facilities: The Economic Case.


5. Aviation Fuel: A Special Case (cont’d) 5.4 Airfields in Government of Sudan Held Areas of South Sudan (a) Juba Juba is the largest and central town in South Sudan with a major airfield – capable of servicing large jets - currently under Government of Sudan (GoS) military control. The Government has a facility and aircraft refuellers on the airfield but access to that site is currently very restricted by the military. Adjacent to the airport, but within its perimeter, is an unused UN fuel point that has fallen into disrepair. The cost of refurbishing the system and making it operational would be considerable. As an alternative, assuming that UN air operations from Juba become possible, we recommend that an above ground bulk fuel system is installed with the use of aircraft refueling systems such as bowsers or trolleys. The Juba airfield location is particularly ideal as it is close to the Nile River barge offloading point for fuel resupply. However, the offloading area has also fallen into disrepair and requires the use of a dragline to clear accumulated water vegetation. This is not a huge task and would certainly help to facilitate imports of barged fuel from the north once they are possible, especially during the crucial rainy season. However, Nile barges in the area are not in good order. Those sighted by UNJLC personnel could carry a payload of around 400 tonnes (about 450,000 litres, or the equivalent of a dozen large road tankers) whilst the other general cargo vessels are about 500 tonnes. New investment is being made in the Nile barge fleet in Khartoum. We believe that in time this will be the most cost effective route to refuel Juba and several other areas in the south. Given likely problems with accessibility to the site in the initial phases after the implementation of the Peace Agreement, combined with the uncertainty that it may even be available to the humanitarian community and the time it may take for barged deliveries from the north to resume, it would be prudent to plan for fuel supply to Juba through the southern routes, either from Yei in the west, Lokichokio in the east4, or a new route that may be opened due south of Juba from Uganda. The success of ground delivery of fuels to Juba will be contingent on the road improvements and the de-mining currently taking place. The site at Juba, including the Nile River berth and installations, are owned by the Nimoli Transportation Company, Gumharia Street, Khartoum Telephone 249(011) 779995, fax 249(011) 796489.

4 Road improvements between Lokichokio and Juba, a distance of 400 km, are under way, but are expected to take about another year to complete. The usefulness of this road as a supply corridor is limited by the poor state of the road from Kitale to Lokichokio, inside Kenya. Yei, which is just inside Sudan from Uganda and can be supplied from Uganda, is a lesser distance of 160 km from Juba. It is understood that an adequate road could be constructed within three months, including basic demining, depending on the season. A second choice for a corridor to Juba might be from Gulu, which is served by a good road from Kampala.


5. Aviation Fuel: A Special Case (cont’d) 5.4 Airfields in Government of Sudan Held Areas of South Sudan (cont’d) (b) Wau Wau, a strategic town 500 km north-west of Juba and 200 km from Rumbek, is a most difficult location for supplying good quality fuels. Ground access is difficult from the north and east and non-existent from the west. It cannot be supplied directly by river barge, and a railway that once ran from the north is no longer operational. Although reports suggest that only 80 kilometres of this railway line needs replacing, is unrealistic to expect this to be reopened in the near future, perhaps for several years. The runway at the airstrip is presently too short for the larger aircraft that would be needed for economic bulk fuel deliveries. However, Wau can be reached by road from the south, although demining of the road would be required. If plans to install a bulk commercial refuelling station at Rumbek proceed, this may increase the supply of fuel to Wau to a point where it will be cost-effective to also install a separate bulk refueling station there. The fuel will continue to be highly-priced as it would be sourced from Mombasa, with transportation costs over a 3,000 km distance. However, bulk fuel facilities at both Wau and Rumbek would greatly increase the supply of fuel to the more populous areas of the Bahar Al-Ghazel province, of which both towns form a key part. (c) Malakal Malakal, 500 km due north of Juba, is best supplied from the north. It has excellent Nile barge berthing facilities and fair road from the north but little or no road access from any other direction. There is an unused Jet A-1 storage installation at the airfield, previously owned by Shell Sudan but now by Nimoli Transport Company (see 5.4 (a) above for contact details). The state of this is unknown. The barge depot is in good condition and does receive barges some two kilometres from the airfield. A pipeline links the depot to the airfield but this would require further examination before Jet A-1 is pumped through it. There are a number of Jet A-1 storage tanks at the barge depot but these have been converted to hold Diesel. It would require considerable work to convert these back to Jet A-1. The Government has a facility for Jet A-1 at the airport. It is our recommendation that a new and clean containerized aviation fuels facility is installed if the airfield is to be used by the humanitarian community.


5. Aviation Fuel: A Special Case (cont’d) 5.5 Handling of Aviation Fuels and Recommendations In the interests of air safety, handling of aviation fuels require special care and attention to detail. The risk to life from the use of low quality or contaminated aviation fuel is immensely greater than that for ground fuels. During our field visits, we noted poor handling of aviation fuel drums. They were dropped from the back of trucks directly onto the ground, dented, rolled to aircraft over rough ground, and not allowed to stand for a period to let water or sediment settle below the lowest point before being opened. Filters used on the hand-operated pumps would be unable to eliminate water mixed with the fuel. Fuel handling practice should be improved and more formal procedures introduced in line with normal ground refuelling standards. Whilst drums will remain as a primary source of aviation fuel in the field, any damaged drums should be discarded and not used for refuelling aircraft. We recommend that a certificate of competency be introduced for all fuel handlers. 5.6 Reducing the Overall Cost of Aviation Fuels The cost of aviation fuels will remain high for at least the remainder of this year owing to high crude oil prices compounded by high demand. This will be exacerbated by the increasing cost of steel drums. As such, the volume of fuels throughput at which a bulk fuel installation becomes economical is reducing and will continue to reduce. Drummed fuel will always be the most economical option at the smaller airfields but we recommend that the humanitarian community move to bulk systems with mechanised pumping and monitors on selected larger or busier airfields. In addition to reducing the cost of fuels delivered to aircraft, this has the potential to increase the productivity of aircraft by:

• allowing greater loads to be moved i.e. if aircraft can refuel quickly, conveniently and safely at remote

airfields, they need to carry less fuel from their point of origin and can thus carry heavier loads. This in turn reduces passenger and freight costs to the user;

• decrease the turnaround time for aircraft. This is especially the case for larger DC-3 type aircraft.

