Review of economic regulation of liquid fuels and related products
Pamela Mondliwa and Simon Roberts
CCREDCentre for Competition, Regulation and Economic DevelopmentUniversity of Johannesburgwww.uj.ac.za/ccred
A. Overview
Description of evolving regulatory frameworkDifferent standards against which regulatory framework
can be assessed, and government reviews undertaken
Linkages between regulation of fuels and related products and economic growth
Case study of fuel regulation, competition enforcement and polymer chemicals
Case study of piped gas regulationConclusions
Objectives of the Study• Part of wider project reviewing economic regulation
• In terms of development of economy and economic policy• In terms of different rationale for regulation
• Input to measures to improve capacity of regulators• Key questions
• Effects of regulation of pricing and access in liquid fuels and distribution over time, against objectives of restraining market power and fair internationally competitive prices, ensuring security of supply, incentivizing investment, and increasing participation (including HDSA)
• Impact of regulatory framework of fuel for related products• Assessment of regulation of piped gas pricing in light of learning
from experience• Why there have been observed changes, and how does this
represent the balancing of different interests
Fuel and related products supply chain
CoalCrude Oil
PetrolDiesel
IP*LPG
Bitumen
Gas
By products and chemical feedstocks,
such as ammonia and monomers
Fuel Wholesale Polymers
Ammonium nitrate, MAP
& DAP
Fuel Retail Plastic Products
Fertilizer
Refining and synthesizing
Distribution via pipelines
and road
Why regulate fuel?Considering the rationale for regulation:
The natural monopoly problem and market powerExternalities and market failuresAssessing the private and social returns
Large capital investments, state support and geography have meant entrenched inland position of Sasol and NatrefAlso reason for coordination by state, and for longer term view
underpinning investments (lower discount rate)
Value placed on local production of liquid fuels and security of supplyDifferent basis under apartheid given threat of sanctions
Environmental concerns
Net trade: local demand outstripping supply for liquid fuels
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
-400
-300
-200
-100
-
100
200
300
Diesel Petrol
Billio
n lit
res
Performance: output (VA)
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 -
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000 Plastics (0338)
Coke and Refined Products (0332)
Basic Chemicals (0334)
Other chemicals and man-made fibers (0335)
Rm co
nsta
nt 2
005
pric
es
B. Regulatory framework: history
State took over price setting role in 1946 from industry (had previously been self regulating with industry controlling price and access)
Sought to develop local fuel productionSasol was built as part of the States oil security strategyMain Supply Agreement (1954)
constituted a government-brokered and sanctioned form of private regulation
oil companies were required to purchase all of Sasol’s production volumes pro-rata to their market shares for marketing in the inland region
The petroleum industry was also exempted from the competition law between 1988 and 2001.
Regulatory framework: changes since 1994
MSA continued to end 2003; Industry barriers were maintained
Protection continued, then removed in 2000 Had provided that if the oil price were below $23/bbl, protection If oil prices were above $28.7/bbl, windfall gains repaid
Prices regulated at In Bond Landed Cost (IBLC)Choice of majority Singapore refineries as a referenceThe use of posted prices (100% pre 1994, 80% 1994-2002) as
opposed to spot prices
Review indicated above true import parityMove to Basic Fuel Price in 2003 which used better assessments
of what fuel could be imported for; and more appropriate international sources
1994• Change in import parity price calculation (for refined product at refinery gate) from
100% posted prices to 80% posted and 20% spot prices for the selected international markets (posted prices generally higher)
• Reference refineries were changed to include wider basket (Arab gulf, Mediterranean in addition to Singapore which was generally more expensive and further away)
2000• Equalisation fund discontinued (retail price smoothing, effective SSF tariff protection, synfuel
levy, crude oil price premiums paid by SFF to circumvent oil sanctions)• Slate levy introduced as smoothing mechanism
2003• Move from IBLC to BFP basis for the import parity price calculation• Change from 80% posted prices to full spot prices (of the reference refineries) approx 9% reduction to the retail price (as % of refinery gate price)?
