Fuel fight reaches fi­nal round

Finweek English Edition - - IN THE NEWS - BY MAR­CIA KLEIN

Chevron says that a new fuel stor­age fa­cil­ity in Cape Town, to be built by ri­val Bur­gan Cape Ter­mi­nals, will halve its prof­its and kill the lo­cal fuel in­dus­try. Bur­gan, how­ever, con­tests this, say­ing that Chevron’s ar­gu­ments are those of a dom­i­nant com­pany not want­ing com­pe­ti­tion. This is the crux of the fight be­tween the two – a fight which Chevron, which op­er­ates as Cal­tex lo­cally, has lost at ev­ery stage so far. Its last chance is through its En­vi­ron­men­tal Im­pact As­sess­ment ob­jec­tion, on which the Na­tional En­ergy Reg­u­la­tor (Nersa) will de­cide within weeks.

Bur­gan, owned by Dutch group VTTI, Thebe In­vest­ment Cor­po­ra­tion and BEE com­pany Ji­caro, was granted a li­cence for its stor­age fa­cil­ity in De­cem­ber and says that it will in­vest R650m in the project in the f irst two years. It is now wait­ing for Nersa’s En­vi­ron­men­tal Im­pact As­sess­ment ap­proval on 17 or 18 March in or­der to go ahead.

It is un­likely there will be any hitches, es­pe­cially as Bur­gan re­cently an­nounced that gov­ern­ment has ap­proved its fa­cil­ity as an Op­er­a­tion Phak­isa project. But Chevron, whose crude oil re­fin­ery in Cape Town has a pro­duc­tion ca­pac­ity of around 100 000 bar­rels a day, is not happy, say­ing that Bur­gan is go­ing to im­port clean fu­els which will un­der­cut lo­cal com­pa­nies that can­not pro­duce them. Chevron and South African Petroleum In­dus­try As­so­ci­a­tion (Sapia) chair­per­son Nobuzwe Mbuy­isa says that Bur­gan will “cre­ate the abil­ity” to im­port an un­lim­ited amount of clean fu­els at the ex­pense of lo­cal pro­duc­tion and thou­sands of re­fin­ery jobs.

“The con­cern here is not that the land­lord [ Bur­gan] will im­port clean fu­els, but that its ten­ants [and traders] will end up f lood­ing the mar­ket at the ex­pense of lo­cal re­finer­ies’ pro­duc­tion out­put. Im­ports should only be al­lowed when lo­cal pro­duc­tion can­not meet mar­ket de­mand,” she ex­plains.

She says that since 2009/10, the i ndustr y has been i n dis­cus­sions with gov­ern­ment on new clean fuel spec­i­fi­ca­tions ac­com­pa­nied by up­grades. Bur­gan, on the other hand, just needs to show that it is not tak­ing busi­ness away from lo­cal com­pa­nies – there is no lo­cal mar­ket for clean fu­els, so it can eas­ily side­step reg­u­la­tion.

Muzi­wandile Mse­leku, CEO of Bur­gan Cape Ter­mi­nals, says that the fa­cil­ity will “as­sist with se­cu­rity of fuel sup­ply in the re­gion” and play a role in “open­ing a pre­vi­ously closed mar­ket for emerg­ing black-owned in­de­pen­dent fuel sup­pli­ers”. He says that Eskom has shown in­ter­est in us­ing Bur­gan’s stor­age for backup fuel. Chevron is ob­ject­ing “de­spite the fact that ex­tra stor­age ca­pac­ity could be ben­e­fi­cial to lo­cal oil com­pa­nies, in­clud­ing Chevron, to in­crease the avail­abil­ity of strate­gic petroleum stocks in the West­ern Cape”.

The ar­gu­ment that im­ports will re­place lo­cal sup­ply is fal­la­cious as the sup­ply of do­mes­tic fuel “is not only cheaper t han i mports and coastal sup­plies, but lo­cal re­finer­ies, in­clud­ing Chevref [the Chevron ref in­ery], are pro­tected by leg­is­la­tion”, which en­sures that do­mes­tic fuel sup­plies are ex­hausted be­fore im­ports are ap­proved.

“Its ar­gu­ment now is that we should be pre­vented from im­port­ing cleaner fu­els and this will re­place what they man­u­fac­ture. We are not im­port­ing cleaner fu­els,” says Mse­leku.

“Ch e v r o n h a s ad­van­taged in­fra­struc­ture in Cape Town. I am ar­gu­ing for ev­ery­one to have mar­gins they have worked for, not ones which have been ar­ti­fi­cially propped up.”

The depart­ment of en­ergy did not re­spond to ques­tions and re­quests for com­ment.

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