Transnet To Appeal Fuel Giant's R6bn Court Victory

Transnet will appeal the more than R6 billion damages award granted in the Gauteng High Court last week to Sasol Oil and TotalEnergies for supposedly overcharging the energy giant for use of its fuel pipelines.

According to the high court order, Sasol Oil was awarded about R3.9bn and TotalEnergies won R2.1b plus interest following the protracted court battle over Transnet Pipeline tariffs.

Sasol Oil said in a statement that interest owed on the amount was about R2.3bn

This comes after Transnet demanded R815 million from Sasol and R461m from TotalEnergies for services including usning its pipelines to convey crude oil from Durban to the Natref Refinery in Sasolburg.

The amounts charged are linked to National Energy Regulator of South Africa (Nersa) tariffs and not to a preferential pre-existing Apartheid-era variation agreement it had signed with the energy companies more than 50 years ago.

The agreement, which set the tariff and subsequent increases in the price of moving fuel for TotalEnergies to the inland Natref refinery, was signed in 1967 as part of the governments protectionist measures to secure energy supplies during sanctions.

The agreement held to a neutrality principle that companies should not be advantaged or disadvantaged by their distance from the coast.

Transnet cancelled the agreement in 2020 on the grounds that it gave Sasol and TotalEnergies preferential treatment over other companies such as BP, Shell and Caltex, now known as Altron.

It also argued that it was legally not allowed to continue the agreement as the laws have changed over the years, and Nersa now determines tariffs.

However, last week the court awarded Sasol Oil and TotalEnergies about R6bn in damages plus interest finding that Transnet had overcharged the companies for a number of years for its pipeline services.

The litigation has been ongoing since 2017 when TotalEnergies and Sasol took on Transnet in what became a protracted battle, leading to a number of issues in the matter being determined by the High Court, Supreme Court of Appeal and Constitutional Court.

In the punitive ruling handed down on June 18, Transnet was ordered to pay costs including for three counsels, the wasted costs of a postponement in October, and the fees of TotalEnergies expert.

Transnet group executive Michelle Philips said in a statement that the company was disappointed by the judgement and intended to file an appeal.

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 (agreed to) by the parties (also by way of an exchange of letters) in 1991, she said.

She said the 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 judgement 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, Phillips said.

The judgement thus has enormous implications not only for the public purse but also for Transnets ability to discharge its obligations under the applicable legislation and its licence conditions. Transnet intends to appeal the judgement and is in the process of instructing its legal team accordingly, she said.