The major crude oil refiners operating in South Africa expressed serious concern on Monday over new legislation to restructure the industry, arguing it may perpetuate past distortions.
The Coastal Crude Refiners — representing Caltex, BP, Engen and Shell — look set to clash with synfuels giant Sasol and PetroSA over the Petroleum Products Amendment Bill, currently before Parliament.
The bill aims to pave the way for major restructuring in the industry, as Sasol’s entry into an already over-traded retail market looms. Caltex corporate planning manager Teresa Booth-Oliveira told Parliament’s minerals and energy portfolio committee the bill appeared to give the government power to control competition in the industry.
A clause allowing the minister of minerals and energy to allocate retail site licences according to production, perpetuated a distortion that had allowed Sasol a significant slice of local manufacturing.
”Coastal refiners object to the use of this specific criterion to determine who gets licences on the basis that Sasol produces more than 40% of the country’s total product requirements and manufactures substantially more product than any other refiner in South Africa.
”We object to an allocation of licences based on historical distortions in the market, which have obliged us to cut back refining capacity and reduce our manufacturing volumes,” she said.
The bill — which seeks to give the minister power to issue licences for refiners, wholesalers and retail sites — allows for regulations to replace industry-wide agreements.
In the past, the major crude oil producers were obliged to buy all of Sasol’s synfuel production and production from the Natref refinery, while Sasol was restricted from participating in the retail sector.
That agreement comes to an end at the end of this year. Booth-Oliveira said Sasol’s preferential treatment in manufacturing should not be carried through into the new retail licensing regime.
”No other refiner has enjoyed the benefit of having its production placed preferentially in the local market; on the contrary, crude refiners were forced to cut production, defer expansions and export their surpluses,” she said.
Engen industry and government liaison manager Angus Quail said the bill offered the potential, through regulations, to tilt competition in the market to favour certain producers.
”What we are saying is, let’s be careful not to distort competition in the industry.”
He acknowledged that regulation was still necessary in the retail sector to assist small companies and maintain jobs, but this should not be extended to other parts of the industry, as the bill seemed to suggest.
In their response, however, Sasol stressed that negotiations with other players over the future shape of the market were continuing.
”Negotiations regarding future product supply to other oil marketing companies are ongoing, and we are confident that conditions are present that will result in win-win-solutions,” said the company’s spokesperson Johann van Rheede.
The bill, among other things, aims to ban cross-ownership between producers, wholesalers and retailers, as well as market behaviour that undermines price regulation, including promotions and mixing fuels.
It also seeks to outlaw self-service at petrol outlets, and will limit the different types of fuel specifications available to help guard against proliferation of fuel types.
African Minerals and Energy Forum’s (Amef) Maurice Radebe warned against over regulation, and appealed for the ”orderly entrance” of synthetic fuel producers into the retail sector.
The department is expected to report back to the committee next week, after considering all submissions on the bill. – Sapa