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South Africa will start blending different grades of crude oil for export to refineries across Asia in the world’s first crude oil blending terminal, starting in 2017

Construction of the blending terminal is expected to start in August this year and will cost about US$161mn. The facility will consist of 12 concrete bunkers and output is expected to begin in Q2 2017. The terminal is being developed by a joint venture firm, OiltankingMogs.

Pieter Coetzee, director at OiltankingMogs, told Reuters, “Our model is based on blending of different grades of crude to supply a specific recipe to a refinery. We saw, in terms of environmental legislation worldwide to produce clean fuels, that there is a need for refiners to blend different grades of crude to get that specific clean fuel on the other side.”

To illustrate his point, Coetzee explained that they could typically take heavy crude oils from South America and blend them with the lighter, sweet crude of West Africa to provide almost any fuel specification for refineries in India, China, South Korea and Japan, which are the main markets targeted for export.

“Obviously, blending happens within the refineries, they will blend on a small scale before it gets fed into the refinery, but this is no longer feasible. They need the right recipe coming into the refinery,” he added.

The terminal will use a patented system, which uses fluid dynamics to blend the crude varieties, with specialised equipment in the tanks using the velocity of the incoming fluid to mix with the crude in the tank. Each of the 12 tanks will have the capacity to hold 1.1mn barrels of crude, giving the terminal a total capacity of 13.2mn barrels.

“We’ve got 10 of the 12 tanks committed for long-term contracts and the off-takers include the oil majors and oil traders,” Coetzee said.

The terminal, when fully operational, will be able to fill a very large crude carrier tanker within 48 hours.

South African logistics firm Grindrod, Royal Bafokeng Holdings-owned MOGS and oil storage company Oiltanking are among the shareholders at the terminal, which is located at Saldanha Bay, South Africa’s deepest natural port and emerging oil and gas hub.