2010• Move from MPAR to Regulatory Accounting System (RAS)
Current regulation and institutionsPolicies & Objectives
Petroleum Products Act (1977), amended 2003 and 2005Energy White Paper (1998):
o Short and medium term objective to re-regulate the liquid fuels industry to achieve higher levels of competition and unrestricted market access
o Long term objective of deregulation (removing price and trade controls)
Replacing MPAR with RAS in 2010:To locate margins at level where costs incurred.Short coming: the model is based on Retailer-Owned, Retailer-
Operated stations (40% of market, CORO is 60%)
Some (limited) opening up to independent traders, increased in around 2011
• Institutions• DoE• Nersa• Competition Authorities
• Role played by industry in (self)regulation – SAPIA and oil companies
Progress with liberalization (against White Paper)
• Phase 1 milestones (still only partially met)• Sustainable presence, ownership/control by HDSAs of ~25% NO• Mutually acceptable arrangements between producers & marketers of fuel on the upliftment &
marketing of synfuels YES• equitable participation of small businesses in the industry NOT ENTIRELY• The introduction of suitable transitional arrangements within the Service Station
Rationalisation Plan YES• Equip regulator with capacity required to adequately monitor possible post deregulation
distortions and address these NOT ENTIRELY• arrangements to address any labour related consequences of deregulation NO• capacity to license and/or regulate oil and liquid fuel pipelines storage facilities if this is found
necessary YES
• Phase 2 milestones• Retail price regulation, import control and Government support for the Service Station
Rationalisation Plan will be simultaneously removed
• Phase 3 milestones• Government will monitor and evaluate possible problems arising from the introduction of
deregulation and will take corrective action
C. Assessing economic regulationPrevious assessments
Liquid Fuels Industry Task Team (1994)Arthur Andersen (1995)PVMWindfall Tax Team (2006/07)Nedlac Administered Prices study (2011)
ConcernsPost 1994: IBLC benchmarks and data at above actual IPP levelsSince mid-2000s: MPAR, non regulated products
Critical review
Regulation affects firm strategies, determines outcomes: developments of Sasol-Engen merger
Sasol decision to give notice on MSA - part of strategy to respond to anticipated liberalisation:Notice in 1998 for MSA to end Dec 2003OOCs do not have to buy Sasol product (so can bargain for lower prices);
Sasol can move downstreamNB MSA had only been granted limited exemption by Competition
CommissionSasol acquisition of OOC means instant distribution network – do not have to
rely on OOCs for sale of productTake bigger stake in crude oil refining – coastal refiners have surplusExplored acquisitions of various OOCs (refining and marketing/
distribution operations), decided on EngenTribunal blocked merger as found Engen acquisition reinforced market
power in inland market
Sasol-Engen (uHambo merger)Sasol decision to give notice on MSA part of strategy to respond to
anticipated liberalisation:Move downstream so as not to rely on OOCs for sale of productTake bigger stake in crude oil refiningNB MSA had only been granted limited exemption by Competition
CommissionExplored acquisitions of various OOCs (refining and
marketing/distribution operations)Tribunal found Engen acquisition reinforced market power in inland
market as:Power constrained by Sasol’s reliance on OOCs as customersSasol vertically integrating downstream would change the
bargaining game which had seen inland discounts
Sasol-Engen merger cont.• Tribunal found credible threat by Sasol to foreclose (refuse to supply)
OOCs given the merger• Vertically integrating downstream would change the bargaining game
which had seen inland discounts, as OOCs had countervailing power• Tribunal hearing revealed strategy, exclusion, bargaining games• Sasol had responded to OOCs bargaining for discounts by:
• Commit to cut back production (at Natref); by-pass OOCs thru exports• OOCs: ability to turn to coastal volumes through pipeline, rail, road• Synfuels pricing internally had reflected its poor alternatives
• Cannot easily vary production; very low variable costs• Should be willing to sell at prices far below inland IPP, absent creating
commitment to maintain these prices• Structure of transaction to lock-in inland IPP prices for 10 years• In the end, did not need merger as demand increase, and logistics
constraints – pipeline capacity and cost are critical
Windfall tax teamAgainst backdrop of structural increase in oil prices (and
other natural resources) This meant a ‘windfall’ for synfuels producers with low cost
feedstock and established capacity
Had been ‘tariff protection’ with floor price (of $23/bbl) and refund above ceiling price
