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NERSA CEO: Smunda Mokoena

16 November 2010

Presentation to the Portfolio Committee on Energy and the Select Committee on Economic Development

NERSA ACTIONS ON ISSUES RAISED AT THE 14 SEPTEMBER 2010 PUBLIC HEARINGS

CONTENTS• Roles and Responsibilities• Petroleum Pipelines Act• Third Party Access• Charter Provisions on Petroleum Infrastructure• Issues Raised at the 14 September 2010 public Hearing• Addressing the Issues Raised• Conclusion

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ROLES & RESPONSIBILITIES• POLICY MAKER

- Minister of Energy • LEGISLATION

- Parliament (Acts)- Minister of Energy (Regulations)

• ADMINISTRATOR- National Energy Regulator

- Petroleum Pipelines Act, 2003 ( Act No. 60 of 2003);- Department of Energy (DoE)

- Petroleum Products Act, 1977 (Act No 120 of 1977)

- The charter is not part of the Petroleum Pipelines Act

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PETROLEUM PIPELINES ACT (Pipelines Act)

• NERSA mandate derived from – Petroleum Pipelines Act read with the – National Energy Regulator Act, 2004 (Act No. 40 of 2004)

• Powers and functions include:

– Licensing the construction, operation and conversion of petroleum pipelines, storage facilities and loading facilities;

– Gathering and storing of information relating to these activities;– Undertaking investigations into these activities; and– Setting and approving tariffs in a manner prescribed.

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PIPELINES ACT

• Object 7 - promote companies in the petroleum pipelines industry that are owned and controlled by historically disadvantaged South Africans (HDSAs), by means of licence conditions to enable them to become competitive

• Section 20(1)(b) – NERSA may only impose licence conditions to promote HDSAs, in the manner prescribed

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MANNER PRESCRIBEDRegulations made by Minister ito the Petroleum Pipelines Act

– Published on 4 April 2008

– Regulation 8(1) of Regulation made i.t.o the Pipelines Act

•Applicants for licences must, and existing licensees must annually, submit information regarding commercial arrangement made for the participation of HDSAs in their activities;

•Including information regarding:

• Shareholding by HDSAs;

• Directorship by HDSAs;

• Management by HDSAs;

• Procurement of HDSAs;

• Compliance with Employment Equity Act

• Plans and actions taken for development of HDSAs6

MANNER PRESCRIBEDRegulation 8(2) of Regulation made i.t.o the Pipelines Act

NERSA must use the information gathered in such a manner so as to facilitate ownership, control or management of operations of petroleum pipelines, storage facilities and loading facilities

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THIRD PARTY ACCESS TO INFRASTRUCTUREPipelines Act• section 20(1)(n)

- Licence condition – licensee must allow third party access to uncommitted capacity in storage facilities;

•Regulation 6- storage licensee submit to NERSA & publish

their capacity allocation mechanism8

CHARTER PROVISIONS ON INFRASTRUCTURE

Access and Ownership of Joint Facilities

“Access to large infrastructure for the movement and storage of crude oil and petroleum products….is acknowledged as critical in the supply chain of emerging companies. In this regard owners of such facilities (will) provide third parties with non-discriminatory access to uncommitted capacity”

Retailing / Wholesaling

“The parties agree to create fair opportunity for entry to the retail network and commercial sectors by HDSA companies”

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ISSUES RAISED AT 14 SEPTEMBER PPC HEARING

Black Petroleum Institute– “NERSA operates in a vacuum, and just licensing”

– “NERSA is not taking up the matter of gabs within its legislation”

– Berth 6: The process followed by the National Ports Authority in allocating land for commercial /industrial use;

– Berth 6: Ownership of the facilities at the berth

– Berth 6: NERSA’s “clinical” application of the legislations;

– Berth 6: NERSA’s advice on taking its decision on appeal;

– Storage: NERSA’s claim that uncommitted capacity cannot be determined;

– Storage: Licensed but unused facilities;

– Storage: Mothballed facilities & unlicensed facilities

– “NERSA needs to increase capacity to enforce compliance”10

ISSUES RAISED AT SEPTEMBER PPC - 2

Women in Oil and Energy SA– Levy for Transnet making the WOESA investment

in Petroline a risk;

General– Problems with access to storage even when there

is access to pipelines;– Access to loading facilities.

