Johannesburg – Responding to an article titled “Diesel or darkness: PetroSA charges Eskom unfair prices,” PetroSA in a statement has denied the allegations, saying the report was designed to take focus away from the real issues and challenges that our economy has in relation to power generation.
PetroSA said it saw fit to respond to the article, which seems not to be well versed in appreciating the dynamics and pricing structure in the product market and how this is linked to product supply nominations.
“It is important to first provide context and dispel the misinformation that is being peddled in this article in relation to the Eskom supply of diesel by PetroSA. It is important to note that the contractual terms between PetroSA and Eskom are based on the Basic Fuel Price (BFP) pricing mechanism. This ensures that PetroSA sells to Eskom in line with the M-1 BFP,” said PetroSA.
The state-owned enterprise says it has a thorough understanding of how the product market works. PetroSA engaged Eskom in October 2022, requesting that Eskom provide it with at least a 3-month forecast for its demand for diesel.
“This was mainly due to the losses that PetroSA was suffering due to the erratic or spot nature of the nominations of product volumes from Eskom,” added PetroSA.
“The SEO further indicated that the request for a 3-month forecast from PetroSA was informed by Eskom’s increasing burn rate, which clearly indicated to us that the power generation challenge was deepening.
"This meant that spot nominations would have been a thing of the past had PetroSA’s request been acceded to, and by implication, would have led to better landed product prices, resulting in both Eskom and the South African economy benefiting.“
In relation to the November 2022 supply to Eskom, PetroSA once again had prompt or spot demand from Eskom. This prompt demand resulted in PetroSA having to buy two spot cargoes that were not linked to M-1 pricing.
“The published BFP pricing in November 2022 was based on the preceding month, which resulted in the pricing exposure,” read the statement.
PetroSA also said that in relation to December 2022, they took a position in November 2022 and bought a cargo priced in November 2022, which would be aligned with the December 2022 published BFP.
“However, Eskom did not purchase any volumes in December 2022 from PetroSA and only requested volumes in January 2023. This meant that PetroSA was now exposed to a flat price with a huge price exposure to a January 2023 published BFP. The January 2023 BFP dropped by 140 scpl, and this drastic drop exposed PetroSA to heavy losses; hence, the price of volumes sold to Eskom was not aligned with the January 2023 published BFP,” said PetroSA.
The company said that they make this point in relation to the next two months to indicate the importance of providing a minimum 3-month forecast so that there is no pricing exposure and that volumes can be landed at the most favourable terms and price.
“There is no substitute for planning demand to produce a forecast when it comes to the demand side of the product market; otherwise, spot prices will prevail. It is for this reason that PetroSA advises its clients that forecasting and planning are critical to ensuring that cargo prices can be locked at favourable terms,” the company added in a statement.
PetroSA says it reiterates that it is under no obligation to share commercial terms entered into between PetroSA and its customers.
“It is also important to state that PetroSA and Eskom will continue working together to find amicable ways to reduce load shedding, which is caused by high levels of breakdowns and limited emergency generation reserves,” said PetroSA.
The Star