Refuelling under current practice by hand pump takes about 25-30 minutes. A simple mechanical pump would reduce this to around five to seven minutes.

There are a number of options available as follows for bulk fuel installations (BFI’s). These would in particular benefit WFP Air services but other UN Agencies and NGOs would also benefit. • A rubber or polyethylene Fabric Tank BFI using what

are commonly known as “bladder tanks”. For technical and performance reasons, we suggest that only rubber-based tanks are used in Sudan. This type of system is simple to transport, construct, use and decommission but does require technical expertise to design, commission and certify. It should be operated only by competent personnel under a system that requires the use of an Authorised Person (Petroleum) to conduct that procedure.


5. Aviation Fuel: A Special Case (cont’d) 5.6 Reducing the Overall Cost of Aviation Fuels (cont’d) WFP have a number of bladder tanks and pumps stored in Brindisi and Dubai. The use of this stock

would lower the capital outlay and perhaps allow several sites to be set up at lower cost. However, operation of bladder systems in the rainy season is always difficult. We suggest that covers are placed over the system to reduce the potential of contamination from excessive rain water that will mix with the spillage in the protected bunded areas around the tanks.

• WFP-funded installation using containerised systems.

This is a simple transportable system, with a number of variable storage elements that can be purchased and shipped from a variety of manufacturers. Installation requires little site preparation and is fully certified. If at any time the site becomes redundant, the system can be transported, without fuel, to another site and easily set up again. Construction should be the responsibility of a contractor and again should be certified and commissioned by an Authorised Person (Petroleum). We also suggest that the operation is contracted out. This option should lower the cost of fuels considerably as the drum element and restriction on quantity are removed from the equation. It is also more flexible should it be uncertain how long a location may be required for.

• Contactor Constructed Site. We consulted several contractors who were willing to provided WFP with

a complete system capable of meeting a declared need if WFP is willing to commit to a contract with them covering two years for the supply of fuel based on the current pricing structure. This would still save a considerable sum for WFP annually, provide greater flexibility and should increase productivity in related areas. The difficulty arises if the site has to be closed before the expiry of the two-year period, this placing a financial burden on WFP to compensate the contractor. It is therefore less flexible than other options. However, this could be addressed in the contract with a sliding scale of liability i.e. the longer the site remains operational throughout the contract period, the less compensation is payable.

At the end of the contracted two years, ownership of the installation would revert to WFP and could perhaps then be gifted to the SPLM/A as part of capacity building for their development infrastructure.

The economic argument covering the drum and bulk fuel installations is outlined at Annex B, Use of Bulk Facilities: The Economic Case.


6. Ground Fuels: Transportation and Power Generation 6.1 Diesel Diesel (otherwise known as automotive gasoil) is by far the most common ground fuel in use within South Sudan. The supply chain follows the traditional western and eastern humanitarian supply corridors. Supply of Diesel is in the main by drums from Kenya and Kenya via Uganda but commercial bulk tanker loads are now starting to service as far north as the Rumbek area. This is slowly pushing the drum-based Diesel operations northwards. The economic argument for the UN lessening the dependency on fuel drums is discussed at Annex B, Use of Bulk Facilities: The Economic Case. Given their flexibility and suitability for small fuel needs, drums will never be dispensed with completely. However, a reduction on dependency on drums, and a shift to bulk where it can be dispensed directly, should be actively encouraged. We are concerned at the high price of delivered fuels in South Sudan and have consulted several major and smaller contractors regarding the use of a prepaid voucher scheme and a containerised fuel system. The scheme would, in our opinion, benefit a number of humanitarian organisations and may work as a model to: • reduce costs through the application of bulk buying power; • increase security for personnel, as cash will not need be carried into South Sudan to purchase fuel; • lower costs of transport as bulk fuel will be available to transport companies; • assist in the commercial development of South Sudan and thus reduce dependency on humanitarian aid. We suggest that a pilot trial for such a scheme be conducted on the western corridor inside South Sudan with a commercial company. Selecting the site for this will be a major consideration. Initially, Yei was considered as it is a busy crossroads and traffic hub. However, following interviews with a number of NGO’s, it was suggested that Rumbek would be a more effective site. The logic is that the NGO’s operating from the Rumbek area through to Wau and points further north fly their fuel from Rumbek. UN Agencies and other NGO’s working in the region are widely dispersed but all travel through Rumbek. A vehicle using the western corridor fills up with fuel before leaving Uganda and uses jerry cans to cover the route through Rumbek. The 80 km distance from the border to Yei is relatively short, leaving relatively little room in tanks for topping up. Fuel tanks, however, are generally empty by the time the vehicle arrives in Rumbek. If transport vehicles could re-fuel at Rumbek, and NGO’s working north of Rumbek could use Rumbek as a main refuelling point for their operations. This would be a huge benefit, both economically and in terms of convenience. It would further allow them to channel vital resources into their main core activities. The larger agencies may also wish to invest in containerised type system as it would allow better control of their fuel expenditure. The systems are fully secure with all safety facilities built in. No site preparation other than a level site is required.


