Transcript Document

Infrastructure developments
in the petroleum pipelines
industry
SAPIA 20th Anniversary
18th July 2014
Dr Rod Crompton
National Energy Regulator of
South Africa
Personal opinions
They can be provocative
CONTENTS
1. Investment, boom or bust?
a) Downstream
b) Upstream
2.
3.
4.
5.
The state of economic regulation
What has regulation achieved?
Mercurial LPG
The next big things
Investment
Boom or Bust?
Downstream
4
Petroleum Infrastructure construction
Construction Licences granted by NERSA 2006-Q1 2014 Rbn
35
30
Investment R billion
4
25
20
Not started R7 bn
15
Complete & in progress
R29 bn
26
10
5
3
3
0
Pipelines
Storage & loading
5
DOWNSTREAM PRODUCT PIPELINES
• Transnet NMPP
– Cost escalations:
• 2007: R 11 bn
• 2010
R 23.4 bn
• next
????
– Delays: 3+ years, so far
• Oil majors – feeder pipelines
– delayed with NMPP
6
Storage New Capacity 2006 to Q1 2014
600,000
Capacity (m3)
500,000
400,000
Oil Majors
Merchants
300,000
200,000
100,000
Completed
In progress
Preconstruction
If all is built merchant to oil major ratio will
be 1.8:1 (new capacity only)
7
Structural changes taking place
8
DOWNSTREAM INFRASTRUCTURE
• After a long drought, mostly pipeline led,
• State crowding in the private sector to
some extent
9
Investment
Boom or Bust?
Upstream
10
UPSTREAM INFRASTRUCTURE
8 years, no pipeline applications. No oil production
What happened to
oil exploration?
Brent Oil Real (2013 Rands, Year end)
1400
1200
R
a 1000
n
d 800
/ 600
b
b 400
l 200
0
We should be more
worried about this
1994-01-01
1995-01-01
1996-01-01
1997-01-01
1998-01-01
1999-01-01
2000-01-01
2001-01-01
2002-01-01
2003-01-01
2004-01-01
2005-01-01
2006-01-01
2007-01-01
2008-01-01
2009-01-01
2010-01-01
2011-01-01
2012-01-01
2013-01-01
Oil per barrel costs
the economy >7
times what it cost in
1994, in real terms
11
UPSTREAM INFRASTRUCTURE
8 years, no pipeline applications. No production
What happened to
oil exploration?
Brent Oil Real (2013 Rands, Year end)
1400
1200
R
a 1000
n
d 800
/ 600
b
b 400
l 200
0
We should be more
worried about this
1994-01-01
1995-01-01
1996-01-01
1997-01-01
1998-01-01
1999-01-01
2000-01-01
2001-01-01
2002-01-01
2003-01-01
2004-01-01
2005-01-01
2006-01-01
2007-01-01
2008-01-01
2009-01-01
2010-01-01
2011-01-01
2012-01-01
2013-01-01
Oil per barrel costs
the economy >7
times what it cost in
1994, in real terms
12
The state of economic
regulation
13
• Infrastructure investment requires regulatory certainty
• In the petroleum value chain we have 6 different
economic regulators: (excluding HSE)
1.
2.
3.
4.
5.
6.
The Minister of Mineral Resources
The Minister of Energy
The Petroleum Agency of South Africa (PASA)
The National Energy Regulator
The Transnet National Ports Authority
The Ports Regulator
• 5 of these 6 have elements of overlapping jurisdiction.
• 3 possibly 4 of the 6 economic regulators have their
founding statutes currently under review.
14
• A golden opportunity to synchronise and
align legislation
• Crucial to get the petroleum sector going
• Can there be a coordinated review of all of
these pieces of legislation?
15
What has regulation
achieved?
