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The company believes that Chevron, the dominant player in the Western Cape fuel market, is engaged in exclusionary conduct and consequently is in breach of section 8 of the Competition Act.
Chevron is estimated to supply more than 90% of fuel to the region.
Chevron is opposing Burgan’s plan to develop a fuel storage and distribution facility in the Eastern Mole of the Port of Cape Town, alleging that it will allow for the rampant importation of fuel on a scale which will result in the closure of its Milnerton-based Chevref refinery.
It has objected to Burgan’s EIA and the granting of a construction and operations licence by Nersa.
Importers of fuel
The CEO of Burgan, Mzwandile Mseleku, said: "Chevron’s argument that the refinery will have to close is a red herring to hide its exclusionary conduct and block competition.
"Existing South African import regulations ensure local production is prioritised over imports, hence protecting the refinery.
Importers of fuel to South Africa cannot do so without a permit from the department of energy.
Permit guidelines indicate that local manufacturing and security of supply should be taken into consideration during the issuing process. Consequently, petroleum products may only be imported if the refinery is short of a product or cannot produce a particular type of fuel. Otherwise, all fuel distributors in the Western Cape are reliant on Chevron supply.
Burgan’s storage facility will be leased to fuel marketers in the Western Cape region and will add much-needed fuel storage and distribution capacity into a market that continues to suffer from inadequate security of supply from the refinery.
Fishing and aviation
The National Port Authority awarded Burgan the tender for the development to address the ongoing problems with security of fuel supply in the area.
The facility will also provide access to storage facilities for independent wholesale license holders, thereby lowering the barriers to entry and fostering healthy competition in the Western Cape’s fuel storage and distribution market.
“Chevron’s objection undermines the urgent need to ensure that there is enough fuel in the Western Cape to power Eskom, other critical industries like farming, trucking, commercial fishing and aviation, as well as keeping petrol stations from running dry, especially those in the more remote and rural areas.
"The reality is that Chevron is trying to maintain control of the Western Cape fuel market, block competitors in supply, wholesale and retail, and is holding the country to ransom with a threat of refinery closure.”
Analysis from some of the country’s leading experts indicates that the project will not jeopardise Chevron’s existence and that in a worst case scenario the Burgan Cape terminal may reduce Chevron’s profits.
Mseleku said: "The real conflict is the fact that Chevron's profits in its downstream distribution business will come into play.
"Independent distributors will have better bargaining power if they have alternative options and not be dependent on Chevron's unreliable supplies. New entrant wholesalers will be able to participate in tenders as they can now show proof of a reliable source of supply, something they can’t do today.
Stock storage
"The Burgan facility will result in a more equitable distribution of power and profits in the value chain and great opportunities for new, often BEE, entrants.”
“The Western Cape economy will also get the urgently needed benefit of greater security of supply that will result from greater strategic stock storage and emergency import capacity which will be needed if the Chevron plant has an unplanned shut-down, possibly coinciding with greater use of Eskom's Ankerlig OCGT power station and a spike in associated diesel demand.”
In the Western Cape, Chevron controls the supply and refining of petroleum products as it operates the only refinery in the region, Chevref, and owns and operates the fuel distribution tanks and pipelines connected to the liquid fuel berths at the Port of Cape Town.
The pipeline is connected to Engen and BP storage tanks and Chevron’s own storage at Chevref, via a gooseneck in the pipeline that permits product flow only between two points at any one time.