6. Ground Fuels: Transportation and Power Generation (cont’d) 6.2 Gasoline Gasoline, also known as motor spirit, is used in very small quantities and is again mainly supplied in drums. It is not a commodity that will attract a commercial interest until the quantities become greater. UN Agencies should be encouraged to have a policy of using diesel vehicles only until the supply situation changes. 6.3 Kerosene Kerosene is not used in great quantities but is included in the fuels being considered as it is used by NGO’s for cooking, refrigeration and lighting. It is particularly important for kerosene-powered refrigeration for vaccines and medicines. However, Jet A-1 is essentially kerosene. The contents of damaged Jet A-1 drums that are not permitted to be loaded into aircraft form part of the current supply as do the last 6 inches of fuel in the bottom of a Jet A-1 drum, which is never used for aircraft as it may have some sediment which precludes it from aviation use, but not for ground use. These small volumes, when aggregated and filtered, provide a ready and adequate kerosene substitute. Current practice is mix kerosene with diesel (effectively diluting the more expensive Diesel with less expensive kerosene) in Diesel engines thereby reducing running costs. This practice it is not particularly harmful to the engines. Contractors are willing to sell the kerosene from the damaged drums and to stock additional small stocks. The price under these arrangements should remain around the current level.


7. Fuel Dependencies 7.1 Estimates of Demand Dependency is, in effect, the users’ requirements. These are expected to increase quite significantly in the months following the implementation of the Peace Agreement. In an ideal world, we would have polled all the UN Agencies, IO’s and NGO’s for their actual current needs and estimated future needs. However, owing to the short timeframe available for the study we were obliged to take a sample across the major UN Agencies and NGO’s and to make a number of assumptions. The assumptions made in drawing up the table below were: (a) UN Agencies: Estimates are based on UNICEF holdings of 46 x 4x4’s, six motor cycles and 26

pick-ups, all using the standard Fuel Consumption Unit (FCU)5 for the vehicle type, plus a 10% contingency.

(b) NGO’s: Estimates are based on a sample drawn from the 71 NGO’s that form part of Operation

Lifeline Sudan, and other associated NGO’s. The size and nature of the NGO’s involved was extremely varied, as would be their fuel dependencies. Estimates were derived assuming five 4x4 vehicles and three pickup trucks or similar vehicles for each NGO’s team in Southern Sudan, using the relevant FCU, plus a 10% contingency.

Humanitarian community user category, estimated dependency, litres per month Fuel type WFP UNICEF Other Agencies NGO’s Totals % Ground Fuels - Diesel 236,978 236,978 100,000 89,000 662,956 62.2%- Gasoline 600 600 600 450 2,250 0.2%- Kerosene Nil Nil 300 600 900 0.1%Ground fuels 237,578 237,578 190,000 90,050 666,106 62.5%Jet A-1 300,000 Nil 100,000 Nil 400,000 37.5%Total 537,578 237,578 290,000 90,050 1,066,106 100% Notes: • The Jet A-1 estimates above exclude that of Lokichokio, which is within Kenya’s borders. Industry

sources suggest that consumption of Jet A-1 at Lokichokio is about 4 million litres per month. • The Jet A-1 estimates for Rumbek will rise considerably as larger planes operate into and out of that

base, once the extension of the strip to allow this is completed. We estimate that the current civilian requirement for ground fuels within South Sudan is about 25% lower than that for the humanitarian community, with no requirement for aviation fuels, or about 500,000 litres. Total fuel requirements for South Sudan ground fuels are therefore presently estimated at 1.1 million litres per month6. With aviation fuels, the total estimated monthly fuels requirement, for all fuel types, is around 1.5 million litres per month.

5 A standard Fuel Consumption Unit (FCU) is the amount of fuel required to move a particular vehicle or piece of equipment ten kilometers at ten kilometers per hour. 6 About 666,106 litres for the humanitarian community, plus 500,000 litres for civilian use. 1.166 million litres


