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PETROLEUM PIPELINES BILL

PETROLEUM PIPELINES BILL. MANNY SINGH Director : Petroleum Policy Department of Minerals and Energy 9 TH June 2003 Presentation to the NCOP. WHITE PAPER ON ENERGY POLICY (December 1998). “Government will promote competition in the transport of liquid fuels.”

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PETROLEUM PIPELINES BILL

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  1. PETROLEUM PIPELINES BILL MANNY SINGH Director : Petroleum Policy Department of Minerals and Energy 9TH June 2003 Presentation to the NCOP

  2. WHITE PAPER ON ENERGY POLICY (December 1998) • “Government will promote competition in the transport of liquid fuels.” • “The petroleum regulatory regime will inhibit monopolistic abuse of pipelines and storage facilities. Pipelines will be required to provide non-discriminatory open access to uncommitted capacity, transparency of tariffs, and disclosure of cost and pricing information to a suitable authority.”

  3. BACKGROUND TO BILLWhy regulate now? Strategic importance to RSA Supply to Industrial heartland Reduce monopoly rents in natural monopolies Competition between and within carriers “Rules of the game” for Investors Regulation where necessary Govt has duty to ensure accessibility to infrastructure

  4. Governments Consideration Strategic importance eg. Natref Fire Almost all pipelines State owned Additional capacity/investment required by 2007 Not clear if tariffs market related Transparency in tariff composition

  5. Government process this far…. IEA survey 1996 WP energy Policy 1998 Consultants appointed 2000 Three stakeholder workshops Published for Comment Submissions/presentations to PPC Now in final stages of finalisation

  6. Submissions Received at PPC COSATU/CEPPWAWU Coastal refineries Inland Refineries Groundwork Petronent Sasol TOSACO Total FinaElf Sacob SAPIA Competition Commission Bp/Caltex/Engen/Shell AMEF

  7. Objectives of Bill Promote Competition Promote Efficient,effective,sustainable and orderly development

  8. Objectives continued… Equitable access Safe,efficient,economic and environmentally responsible Facilitate investment Provide for security of pipelines and related infrastructure BEE Promote development of competitive markets Promote access to affordable petroleum products

  9. KEY ISSUES Establishment of Regulator Licensing dispensation Common Carrier principal

  10. Scope Crude oil Petroleum Products Pipelines,storage facilities, off-loading facilities

  11. Stakeholder Submissions General jurisdiction Transport neutrality Implications for BEE Licensing regime Tariff methodology Independence of Regulator HSE Definitional querries Multi-purpose use

  12. NON-COMPETITIVE SEGMENTS • Price control • Natural monopoly • Efficiency ( by pricing ) • Rate of return • Book value versus replacement value • Price cap e.g.Argentina • Adjusted for inflation 6 monthly • Reviewed every 5 years

  13. GENERAL PRINCIPLESOF REGULATION • Rule of law - appeal to the judiciary • Transparency – consultation & accessibility • Neutrality • Predictability and consistency • Independence – adequate skills, resources, information • Accountability – especially for general management

  14. REGULATORY INDEPENDENCE • Ensures transparency and a level playing field • Regulatory capture: • By stakeholders (particularly monopolies), problem of information, selection, no financial interests or revolving door with industry • By politician – must comply with government policy (not instructions), irrevocable mandate

  15. INDEPENDENCE SAFEGUARDS • Fixed periods of appointment • No conflicts of interest – financial or revolving door • Stable and reliable funding • Competitive salaries • Transparent decision making process • Review by courts

  16. REGULATORS’ QUALIFICATIONS • “Integrity, competence, the ability to exercise independent judgement, and the strength to resist pressure are indispensable to regulators, while technical experience in the regulated industry is generally considered to be of secondary importance.” (Regulatory Institutions – IEA)

  17. AIMS OF REGULATORS • Transparency and efficiency; • Tariff mechanisms; • Ensuring non-discriminatory access; • Fostering competition; • Encouraging the growth of transport capacity and interconnections; • Promoting adequate infrastructure investment; • Contributing to long-term security of supply.

  18. COMMON CARRIERS • A pipeline company obliged by law to provide service to all interested parties without discrimination to the limit of the pipeline’s capacity. Once the pipeline’s capacity is reached the service must be offered to all shippers in proportion to the amounts tendered for shipment.

  19. OVER-BOOKING! • In Canada the 3 700 km Inter-provincial Pipeline (IPL) carries two thirds of western Canada’s oil production to eastern Canada • April 1995 shippers’ nominations were twice the oil production of western Canada • Penalties of $2.70/barrel imposed • Penalty funds used to lower overall tariffs, thus rewarding responsible nominators

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