Taskteam Brief (multiple objectives reflecting different priorities in government) Fiscal response to situation of higher oil pricesImproved efficiency of value chain, transmission to consumersFuture investment to meet accelerated growth, employment,
Reduce volatility of fuel priceEnergy policy objectives, including security of supply
Windfall tax team – main findingsRents/excessive profits arise at different levels:
Upstream oil & gas (linked to royalties)Excessive synfuels profits – different cost structure and IPP basis for pricing
Inland ‘must have’ fuel volumes not subject to supply competition because infrastructure constraints: regulatory reform and/or fiscal measures
Recommended: smart regulation package, together with fiscal measuresRegulation improvements: remove import control; BFP be over-hauled to get price
closer to ‘true IPP’; change petrol to price cap; regulate pipeline tariffsAddress inland market power: Until logistics constraints removed in inland market
regulation of prices at level approximating competitive market pricesSpecial levy on synfuels triggered by oil price above specified level – independent
study had recommended $28/bbl in 2000 (could be updated for inflation)Incentivising new investment in local fuels (aside from crude oil and imported natural
gas), i.e. including synfuelsNoted existing regulatory reform: MPAR being reviewed (wholesale margin);
Retail margin no longer regulatedNoted likely windfall profits from Sasol privatization, but not in ToR
Windfall tax team – what happened next?Findings noted by NT in 2007 Regulatory recommendations referred to Ministry of Minerals
& Energy (was not part of Windfall Tax process)Noted that ‘most countries’ used royalties, production sharing
agreements or state equity (UK has higher taxes over threshold?)
Noted negative effect of higher taxation on investment, and policy objective to reduce dependence on imported fuel
No further action taken regarding regulating synfuels inland prices, or progressive taxation structure
NT indicated that Cabinet ‘effectively’ released Sasol from obligation to repay subsidies in 1998, provided it continued to develop the petrochemicals sector
Cont.• Quid pro quo?
• NT welcomed Sasol commitment to feasibility of investing in Project Mafutha CTL and possibility of GTL upstream investment in refining
• Would ‘hold Sasol to its commitment to significantly expand its synthetic fuel production capacity in support of national interest in terms of fuel security and macroeconomic stability’
• Sasol promoting new Mafutha synfuels in Waterberg, but:• only with substantial government (IDC financing) and guarantees• big concerns about CO2 emissions and water use• not clear would lead to lower prices under existing regulation.
• Bottom line? No enforceable agreement, no credible commitments• Sasol not making investments in expanding refining
• investments made related to clean fuels (Project Turbo) and more recently in polymers; but, not leading to more competitive prices, simply those in its narrow interests
Criteria against which to make assessment?
Market powerPrice control?
Regulating access?Investment?Security of supply?Diversification and industrial development?
Critical assessment – learning from the past
Firms had achieved high margins, by:Effectively self regulatingLeveraging from legitimate concerns about security of supply to
custodianship being passed to industryInfluencing what measures were used (IBLC) and what data were
used to do the measurement (spot v posted; Singapore refineries etc)
Rate of return on marketing assets means ‘gold-plating’ very weak incentives for efficiency
Insiders as gatekeepers, even in trading and retailCompetition undermined, even where it would have been
possibleUnwinding historical arrangements, but legacy persists
Criteria – addressing market powerControl over infrastructure
Inland position – ‘location advantage’Lily Pipeline – was used for strategic crude oil stocks; Sasol
secured it for industrial gas to KZN (preventing it being used for bringing product inland)
Control over productive capacity and technologyPetroSA restrictions
Competition investigations:Exemption for MSA – restricting competitionInformation exchange in fuelMerger controlAllocating customers and dividing markets?Polymer chemicalsFertilizer
Assessing regulation: assessing investment and security of supply
Distinguish between:Local refining from imported crude (does this increase security?)Production from local (regional?) feedstock
Security means accessing supplies:can import, with efficient distribution
Access to distribution:Insiders have controlled and argued for centralized coordinationCompetition means greater responsiveness to demand, increased
participation, lower information requirements on regInvestment decisions in refining?
Mafutha? Umthombo? Role of PetroSA? Regional dimensions?Considering refining as part of petrochemicals production?
