1 PRESENTATION TO THE PORTFOLIO COMMITTEE ON MINERALS AND ENERGY PETROLEUM PIPELINES BILL [B22-2003] BY: CHARL MÖLLER & JOHN MORGAN 4 JUNE 2003

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PRESENTATION TO THE PRESENTATION TO THE PORTFOLIO COMMITTEE ON PORTFOLIO COMMITTEE ON

MINERALS AND ENERGYMINERALS AND ENERGY

PETROLEUM PIPELINES BILLPETROLEUM PIPELINES BILL

[B22-2003][B22-2003]

BY: CHARL MBY: CHARL MÖÖLLERLLER& JOHN MORGAN& JOHN MORGAN

4 JUNE 20034 JUNE 2003

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PETROLEUM PIPELINE BILLPETROLEUM PIPELINE BILL

CONTENT OF PRESENTATION

1. PETRONET’S VIEW ON REGULATION

2. NATIONAL PORTS AUTHORITY COMMENT ON BILL

3. PETRONET SPECIFIC COMMENTS/QUERIES/ SUGGESTIONS ON BILL

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PETRONETS VIEW ON REGULATIONPRINCIPLE NOT OPPOSED - PARTICIPATED IN THE PROCESS(SEVERAL WORKSHOPS) SINCE 2000.COMMENTED ON DRAFT BILL IN 2001.

INTERNATIONAL NORM

PRESENT COMMERCIAL REGULATION AND AGREEMENTS HIGH RISK

SETS STANDARDS

OFFERS PROTECTION AGAINST POSSIBLE UNFAIR COMPETITION FROM FUTURE PIPELINES OF LOWER STANDARDS

CERTAINTY ON RULES FOR FUTURE PUBLIC AND PRIVATE INVESTMENTS

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PETRONETS VIEW ON THE BILL

MAIN IMPACT: COMMERCIAL ASPECTS OF PIPELINING

TARIFFS, CONDITIONS OF CONVEYANCE, FINANCIAL REPORTING, ETC.

TECHNICAL, HEALTH, SAFETY, ENVIRONMENT COVERED IN VARIOUS PIECES OF EXISTING LEGISLATION

BUT: OPERATING COMPETENCIES NOT ADDRESSED IN THE BILL

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PETRONETS VIEW ON THE BILL

STRATEGIC ROLE OF PETROLEUM PIPELINES IN SA AKNOWLEDGED

SUSTAINABLE BUSINESS ENVISAGED

LOW RISK OF REGULATION BEING DISRUPTIVE TO PRESENT PIPELINE NETWORK OR LEADING TO UNSUSTAINABLE SITUATION

WILL ENHANCE THE COMMERCIAL MANAGEMENT AND FUTURE DEVELOPMENT OF PIPELINE INFRASTRUCTURE

RULES SPELT OUT

INVESTMENT, RETURNS, TARIFF POLICY


NATIONAL PORTS AUTHORITY COMMENT

DEGREE OF OVERLAP BETWEEN THE POWERS OF THE NATIONAL PORTS AUTHORITY IN TERMS OF THE NATIONAL PORTS AUTHORITY BILL (B5-2003) AND THE PETROLEUM PIPELINES AUTHORITY

CONSTRUCTION AND OPERATION OF MARINE LOADING AND STORAGE FACILITIES

SBM / BERTHS / ETC ?

THIS POSITION TO BE CLARIFIED

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SPECIFIC COMMENT/QUERIES/SUGGESTIONS

Section 20 - Conditions of licence

20 (1) (d) This clause in Petronet’s opinion is restrictive on existing pipelines and has the potential to create inefficiencies and artificial capacity constraints within an existing integrated pipeline network. It will be far more efficient to convey refined products through a crude oil pipeline which has surplus capacity then to provide additional refined pipeline capacity.

Optimal utilisation of very expensive (Capital Intensive) existing pipeline capacity must be allowed for. Not only

under emergency conditions.

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PETRONET PIPELINE NETWORK DEVELOPMENT

2. 1965 - MULTI PRODUCTS PIPELINE (DJP): DURBAN – JOHANNESBURG

3. 1970 - CRUDE OIL PIPELINE (COP): DURBAN – COALBROOK (NATREF) – KENDAL

4. 1973 - MULTI PRODUCTS PIPELINE (EXTENSIONS)PRETORIA, BENONI, KLERKSDORP

- AVIATION TURBINE FUEL PIPELINE (AVTUR)

COALBROOK – JOHANNESBURG INTERNATIONAL AIRPORT

4. 1978- NEW MULTI PRODUCTS PIPELINE (DWP): DURBAN – ALBERTON (VIA SECUNDA)