7. Fuel Dependencies (cont’d) 7.1 Estimates of Demand (cont’d) To place the quantities in perspective, a large standard road fuel tanker can carry 36,000 litres. Tanker trucks used to supply South Sudan, most of which need to be 4x4, will carry smaller loads. Thus, the ground fuels requirement of 666,000 litres is the equivalent of 31 large road tankers per month7; the aviation fuels requirement of 400,000 litres is estimated at 11 large road tankers per month8. Assuming that tanker trucks used in South Sudan can carry half this amount, the requirement would be for about 82 18,000-litre cargos. The Nairobi to Eldoret section of the Kenya Pipeline, which feeds Western Kenya, all of Uganda, and other parts of East Africa, can carry no more than 117 million litres per month9. The combined Kenyan and Ugandan railway systems can carry about 13 million litres per month10. The combined needs of Uganda and the UN’s current MONUC peacekeeping operation in the Democratic Republic of Congo amount to around 9 million litres per month, Therefore, in theory, there is sufficient capacity within the system to simultaneously support a UN DKPO in Southern Sudan and the needs of Western Kenya, Uganda, other parts of East Africa served by the system, and MONUC. However, in practice, owing to the poor state of both the railways and pipelines, this ability will be tested to the limit. The buffer proved by generally good storage capacity in Kenya should allow the system to cope with anything other than a catastrophic break down, but the only effective alternative means of supply in this case would be by road tanker. In practice, it has been necessary for a road tanker operation to be instigated by the major oil companies to support MONUC direct. This has ensured the independence of fuel support to the operation and meant that it did not interfere with the region’s industrial and domestic requirements. 7.2 Proposed Voucher System We have discussed the idea a voucher scheme for ground fuels, as described in Section 6.1 above, with a number of commercial companies, using the above estimates, whilst allowing for individual agencies to enter into local arrangements. This would involve customers prepaying for vouchers for specified quantities of fuel in Kenya, and then being able to use those vouchers to have fuel supplied from bulk installations in the field. Such a system has been used successfully elsewhere, in similar environments. It has the added benefits of assisting UN agencies and NGO’s to control their fuel costs from a central location, and adding to the safety of staff in the field by minimizing the amount of cash they need to carry. This was well received by the major oil companies and contractors. In our opinion, a price of around 77 US cents per litre could be achieved at current prices. Oil prices will, however, vary dependent upon the world price of crude and Plats reference prices for refined products. Nevertheless, the movement from drummed operations to bulk fuel will have a very positive effect on availability. This will inevitably be reflected in a lower pricing structure.

7 1.1 million litres divided by 36,000 litres, rounded up, equals 31. 8 400,000 litres divided by 36,000, rounded down, equals 11. 9 Section 3.3(a) above. 10 Section 4.3 above.


8. Effect of a Sudan Peacekeeping Mission The UN Department of Peacekeeping Operations (DPKO) is examining the feasibility of putting in place a large turnkey fuel contract to supply their anticipated monitoring operation, subsequent to the implementation of the Peace Agreement. The supply for this is expected to be 80% from the north and 20% from the South. 8.1 Initial Stages In the initial stages of the operation, in order to avoid any delay in start up, it is DPKO’s intention to supply fuel to Wau, Malakal and Juba by air using fuel tanker aircraft from North Sudan, principally Khartoum. The chart below summarizes the monthly fuel requirements with a start date of “M” for Jet A-1 for DPKO locations in South Sudan. We are concerned that with an operation of this scale, in addition to the current WFP and other humanitarian operations, fuel supply from the refineries in the north will be insufficient for the new overall level of demand. Importation of aviation fuel into the north may therefore be required.

At the time of writing, the contract has not been placed. The current draft may yet be altered to set in place arrangements to serve the north and south separately, especially if supplies available from the north are insufficient. If this does happen, it will have a profound effect upon the fuel supply to other UN agencies and NGO operating in the south, as well as supply to the populace. If all fuel for DPKO operations in Juba, Wau and Malakal is provided from the south, this would significantly increase overall demand, even leaving aside the increase as a result of scaled-up humanitarian operations. Such a volume would likely be more than the capacity of the Kenyan and Uganda rail systems, and the Kenyan pipeline system, could cope with. An arrangement using road tankers, similar to that presently used for MONUC, may be necessary.


8. Effect of the Peacekeeping Mission (cont’d) 8.2 Later Stages Once the rainy season is over in October/November, it is believed that the DPKO intends to establish a long-term turnkey contract to build permanent and semi-permanent installations in key hubs around the country. These will hold sufficient fuel stocks to cover the subsequent rainy season, commencing in May 2005. It is also intended to supply these installations where possible by road. The current price differential between north Sudan, where fuel is relatively cheap, and Kenya/Uganda will, we believe, inevitably lead to a greater supply from the North. However, this may be difficult to achieve in the short term with the need to complete demining of routes to Juba, Wau and Malakal. Furthermore, before supply from the north can occur, some upgrading of the refineries may well be required, particularly for aviation fuel. That type of work requires years and not months. This may mean that imports, even into the north, are required to fill the gap for the foreseeable future. Improvements to the road from Lokichokio to Juba are progressing. As such, it may well be possible to supply fuels directly from Lokichokio to Juba overland. This assumes that sufficient fuels can be transported on the sometimes difficult road within Kenya from Kitale to Lokichokio but would represent a considerable reduction in costs to the DPKO operation compared to taking the fuels through Uganda. We also believe that the DPKO air operations for South Sudan may opt to use Uganda’s Entebbe Airport as its main base, given that DPKO is already well-established there for its MONUC operation in the Democratic Republic of Congo. Although DKPO in conjunction with Shell have increased storage capacity at Entebbe, all fuel for this facility (in addition to DPKO’s fuel requirements for the MONUC operation) comes from Mombasa. This may further strain the system. The prospect of a pipeline extension from Kenya to Uganda cannot be relied upon. Any such project will not eventuate in time to be of relevance to these operations. Furthermore, the prospect of South Sudan supplying fuel to Uganda by the end of the decade, from new production in yet-to-be-developed oilfields, argues strongly against a pipeline extension. 8.3 Recommendation It is recommended that a conference be convened at the earliest opportunity between senior representatives of the humanitarian community, the Government of Kenya, the Kenyan oil industry secretariat and the UN DPKO to review the situation and ensure that fuel transport resources and supply are geared to meet the priorities. The key to increasing the capacity of the transportation to a level where it may be able to cope with the increase in demand in South Sudan will be to allow trucking of export fuels from Kenya. The Kenya Pipeline Company, Kenya Railways Company, and possibly Uganda Railways may also be brought into this discussion, perhaps at a later stage. It is understood that the Kenyan oil and fuels industry would strongly support the lifting of the Kenya Government ban on using trucks for export fuels. A further matter that might be considered is the upgrading of the Kitale to Lokichokio road, perhaps with the assistance of international donors.