Regulation of fuel and economic development – adopting a wider lens
Fuel is part of petrochemicals industry, not stand aloneKey linkages with upstream feedstock: coal, oil, natural gasAnd, with infrastructure: pipelines, rail, storage Requires major investments in large scale plant and site
Consider as part of economic structureLinkagesAgencies, that is, different interests
Evaluate sector development as part of industrial policy - development of pattern of comparative advantages and capabilities
Regulation and development of fuel and chemicals
Complex and diversified sectorIndustries in this sector are highly inter-linked Well-developed upstream & underdeveloped
downstreamLargest broad manufacturing grouping in terms of value-
addedThird largest employer in manufacturing: relatively
capital-intensive upstream and more labour-intensive downstream
Performance of different parts of industry?
Average growth of plastics sector (value-added at factor cost, constant prices) compared to coke & refineries and basic chemicals (Quantec data):
1994 - 2011Plastic products: 1.8%Coke & refineries: 6.0%Basic chemicals: 4.9%Other chemicals and man-made fibers: 4.7%
2006 - 2011:Plastic products: -3.4%Coke & refineries: 4.8%Basic chemicals: 2.8%Other chemicals and man-made fibers: -0.5%
Trade deficitPlastic products net trade deficit trebled from 2002 to 2011, to R4.9bn (constant 2005
prices)Employment: more than 25% of jobs lost in plastic products since peak in 2000Plastic products should be growing more rapidly than GDP and than upstream sectors in
diversified industrialising economy
Performance of different firms?Data on listed firms indicates that mark-ups are very high in
petroleum and basic chemical products:Aghion et al. (2008) est of price mark-ups over marginal cost for
1971-2004 found coke & petroleum products 2nd highest manufacturing sector (at c330% mark-up)
Chemicals profits (net income to asset ratio) in South Africa is more than 2.5 times the world average
The adjustments made to the IPP calculations indicate that refiners have been earning above IPP prices
Windfall Tax Study indicated very high margins for synfuels producers give the prevailing crude oil priceNB PetroSA had been obliged to sell to OOCs at export parity
Downstream sectors (plastic products) performing poorly
Economic policies to support industry?
Industrial policy and incentivesTrade policyEnvironmentMining/natural resources policyRegional developmentWhat coordination between these?
E. Case study of linkages of fuels to chemicals & manufacturing: propylene and polypropylene
Context:Propylene is by-product of synfuels, produced in very high
proportions (relative to ethylene)Investments to produce propylene are part of liquid fuelsNot subject to regulationCan be combined into fuel pool (for petrol, diesel) to limited
extent and with further processing requiredThere is a ‘fuel alternative value’ which for Synfuels is relatively
low
Propylene made into PolypropyleneThis is key input to plastics, and priced at IPP level
despite net exports of around half of production
Case study: history
Sasol had apparently changed behaviour in 1995, Arthur Andersen review found:Sasol was not charging IPP for number of by-products and co-
productsPrices were in line with net export prices for various products
such as PPThis meant downstream industries were not disadvantaged
Sasol then returned to IPP by at least 2000Competition regime meant to address dominant firm
conduct, including excessive pricingDTI concern about poor growth of labour-absorbing
downstream industries, such as plastic products
Plastics trade performance: major categories
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
-300
-250
-200
-150
-100
-50
0
50
100World Trade H3917: Plastic tube, pipe,
hose and fittings
H3918: Plastic floor, wall or ceiling covering, roll or tiles
H3919: Self-adhesive plates, sheets, film etc of plastic
H3920: Plastic plate, sheet, film not cellular, reinforced
H3921: Plastic plate, sheet, film, foil, strip, cel-lular, nes
H3922: Bathroom wares, of plastics
H3923: Containers, bobbins and packages, of plastics
H3924: Plastic table, kitchen, household, toilet articles
H3925: Plastic articles for use in construction nes
H3926: Plastic articles nes
US$
mill
ions
Polymers cont.DTI requested Competition Commission to investigate polymer
pricing in 2007Commission initiation after initial research. Case referred by
Commission on excessive pricing of propylene & PPTribunal hearing concluded in 2013, decision pendingSasol arguments on definition of economic value
The advantage from cheap feedstock is a special advantage that Sasol should retain profits from
How to assess return on capital – replacement cost, shared costsCommon cause that: Sasol costs of producing PP are lower than
almost all other countries while its prices to local customers have been higher
No other policies pursued in meantime (industrial policies, regulatory measures)
Case study: Gas regulation?• Regulation is understood in terms of price and access• Prices are controlled because otherwise they would be set at monopoly
levels• Regulation thus seeks to control the rents that accrue as a result of market
failures• These rents represent the excess income that is achieved over and above
the next best alternative.• However, this excess is sometimes required to attract capital into a
particular market• This complicates the role of the regulator as they have to distinguish when
it is efficient to allow high profits and when it will retard growth• Gas Act Identifies stimulating investment and fair and competitive prices as
its objectives• Requires the regulator to make choices about which interests to prioritise
when taking its decisions
Legislation relating to the Gas MarketIn 2001, Sasol Gas needed to make investment decisions regarding
Mozambique gas, but there was no specific legislation for gas projects at the time
the South African Government and Sasol Gas concluded the “RSA Regulatory Agreement”, giving Sasol Gas a Special Regulatory Dispensation regarding exclusive rights to ROMPCO’s infrastructure for a period of 10 years from the first gas received by Sasol.
