1. SAPIA 20 TH ANNIVERSARY CELEBRATION - 18 JULY 2014 FUTURE SUPPLY CHAIN OF PETROLEUM PRODUCTS STRATEGY TRANSNET PIPELINES LM MOODLEY

2. PAGE 2 South Africa’s Modal Supply Pattern Fuel Supply Chain Current Transnet Pipelines Infrastructure Transnet Pipelines Roadmap Factors Affecting Transnet Pipelines Long Term National & Inland Fuel Demand Key Investment Decisions NMPP Modular Expansion NMPP Operating Philosophy Conclusion CONTENTS

3. National Market for Petroleum Products in South Africa and Transport Modes used for supplying the market. The mode choice also influences the transport cost element of the regulated fuel pump price in the different parts of the country Included in “National Demand” is the demand for Botswana, Swaziland, Lesotho & Namibia (BSLN countries) 3 SOUTH AFRICA’S MODAL SUPPLY PATTERN

4. Depot FUEL SUPPLY CHAIN

5. INDIAN OCEAN FYNNLAND HOWICK LADYSMITH BETHLEHEM NEWCASTLE KROONSTAD KLERKSDORP WITBANK KENDAL WALTLOO PRETORIA WEST SECUNDA STANDERTON ALRODE COALBROOK SASOLBURG TARLTON LESOTHO NATAL FREE STATE GAUTENG ø406,4 (16”) ø323,8 (12”) QUAGGA ø457,2 (18”) N RUSTENBURG MAGDALA NORTH - WEST MPUMALANGA KWAZULU / AIRPORT BHT MEYERTON VAN REENEN DUZI LANGLAAGTE FORT MISTAKE MOOIRIVER JAMESON ø502 (20”) ø457,2 (18") ø323,8 (12”) Ø168,3 (6”) Ø219,1 (8”) ø323,8 (12”) Ø219,1 (8”) Ø457,2 (18”) ø323,8 (12”) Ø406,4 (16”) PARK ø457,2 (18”) ø406,4 (16”) ø323,8 (12”) DOUBLE PUMP STATION DELIVERY STATIONS / METERS PUMP STATIONS REFINED PRODUCTS CRUDE OIL AVTUR INTAKE STATIONS NMPP PIPELINES NMPP PUMP STATIONS Ø ELARDUS PARK HILLCREST MNGENI VREDE “T”“T” WILGE ø457,2 (18”) TWINI HILLTOP MNAMBITHI VOLKSRUST SCHEEPERSNEK MAHLABATINI VRYHEID Ø406,4 (16”) Ø457,2 (18”) INGOGO EMPANGENI RICHARDS BAY GAS DURBAN DEPOT TPL INFRASTRUCTURE TO SERVICE MARKET : PETROLEUM PIPELINE AND GAS SYSTEMS

6. 6 TPL ROADMAP Partial commissioning of the NMPP & utilisation for diesel transport Continued utilisation of the DJP Limited slippage to road therefore reducing volume on road and therefore lowering cost of fuel transportation to the economy Completion of phase 1 of the NMPP at a capacity of 1000 m 3 /h and in Multi- Products service. Efficient transportation of fuel to further reduce the road volumes Facilitation of new entrants into the pipeline and Industry. Stay ahead of market demand with future phases of NMPP up to 3000 m 3 /h Determine feasibility of an import terminal Integrated fuel planning and execution with TFR Present 14/15 Future Adequate installed capacity Sustainability & growth Capacity constrained. Need for Bridging Plan initiatives: o Drag Reducing Agents o Introduction of Diesel & Petrol in the Crude Oil pipeline o Introduction of the Fuel Bridging Plan in conjunction with TFR Volume slippage to road Past Insufficient capacity to meet demand

7. Technology Competition Regulation Efficiency Insufficient Supply Corporate Strategy Systems Failure Reliability of Assets Client Capacity & Infrastructure Client Solvency Political Impact Human Resources Clean Fuels Capital Impact of Economy Bio-Fuels NMPP Completion FACTORS AFFECTING - TPL Mthombo Strategic Stocks

8. PAGE 8 LONG TERM NATIONAL & INLAND FUEL DEMAND The table below shows the forecasted demand for Jet, Diesel and Petrol from 2014 to 2043