CRUDE OIL RETURN PIPELINE (KDC): KENDAL – VREDE

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PETRONET PIPELINE NETWORK DEVELOPMENT

5. 1993- MULTI PRODUCT PIPELINE EXTENSION: LANGLAAGTE -

RUSTENBURG

6. 1995- NETWORK RECONFIGURATION (COP/DWP) TO INTRODUCE GAS:

SECUNDA – DURBAN

7. 2002- UPGRADE CRUDE OIL PIPELINE CAPACITY: DURBAN –

COALBROOK (5 ADDITIONAL PUMP STATIONS)

8. 2004- DEBOTTLE NECK MULTI PRODUCTS PIPELINE:SASOLBURG - ALRODE

PPT-0591

1965 - MULTI PRODUCTS PIPELINE (DJP):

DURBAN – LANGLAAGTE

1970 - CRUDE OIL PIPELINE (COP):

DURBAN – CBK – KENDAL

PPT-0592

PPT-0593

1973 - MULTI PRODUCTS PIPELINE (EXTENSIONS): PRETORIA, BENONI, KLERKSDORP

AVIATION TURBINE FUEL PIPELINE (AVTUR): COALBROOK – JOHANNESBURG INTERNATIONAL AIRPORT

1978 - NEW MULTI PRODUCTS PIPELINE (DWP): DURBAN – ALRODE (VIA SECUNDA)

CRUDE OIL PIPELINE (KDC): KENDAL – VREDE

PPT-0594

PPT-0595

1993 - MULTI PRODUCT PIPELINE EXTENSION: LANGLAAGTE - RUSTENBURG

1995 - NETWORK RECONFIGURATION (COP/DWP): SECUNDA – DURBAN

PPT-0596

2002 - UPGRADE CRUDE OIL PIPELINE CAPACITY:

DURBAN – COALBROOK (5 ADDITIONAL PUMP STATIONS)

DOUBLE PUMP STATION

DELIVERY STATIONS / METERS

PUMP STATIONS

REFINED PRODUCTS

CRUDE OIL

GAS

AVTUR INDIANOCEAN

DURBAN

HOWICK

LADYSMITH

BETHLEHEM

VOLKSRUST

NEWCASTLEKROONSTAD

KLERKSDORP

POTCHEFSTROOM

WITBANKKENDAL

WALTLOOPRETORIA WEST

SECUNDA

STANDERTON

ALRODE

COALBROOKSASOLBURG

SCHEEPERSNEK

MAHLABATINI

HILLCREST

TARLTON

LESOTHO

NATAL

FREE

STATE

GAUTENG

ø457,2

ø406,4ø323,8

QUAGGA

ø457,2

N

RUSTENBURG

MAGDALA

NORTH - WESTMPUMALANGA

KWAZULU /

AIRPORT

VRYHEID

RICHARDS BAY

CAPE TOWN

DURBAN

GAUTENG

SOUTH AFRICA RICHARDS BAY

PPT-0597

( 18" )

( 16" )( 12" )

( 18" )

ø457,2( 18" )

ø406,4( 16" )

BHT

INTAKE STATIONS

AFRICA

MEYERTON

MNGENI

VAN REENEN

LESOTHO

SECUNDA

DUZI

INGOGO

WILGE

LANGLAAGTE

FORT MISTAKE

EMPANGENI

VREDE

MOOIRIVER

2004 - DEBOTTLE NECK MULTI PRODUCTS PIPELINE:2005 SASOLBURG - ALRODE

DOUBLE PUMP STATION

DELIVERY STATIONS / METERS

PUMP STATIONS

REFINED PRODUCTS

CRUDE OIL

PROPOSED CHANGES

REQUIRED CHANGES LDC INDIANOCEAN

DURBAN

HOWICK

LADYSMITH

BETHLEHEM

NEWCASTLEKROONSTAD

WITBANKKENDAL

WALTLOOPRETORIA WEST

SECUNDA

STANDERTON

ALRODE

COALBROOK

HILLCREST

TARLTON

LESOTHO

NATAL

FREE

STATE

GAUTENG

ø406,4ø323,8

QUAGGA

ø457,2

N

RUSTENBURG

MAGDALA

MPUMALANGA

KWAZULU /

AIRPORT

RICHARDS BAY

PPT-0574

( 16" )( 12" )

( 18" )

( 18" )

( 16" )

BHT

MNGENI

VAN REENEN

DUZI

WILGE

LANGLAAGTE

FORT MISTAKE

VREDE

MOOIRIVER

“T”

VREDE

NIGELSASOLBURG

NATREF

EX COAST

NEW PIPELINE

VREDE “T” PIGGING STATION

JAMIESON PARK PIGGING STATION

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Section 27 - Health, Safety, Security and Environment