The agreement also had obligations relating to the supply of piped gas to customer and third party access to the Mozambique pipeline and Sasol’s own pipelines
The Gas Act was enacted in 2002 and enforced the RSA Regulatory Agreement mandating NERSA to control access through licensing and registrations and prices through maximum piped gas prices post the special dispensation
The special dispensation period comes to an end on 25 March 2014
Gas prices under the special dispensation
• Sasol Gas priced using the market value pricing principle (MVP)• Where MVP was defined as the determination of the gas price in
comparison with:the cost of the alternative fuel delivered to the customer’s premises (in the case of
Greenfields Customers); plus• the difference between all the operating costs of the customer’s use of the
alternative fuel and all the operating costs of using natural gas; plus• the difference between the Nett Present Value (NPV) of the capital costs of the
customer’s continued use of the alternative fuel and the NPV of the capital costs involved in switching to natural gas,
This pricing methodology produced a price cap for Sasol Gas and it could negotiate with individual customers.
Sasol Gas was allowed to offer discounts on the MVP based on annual quantity purchases
• There was an additional clause to cap the average prices• The purpose was to limit Sasol Gas revenues compared to a
benchmark• The benchmark was the European Benchmark Price established
using data from Spain, Netherlands, Belgium, Italy France and Germany.
• The Sasol volume weighted average gas price was not allowed to exceed the EBP
• In the event that it did customers were eligible for refunds from Sasol Gas
The Gas Act• NERSA to set prices for distributors, reticulators and all classes of
customers, where there is inadequate competition• requires non-discrimination prices, tariffs and other conditions• Gas Act mandates NERSA to ‘approve maximum prices for
distributors, reticulators and all classes of customers, where there is inadequate competition’
• Based on the legislative provisions NERSA developed two sets of methodologies:• Tariff Guidelines, 2009, applicable to transmission and storage
tariffs• Maximum Prices Methodology, applicable to the price for gas
energy (molecule)• In February 2012, NERSA determined ‘inadequate competition’ in
gas
Maximum prices as per NERSA (gas energy price)
Maximum price based on a weighting of prices of alternative sourcesCoal, diesel, electricity, HFO and LPG
Weights are derived by total energy consumption of the selected sources:
Coal (36.2%), diesel (24.8%) and electricity (37.1%)
Prices of sources derived from available benchmarks Coal is the FOB Richards bay priceDiesel is the BFP for diesel Electricity is the Eskom average tariff HFO is the DOE priceLPG is the maximum Refinery Gate Price (Coast)
Evaluation- Special Dispensation• The MVP effectively allows maximum exertion of market power up to
alternative.• NERSA has not found that the Sasol volume weighted average gas
price has exceeded the EBP• Is the European Benchmark appropriate considering that the Gas is mainly
sourced from Russia and Algeria (longer transmission distances)• The comparison is of SASOL customers consuming up to 10 million GJ pa and
the EBP customers consuming a maximum of 1 885 000 GJ pa • Should the EBP comparison be done on a customer category level rather than
using average prices?
