unclear policies and regulations on the funding of huge infrastructural investments in the energy sector had made planning for Transnet's new R12 billion multiproducts pipeline very difficult, Charl Möller, the chief executive of Transnet Pipelines, said last week.
The National Energy Regulator of SA (Nersa) last month refused the state-owned utility's application for a 74 percent tariff hike, stating that it had no authority to set tariffs for existing pipelines in order for the licensee to recover costs for a pipeline that had yet to be built.
Nersa instead cut Transnet's pipeline tariffs by 10 percent.
Möller said the decision meant Transnet Pipelines was spending R10 million a day while earning an income of just R3.6m a day. "Luckily I'm part of the Transnet group. If it hadn't been for that, we would seriously have had problems," he told an SA National Energy Association conference.
The Nersa ruling had added to Transnet's already huge challenges from a funding and rating perspective, he said.
The transport utility has a five-year, R80bn infrastructural expansion programme, and is sourcing debt funding both locally and overseas.
Möller said a solution for the pipeline funding problem would be found. "We've got no choice - it's in the national interest." The utility is reportedly in talks with the government about alternative funding options, from state assistance to public-private partnerships.
He hinted that an "equity" solution could be found, but did not want to "give away a secret".
The planned multiproducts pipeline between Durban and Johannesburg is designed to ease a refined product shortfall in the inland market. About 2 billion litres a year is transported inland by road and rail.
Möller said the effect of pipeline tariffs on fuel prices was small - about 14c a litre, or 2 percent of the price. Even a doubling of the tariff would not add a great burden to motorists.
Oil companies like BP and Chevron objected to Transnet's tariff increase application as the locational advantage of oil refiners like Sasol and Natref would be worth billions of rands, due to the zone differential component of fuel prices.
Möller said he was often asked why the pipeline was so expensive. A key factor was that the 24-inch line was too big to go into clients' depot facilities and had to run between terminals.
An incorrect impression had been created that Transnet had delayed the project deliberately because of misalignment with Nersa on its funding.
Möller said the revised plan for completion was still within the realms of its licence.