Transnet sues Sasol, Total over apartheid-era tariff deal

Transnet is suing Sasol and TotalEnergies for R1.3 billion for allegedly short-paying tariffs owed to the utility relating to the cancellation of an apartheid-era variation agreement for the transport of oil. 

The utility is demanding R815 million from Sasol and R461 million from TotalEnergies for services related to its crude oil pipeline from Durban to the Natref refinery in Sasolburg.

Sasol and Total are disputing Transnet’s right to charge them the maximum tariffs for using its pipeline. 

The dispute arises from the variation agreement Transnet concluded in 1991 with Sasol and Total, which was terminated in 2020. The agreement stipulated a formula for increases in the crude oil tariff. 

Transnet now relies on tariffs set by the National Energy Regulator of South Africa (Nersa) to charge Sasol and Total for using the pipeline. 

However, Sasol and Total argue that Transnet is under a legal obligation to discount the tariff they are charged.

Sasol and Total argue that the tariffs set by Nersa are higher than those that would have been applied under the variation agreement.

Thus, the companies claim Transnet is legally obliged to discount the tariff to the same level that would have been applied under the agreement.  

Conversely, Transnet argues that it is entitled to charge the Nersa tariffs, as they are consistent with the Petroleum Pipelines Act. 

Transnet holds a licence to operate a petroleum pipeline system and must charge users tariffs consistent with the Act.

The utility said the amount it is claiming from Sasol and Total stems from invoices charged after the agreement was terminated in 2020. 

These invoices were not settled in full as the companies claimed Transnet was legally obliged to discount the tariff. 

BusinessDay first reported that the High Court in Johannesburg recently dismissed Sasol’s application to compel Transnet to share documents related to how the tariff is set. 

Sasol said it is in discussions with Transnet over a new contract. 

Apartheid roots

In 1967, the apartheid government entered into an agreement with TotalEnergies to establish an inland oil refinery in Sasolburg due to the country’s coastal refineries being unable to meet demand. 

The agreement included a “neutrality principle” that ensured the costs of transporting crude oil from the coast to the inland refinery would not place TotalEnergies at a disadvantage compared with coastal refineries.

The agreement was amended in 1991 to provide that Transnet would increase the tariffs for the transport of crude oil by no more than a weighted average cost for the conveyance of refined petroleum products from the coast to inland markets.

However, Transnet breached the variation agreement on two occasions – once in 2008 by increasing the tariff by 10.25% and again in 2011 by increasing the tariff by 107%. 

This sparked a legal battle between Transnet, Sasol, and TotalEnergies.

In 2020, Transnet terminated the agreement, arguing that it was unfair to other oil companies such as BP, Shell, and Caltex.