The Moerane commission, which investigated South Africa’s fuel-supply crisis suffered late last year, has reported that another supply crisis could emerge in the second half of this year because of scheduled refinery shutdowns.
But Minister of Minerals and Energy Buyelwa Sonjica says she has a task team in place with the industry and hopes this will be avoided.
The minister said at a media conference at Parliament on Wednesday that the commission concluded that the fuel shortage last year resulted “from a convergence of a number of events”, but of greater importance “and concern” is that these events exposed “underlying and regulatory weaknesses in the sector”.
She and her director general have identified the need for South Africa to build another refinery. Sonjica said an announcement on such a refinery could be made “within a month”. The director general declined to say whether this would be a government or a private-sector initiative.
The Moerane commission also said it considered that there is “no legal basis for requiring the oil companies” to compensate consumers for the fuel shortages experienced in December last year. The report stated that “this is because there is no evidence that the allowance for stock holdings included in the basic fuel price can be translated into a commitment by the oil companies to hold these stocks”.
During the fuel crisis last year, former minerals and energy minister Lindiwe Hendricks said oil companies were being paid via the basic fuel price to hold stocks, but had failed to do so. It was reported earlier this year that refiners get 3,8c a litre, or about R760-million a year, for storing fuel for 25 days. The Moerane report therefore effectively lets these companies off the hook.
Sonjica, who is also scheduled to hold talks with the South African Petroleum Industry Association on September 6, said the key concern is that there is inefficient storage capacity for South Africa’s fuel stocks. This is a by-product of the strong economic growth of the country.
Underscoring this point, the Moerane report said the major lesson is that the department should review the responsibilities of stakeholders “in relation to security of supply. Government needs to review its policy with regard to strategic stocks.” It said further that the oil companies and synthetic fuel plants “should be obliged to hold prudent commercial levels of refined product stock”.
The minister warned that the consumer is likely to have to carry the burden of the costs of holding such stocks, while director general Sandile Nogxina acknowledged that there is a lacuna in the regulatory environment concerning commercial levels of stock and it has to be revisited. At present, the state is required to hold 35 weeks of crude oil stock.
The Moerane commission — headed by the deputy chairperson of the Competition Tribunal, advocate Marumo Moerane — recommended that a group be constituted and given the responsibility of marking future supply-and-demand projections in order to establish requirements for additional refinery investments.
It also noted that additional pipeline capacity is “urgently required to supply the inland markets” and recommended that Petronet expedite the development of a new pipeline from Durban and Gauteng.
Sonjica noted that department teams monitor the supply and demand of fuel “on a daily basis” to prevent the country being taken by surprise again. In addition, Moerane proposed that an action plan be put in place to address all aspects associated with any potential future supply shortages. Regular meetings with farmers who use diesel — badly affected by shortages last year — should be held “to find a solution for their recurring seasonal shortage problems”.
Among its recommendations is that the department “give consideration to increasing the frequency of price changes” to avoid panic buying that creates short-term “stock-outs” at fuel stations. — I-Net Bridge