Petrol retail deregulation

Posted On Sunday, 26 August 2001 03:01 Published by
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THE big oil companies are worried that Pick 'n Pay may have ambitions to become a major player in their industry, and not just as a retailer.

THE big oil companies are worried that Pick 'n Pay may have ambitions to become a major player in their industry, and not just as a retailer.

Government is poised to amend the rules on the granting of service station licences, which would give more power to Phumzile Mlambo-Ngcuka, the minister for minerals and energy.

This would give the minister more control over the granting of licences, and would enable her to speed up empowerment in the retail fuel sector.

She is unlikely to want a change in the current rules, which prevent oil giants from owning and operating SA service stations.

However, the oil companies fear that the current practices might be changed to allow any group of operators of service stations, or other big customers, to move upstream within the industry by buying in supplies of refined products on the world market.

In this way, they could bypass their traditional suppliers, and they would have the potential to make big savings.

The oil companies have told government they would accept a ban on their ownership and operation of service stations. However, a memo which has been sent by the oil industry body Sapia to government requests that in a similar way there should also be a ban on retailers moving upstream within the oil industry.

Pick 'n Pay currently has 12 petrol outlets in and around its hypermarkets, and is giving them an overhaul.

The company's director of international expansion Nick Badmington said that it would be impractical for Pick 'n Pay to move into fuel refining, and he noted that there are challenges in moving fuel around the country. 'This would require enormous investment,' he said.

He shrugged off the concerns of the oil giants as 'a red herring.'

However, the position could change if Pick 'n Pay were able to expand its network of fuel retail outlets.

Meanwhile, other fuel industry customers, such as the airlines, might be tempted to arrange their own supplies if there were a change in the rules, so the oil companies plan to keep a close watch on developments.

The consultation process on the new licensing laws for service stations is due to be launched today, with the publication of a discussion document by the minerals and energy ministry.

However, a ministry spokesman cautioned last night that legislation would not be finalised until the issue had been discussed in the cabinet.

Publisher: Business Day
Source: Business Day

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