PRESENTATION TO THE PORTFOLIO COMMITTEE ON MINERALS AND ENERGY

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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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PETROLEUM PIPELINE BILL CONTENT OF
PRESENTATION 1. PETRONETS VIEW ON REGULATION
2. NATIONAL PORTS AUTHORITY COMMENT ON
BILL 3. PETRONET SPECIFIC COMMENTS/QUERIES/
SUGGESTIONS ON BILL
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• PETROLEUM PIPELINE BILL
• PETRONETS VIEW ON REGULATION
• PRINCIPLE 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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• PETROLEUM PIPELINE BILL
• 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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• PETROLEUM PIPELINE BILL
• 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

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• PETROLEUM PIPELINE BILL
• 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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• PETROLEUM PIPELINE BILL
• SPECIFIC COMMENT/QUERIES/SUGGESTIONS
• Section 20 - Conditions of licence
• 20 (1) (d) This clause in Petronets 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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• PETROLEUM PIPELINE BILL
• PETRONET PIPELINE NETWORK DEVELOPMENT
• 1965 - MULTI PRODUCTS PIPELINE (DJP)
  DURBAN JOHANNESBURG
• 1970 - CRUDE OIL PIPELINE (COP)
  DURBAN COALBROOK
  (NATREF) KENDAL
• 1973 - MULTI PRODUCTS PIPELINE (EXTENSIONS) PR
  ETORIA, 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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PETROLEUM PIPELINE BILL 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


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1965 - MULTI PRODUCTS PIPELINE (DJP) DURBAN
LANGLAAGTE
PPT-0591
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1970 - CRUDE OIL PIPELINE (COP) DURBAN CBK
KENDAL
PPT-0592
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1973 - MULTI PRODUCTS PIPELINE (EXTENSIONS)
PRETORIA, BENONI, KLERKSDORP AVIATION TURBINE
FUEL PIPELINE (AVTUR) COALBROOK JOHANNESBURG
INTERNATIONAL AIRPORT
PPT-0593
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1978 - NEW MULTI PRODUCTS PIPELINE (DWP) DURBAN
ALRODE (VIA SECUNDA) CRUDE OIL PIPELINE (KDC)
KENDAL VREDE
PPT-0594
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1993 - MULTI PRODUCT PIPELINE EXTENSION
LANGLAAGTE - RUSTENBURG
PPT-0595
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1995 - NETWORK RECONFIGURATION (COP/DWP) SECUNDA
DURBAN
PPT-0596
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2002 - UPGRADE CRUDE OIL PIPELINE CAPACITY
DURBAN COALBROOK (5 ADDITIONAL PUMP STATIONS)
GAUTENG
WALTLOO
GAUTENG
PRETORIA WEST
SECUNDA
RUSTENBURG
WITBANK
KENDAL
AIRPORT
SOUTH AFRICA
RICHARDS BAY
MPUMALANGA
TARLTON
LESOTHO
NORTH - WEST
DURBAN
LANGLAAGTE
ALRODE
CAPE TOWN
ø406,4
MEYERTON
( 16" )
POTCHEFSTROOM
SECUNDA
ø457,2
( 18" )
KLERKSDORP
COALBROOK
SASOLBURG
STANDERTON
WILGE
AFRICA
ø457,2
VOLKSRUST
( 18" )
FREE
VREDE
MAGDALA
QUAGGA
INGOGO
STATE
VRYHEID
NEWCASTLE
KROONSTAD
SCHEEPERSNEK
FORT MISTAKE
KWAZULU /
BHT
BETHLEHEM
MAHLABATINI
VAN REENEN
NATAL
LADYSMITH
EMPANGENI
RICHARDS BAY
REFINED PRODUCTS
LESOTHO
MOOIRIVER
CRUDE OIL
ø323,8
ø406,4
( 12" )
GAS
( 16" )
INDIAN
ø457,2
AVTUR
( 18" )
HOWICK
OCEAN
DUZI
DOUBLE PUMP STATION
PUMP STATIONS
HILLCREST
MNGENI
DELIVERY STATIONS / METERS
DURBAN
INTAKE STATIONS
PPT-0597
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1. - DEBOTTLE NECK MULTI PRODUCTS PIPELINE
2. SASOLBURG - ALRODE

