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Petroleum industry mum on Concourt judgment to keep distance from state pipelines

A Total truck filling gas at the Total station in Newton Johannesburg. Picture, Dumisani Dube.

A Total truck filling gas at the Total station in Newton Johannesburg. Picture, Dumisani Dube.

Published Jun 23, 2022

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Petroleum giants Sasol and Total were unavailable yesterday to shed insight on the Constitutional Court judgment that effectively ends 50 years of agreement that benefited them in transporting fuel and oil from the coastline to inland at an affordable cost.

Efforts to elicit insight from the respective companies drew a blank yesterday as speculation rose that the petroleum companies, currently heavily protected by legislation, had to find means of dealing with the added costs of transporting and storing vast amounts of fuel at their own instance.

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In the absence of a response from the petroleum giants, an analyst, who declined to be named, said yesterday that the judgment delivered on Tuesday threw the business model of these companies into disarray.

“Total and Sasol had hoped these were evergreen contracts. Now that the carpet has been pulled from under their feet, they may want to look at their business models. They cannot do anything about petrol because that is regulated, but diesel is not regulated,” the industry expert said.

In a unanimous judgment penned by Justice Mbuyiseli Madlanga, the Constitutional Court ruled that Transnet had validly terminated a 50-year-old agreement with Total and Sasol, an agreement that regulated the conveyance of crude oil from Durban to the Natref inland refinery in Sasolburg.

The ruling is a major win for Transnet in a litigation battle which has been ongoing since 2013, under which Total South Africa and Sasol Oil are claiming damages for an alleged breach of Transnet's obligations under the crude oil conveyance agreement.

“Transnet will continue to provide use of the pipeline from Durban to the Natref refinery, and while some issues in the matter remain to be decided (both before the High Court and in respect of Transnet’s formal complaint to the National Energy Regulator of South Africa), the effect of the Constitutional Court’s judgment is that, as of 13 September 2020, Transnet is no longer bound to the terms of an outdated pre-constitutional agreement,” the court ruled.

Transnet said it welcomed the decision handed down by the Constitutional Court.

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“The Constitutional Court has shown that it is on the side of the people. These companies had exclusive access to the pipeline. Now the principles of procurement will have to apply, and that changes things quite a bit for these companies,” the source said.

The government recently introduced a R1.50 subsidy for motorists to soften the sting of prices after the Russia/Ukraine conflict threw supply chains into a tailspin.

The subsidy, initially meant to last until the end of May, has been extended to the end of July as the state seeks to quell dissent at the petrol pump with consumers engulfed by high costs of basic commodities, including fuel.

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Earlier this year, the question of the state's subsidy for petroleum companies came into question when the government had to decide on the disposal of its oil reserves in Saldanha Bay, while all major refineries, including that of Engen, announced their closure due to the high costs of maintenance.

The major import sources for South Africa’s 450 000 barrels-a-day of crude oil are Saudi Arabia, Nigeria, Angola, Ghana, Togo and Norway.

South Africa also imports about 200 000 barrels a day of refined products from Oman, the United Arab Emirates, Singapore, India and Bahrain.

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