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Johannesburg - Chevron is to appeal to the energy department to restrict supplies of imported clean fuels to a rival company’s proposed petrol and diesel storage plant, which has been given the green light by the industry regulator.
Chevron, which has a major refinery which includes vast storage facilities at Milnerton in the Western Cape, says it has no problem at all with the recent decision by the National Energy Regulator of South Africa (Nersa) to allow its rival Burgan Cape Terminals to set up a storage plant in the Cape Town harbour.
READ: Chevron rival states case at Nersa hearing
“Chevron South Africa welcomes competition in the construction of independent storage facilities and wholesalers in South Africa and related employment opportunities,” the company said in a statement.
Chevron's problem does not lie with the competition, but with what the plant will be used to store. “Whilst these facilities appeal to the current need for additional fuel due to electricity constraints, it will undermine investment in local manufacturing,” said Chevron.
Reacting to Nersa’s decision, announced earlier this month, Chevron South Africa chairperson Nobuzwe Mbuyisa said the company “acknowledges the national energy regulator’s decision to grant a licence to store and distribute fuel” to a new entrant in the market.
However, she added: “We are naturally disappointed with the decision given the narrow interpretation of regulation and the relationship between fuel storage and fuel import protection in this specific case.”
READ: Chevron ups ante in diesel storage wars
Mbuyisa was emphatic that the company welcomed the competition in the fuel storage element of the fuel supply chain, but argued that there was a regulatory lacuna – which it acknowledged fell outside the authority of Nersa - which allowed Burgan the opportunity to tap into the fuel imports market.
At the Nersa hearing in November, Chevron argued that if Burgan’s storage facility would be used for imported fuels, this would render Chevron’s Cape Town plant uncompetitive. It argued that it would put 500 direct jobs and 13 000 indirect jobs in severe danger - and could, indeed, close its refinery plant altogether.
The importation of clean fuels, Chevron said, “must be limited if South Africa is interested in maintaining its local manufacturing capacity”. Chevron cited international experiences of “excessive imports” having decimated local refinery production and jobs. For example in Europe 13 refineries had closed, affecting 2 500 jobs.
“Developed economies such as these can absorb this impact due to their robust economies and very low unemployment rates,” said Mbuyisa. “This would not be the case in South Africa where unemployment is at 26%.”
Chevron acknowledged that Burgan Cape Terminals has publicly indicated that imports are not central to its business case. It is now up to the department of energy and trade and industry to update the policy, limiting “excessive imports of cleaner fuels into the country to avoid putting refineries and jobs unnecessarily at risk”.
“We are optimistic that we can find mutually beneficial solutions that provide opportunity for independent storage while maintaining local refining capacity,” said Mbuyisa.
Burgan, however, in an indication that the gloves are off in its fight with its rival, said earlier this month it has taken Chevron South Africa to the competition commission. It has laid a complaint against Chevron for “exclusionary” – and possibly exploitative – conduct.
Burgan spokesperson Dani Cohen confirmed that Werksmans attorneys’ director Petra Krusche has laid the complaint on Burgan’s behalf in terms of the Competition Act of 1998. It asks the commissioner to investigate the conduct of “a dominant firm”, as it described Chevron.
READ: Burgan to lay complaint against Chevron
Burgan said its “suspicion” is that Chevron is using and has used “dilatory and exclusionary tactics in the regulatory processes to foil or hamper credible competition in the oil market in the Western Cape to cement its decades-long advantage”.
Kim Camilleri of FTI Consulting for Chevron said in reaction that Chevron does not oppose competition in the petroleum storage market “and has not objected to petroleum storage as such”. Chevron provided the energy regulator with solutions for both parties to co-exist.
“Chevron’s main concern is in the import market of clean fuels products that will undermine the viability of local refinery capacity,” said Camilleri.
“The decision to maintain local refining capacity over imports is in line with government policy as published in the White Paper on Energy Policy (of 1998), the Energy Security Master Plan (on) Liquid Fuels (of 2007), the national development plan and the industrial policy action plan (of 2013/14). All of these policies promote local manufacturing over imports.”
Countering Burgan’s argument that Chevron has “attempted to block” the proposed Burgan terminal at the regulator’s hearings for its licence as well as before the environmental affairs department, Chevon said this is not correct. Instead, Chevron is “disappointed with the decision given the narrow interpretation of (the) regulations and the relationship between fuel storage and fuel import protection in this specific case”.
It understood that Chevron is mandated only to consider current policy which does not specifically cover – or specify the restriction of - clean fuels importation. “Our issue is not with Nersa, but with the current import guidelines which need to be updated (to avoid) rampant imports,” said Chevron.
Responding to Burgan’s complaint that Chevron determined the berthing schedule to feed into the pipeline to the Chevron plant which exposes competitors “to extra demurrage as vessels have to wait for Chevron’s business to be completed before they can discharge coastal supplies and imports”, Chevron said this is “factually incorrect.”
Instead, vessels “are accommodated on a first plan, first serve basis. As a licensed operator of infrastructure, we are regulated and accountable to Nersa and would be in breach of conditions if these were in fact the case”.
Burgan, which is 70% owned by Dutch-based company VTTI, has a 30% black empowerment interest through Thebe Energy and Jicarro. It won a licence to build a R650m petroleum and diesel storage facility. It has proposed starting the build programme in early 2015 and completing it within about 18 months.
Chevron operates a crude oil refinery in Cape Town with a production capacity of around 100 000 barrels a day. The refinery produces petrol, diesel, jet fuel and liquefied gas for South Africa and for export to other African countries.