9. The Peace Agreement: Effect on Fuel Supply and Demand 9.1 Short Term In the short term, additional humanitarian, UN, and other associated activities that will arise from the consequences of the implementation of the Peace Agreement, as assumed by major international actors in the region for their contingency planning, are:

• movement of up to one million internally displaced persons to their places of origin;

• movement of up to 500,000 refugees from neighbouring countries to their places of origin;

• relocation of various armed groups throughout the country;

• deployment of UN DPKO peacekeeping troops or monitors, as discussed above in Section 8. Given the nature of these operations, and the distances involved, it is expected that the main additional fuel requirement, in absolute terms, will be for aviation fuels. In relative (percentage) terms, the need for ground fuels will probably increase at a greater rate, but given the predominance of Jet A-1 in the fuels mix, the absolute increase will not be as large. In the timeframe available for this survey, it has not been practicable to arrive at estimates of how much the increases will be. The peace agreement is expected, however, to also lead to faster progress on the construction of transport infrastructure in South Sudan, particularly emergency road repairs on routes to Juba and Rumbek. Although the pace of progress will be influenced by the rainy season, it is expected that this will enable greater delivery of fuel by road. The increased demand may also further justify the establishment of bulk fuel facilities at more strategic locations, with decreased transport costs from bulk rather than drummed facilities. It is further expected that fuel barge traffic on the River Nile will resume, but timing is uncertain. An additional factor that emerged during our survey is the needs of the oil exploration teams and for the development of the oilfields in the south. These will compete for the same resources currently being looked at by the UN to support their own varied operations. It may therefore be prudent to tie in key contractors to the needs of the humanitarian community at an early stage before oil exploration activities in the south commence in earnest. 9.2 Medium to Long Term In the medium to long-term, fuel demand beyond the increase caused by increased humanitarian and peacekeeping operations will most likely be affected by the following factors: • increase in oil exploration activity in the south, requiring large quantities of both aviation fuel

and diesel; • commencement of gold and diamond mining, and other extractive industries; • an increase in agriculture and forestry, with associated transport costs; • a general increase in economic activity.


9. The Peace Agreement: Effect on Fuel Supply and Demand (cont’d)

9.2 Medium to Long Term (cont’d) The factors most likely to affect fuel supply will be: • Commencement of supplies from the north, where there are low-cost existing supplies. The obvious

source of supply will be by Nile barges, but discussions with civil authorities in the south suggest that a fuels pipeline may eventually be built from north to the south. The timing is uncertain, but this would not be a difficult project technically, and could be accomplished in a matter of months, depending on the season.

• Commencement of southern crude oil production. South Sudan is considered to be highly prospective

for oil. Major western and Middle Eastern oil companies have retained interests in the area for most of the past two decades, despite being unable to carry out exploration work. However, it is understood that significant volumes of seismic data was collected before the stoppages of work came into effect in the 1980’s. This data has been reprocessed recently using contemporary techniques. It may be assumed that these companies will restart work as soon as conditions allow. Should oil be discovered, it will make LPG available almost immediately, and it would be possible to build small mobile regional “skimmer” or topping refineries, with a capacity to process about 2,000 to 10,000 barrels (300,000 to 1.6 million litres) per day, with about half of that being residual crude or heavy fuel oil (HFO). These plants would be unable to produce aviation fuel but they could greatly assist in meeting local demand for grounds fuels and power generation, using the HFO, although the amount of HFO available may well prove a liability given the low population density.

It would be overly optimistic, however, to assume that crude oil could be brought onstream in less than 18 months to two years after the full implementation of the Peace Agreement. In time, it is reasonable to assume that South Sudan will be able to export refined fuel products to Uganda, Kenya and the Democratic Republic of Congo.

• Construction of crude oil export pipeline from southern oilfields to the northern Kenyan coast, a

distance of at least 1500 km. Should oil be discovered in the south, it is unlikely that these fields will be connected northwards 400km from the most prospective areas to the existing crude oil export pipeline that passes through Khartoum to Port Sudan. Instead, the authorities in the South, in order to consolidate economic independence, will most likely insist of a pipeline south-east through Kenya to the Indian Ocean. Such a pipeline can be constructed in less than two years and will bring significant economic benefits to the area, particularly during the construction phase. Once completed, it will allow crude oil exports directly from South Sudan. It should not be assumed that this crude will be suitable for processing in the Kenya Refineries Company Mombasa refinery.


10. LPG: A Development and Environmental Opportunity Should oil be discovered and brought onstream in South Sudan, as appears likely within several years of the implementation of the Peace Agreement, this will be accompanied by the production of gas, making possible the local production of LPG11 cooking gas. LPG seems to be little used in the region, largely because of the capital investment required in gas-burning stoves for the population, the introduction of the necessary stock of circulating gas bottles, and the installation of gas bottle filling plants. However, the overall cost of LPG as a cooking fuel, even including the capital investment required, is generally cheaper than the charcoal and other fuels presently used by the population for cooking. This is especially so if the LPG itself is available from local oil production. As importantly, LPG helps reduce deforestation and thus protects the environment as the population would no longer have to cut down trees and manufacture charcoal for cooking. This will be particularly important for major population centres; in urban locations with their greater density, people are less able to get traditional cooking fuels from the countryside. Other significant potential benefits identified from LPG usage are: • Increased empowerment of women, with the social stability and other benefits that arise from this. At

present, women spend much of their time looking for cooking fuel. This takes them away from the home and child care, which in turn affects children’s educational progress. Ready availability of LPG would provide them with more time for productive work, which in turn enhances family cohesion, increases incomes and limits crime through reducing the need for men to engage in such activities for survival;

