Fuel fight reaches final round
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.