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S.African fuel crisis: Oil companies could owe motorists R60m

In the wake of the continuing fuel shortage in South Africa, Minister of Minerals and Energy Lindiwe Hendricks has called for fuel companies operating in South Africa to reimburse motorists for the payments they receive for storing extra stocks of petrol and diesel, meaning the industry could face a collective payment of about R60-million.

Speaking at a press conference at Parliament on Wednesday, Hendricks said it is "important for the industry to find ways to compensate consumers" -- since part of the basic fuel price reimburses petroleum companies for keeping stock up to 25 days.

"Clearly they have not done so, and this money must be refunded," she said.

South African Petroleum Industry Association (Sapia) director Colin McClelland estimates that the industry receives between R700-million and R720-million per year in payments for storage, comprising 2,5 cents per litre of fuel for stock financing and another 1,3 cents per litre for stock tankage. If the government was to decide that motorists should be compensated for one month's worth of storage, this would cost the industry collectively about R60-million.

The mechanism for repayment could simply be to lower the fuel price by an equivalent amount, treating it as an "over-recovery" in terms of the current monthly basic-fuel-price mechanism, McClelland suggested.

However, Hendricks stressed that so far the government has not yet determined how such a reimbursement could be effected or how much this would amount to.

Sapia represents all of the major petroleum companies operating in South Africa, including Shell, British Petroleum, Caltex, Sasol, Engen and Total, as well as state-owned group PetroSA. Representatives from most of the groups attended Wednesday's press conference.

The minister stated she felt "misled" by the energy companies on Monday, early in the fuel shortage crisis, when she was told by them that there was "no shortage" of fuel. Although this was true at the refineries, where production levels were normal, there were significant problems being experienced throughout the logistics and distribution systems -- at depots and retail service stations -- which the industry had not disclosed.

As a result, she had understated the problem to the public on Monday, assuring them there was not a serious shortage.

"I have been meeting with the petroleum companies to see how they can work together to alleviate the plight of consumers and minimise the impact on the economy," Hendricks said. "These companies have unreservedly apologised to both me and the public at large for the inconveniences experienced."

She said she has personally conducted an investigation into the shortages with the full cooperation of the companies, and has concluded that "there is no long-term fuel shortage in the country".

"The industry representatives have assured me that they are doing everything in their power to safely transport the fuel from the refineries and depots to service stations.

"I would strongly caution the public against trying to hoard fuel, as not only is this extremely dangerous and could result in loss of life and other damage, but it will serve no long-term benefit as the supply of fuel to petrol stations gets sorted out."

Speaking for the industry, Phillip Jordan, head of Total SA and current chairperson of Sapia, explained that most of the current shortage problems are due to panic buying of petrol and diesel across the country, resulting in a jump in demand in December to levels 20% above the daily average demand seen in November.

The country's fuel-supply systems -- pipelines, storage depots and road transport -- are struggling to keep up with such high demand, although all of the refineries are currently meeting this demand in terms of production.

"At the beginning of the week, we underestimated the impact of the extremely high demand on the system -- there are clearly logistics constraints from the refineries to depots and end-customers," he elaborated. "The industry is very aware of the constraints and has put in place extraordinary measures in certain areas of the country and at the key points."

He cited extra road transport being used in certain areas to overcome blockages, as well as extraordinary coastal shipping and imports, with oil imports being due in both Cape Town and Port Elizabeth on Thursday.

Editorial Notes: Consider the previous days story Govt denies fuel shortages. Also, and probably more significantly, there's: -- Minister Dowry Appeals to Petroleum Industry Association for Action Diesel Shortage Affecting Farming Operations - South Africa 14 December 2005 SOURCE: Ministry of Agriculture (Provincial Government of the Western Cape) www.capegateway.gov.za/eng/your_gov/3576/news/2005/dec/120534 Copy of a letter from Cobus Dowry, Minister of Agriculture in the Western Cape to the South African Petroleum Industry Association (Sapia) requesting urgent attention to certain areas in the Western Cape where a diesel shortage is affecting farming operations. This letter was also sent to the Chairperson of the Portfolio Committee on Minerals and Energy in the National Parliament. Mr Colin McClelland Director South African Petroleum Industry Association PO Box 7082 Roggebaai, 8012 Fax: 021 419-8058 Dear Sir Diesel Shortage Affecting Farming Operations I have been approached by organised agriculture in the Western Cape to assist in urging SAPIA and your associated refining and marketing companies to urgently make special arrangements for certain farming areas in the Western Cape affected by the diesel shortage. Some farming areas are currently finishing with fruit harvesting and producers are transporting various fruits to markets and fruit processing plants. They are however now severely hampered by the diesel shortage which could have the undesired consequence of huge amounts of fruit being stockpiled and not reaching the markets or plants for processing and or cooling. This might have catastrophic results for farmers and the broader farming communities in the rural areas, already burdened by drought conditions, thus affecting the local economies. It is my understanding that you are currently doing everything possible to alleviate the fuel shortage affecting various industries, but I have been requested to make a special appeal to you to do everything possible to assist in making diesel available to farmers especially in the Piketberg and Malmesbury areas where there is almost no diesel available. Your understanding in this matter is appreciated. Kind regards Cobus Dowry Minister of Agriculture Western Cape Enquiries: Alie van Jaarsveld Spokesperson Ministry of Agriculture: Western Cape --

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