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Burgan gets go-ahead to develop Cape Town fuel storage facility

17 Jun 2015 10:48 GMT

Plant is to include 118,000 cubic meters of storage and a 12-metre jetty.



Burgan Cape Terminals (Pty) Ltd has been granted environmental authorisation by South Africa's Department of Environmental Affairs and Development Planning (DEA&DP) to develop its independent fuel storage and distribution facility at the Eastern Mole in the port of Cape Town.

The plant is to include 118,000 cubic meters of storage and a 12-metre jetty to accept vessels with drafts of up to 12 metres.

The terminal will also be directly connected by pipeline to the inland Chevref refinery. The cost of the project is estimated at $61 million.

Commenting on the news, CEO Muziwandile Mseleku said: "We are very pleased with the decision and would like to thank the environmental authorities for conducting an independent, thorough and professional process. DEA&DP's decision is a vote in favour of security of fuel supply in the Western Cape and for greater competition.

"The country's evident need for the independent storage and distribution facilities is supported by the fact that we have already signed up a number of customers. We hope to commence with construction as soon as all the necessary permits and licences are in place."

Towards the end of last year, Transnet Holdings SOC Ltd., South Africa's state-owned ports and rail operator, awarded Burgan the tender to develop the facility.

During the environmental impact assessment (EIA) application process, Chevron, the dominant player in the Western Cape fuel market, raised concerns about the impact of the proposed Burgan facility on the existing local fuel industry.

This resulted in Burgan filing a complaint with South Africa's Competition Commission against Chevron for engaging in "exclusionary conduct".

On February 10, Burgan said in a statement that Chevron had based its objection to the Western Cape development on the grounds that it would result in the closure of its Cape Town refinery because imports would increase.

Explaining the reason for developing the new facility, Burgan said at the time: "We see Burgan as enhancing the petroleum storage capacity in the Western Cape. Burgan is a fuel storage company that can potentially provide space to the incumbents. It is not a refinery or petroleum wholesaler and is therefore not in direct competition with Chevron. Companies that rent storage space from Burgan will mainly off-take their products from the Chevron Oil refinery which is the main supplier of fuel to the Western Cape. In case of product shortfall, customers have the option to import product subject to the import regulations governing the fuel industry.

"Oil companies in the Western Cape will and intend to continue to support Chevron's supplies in preference to imports and coastal supplies even if the Burgan Terminal is installed. This is because the supply of domestic fuel in the market is not only cheaper than imports and coastal supplies, but local refineries, including Chevref, are protected by legislation imposed by DOE and ITAC which effectively ensures that domestic fuel supplies are exhausted before imports are approved.

"South Africa is likely to be energy constrained for many years to come, so the more contingencies we put in place to address this energy challenge the better. Secure and plentiful energy means a growing economy and much needed jobs."

Mseleku added this week: "There is space for everyone. Oil companies in the Western Cape will and intend to continue to support Chevref's supplies in preference to imports and coastal supplies when the Burgan Terminal is installed. We are a fuel storage company, not a refinery. Burgan has never been a direct competitor to Chevron.

"Our vision when we started planning the construction of Burgan Cape Terminals has always been about creating more options for petroleum storage in the Western Cape market. Our aim has been to act as a conduit for existing and new entrants into the fuel market. We are sure that this facility will create new opportunities in the petroleum industry that will translate into benefits for the general public and local businesses."

Burgan is 70 percent owned by terminal operator VTTI BV, a venture between energy and commodity trader Vitol and shipping company MISC.






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