PETROLEUM PIPELINES BILL PARLIAMENTARY PORTFOLIO COMMITTEE WORKSHOP 20 MAY 2003 DEPARTMENT OF MINERALS AND ENERGY Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

Background – Government’s Objectives Lower intermediate input costs (energy) to create low-cost platform for economic development – esp. in industrial heartland Reduce monopoly rents in natural monopolies (Energy Policy White Paper – Dec 1998) Gauteng are ~ 50% of all consumption Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

Background 2 – Government’s Approach Competition between and within energy carriers Protect country’s strategic interests Appropriate ‘rules of the game’ for investors Facilitate investment projects Regulation only where and to extent necessary Road, rail & pipeline Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

Government considerations Pipeline network strategic importance – eg Natref fire Most pipelines currently state-owned Additional capacity & investment needed - +/- 2007 Not clear if all tariffs market related Transparency in tariff composition eg Dbn-Secunda line 40 yrs old Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

Process to date International Energy Agency survey - April 1996 Energy White Paper – December 1998 Consultants appointed July 2000 3 stakeholder workshops Published for comment, 14 September 2000 Submissions from 8 parties Cosatu Engen (Coastal refiners) Groundwork (Environmental NGO network) Petronet Sasol SA Institute of Civil Engineers TotalFinaElf Umhaba Estates Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

Purpose of Bill Scope of Bill - Establish a national regulatory framework - Establish a Regulator as custodian & enforcer of regulatory framework - Provide for issuing of licenses Scope of Bill Crude oil Petroleum products Pipelines, storage facilities, off-loading facilities Excludes production facilities Others – Safety; investment climate; Security Storage – ie no sales to final end-users Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

Objects of the Bill Promote competition; limit anti-competitive practices Promote efficiency; effective, sustainable & orderly development from national & industry perspective Promote fair & equitable access Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

The Regulator - 1 Independent ( legal person) Functions Issue licenses for construction & operation of pipelines related facilities Gather information Set tariffs & charges Promote competition Right to expropriate land Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

The Regulator - 2 Composition To be phased into single regulator 5 members – full time Appointed by Minister for 4 year term, renewable Limitations RSA citizens; solvent; no convictions Conflict of interest – disclosure To be phased into single regulator Qualifications Relevant experience Impartial & objective Balance between continuity & capacity building Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

The Regulator - Meetings Procedures prescribed by regulator Open to public unless confidential, proprietary or commercially sensitive information discussed Decisions to be reduced to writing Record of proceedings The Regulator - Duties Act in justifiable & transparent manner Not act in own interests Act independently of undue influence or instruction Act in a manner required & expected from holder of public office Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

The Regulator - Decisions Procedurally fair Based on facts & evidence Legally consistent In public interest Written Explained Appeals to to court having jurisdiction Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

The Regulator - Support CEO & professional/administrative support staff CEO may be person employed by another energy sector regulatory authority Support to be common to eventual single regulatory authority Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

Funding Appropriation from national revenue Levies by separate legislation (has been drafted) Fees earned – eg dispute resolution Accounts to be audited by Auditor General Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

Issue of Licenses Applications advertised Objections within 30 days Decision period 60 days after replies to objections Separate licenses for each activity Existing activities must apply and get licenses Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

Licensing Conditions - 1 Regulator may impose conditions, eg Setting & approval of tariffs Period of validity – 25 years – may be relinquished Construction & operations standards HSE concerns Competition issues Non-discriminatory practices Separate management & accounts for vertically integrated companies – no cross-subsidisation Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

License conditions - 2 Access on commercially reasonable terms in transmission & storage for all Negotiated changes in routing, diameter, capacity. Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

Licenses - Miscellaneous Non-discrimination; term; amendment, revocation Regulator can amend licenses Regulator arbitration on request Standards of construction Contraventions Suspend or revoke Fines up to R2 mill / day Appeals to high Court Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

Other provisions Entry, inspection & information gathering by Regulator Voluntary resolution of disputes Compulsory of disputes Compulsory resolution of disputes Expropriation – rights of way Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

Regulations Made by Minister after consulting Regulator & inviting public comment Procedures Record keeping Forms Publishing of information Methodology to be used by Regulator Land rehabilitation Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill

General Prohibition on agreements contrary to Act Short Title – Petroleum Pipelines Act Portfolio Committee Workshop – 20 May 2003 Petroleum Pipelines Bill