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ADDRESSING THE ISSUES 1

BPI:NERSA operates in a vacuum, and just licensing without due consideration to industry dynamics

NERSA applies the act clinically; and

“NERSA is not taking up the matter of gaps within its legislation”

NERSA applies the Act, and takes extensive legal advice; we are not clinical nor emotional

NERSA does not operate in a vacuum • NERSA does extensive public consultation on all matters brought to its

consideration. Prior to NERSA deliberations, there are:– Calls for public comment on all matters, through 30 day notice periods;– Public hearings advertised and– The NERSA reasons for decisions are publicised, and wherein NERSA give

consideration to all issues raised during the consultation process.• The processes highlighted above indicate that NERSA actively seeks inputs

from stakeholders and interested parties, and that due considers such input.• NERSA will continue with these consultation processes, and will also seek ways

of enhancing the participation of stakeholders and interested parties. 12

ADDRESSING THE ISSUES 2BPI:NERSA

NERSA applies the act clinically; and

“NERSA is not taking up the matter of gaps within its legislation”

NERSA and the enabling legislation• NERSA is aware of some of the matters that are not adequately addressed by

the legislation.• We have taken these up with the DoE at regularly over the years• On 8 October 2010, NERSA had a further meeting with the DoE, where amongst

others the matters of the legislation were discussed;• The DoE has indicated that issues it is also aware of the issues and will initiate

processes to review the legislation in the future.

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ADDRESSING THE ISSUE 3

BPI: Berth 6: The process followed by the National Ports Authority in allocating land for commercial /industrial use;

• On 12 October 2010, meeting held with Transnet & the National Ports Authority;

• To Quote: The decision to grant the oil companies access to berth 6 was based on “an investment agreement attached to existing rights”;

– The oil companies have existing rights to berths 5 & 6, and berth 5 is to be revamped;

– Berth 6 had already been revamped, and new facilities had to be build on the berth to mitigate for petroleum security of supply

• The granting of access to berth 6 to the oil companies was according to the ports authority therefore not a flouting of their own rules and procedures.

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ADDRESSING THE ISSUES 4

Further meetings with the NPA were agreed to, to discuss inter alia:

• The Liquid Fuels Charter:

• Ports Act & the Ports Rules;

• Petroleum Pipelines Acts & its Regulations

• BBBEE

There are areas of mismatch, for example

• First come first served vs 3rd Party Access

• Common User Principles vs common carriage.

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ADDRESSING THE ISSUES 5

BPI: NERSA’s claim that uncommitted capacity cannot be determined for storage facilities;

• NERSA has held two workshops with industry & stakeholders regarding the determinations of facilities capacities.

• NERSA has also developed Allocation Mechanisms Guidelines to be used by storage facilities licensees;

• Since the September meeting, NERSA has written all licensees to submit their allocation mechanisms (and storage tariff proposals); and

• Licensees licensees have started responding.

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ADDRESSING THE ISSUES 6

BPI: Storage: Mothballed storage facilities and licensed but unused storage facilities; unlicensed operational facilities

• The matter of licensed but unused facilities, licensed or mothballed has been informally raised at various forums that NERSA attended;

• However, information on such facilities (owners, location and length nor in use) has not yet come into NERSAs possession;

• NERSA has however received a number of applications from existing licensees to have storage operations licences revoked, due to the facility not being required;

• In these instances, NERSA has requested that the licensee provide proof of alternatives explored to keep the facilities open. These include efforts made to sell off the facilities, or relocate the storage

• Also the NERSA procedure for revoking the licence applications will also involved public consultation, and the transfer of such facilities to willing and able operators will be explored.

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ADDRESSING THE ISSUES 7

Women in Energy SA - Levy for Transnet making the WOESA investment in Petroline a risk

• WOESA has invested in the construction of a petroleum products pipeline from Maputo to Kendal, inland. A licence for this construction was issued by NERSA in 2007

• As per the most recent six-monthly construction progress report from Petroline to NERSA, no all investment and construction related activities on the issue has been put on hold; while Petroline holds discussions with the Minister;

• The levy issue is a policy issue• NERSA remains committed to orderly development and the

promotion of competition and security of supply within the petroleum pipelines industry. 18

ADDRESSING THE ISSUES 8

BPI:“NERSA needs to increase capacity to enforce compliance”

• NERSA has just completed the licensing of all section 35 application, and will now be focusing on enforcing compliance to the Petroleum Pipelines Act, 2003, the regulations, the rules and the licence conditions;

• NERSA recognises that additional capacity will be required, given the number for licensed storage facilities;

• NERSA will be reviewing its staff and structure to address the need for increased strength in petroleum pipelines compliance monitoring.

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CONCLUSION

• NERSA has, subsequent to the public hearing of the 14 September 2010 taken the necessary actions to address the matters raised at the September public hearing;

• NERSA has noted the need for increased capacity within the organisation for compliance enforcement, and is making and implementing the necessary strategies;

• NERSA remains open for consultation with licensee, stakeholders and interested parties on matters of petroleum pipelines regulations; and

• NERSA remains committed to the objects of the Act, including promoting third party access, competition and the interest of HDSA

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THANK YOUwww.nersa.org.za+ 27 12 401 4600