BP bucks inland fuel pipe price hike
Industry divided over proposed tariff increase
March 5, 2009
By Justin Brown
The implementation of a increase of about 300 percent in Transnet pipeline tariffs to fund the building of a R13 billion fuel pipeline between Durban and Johannesburg could result in the loss of 21 614 jobs in the petroleum and related sectors and a decrease of R5.5 billion in gross domestic product, BP Southern Africa said on Wednesday.
BP said Transnet's proposed tariff for 2009 of R52.68 for every 100 tons of fuel moved a kilometre was 468 percent more than the European average of R9.26 and 660 percent above the US average of R6.93.
A 300 percent rise in pipeline tariffs would have a "dire" effect on many fronts and would damage the BP's commercial interests, said chairman Rams Ramashia.
However, Transnet denied seeking a 300 percent increase; it wanted just 82.5 percent more.
The National Energy Regulator of SA (Nersa) released Transnet's application for public comment in December 2008 and a draft determination in January 2009.
The regulator plans to announce a decision on the tariffs in March, for implementation in April.
Sipho Maseko, chief executive of BP Southern Africa, said the firm recognised the need for building an extra fuel pipeline to supply the local inland market.
Only about 25 percent of the tariff increase would accrue to Transnet, with the rest of the income going to the inland refiners of crude oil, Sasol and Total, he added.
Avhapfani Tshifularo, director of the South African Petroleum Industry Association (Sapia), said there was a "difference of opinion" among the members of Sapia over the Transnet application for a 300 percent tariff increase.
Tshifularo agreed that the proposed pipeline tariff hike would provide inland oil refiners with an advantage over coastal refiners: BP, Shell, Engen and Chevron.
Sapia was concerned that Transnet had not followed the proper Nersa methodology when it applied for its tariffs, said Tshifularo.
At present, for every litre of fuel sold in the inland areas there is a pipeline charge of 13.5c a litre.
Once the new pipeline tariff comes into effect next year, that charge will rise by 293 percent to 54c a litre.
Transnet denied this, saying its 82.5 percent increase in pipeline tariffs would increase the price of moving fuel from Durban to Johannesburg by just 10c a litre.
Transnet said its application was consistent with the Petroleum Pipelines Act and sector regulations, as well as Nersa's methodology.
BP said the increase in the pipeline charge of the retail price of fuel would have an overall inflationary effect on the economy, and would add to the increase in the state fuel levy of 23c a litre.
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