S.Africa's Transnet launches $2.9 bln fuel pipeline

* Multi-product pipeline will carry petrol, diesel, jet fuel

* Total project cost at 23.4 bln rand

HEIDELBERG, South Africa Jan 11 (Reuters) - South African logistics group Transnet started operating a new multi-product fuel pipeline on Wednesday, the company's single biggest capital project to date, although it will take until 2013 to reach intended capacity.

The 24-inch pipeline running over 550 km replaces an old 12-inch multi-product line from Durban to Johannesburg, built in 1965, which is nearing the end of its life.

The line will help supply fuel to South Africa's Gauteng province, the country's economic hub.

"(The new pipeline) is the greenest, safest and most cost-effective method of fuel delivery," Chief Executive Brian Molefe said at the launch.

"It will ensure that the inland market demand is met ... (and) ease road congestion by reducing the number of tankers on our roads."

The entire project includes the pipeline, a network of smaller inland pipelines, pump stations and associated terminals at a total cost of around 23.4 billion rand ($2.9 billion), more than double an initial forecast of 11.1 billion rand.

Until all terminals are completed, Transnet will only be able to use the new pipeline at half capacity and send only diesel, while the old line will be used to send other products.

Once all facilities are ready in 2013, the new line will carry petrol, diesel and jet fuel at a capacity of a million litres per hour, which can be tripled to meet rising demand over the following two decades via modular expansions.

Molefe said he was confident there would be no further cost escalations to the project. The pipeline is expected to operate for 75 to 80 years, he added.

Transnet was granted a 59.9 percent increase in fuel pipeline tariffs for 2011/12 to help pay for the project, and the logistics group applied for another 22 percent increase in tariffs for the 2012/13 financial year to help cover the costs. ($1 = 8.1163 South African rand) (Reporting by Agnieszka Flak, editing by Jane Baird)