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BP opposes pipeline tariff hike

Apr 01 2011 12:14 I-Net Bridge

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Johannesburg - Oil and gas company BP said on Friday that it strongly opposes the pipleline tariffs set by the National Energy Regulator of SA (Nersa), which would allow Transnet a 59.9% increase.

"The cost to the economy could be up to R1bn annually and conservative estimates are that 40 000 jobs will be lost," the company said on Friday.

Sipho Maseko, CEO of BP SA, said the company's analysis had shown that the new tariffs exceeded the global average by more than 400%.

"At these high input cost levels, business viability is at stake and will inevitably lead to major job losses in Gauteng."

Maseko added that the petrol price increase arising from higher tariffs was only a small fraction of the gross domestic product of the inland provinces, which suggested that they viewed the magnitude of the increase as insignificant.

"However, their own figures show 40 000 job losses, which is very significant."

Maskeko stressed that BP had consistently argued for local pipeline tariffs to be benchmarked against those in other parts of the world.

"Nersa's disregard for this request violates many of the act's objectives, which include promoting the efficient, effective, sustainable and economic distribution of petroleum and the promotion of access to affordable petroleum products."

Maseko said the decision favoured inland refiners, as the pipeline tariff increase would raise the cost of doing business in the interior market relative to the coastal markets.

This posed major challenges for Gauteng as the main business hub.

"Only about 50% of the proceeds from the tariff will accrue to Transnet. The remainder gives inland refiners a massive advantage."

In addition to the R1bn a year cost to the economy of the increase, byproducts other than petrol such as gas, bitumen and the like would also incur the higher tariff when transported to the inland market.

Nersa itself had estimated the cost of the proposed increase at about R500m a year, Maseko said.

"BP has again urged Nersa to review the implications of the tariffs, given its comparison with global benchmarks and the consequent implications for the competitiveness of the regional and South African economies."

On Thursday, when it announced the new tariffs, Nersa said that Transnet had initially applied for a 69.1% increase in allowable revenue.

"Later it revised its application to a 128% increase in allowable revenue."

However, Nersa emphasised that it was "concerned about the unpredictable nature of Transnet's tariffs" as a result of delays in the commissioning of new pipelines and regular increases in the forecasted cost of the new multi-product pipeline.
bp  |  nersa  |  transnet  |  unemployment



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