Petrol body gets more time off from Competition Act

Cape Town – The Competition Commission has granted the South African Petroleum Industry Association (Sapia) another exemption from a section of the Competition Act, a government gazette revealed on Friday.

The body applied for a five-year extension of the exemption, but has only been exempt until the end of 2017.

Sapia is a trade organisation representing the main petroleum and liquefied petroleum gas companies in South Africa and includes companies like BP, Chevron, Engen, Sasol, Shell and Total.

The exemption from Section 4 of the Competition Act “covers a wide range of agreements and practises that, according to Sapia, are required to ensure the continuity and stability of liquid fuels supply to various sectors and geographic locations of the South African economy,” the commission explained in its gazette.

The extension of the exemptions is not new and started as a result of the 2005 fuel crisis in South Africa, when it experienced a series of disruptions to fuel supplies.

“The disruptions affected motorists, airports and certain sectors of the economy, specifically agriculture,” the Competition Tribunal explained in its 2013 ruling against Gas2Liquids, who failed to convince the tribunal to end the exemptions.

“The disruptions ranged in severity from the inconvenient to serious losses for some businesses,” the tribunal explained.

As a result, the commission has granted Sapia continuous exemptions over the years, one from 2009 to 2010 and then another from 2010 to 2015. It then gave it two six month exemptions in 2016, followed by the new exemption until the end of 2017.

Fin24 asked both the commission and the Sapia why the extensions have to keep getting extended.  Fani Tshifularo, executive director at Sapia, responded.

“We have applied for a five year exemption, but the duration of the exemption period is the prerogative of the Competition Commission,” he explained. “The exemption is for a fixed period of time and once expired you re-apply.”

He said the Sapia application requests exemption for its members to interact with each other and other industry stakeholders in order to:

- Manage and mitigate the impact of refinery shutdowns on security of overall supply.

- Monitor the country’s overall supply position, including the operational status of the country’s supply chain infrastructure.  This is done through the DoE-controlled Heads of Supply forum.

- React efficiently and effectively to disruptions or bottlenecks at any identified supply chain infrastructure which threatens to cause a disruption to overall supply.  This is done through meetings of the DoE-controlled Logistics Planning Team.

In the ruling against Gas2Liquids, the tribunal said “The minister of Minerals and Energy, concerned about the (2005 fuel) crisis, appointed a task team to investigate its causes and to make appropriate recommendations”.

“The task team, headed by an erstwhile member of this tribunal, Marumo Moerane, concluded that another crisis could occur in the second half of 2006.

“The task team identified a number of problems that led to the crisis. Amongst those relevant to the present case were the tight supply demand situation, scheduling of refinery shutdowns (specifically the possibility that refineries might shut down at the same time thus exacerbating supply shortages) poor communication amongst stakeholders and inadequate logistical infrastructure.

“The Moerane Report concluded that stability could come about only through a co-ordinated approach involving industry discussions over issues such as supply lines and production shut-downs. But the Report recognised that such co-ordination might infringe the Act. It recommended that exemptions be sought.”

In concluding, the tribunal said the agreements “provide for the regulation of a bottleneck infrastructure”.

“By its very nature this is a scarce resource that has to be rationed amongst its users by way of them reaching agreement on co-ordinating access.  

“The Commission’s decision not to make the exemption dependant on it being extended to all players in the industry cannot be faulted. If it had, the very instability that premised the need for the exemption would again eventuate.

“The Commission’s decision to provide instead for a permissive rather than mandatory regime for access by non-Sapia firms is a sensible compromise.”