• Less respiratory diseases from charcoal and other smoke in the home, and from atmospheric smoke in

urban areas. LPG is a clean-burning fuel; • Enhanced economic activity through the hospitality industry. Most restaurants prefer to use LPG instead

of other costly and dirtier fuels; • Introduction of a new industry servicing the LPG infrastructure, with employment opportunities; • Greater usage of gas from the oilfields, as it would not have to be flared. The authorities in the area also see the wise use of LPG as a means to reduce or delay urbanization until such time as the local economy and society is sufficiently developed to support it. They are concerned that an overly urbanized society, where men in particular may be unemployed or underemployed, will lead to higher crime rates and idleness, leading in turn to a higher incidence of HIV/AIDS and other diseases. They argue that if LPG is made available outside urban areas, this will help to keep people productive on the land, ensure that they are more evenly spread out, and prevent undue levels of urbanization. Furthermore, the major urban centre in South Sudan is generally considered to be Juba, but the authorities see Wau and Malakal as equally important, followed by Bor and Rumbek. The introduction of LPG into these areas may serve to encourage people to live there, thus developing the economy more broadly across all of South Sudan, and preventing excessive concentration in Juba. Furthermore, if a migrant worker employment structure develops where men travel to jobs far from home in urban areas, family cohesion will be affected and the spread of HIV/AIDS encouraged. This has occurred in other parts of Africa. The main impediment to introducing LPG into the economy remains the initial capital investment. It is suggested that major donors may wish to consider financing the pre-requisites for an LPG production and distribution system, together with stoves, bottles and local filling plants, should LPG become available from regional oil production.

11 A mixture of propane and butane.


11. Summary of Recommendations Recommendations of this survey are summarized as follows: 11.1 All-Parties Conference The Kenya fuel supply chain and basic infrastructure are adequate for current needs but are barely managing to serve the needs of the region, with the occasional crisis. However if a Department of Peace Keeping Operations (DKPO) operation in Sudan intends to use Entebbe Airport as its main air operations base, or provide fuel to its operations in South Sudan from Kenya or Uganda, this will strain the Kenyan pipeline and the Kenyan and Ugandan rail network beyond capacity. It is recommended that, as a matter of priority, a meeting is held between senior representatives of the humanitarian community, DPKO, the Kenyan oil industry, and the Kenyan Government. We further suggest that Operation Lifeline Sudan Fuel take the lead in convening the meeting and ensuring that any potential increases in fuels requirements is de-conflicted. It is also recommended that a Memorandum of Understanding is drawn up following such a meeting to arrange for the use of common assets where a site is shared. 11.2 Move to Bulk Supply of Aviation Fuels Drums will continue to be the most effective means of distributing aviation fuel to remote airstrips with low volume requirements but they are an increasingly expensive option for busier airfields. However, the rising world price of steel, the increased supply requirements at the larger airfields and the lower delivered cost of bulk fuels make it imperative that use of drums be reduced in favour of bulk fuels installations. It is recommended that WFP Air Services move to a bulk fuel installation in Rumbek as a start, with other locations considered as necessary. It is further recommended that the fuel quality is monitored using propriety equipment. 11.3 Establishment of Containerised Fuel Stations for Ground Fuels With some exceptions close to the Uganda border, ground fuels in Sudan are also supplied in drums. As for aviation fuels, this is expensive, but less so as quality control for these drums is not as critical. They may be reused more easily. However, they are less convenient to use than fuel stations. It was suggested to a number of contractors with experience in South Sudan that it would be advantageous to establish containerised fuel storage and dispensing systems for fuels in Sudan. This has been well received and two of these contractors, Civicon and Afro Suez Energy, have costed the option and will implement it. Both are proceeding with a trail installation. We believe that the first station may be operating within months. These facilities should also open up the area to commercial business, benefit the UN and NGO’s, encourage economic development and thus reduce dependency on humanitarian aid. Both contractors are willing to run a voucher scheme where prepaid vouchers are issued in Kenya or Uganda and the fuel collected on site. This move will increase the security of humanitarian workers in the region by reducing the amount of cash they need to carry and should also attract a price reduction. With a reliable fuel supply at strategic points in South Sudan, trucks will be able to carry more cargo through not having to carry as much fuel, thus lowering costs and eventually freight rates. It is recommended that the UN and NGO’s support the proposed voucher scheme and that the UNJLC lead this project.


Legend

Annex A

Schematic of Fuel Logisitics Corridors Into and Within South Sudan

Jet A-1 by truck, Nairobi to Eldoret and Kisumu.

Mombasa-Nairobi section of pipeline is inadequate for Nairobi’s needs. Supplement-ed by road and rail.

By air

By air

On intersection of Nile (for barges from Khartoum) and rail line to El-Obeid and Wau. Likely to be a main logistics base for DPKO operation.

Eldoret

Pipeline from Mombasa carries Jet A-1, Diesel kerosene and gasoline to Nairobi, and only Diesel, kerosene and gasoline to Eldoret and Kisumu. Aviation fuel trucked from Nairobi to Eldoret and Kisumu.

Trucked from Eldoret to Lock-ichokio

Delivered by air into Southeastern Sudan, or flown to Rumbek in drums.