The Bill is lacking with respect to the issue of pipeline security. Petronet currently experiences major difficulties in managing the activities of 3rd parties both in and adjacent to its pipeline servitudes. Encroachments by informal developments as well as the increasing number of encroachments inadvertently approved by various local

authorities pose a major risk to health and safety the environment as well as the disruption of the essential services. Consideration should be given to including enabling legislation in this Act

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SECURITY OF PIPELINES

PIPELINES DESIGNED, CONSTRUCTED, OPERATED AND MAINTAINED IN ACCORDANCE WITH PROVEN INTERNATIONALCODES ARE SAFE AND SECURE BURRIED INSTALLATIONS

OPERATIONSADEQUATE MONITORING AND CONTROL SYSTEMS

INFRASTRUCTURE INTEGRITYPREVENTIVE MAINTENANCESERVITUDE MANAGEMENT

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SECURITY OF PIPELINES:SERVITUDES

HIGH RISK FROM 3RD PARTY ACTIVITYPHYSICAL DAMAGE

ILLEGAL ENCROACHMENT/ACTIVITIES IN SERVITUDES- COMPLEX AND TIME CONSUMING PROCESS TO STOP OR REMOVE

ACTIVITIES ADJACENT TO SERVITUDE AFFECTING INTEGRITY OF PIPELINE

PIPELINE OWNER HAS NO JURISDICTION BEYOND THE SERVITUDE LIMIT

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Section 34 - Prohibition of agreements contrary to Act

34 (1) It is not clear from this clause whether existing agreements will be dealt with in terms of 34 (2) or 20 (1) (f) (ii).

EXAMPLE:

Tariff link agreement - Petronet/Natref

•3 Year Termination Clause

Current Conveyance Agreement – Petronet/SA Oil Industry members

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Section 22 - Term of Licence

22 (5) It is recommended that this clause be amended to make provision for the transfer of a licence in the case of State owned entities. A possible mechanism for this is the Transnet Legal Succession Act.

EXAMPLE: TRANSNET (THE LEGAL ENTITY)WILL NEED TO HOLD THE LICENCE. NOT PETRONET - THE PIPELINE BUSINESS ……..


SPECIFIC COMMENT/QUERIES/SUGGESTIONSDefinitions

Pipeline - This is a very broad definition based on product type.

Consider other possible parameters such as diameter, length, pressure, etc

Section 10 - Decisions of Authority

Recommend the“right of appeal” be included as per 25 (3).

Section 15 - Licences

15 (1) Recommend “person” be replaced with “owner”.

This will clear up any uncertainty as to who the licencee is.

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Section 16 - Application for licence

16 (2) (c) Given the importance it is considered essential that applicants also be required to demonstrate their “Operating” abilities.

16 (3) It is requested that the following be considered.

The Authority will at all times adhere to the requirements of the “Access to Information Act” in terms of obtaining/using/controlling and making public any information obtained from any applicant .

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Section 18 - Particular Information to be supplied by the applicant

18 (a) This clause is unacceptable unless:

i) no additional costs are incurred by the licensee, or

ii) the authority makes provision for such additional costs when approving tariffs.

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20 (1) (f) (i) In order to comply with this requirement customer “needs” will have to be defined within the Act. Capacity not the only consideration in a pipeline.Consideration to be given to Technical and product compatibility, minimum batch (slug) sizes, frequency of utilisation, etc. Suggested change is to include the following:

“…………………to their needs and within the operational constraints of the pipeline system/network”.

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20 (1) (r) & (s) Why tariffs would be set by the Authority for petroleum pipelines and only approved for storage facilities is not understood.

20 (2) (a) to ( C) : Should the right to appeal as allowed for in 25 (3) (2) not also be included in 20 (2)?.

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Section 21 - Non-discrimination

The terms “objectively justifiable” and “identifiable” are inadequately descriptive and need to be expanded to ensure compliance with this requirement

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Section 24 - Revocation of licence on application

24 (2) It is unreasonable to expect an uneconomical business to continue for 12 months after notice.

Suggest that the period of notice on licensed activities be reduced from 12 months to 3

months in the case of uneconomical services and 6 months for any other reason

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Section 27 - Health, Safety, Security and Environment

This clause has indeterminable financial and legal liabilities for an undefined period. In order to facilitate and encourage investment, parameters will need to be fixed or limited.

Documents

1 PRESENTATION TO THE PORTFOLIO COMMITTEE ON MINERALS AND ENERGY PETROLEUM PIPELINES BILL [B22-2003] BY: CHARL MÖLLER & JOHN MORGAN 4 JUNE 2003