CSO Draft Regulation The Industry View... Bonang Mohale 12th November 2013

Operational Stock Strategic Stock Making a clear distinction between the purpose and attributes of two very differently motivated “stock- type” requirements- is useful in determining the right solutions for SA Choosing the right solutions is best achieved by careful initial assessment of the problems to be solved Assess the distinctions between different stock concepts Operational Stock Strategic Stock (Prudent Safety Stock) (Country Crisis Stock) Why? To cope with regular internal operational disruptions- logistics and operational- accident, strike, mechanical failure To cope with unusual crises, typically externally triggered (political, war, catastrophe) Crude and Product – Separately held and controlled, if possible close to refineries and market, released by ministerial edict What & Where? Crude and Product safety stocks comingled with operational stock- at correct levels, used in normal operations Capacity secured by oil companies, for appropriate volumes by location - as determined by demand variability, mode, size, lead time and frequency of supply Government builds capacity and strategic stock volumes over time and controls levels- various business models exist, could enable BBBEE entry via agency How & Who? Based on assessing need, affordability and ability to align with other SA priorities- NDP, BBBEE transformation and new entrants, availability of resources( funds, skills) and ensuring competitive access to supply chain Ongoing- capacity and supply chain enhancing initiatives already underway-by oil companies, logistics players, TNPL, TFR, TNPA When?

Key Issues – we request more detailed engagement opportunities on the following issues Affordability for SA consumer overall R70bn upfront cost to country( industry and government) with Recoupment requirement estimated at  20cpl for industry If Govt. also recoups, cost may reach +/- 80cpl as on-going burden to consumer Prioritisation in context of other oil industry and country initiatives: CF2, Biofuels, NMPP, Air emission compliance, Mthombo.. And other country initiatives Relative effectiveness of current and required efforts Current and further –required efforts aim to enhance Operational Stock levels and debottleneck logistics What are the real “ SA risk/need scenarios”? That require Strategic Stock Holding 4. Responsibilities and Business Models- benefits and opportunities 5. Location, Timing, Resources (funds, skills, materials) 6. Avoiding negative impacts On pace of BBBEE/ transformation in the oil industry value chain Inhibiting or delaying new entrant access to supply chain Potentially reducing competition

End Thank you