Delivered by air to some of the dozen plus stations in the area, otherwise by road.

Drums from Mombasa delivered by truck from Yei to Rumbek.

Entebbe

Aviation fuel drummed in Mombasa is moved by rail to Koboko, then Kaya where it is stored in bonded warehouse before being called forward to Rumbek.

Koboko

Juba

Refinery at El-Obeid, but produces little Jet A-1

Bor

Malakal

Kosti

El-Obeid

Railway between Kosti and Wau, but non-operational south of Babanusha between Al-Obeid and Wau

Yei

Rumbek

Wau

Mombasa

Supplied by Kenya Refineries Co. or by imports from Middle East.

Kisumu Kampala

In Uganda

In Kenya

In SPLM/A Area

In GoS Area

: River Nile, navigable by barge

: Kenya Pipeline Co products pipeline

Nairobi

Kaya

From Khartoum

: By rail inside Kenya, rail and road inside Uganda

Lokichokio

By truck, or by barge from Kisumu across Lake Victoria

Caltex and TOTAL drumming and bulk fuel facilities at Lokichokio.


Annex B

Bulk Refuelling Facilities: The Economic Case Background The main means of transferring fuel into South Sudan is through steel drums, with each drum holding 200 litres of fuel. The drums are manufactured with a short life expectancy using modern techniques, with a very thin wall to reduce steel content (thus price) and weight. For aviation fuels in particular, they are cleaned and sprayed internally with a coating so as to meet stringent aviation requirements for fuel storage and transportation. Drums used for aviation fuels also require a special sealing process that can only be carried out under licence by certified operators. Diesel fuels and gasoline may be stored and transported in drums previously used for aviation fuel to achieve a more cost-effective utilisation on drums through recycling. However, the relatively low level of robustness of modern drums does limit their life cycle. There are many empty drums scattered around Sudan, both north and south, as the cost of returning drums to the suppliers for a refund is not a cost-effective exercise. The rate of growth in the cost of steel has slowed marginally in recent months, but it is expected to continue to rise to a point where it will reach about 50% of the value of the fuel in the drum by the end of the year. Intent In this Annex, we have used the WFP operation at Rumbek to illustrate the respective options, and to show how the move from drummed fuels to bulk fuel can be cost-effective. Although we have concentrated on aviation fuels, the same criteria will apply to all fuels, but will lesser capital outlay for ground fuels. All pricing estimates were compiled using UN staffing figures, and courtesy of the goodwill of contractors operating in the area. Estimated Cost of a Drummed Fuel Operation The cost to WFP of a new empty drum, fuel excluded, is about US$30.00. The refund available for returning a drum in good condition to the supplier or contractor is about US$7.20. For the purposes of this exercise, we have assumed that all drums are returned, and that the net cost to WFP of a drum is a conservative US$23.00 per drum. In practice, as few drums are returned, it will be more than this. Based on an average usage of about 1,000 drums per month, the monthly non-recoverable cost to WFP is estimated as at least US$23,000 (1,000 x US$23), or US$276,000 (12 months x US$23,000) annually.


Annex B

Bulk Refuelling Facilities: The Economic Case (cont’d) Costs of Bulk Refuelling Installations During our short study, we considered three options. All of these are assume 500,000 litres of storage arranged in a minimum of three tanks, one for receiving, one for settling, and one for operation. They also include the cost of equipment to refuel the aircraft. The options are:

• Fabric tanks installation; • Semi-permanent containerised installation; and • Contractor-owned/Contractor-operated (COCO) installation.

Option 1: Fabric Tanks with Pumps, Filtration and Aircraft Refuelling Trolleys General: The equipment is lightweight and can be flown in, ready to install, relatively quickly. Furthermore, WFP currently have this equipment in their stock so it may well be a simple solution and particularly cost-effective as it takes advantage of an already sunk cost. Such equipment has a limited life, even in storage, and would be presently incurring storage and maintenance costs.

Advantages Disadvantages - Low cost, and ease of transport - High maintenance - Utilises stocks already held - Difficult to audit - Can be commissioned/ decommissioned quickly - Requires trained staff - Robust - Difficult to operate in rainy season Option 2: Containerised Small Airport System plus Trolleys General: This is the most common type of installation used in modern small airports. It is being rapidly introduced into Africa and the Middle East after a successful trial period in the Far East and South America. The systems are simple to transport as they are based on the standard 20-foot module container and can be commissioned and decommissioned quickly. They do not require highly-trained staff and have built-in safety features and fuel sampling points.

Advantages Disadvantages - Ease of operation with failsafe systems inbuilt - High capital cost - Secure - Can be commissioned/ decommissioned quickly Capital cost is high, but the - Meets international fuel quality, safety regulations system can be decommissioned - Expandable with accommodation, office modules and used elsewhere with ease. - Inbuilt security lighting, generator power available


Annex B

Bulk Refuelling Facilities: The Economic Case (cont’d) Costs of Bulk Refuelling Installations (cont’d) Option 3: Contractor Owned and Operated Installation General: This option shifts the capital and operating costs to a commercial contractor through a higher per-litre price for fuels. WFP would be the main customer that would provide the economic justification for a contractor to set up such an operation. Significantly, this is the only one the three options that would allow development of fuel supplies to the local community, thus encouraging the local economy. The per litre price of fuel would be calculated based on Platts prices (a World standard benchmark price for virtually all fuels, publicly updated daily) plus factors for variable (generally operational) and fixed (generally capital) costs. This simple formula works successfully worldwide in situations not unlike those in South Sudan. In order to spread the contractor’s capital costs over a reasonable recovery period (and thus minimise the fixed costs factor in the price of the fuels), a contract duration of about two years would be advisable. The option would be more costly than a client owned/ contractor operated installation as the contractor has to build in a profit element for his significant risk, but is similar to a regular lease/ hire arrangement where the client would own the installation at the end of the contract period. At the end of the period, the installation could be gifted by WFP to the local community to support further development of the area. The contract would have to be well-written, to a high specification, to balance the interests of WFP and the contractor, and to provide adequate checks and balances on the contractor’s performance and service delivery.