Chevron, which has a major refinery which includes vast storage facilities at Milnerton in the Western Cape, says it has no problem at all with the recent decision by the National Energy Regulator of South Africa (Nersa) to allow its rival Burgan Cape Terminals to set up a storage plant in the Cape Town harbour.
READ: Chevron rival states case at Nersa hearing
“Chevron South Africa welcomes competition in the construction of independent storage facilities and wholesalers in South Africa and related employment opportunities,” the company said in a statement.
Chevron's problem does not lie with the competition, but with what the plant will be used to store. “Whilst these facilities appeal to the current need for additional fuel due to electricity constraints, it will undermine investment in local manufacturing,” said Chevron.
Reacting to Nersa’s decision, announced earlier this month, Chevron South Africa chairperson Nobuzwe Mbuyisa said the company “acknowledges the national energy regulator’s decision to grant a licence to store and distribute fuel” to a new entrant in the market.
However, she added: “We are naturally disappointed with the decision given the narrow interpretation of regulation and the relationship between fuel storage and fuel import protection in this specific case.”
READ: Chevron ups ante in diesel storage wars
Mbuyisa was emphatic that the company welcomed the competition in the fuel storage element of the fuel supply chain, but argued that there was a regulatory lacuna – which it acknowledged fell outside the authority of Nersa - which allowed Burgan the opportunity to tap into the fuel imports market.
At the Nersa hearing in November, Chevron argued that if Burgan’s storage facility would be used for imported fuels, this would render Chevron’s Cape Town plant uncompetitive. It argued that it would put 500 direct jobs and 13 000 indirect jobs in severe danger - and could, indeed, close its refinery plant altogether.
The importation of clean fuels, Chevron said, “must be limited if South Africa is interested in maintaining its local manufacturing capacity”. Chevron cited international experiences of “excessive imports” having decimated local refinery production and jobs. For example in Europe 13 refineries had closed, affecting 2 500 jobs.
“Developed economies such as these can absorb this impact due to their robust economies and very low unemployment rates,” said Mbuyisa. “This would not be the case in South Africa where unemployment is at 26%.”
Chevron acknowledged that Burgan Cape Terminals has publicly indicated that imports are not central to its business case. It is now up to the department of energy and trade and industry to update the policy, limiting “excessive imports of cleaner fuels into the country to avoid putting refineries and jobs unnecessarily at risk”.
“We are optimistic that we can find mutually beneficial solutions that provide opportunity for independent storage while maintaining local refining capacity,” said Mbuyisa.
Burgan, however, in an indication that the gloves are off in its fight with its rival, said earlier this month it has taken Chevron South Africa to the competition commission. It has laid a complaint against Chevron for “exclusionary” – and possibly exploitative – conduct.
Burgan spokesperson Dani Cohen confirmed that Werksmans attorneys’ director Petra Krusche has laid the complaint on Burgan’s behalf in terms of the Competition Act of 1998. It asks the commissioner to investigate the conduct of “a dominant firm”, as it described Chevron.
READ: Burgan to lay complaint against Chevron
Burgan said its “suspicion” is that Chevron is using and has used “dilatory and exclusionary tactics in the regulatory processes to foil or hamper credible competition in the oil market in the Western Cape to cement its decades-long advantage”.
Kim Camilleri of FTI Consulting for Chevron said in reaction that Chevron does not oppose competition in the petroleum storage market “and has not objected to petroleum storage as such”. Chevron provided the energy regulator with solutions for both parties to co-exist.
“Chevron’s main concern is in the import market of clean fuels products that will undermine the viability of local refinery capacity,” said Camilleri.
“The decision to maintain local refining capacity over imports is in line with government policy as published in the White Paper on Energy Policy (of 1998), the Energy Security Master Plan (on) Liquid Fuels (of 2007), the national development plan and the industrial policy action plan (of 2013/14). All of these policies promote local manufacturing over imports.”
Countering Burgan’s argument that Chevron has “attempted to block” the proposed Burgan terminal at the regulator’s hearings for its licence as well as before the environmental affairs department, Chevon said this is not correct. Instead, Chevron is “disappointed with the decision given the narrow interpretation of (the) regulations and the relationship between fuel storage and fuel import protection in this specific case”.
It understood that Chevron is mandated only to consider current policy which does not specifically cover – or specify the restriction of - clean fuels importation. “Our issue is not with Nersa, but with the current import guidelines which need to be updated (to avoid) rampant imports,” said Chevron.
Responding to Burgan’s complaint that Chevron determined the berthing schedule to feed into the pipeline to the Chevron plant which exposes competitors “to extra demurrage as vessels have to wait for Chevron’s business to be completed before they can discharge coastal supplies and imports”, Chevron said this is “factually incorrect.”
Instead, vessels “are accommodated on a first plan, first serve basis. As a licensed operator of infrastructure, we are regulated and accountable to Nersa and would be in breach of conditions if these were in fact the case”.
Burgan, which is 70% owned by Dutch-based company VTTI, has a 30% black empowerment interest through Thebe Energy and Jicarro. It won a licence to build a R650m petroleum and diesel storage facility. It has proposed starting the build programme in early 2015 and completing it within about 18 months.
Chevron operates a crude oil refinery in Cape Town with a production capacity of around 100 000 barrels a day. The refinery produces petrol, diesel, jet fuel and liquefied gas for South Africa and for export to other African countries.
