Due Diligence Study of Two Fuel Depots in South Africa

British Petroleum Southern Africa sold two of their fuel depots, located at Langlaagte and Klerksdorp in South Africa to Royale Energy. Prior to the transaction, Royale Energy approached the Public Investment Corporation (PIC) as a possible source of funding for the purchase.

The PIC engaged with EPCM to conduct technical due diligence studies on both of the depots. The purpose of the due diligence studies was to leverage governance to the PIC before finalising the purchase.

In order for EPCM to thoroughly assess and comment on the integrity and longevity of the depots it was necessary for them to gain access to the BP archived technical data from a shared data room. The technical data included; facilities and product descriptions, previous tank inspections, piping integrity reports, previous electrical Certification Reports etc.

The method of preparation of the studies included a comprehensive review of the technical data in conjunction with regular meetings between EPCM and Royale Energy, ample site visits to the Langlaagte and Klerksdorp depots and discussions with Transnet Pipelines on their infrastructure for receiving fuel.

The Langlaagte depot has been decommissioned since 2013 and is situated approximately 5 km West of the Johannesburg CBD. The facility contains 10 above-ground vertical Diesel and Petrol tanks with 15,000 m3 of total working capacity, below-ground Diesel tanks, 4 road tanker loading bays, product transfer and loading pumps and accompanying office and storage buildings.

The Klerksdorp depot is currently a live depot and is located in an industrial area with no residential or sensitive areas in the vicinity. The facility contains 9 above-ground vertical Diesel and Petrol tanks with 8,600 m3 of total working capacity., below-ground product storage tanks, 2 road tanker loading bays, product transfer and loading pumps and accompanying office and storage buildings.

Royale Energy’s Langlaagte business plan includes the re-commissioning of the depot, storage and distribution of 93 ULP, 95 ULP, 500 ppm LSD and 50 ppm LSD. They have no intention of injecting additives into the products they supply. The rail and IP facilities will not be recommissioned.

Royale Energy’s Klerksdorp business plan is similar with the re-commissioning of the depot, storage and distribution of 93 ULP, 95 ULP, 500 ppm LSD and 50 PPM LSD. There is a possibility to inject additives into the products, depending on the fuel supplier. Royale Energy also intends to reinstate the rail siding facilities. At the time of the due diligence Royale Energy has not yet decided on the storage of IP.

The studies for the Klerksdorp and Langlaagte depots were completed and submitted successfully. During the studies, it was found that both of the depots were old but maintained in reasonably good condition.

In conclusion, it was determined that with minor inspections, repair work and maintenance, all of the goals that Royale Energy initially set out could be achieved on both of the depots.

From a technical point of view, it was deemed that there is nothing that prevents Royale Energy from purchasing the depots.