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Infrastructure Minister's fuel farm statement

10 March 2016

The Minister for Infrastructure, Deputy Eddie Noel, has made the following statement:

We are renewing a lease for the land at La Collette. We had no contract to tender as we only own the land, not the equipment needed to run the operation. That equipment is owned by La Collette Fuel Terminal ltd (Rubis), so we could not tender the running of the fuel farm without buying the equipment.

The lease that expired on 31 January 2016 did contain a clause that allowed the States to buy the equipment from Rubis but, in order to do that, the decision had to be communicated 18 months before the end of the lease (July 2014 at the latest). In order to communicate that decision in July 2014, we would have had to decide to buy the equipment during 2012 so it could be included in the budget. 

In 2012 Rubis was upgrading its operation in line with post-Buncefield safety requirements, and there had been no representations from any other operator. It would only have been sensible to buy the equipment if there was a clear public benefit from that purchase. So a decision was not taken to buy the fuel farm equipment.

In September 2014 CICRA approved, with conditions, Rubis buying out Esso to become 100% owners of La Collette Terminal Ltd. The conditions were intended to permit fair, reasonable and non-discriminatory terms for other fuel operators wanting to use the terminal and a throughput agreement was required.

It was CICRA’s view that these conditions, together with an effective dispute resolution arrangement, appropriately addressed the risks posed by the lessening of competition arising from the acquisition.

In November 2015 a CICRA review of Jersey’s fuel market, which covered the fuel farm, found that Rubis was not making excessive profits. It found no evidence to support concerns over prices and said that the rate of return over the previous 4 years was not out of line with reasonable comparators.

Islanders are better served by a new operating agreement attached to the new lease. It gives other companies using the facilities access to arbitration and, if the operators break the competition law, CICRA has the power to correct the problem. If that isn’t sufficient, the States now have the ultimate sanction of terminating the lease and buying the equipment without any compensation for loss of future business, then alternative arrangements would be put in place.

It also allows the imposition of damages if any required safety work is not done to a tight timescale.

Competition issues will continue to be monitored closely and, if any party raises valid concerns, there is provision under the competition law to take further action and carry out detailed investigations into how the fuel farm impacts on fuel supply in the island. CICRA have already included in their work programme for 2016 a review of the effectiveness of the conditions they imposed at the fuel farm.

I received correspondence from ATF and responses have been provided. All the information received has been taken into consideration. We can’t determine whether or not quoted price comparisons (1p versus 3.4p) are valid, but CICRA have reviewed the market and said that profits are not excessive.

In the petroleum industry the key guiding principles are safety, security of supply and economic/commercial interests. All negotiations on the provision of fuel for Jersey are based on those principles and in that order.

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