16
1991/92
cents / liter
Nominal tariff
1997/98
1996/97
1995/96
1994/95
1993/94
1992/93
Real tariff (1991/92 = base)
2000/01
1999/00
1998/99
Financial year
2007/08
2006/07
2005/06
Base line
2013/14
2014/15
2014/15
2011/12
2010/11
2009/10
2008/09
2013/14
30
25
20
15
10
5
0
2012/13
Transnet's Durban to Coalbrook (Crude) Pipeline Tariff
2012/13
2011/12
2010/11
2009/10
2008/09
2007/08
2006/07
2005/06
2004/05
2003/04
2002/03
2001/02
Financial year
2004/05
2003/04
2002/03
2001/02
2000/01
1999/00
1998/99
1997/98
1996/97
1995/96
1994/95
1993/94
1992/93
1991/92
cents / liter
Pipeline tariffs
Transnet's Durban to Alrode Pipeline Tariff
30
25
20
15
10
5
0
17
Storage Tariffs
Approved StorageTariffs 119 Facilities
250
Tariff cemts/litre
200
150
100
50
0
0
1
10
100
1,000
Projected Volumes (million litres) log scale
10,000
100,000
Storage Access for 3rd parties
• Gradual improvement in
regulatory reporting
• 3rd party access volumes
are 1.7% of total volumes
excluding merchants
No. of Licenses
HDSA Reporting 2013/14
45
40
35
30
25
20
15
10
5
0
42
35
Storage Tariffs
200
180
160
140
120
100
80
60
40
20
0
186
125
41
6
No. of
storage
facilities
14
Approved
Tariffs
Tariffs not Decisions
tariffs outstanding approved in progress
Progress in 3rd party access mechanisms
50
40
30
20
10
0
Total No. of Licensees
HDSA Due 2013/14
HDSA Submitted
2013/14
Total No. of Mechanisms Received
Published on licensee Website
19
What has storage regulation achieved?
• Fresh focus on cost of capital for
infrastructure
– Too low: infrastructure provision slows
– Too high: cost burden on the economy for 70
years
• A curious “negotiation”
Licensee
Equity & Debt
Debt
Lenders
Debt
Regulator
20
Return Expectations
REIPPP Project Nominal Returns - Post tax
35%
30%
25%
20%
15%
10%
5%
0%
21
When I am abroad, I always make it a rule
never to criticize or attack the government
of my own country. I make up for lost time
when I come home.
Winston Churchill
22
Petrol ULP 93 Gauteng April 2014
cents/litre
Basic Fuels Price
%
835.59
59%
Wholesale Margin
31.00
2%
Secondary Storage
17.10
1%
Secondary Distribution
11.70
1%
0.15
0%
33.10
2%
Retail Margin
139.10
10%
RAF
104.00
7%
4.00
0%
224.50
16%
15.36
1%
0.40
0%
Petroleum Products Levy
Zone differential in Gauteng
Customs &excise
Fuel tax
Slate levy
Pump Rounding
Retail price
1416.00 100%
%
International component
+ refining margin
59
Taxes & Levies
23
Local administered prices
17
100
What type of investment
is being incentivised?
23
Petrol margins Real (2000 Rands)
80
70
cents/litre
60
50
40
30
20
10
0
2000
2001
2002
2003
2004
2005
2006
2007
Wholesale margin
Retail Margin
Wholesale + Retail
Transport
Retail + wholesale x2
Transport x3
Service Costs x3
2008
2009
2010
2011
2012
2013
2014
Service cost recoveries
• Old fashioned regulation
was CPI-x,
• Not CPI X 2 or 3
24
• Developmental State relies on infrastructure
• Is this what we wanted regulation to achieve?
• Do the resources spent on 17% of the petrol
price warrant it? Would competition do a
better job?
• Regulation of storage facilities the way
NERSA is required to do it would probably
not do well in a cost benefit analysis given
other regulators and market forces
• Regulatory impact assessment – normal &
25
due
Mercurial LPG?
26
The past:
– sluggish growth: 2002 to 2012 1.7% p.a.
– shortages & supply interruptions
The future:
– import and storage applications piling up
– growth projections by some licensees for next
10 years are 3 to 4 times that
27
The Next Big Things
28
The next big things for petroleum infrastructure
1. How will Transnet’s NMPP project turn out?
2. Will the new merchants invest?
3. Biofuels
4. Cleaner fuels 2
5. Strategic Stocks
6. LPG lift off?
5/
6
Government driven but uncertain
29
Thank you
www.nersa.org.za
30