Thursday, 25 July 2024
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Transnet points to ‘neutrality principle’ in response to oil companies’ damages award

Home Government & Municipal Transnet points to ‘neutrality principle’ in response to oil companies’ damages award

TRANSNET’S pipelines business unit transports crude oil for both Sasol and TotalEnergies from Durban to the Natref crude oil refinery which is jointly owned by Sasol (64%) and TotalEnergies (36%) located in Sasolburg.

According to Sasol, in 2017, the company followed TotalEnergies in instituting legal action against Transnet for damages arising from Transnet’s breach of its obligation to set pipeline tariffs for conveyance of crude oil in terms of an agreement that had been entered into between the parties in 1991. The result of the breach was that Transnet overcharged Sasol Oil for the conveyance of crude oil over a number of years.

The litigation between the parties has been ongoing for years and a number of issues in the matter have been determined by the High Court, Supreme Court of Appeal and Constitutional Court.

The remaining issues in the litigation proceeded to trial in the High Court of South Africa from 15 April to 3 May 2024. On 18 June 2024, judgement was handed down by the High Court in Sasol Oil and TotalEnergies’ favour. Damages in the amount of R3,9 billion plus interest amounting to approximately R2,3 billion were awarded to Sasol Oil.

Transnet’s group chief executive, Michelle Phillips said that Transnet is disappointed by the judgment.

Phillips explains that the case concerned the application of an agreement (which took the form of an exchange of letters between the parties) concluded in 1967 between Total, Sasol and the South African government at the time, which was varied by the parties (also by way of an exchange of letters) in 1991. This agreement, which has since been cancelled, had as its central feature that, in calculating the tariff from Durban to the Natref refinery, the so-called “neutrality principle” would apply in terms of which Natref would neither be advantaged nor disadvantaged by its inland location.

“The judgment handed down by the High Court concerns the application of the neutrality principle in the face of uncontested evidence that Total and Sasol made vast transport profits during the claim period. The judgment thus has enormous implications not only for the public purse but also for Transnet’s ability to discharge its obligations under the applicable legislation and its licence conditions. Transnet intends to appeal the judgment and is in the process of instructing its legal team accordingly,” said Phillips

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