A row is brewing between the local oil refining industry and the industry's regulator. Nobuzwe Mbuyisa, chairwoman of the South African Petroleum Industry Association, says decisions taken by the National Energy Regulator (Nersa) will endanger the viability of the refining industry in South Africa by allowing cheap oil imports.She says the government's failure to implement policy decisions affecting the industry is also a major threat to its future in the country.Her attack on Nersa comes after it recently granted a licence to Burgan Cape Terminals for the construction and operation of a fuel storage off-loading facility in Cape Town.In addition to being the industry's chief representative, Mbuyisa, 40, a chemistry honours graduate from Walter Sisulu University of Technology in Mthatha, has also since 2012 been chairwoman of Chevron South Africa, which refines and markets Caltex fuel and lubricants.Nersa has dismissed her objections to the Burgan terminal as an attempt to protect Chevron from increased competition. She says the regulator doesn't understand the industry it is supposed to regulate."We were surprised by some of the reasons they gave for their decision," she says. "They didn't say anything about ensuring we have a viable refining industry in this country in the future. They haven't put any mechanism in place to mitigate the risk to the industry created by cheap imports."The Burgan facility will enable the import of clean fuels that meet international specifications. The problem local refineries have with this is that they are not in a position to produce these clean fuels because they have not upgraded their facilities.Mbuyisa may accuse Nersa of not understanding the industry, but clearly the regulator understands the need for cheaper and greater supplies of diesel so that Eskom can power its open-cycle gas turbines and keep the lights on.Is it Nersa's fault if her members can't get their act together and produce fuel to the right specifications and at the right price?"We've been talking with government for almost five years now about a cost-recovery mechanism that would allow us to invest in refineries so that we can produce the fuels South Africa needs, or wants, to move towards," she says. "So if you make a decision today that undermines that decision, you are basically rendering the refineries unviable."She concedes that the new terminal "may mean" cheaper diesel for Eskom."You could have opportunistic traders coming in and out of the terminal who may have a cheaper product. But in the end it's also about security of supply."So while you may be able to get a cheaper product, it may not be as consistent as it would be if it came from a local refinery."Nersa has argued that it is precisely to ensure a secure supply of fuel that the new terminal is necessary. It points to the fuel shortage crisis of a few years ago when the Chevron refinery was shut down, and also the shortage of diesel for Eskom's emergency gas turbines, which led to load-shedding in November and December.But Mbuyisa says Nersa's argument that the new terminal will enhance security of supply is short-sighted."Some products are not so easy to import as diesel and gasoline. Consider the road infrastructure in South Africa and the amount of work we need to do to upgrade and build new roads. A product used in road surfacing is bitumen, which is very expensive and impractical to import. If you make decisions based on diesel and gasoline only, it could have a negative impact on the production of bitumen and the resultant downstream effects on the value chain which is supported by bitumen production."She says that in one of his recent state of the nation addresses, President Jacob Zuma confirmed the government's support for cost recovery. She concedes that his failure to mention the matter at all in his latest state of the nation address doesn't bode well for the industry."Without agreement on a cost-recovery mechanism, the future viability of the local refining industry would be at risk," she warns. And this would have major negative socioeconomic ramifications."The government can't be talking about how it wants to facilitate local production and the creation of local jobs and investment into the country and then act in a different way."There needs to be consistency between government policy and government actions. Governments that move forward are governments that can make decisions and choose a path."She says the government must be careful not to make the same mistake it did when it failed to heed Eskom's warning of an energy crisis if new power stations were not built."We are highlighting risks today that may not be apparent to some people but in five years' time will be real. We cannot afford to talk about clean fuels for another five years before deciding to implement the policy."By that time the refining industry may not be in a position to invest in these clean fuels." Has R40bn subsidy just evaporated?Mbuyisa blames the government for reneging on a commitment to give the industry R40-billion to upgrade refining facilities so that it can produce clean fuels to the required specifications."It is the physical inability of local refineries to produce cleaner fuels that is keeping us out of the game."She denies that Chevron is merely afraid of competition, but acknowledges that it won't be able to compete with Burgan Cape Terminals, which was recently granted a licence for a fuel storage off-loading facility in Cape Town."Because we're not able to produce fuel to the new international specifications, we are constrained in our ability to compete with imports that meet these specifications."If we had an acceptable cost-recovery mechanism, we'd at least be in the game. And then it would be basically an open market."The question is, why should taxpayers fork out R40-billion, which is the local industry's own estimate of how much it would cost, so that vastly profitable multinationals can compete to become even more profitable?"What we are asking for is consistency of action from the government in line with existing policy," she says.That still doesn't explain why taxpayers should subsidise highly profitable multinationals."It's not a subsidy," she says. "It's a cost-recovery mechanism. We are in a regulated environment. Any business, however profitable, will always look for a way to recover their investment."But why should the government, in other words taxpayers, finance the upgrading of their facilities?"In an environment where there is a restriction on the price we can charge consumers, it means our ability to recover fully our investment is limited," she says. "This is where the government needs to come in as a regulator to communicate to us how it will intervene to ensure that we are able to fully recover our investment."But if clean fuels can be imported at more competitive prices, such as through the new terminal Chevron and other members are objecting to so strenuously, why should taxpayers spend R40-billion to upgrade their facilities so that they can produce those fuels locally and probably at greater expense?"Perhaps that's a decision South Africa must make through its government," she says. "At this stage it has not been made."Hasn't it made that decision by allowing the terminal?"If that's the way it wants to go, then it needs to be communicated appropriately so that as businesses and industry we know what we're dealing with. But that would be most unfortunate, because if you don't have local refining it will impact on security of supply and reliability."..