9. PAGE 9 KEY INVESTMENT DECISIONS – NATIONAL PIPELINE NETWORK

10. PAGE 10 KEY INVESTMENT DECISIONS – TRANSNET PIPELINE NETWORK

11. PAGE 11 KEY INVESTMENT DECISIONS – SCENARIOS Scenario 1 – With Ngqura – Gauteng Pipeline

12. PAGE 12 KEY INVESTMENT DECISIONS – SCENARIOS Scenario 2 – Without Ngqura – Gauteng Pipeline

13. 13 NMPP INITIAL INVESTMENT AND MODULAR EXPANSION ABILITY TO MEET DEMAND Y-O-Y 1 2 3 4 5 Overall phases of project

14. NMPP Phasing (Refer previous slide) Max throughputs (Ml/annum) Maximum Flow rate (m 3 /h) 11/12 to 14/15Transition phase DJP : 3500DJP: 400 NMPP : 4380NMPP: 500 15/16 to 19/20Phase 1 (8 737 Ml) 1 000 20/21 to 28/29Phase 2 (12 230 Ml) 1 400 29/30 to 34/35Phase 3 (13 978 Ml) 1 600 35/36 to 39/40Phase 4 (17 472 Ml) 2 000 40/41 to 43/44Phase 5 (26 208 Ml) 3 000 NMPP CAPACITY AVAILABLE THROUGH ITS DIFFERENT PHASES - 2011/2012 TO 2042/2043 14

15. PIPELINES’ NMPP SYSTEM CONFIGURATION WITH ALL 5 PHASES COMPLETED 15

16. Continuous system with intake (Supply/Refineries) & delivery points interdependent on each other Network has grown over the years, resulting in various intake and delivery flowrates. Hence, the network is not balanced Network optimisation is restricted by up & downstream capability of infrastructure (affecting batch sizes) Interruptions at any point in the network has an impact on the whole network Network efficiency is therefore not only dependent on TPL but all involved in the supply chain When there are capacity constraints, this arrangement leads to security of supply concerns as “lost time” cannot be recovered Interruptions are caused by: Power failures along the pipeline Availability of product at intake Refinery performance Quality Imports CURRENT OPERATING PHILOSOPHY & NETWORK CONFIGURATION

17. CURRENT OPERATING PHILOSOPHY & NETWORK CONFIGURATION (Cont.) Inability of clients to accept deliveries Ullage constraints Demand volatility Price volatility Equipment failure Personnel The key lever be overcome these constraints with the current operating philosophy in the current network is to substantially increase the capacity of infrastructure integrated to the pipeline e.g. Storage at refineries & depots, feederline size & volume increase and distribution throughput at client depots Change the operating philosophy – can only be done with reconfiguration of the network. The NMPP provided this opportunity and its design reflects that the above issues have been addressed

18. Ensure that the pipeline performance is shielded from immediate impact of interruptions. Terminals (Accumulation facilities) in the system provide a buffer to “smooth” the shocks. Advantage of this is less changes in the total supply chain is required. NMPP therefore designed to have an UNINTERRUPTED trunkline operation from TM1 to TM2. Hence, no supply to Ladysmith & Bethlehem. TM2 increases flexibility of distribution to the inland network Natref to inland network and/or TM2 Secunda to inland network and/or TM2 TM2 to inland network without excessive changes to inland facilities TM1 facilitates NMPP trunkline requirements Minimizes “supply shocks” from the coastal refineries & imports Ensure coastal suppliers meet the NMPP future flowrates NMPP accumulators designed on an average 2/3 day security of supply principle Inland supply can be maintained for 3 days if there is an interruption in coastal supply Coast can supply into TM2 for 2 days if there is an inland interruption Hence there is a lag of the impact interruptions have on the performance of the system – SECURITY OF SUPPLY is improved dramatically From an operating & security of supply perspective this is optimal. FUTURE OPERATING PHILOSOPHY & NETWORK CONFIGURATION

19. PAGE 19 The following key issues will define the landscape for TPL in the future: Government’s Clean Fuels 2 Programme and the impact on security of supply Slow-down in local economy and lower fuel demand Implementation of new refining capacity Strategic stocks Import terminal TPL will need to fully understand the implication of these issues and respond appropriately CONCLUSION