Advantages Disadvantages - Simple to establish and operate - Higher per litre fuel costs - Turnkey package, so less administration and trained

staff required - WFP committed to two year contract, with risk of

having to compensate contractor if terminated early - Helps to meet sustainable development goals - Requires a high specification, well-written contract - Helps to control costs - Requires close fuel quality and quantity monitoring - No capital outlay - Equipment is contractors, so no risk of loss to WFP


Annex B

Bulk Refuelling Facilities: The Economic Case (cont’d)

Costs of Bulk Refuelling Installations (cont’d) Summary Comparison of Estimated Costs Option

Capital Cost (a)

Operating Costs (b)

Capital and Operating

$ per litre (c)

Fuel costs, two-years (d)

Total costs, two years

1. Fabric tanks and pumps

$153,700 $100,000 253,700 .80 $3,840,000 $4,093,700

2. Modular contain-erised system

$261,470 $100,000 361,470 .80 $3,840,000 $4,201,470

3. Contractor owned/ operated system

Not applicable

Not applicable

Not applicable

.90 $4,560,000 $4,560,000

Notes: (a) For Option 1, net or real capital cost may be less as required equipment is already held in WFP stores. (b) Operating costs include contract labour to operate the systems, training, supervision, maintenance,

calibration, repairs, annual certification, and daily running costs, all for a two-year period. (c) For comparison purposes in Options 1 and 2, 80 cents per litre is used as a guide. This would generally

be Platts, plus the cost of fuel delivered to the area. Independent contractors agree that this rate is achievable. For Option 3, an additional ten cents per litre is factored in to account for the contractor’s fixed and variable costs, a profit margin and the premium above Platts for fuel delivered to the area.

(d) Fuel costs are calculated based on average monthly consumption of 200,000 litres, which is equivalent to the amount of fuel provided by the current consumption through drums, of 1000 drums per month.

Combined capital and operating costs for Option 1 and 2 compare to estimated cost of drums over a two year period of 2 x US$276,000 per annum, or US$552,000. This is conservative as it assumes return of all drums to the supplier for a full refund, and the current price for drums. Cost of the fuel provided in drums is similar to the cost of fuel dispensed through a bulk fuel installation. Transport costs of bulk fuel is likely to be less than that for drummer fuel owing to economies of scale, and less wasted space on trucks, with the gap between circular drums. Through saving on drums consumption, Option 1 provided savings of US$298,30012 over a drumming operation; Option 2 provides savings of US$190,53013. The overall cost of Option 3 is probably similar to a drummed fuel operation, but with greater intangible benefits, particularly in the development of the local economy, thus reducing dependency on humanitarian aid. In all the bulk refuelling options, further intangible benefits accrue in the form of faster turnaround time for aircraft through the use of electrical pumps rather than the present system of hand-pumping fuel from drums. This will inevitably lead to greater aircraft utilisation and perhaps lower cargo rates and greater cargo capacity. Bulk fuel operations also allow for the downloading of fuel from aircraft into the bulk storage, an option not available with drums. 12 US$552,000 non-refundable cost of steel drums, less US$253,700 combined capital and operating cost of Option 1. 13 US$552,000 non-refundable cost of steel drums, less US$361,470 combined capital and operating cost of Option 2.


Annex B

Bulk Refuelling Facilities: The Economic Case (cont’d)

Costs of Bulk Refuelling Installations (cont’d) Recommendations The move to bulk refuelling from the current drummed fuel operation is imperative if the United Nations is to make the best use of its limited financial resources, and to provide a reliable and safe service to its air operations in South Sudan. The savings on the non-refundable element of a drumming operation alone provide sufficient justification. The options available for bulk refuelling do, however, highlight several quality issues that need to be addressed in establishment of standard operating practice for refuelling operation and in the construction of contracts. We recommend that a quality assurance scheme be introduced utilising a combination of:

• Well-written contracts covering the safety issues a contractor need to address, and the standards to which they are to be held;

• Introduction of standard onside testing procedures by UN agencies for aviation fuels; and

• Testing of random fuel samples using an authorised testing agency.

Although the fabric tank solution (Option 1) may be the most economical solution (and may even be lower than suggested above if such tanks already held in WFP stores are used), we would recommend the modular containerised systems (Option 2) in preference to this and it is safer, more appropriate to the type of low maintenance, high fuel security operation common in South Sudan, and is less susceptible to disruption through the effects of weather during the critical rainy season, when fuel requirements are at their height. However, with the current situation in South Sudan, particularly the lack of trained personnel and the need for rapid economic development, we recommend that in the case of Rumbek, a contractor be engaged to provide a turnkey solution based on the widely accepted Platts-plus-cost formula.

Date post:	10-Sep-2020
Category:	Documents
Upload:	others
View:	2 times
Download:	0 times

SOUTH SUDAN 2004: A SURVEY OF THE HUMANITARIAN FUELS … · 2014. 10. 24. · South Sudan Fuel...

Documents