Comparing International gas price by consumption category (NUS survey for 4500GJ pa comparable –SA class 3)
Sweden
South Africa
Finland
Germany
Portugal
Italy
Austria
Spain
Unighted Kingdom
France
Belgium
Netherland
Poland
Australia
United States
Canada
0 2 4 6 8 10 12
10.35
7.12
7.01
5.33
4.92
4.9
4.76
4.35
4.18
4.15
4.1
4
3.91
3.29
1.83
1.78
Cost (USc/kwh)
Surv
eyed
Cou
ntrie
s
New Dispensation:
• Weights based on total rather than industry energy consumption• FOB Export coal prices are used rather than ex-mine prices• Export grade coal used rather than grades bought by local industry• Average elec tariff used rather than the industrial tariff (or even
megaflex)
Implications of different benchmark prices
• Choice of benchmarks matters• The local the bituminous coal price is R460/t cheaper than the export FOB price
(DOE Energy price Report, 2012)• The average electricity rate 8.03 c/kwh higher than the industrial users rate (DOE
Energy price Report, 2012).
• Illustrative exercise for 2011• Calculated Maximum gas energy price for 2011 (NERSA data) –
R103.40• Using the Industry sector energy consumption balances in the calculation of the
weights alone decreases the 2011 maximum gas price by 17%• Using the industrial electricity price instead of Eskom average reduces the
calculated maximum gas price by 8%• Using the local coal price instead of FOB Richards Bay 7%
SA Energy consumption vs Industry consumptionwas
Overall consumption Industry Sector
Overall Consumption (TJ) Weights
Industry Sector consumption (TJ) Weights
Coal 759858 36.2% 460245 49.55%
Diesel 520952 24.8% 50628 5.45%
Electricity 779140 37.1% 417595 44.96%
HFO 23648 1.1% 364 0.02%
LPG 17323 0.8% 0 0.00%
2100921 928833
Illustrative exercise (2011)
Price-A: Calculated using benchmarks as stipulated in the methodologyPrice-B: Changed the thermal coal price to FOR and electricity price to industry tariff
Weights (industry) Price-A (R/GJ) Price-B (R/GJ)Coal 49.55% 15.47 3.60
Diesel 5.45% 8.49 8.49Electricity 44.96% 61.79 52.61
HFO 0.04% 0.05 0.05LPG 0% 0.00 0.00
Weighted Maximum 100% 85.81 64.75
Approved Maximum Piped Gas Price
GJ p.a
Gas Energy Price (GE) -
R/GJ forecast 2014
Reductions %
Reduction (R/GJ)
Sasol GE (R/GJ)
(26/3/2014)
NERSA approved
(26/3/2013)
Class 1 < 400 128 7.50% 9.6 R 118 R 108.86
Class 2 401 - 4 000 128 7.50% 9.6 R 118 R 108.86
Class 3 4 001 - 40 000 128 15.00% 19.2 R 109 R 100.04
Class 4 40 001 - 400 000 128 22.50% 28.8 R 99 R 91.21
Class 5 400 001 - 4 000 000 128 30.00% 38.4 R 90 R 82.38
Class 6 > 4 000 000 128 37.50% 48 R 80 R 73.56
Breakdown of impact of price decision by customer Size
Total Total in % volume % Volume
*Small Customers that will/ may face decreases 268 58% 1 872 400 3%
Small Customers that may face increases 74 16% 1 227 600 2%#Large Customers that may/will face decreases 66 14% 22 323 100 36%
Large Customers that may face increases 57 12% 36 576 900 59%Total customers 465 100% 62 000 000 100%All Customers facing price decreases 72% 39%All Customers facing price increase 28% 61%
Sasol Gas Turnover and Operating Profit
SA Energy: Sasol GasFinancial
Year 2012 2011 2010 2009 2008 2007 2006 2005
Turnover R m 6931 5445 5371 5666 4697 3702 3209 2404
Operating profit R m 2985 2578 2479 2424 1785 1936 1526 931
Operating profit
margin% 43 47 46 43 38 52 48 39
F. Conclusions?Regulatory framework continued to benefit upstream industry for
many yearsNow evident in re-assessments of margins, benchmarks usedThe ‘deals’ brokered with the industry under apartheid had a
rationale in terms of investment and support for SasolRationales have changed, but implications persist?Continued balance towards investment returns even where new
investment is unlikely Government has continued to privilege a particular view of security
of supply considerations oriented to insidersInvestment concerns motivated by Sasol appeared to trump
stronger interventions (Windfall tax)Industry structured now more skewed to upstream than in 1994Regulatory framework sets ‘rules of the game’, balancing interestsAre the outcomes consistent with required balance?