GAUTENG
WALTLOO
PRETORIA WEST
RUSTENBURG
WITBANK
KENDAL
AIRPORT
MPUMALANGA
TARLTON
LANGLAAGTE
ALRODE
JAMIESON PARK PIGGING STATION
( 16" )
SASOLBURG
NIGEL
SECUNDA
( 18" )
COALBROOK
NATREF
STANDERTON
NEW PIPELINE
WILGE
EX COAST
VREDE
ø457,2
VREDE T PIGGING STATION
( 18" )
FREE
VREDE
T
MAGDALA
QUAGGA
STATE
NEWCASTLE
KROONSTAD
FORT MISTAKE
KWAZULU /
BHT
N
BETHLEHEM
VAN REENEN
NATAL
LADYSMITH
RICHARDS BAY
REFINED PRODUCTS
LESOTHO
MOOIRIVER
CRUDE OIL
ø323,8
ø406,4
( 12" )
PROPOSED CHANGES
( 16" )
INDIAN
REQUIRED CHANGES LDC
HOWICK
OCEAN
DUZI
DOUBLE PUMP STATION
PUMP STATIONS
HILLCREST
MNGENI
DELIVERY STATIONS / METERS
DURBAN
PPT-0574
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• PETROLEUM PIPELINE BILL
• SPECIFIC COMMENT/QUERIES/SUGGESTIONS
• 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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• PETROLEUM PIPELINE BILL
• SECURITY OF PIPELINES
• PIPELINES DESIGNED, CONSTRUCTED, OPERATED AND
  MAINTAINED IN ACCORDANCE WITH PROVEN
  INTERNATIONALCODES ARE SAFE AND SECURE BURRIED
  INSTALLATIONS
• OPERATIONS
• ADEQUATE MONITORING AND CONTROL SYSTEMS
• INFRASTRUCTURE INTEGRITY
• PREVENTIVE MAINTENANCE
• SERVITUDE MANAGEMENT

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• PETROLEUM PIPELINE BILL
• SECURITY OF PIPELINESSERVITUDES
• HIGH RISK FROM 3RD PARTY ACTIVITY
• PHYSICAL 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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• PETROLEUM PIPELINE BILL
• SPECIFIC COMMENT/QUERIES/SUGGESTIONS
• 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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• PETROLEUM PIPELINE BILL
• SPECIFIC COMMENT/QUERIES/SUGGESTIONS
•  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 ..

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• PETROLEUM PIPELINE BILL
• SPECIFIC COMMENT/QUERIES/SUGGESTIONS
• Definitions
•   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 theright 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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• PETROLEUM PIPELINE BILL
• SPECIFIC COMMENT/QUERIES/SUGGESTIONS
• 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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• PETROLEUM PIPELINE BILL
• SPECIFIC COMMENT/QUERIES/SUGGESTIONS
• 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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• PETROLEUM PIPELINE BILL
• SPECIFIC COMMENT/QUERIES/SUGGESTIONS
• Section 20 - Conditions of licence
• 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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• PETROLEUM PIPELINE BILL
• SPECIFIC COMMENT/QUERIES/SUGGESTIONS
• Section 20 - Conditions of licence
• 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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• PETROLEUM PIPELINE BILL
• SPECIFIC COMMENT/QUERIES/SUGGESTIONS
• 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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• PETROLEUM PIPELINE BILL
• SPECIFIC COMMENT/QUERIES/SUGGESTIONS
• 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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• PETROLEUM PIPELINE BILL
• SPECIFIC COMMENT/QUERIES/SUGGESTIONS
• 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.
•  

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