This follows after the National Energy Regulator (NERSA) approved the oil storage company, Burgan Cape Terminal’s, licence application for the development and construction of an independent fuel storage and distribution facility at the Eastern Mole in the port of Cape Town.
“We are very pleased with the decision and would like to thank NERSA for conducting a considered, thorough and professional application process. NERSA’s decision is a vote in favour of security of fuel supply in the Western Cape,” said Muziwandile Mseleku, chief executive officer of Burgan Cape Terminals.
(WATCH VIDEO: Burgan Cape Terminals announce development of fuel storage & distribution facilities)
The Transnet National Port Authority (TNPA) awarded Burgan the tender for the development to address the ongoing fuel shortages in the Western Cape.
“The development of additional storage and distribution facilities is intended to improve the challenges of security of fuel supply and associated flexibility in the region. The development not only addresses the country’s need to increase fuel infrastructure and capacity but it will also have a positive effect on the economy, on global skills transfer and on the transformation of the local energy sector,” he added.
However, NERSA’s licence application was opposed by Chevron, the energy major which controls the fuel supply in the province. It also owns and operates the Chevref refinery as well as the single pipeline that connects the port of Cape Town with the refinery.
“Oil companies in the Western Cape will and intend to continue to support Chevref's supplies in preference to imports and coastal supplies even if the Burgan Terminal is installed.
“This is because the supply of domestic fuel in the market is not only cheaper than imports and coastal supplies, but local refineries, including Chevref, are protected by legislation which effectively ensures that domestic fuel supplies are exhausted before imports are approved.
(WATCH VIDEO: Chevron opposes the Burgan Cape Terminals)
He explained that competition is not only healthy, but good for consumer’s pockets and for emerging South African companies previously unable to enter the tightly controlled fuel market.
Burgan is now waiting for a final decision by the Western Cape Department of Environment and Development Planning on its Environmental Impact Assessment (EIA). However, Chevron is also opposing the EIA, stating that the economic impact of the development will result in the closure of its refinery.
the company said that analysis from some of the leading experts in the country indicated that the project will not jeopardise Chevron’s operations. At worst, an alternative supply of fuel may reduce Chevron’s profits at its refinery.
Burgan has laid a formal complaint against Chevron due to anti-competitive behaviour. The company believes that Chevron is engaged in exclusionary conduct and consequently is in breach of section eight of the Competition Act.
(READ MORE: Burgan drags Chevron to Commission over anti-competitive conduct)
Mseleku said Chevron’s argument that the refinery will have to close is a red herring to hide its exclusionary conduct and block competition.
NERSA is set to release its reasons for the decision in January 2015.