SOL Petroleum (Barbados) Ltd, part of the hemispheric petroleum and energy group founded by Sir Kyffin Simpson, has been found liable for abusive business practices that could have implications for national security, according to a ruling by the island’s Fair Trading Commission (FTC).
In a four-page landmark decision dated June 14, the FTC ordered SOL to “cease the abusive practices” and make restitution to the state-owned Barbados National Oil Company (BNOCL) which had complained of “exclusionary abuse”.
The ruling comes after an FTC investigation into the practices of SOL, a significant player in the Caribbean and Central and South American energy markets.
The FTC found that SOL had, without notice, decommissioned one of its heavy fuel oil (HFO) storage tanks at its Holborn, St Michael facility leased by BNOCL and delayed its replacement. BNOCL also accused SOL of delaying repairs to the pipeline running from Holborn to the Bridgetown Port Inc. (BPI) which negatively affected ships relying on BNOCL’s bunkering services at the port.
The state company had further claimed that the actions of SOL in the storage and transport of its HFO are injurious to its operations, national security and competition in general.
“The impact of SOL’s action is believed to be far-reaching, given HFO is an essential component in both the generation and provision of electricity to householders and businesses,” the FTC found.
“The aforementioned actions threaten BNOCL’s ability to fulfill its obligation to clients, and have negative repercussions on the market for the supply of HFO to the Barbados Light and Power Company, the market for the supply of storage of HFO, and the market for the supply of HFO to the BPI,” the regulator ruled.
The FTC further declared the Holborn facility “an essential facility” – underscoring its importance to national energy security – and said it may appoint a monitor to oversee compliance, with SOL responsible for associated fees.
The commission concluded that SOL had breached the Fair Competition Act by “denying its competitor access to adequate facilities at its Holborn site for the storage of heavy fuel oil”. It also found that SOL denied BNOCL access to the storage facilities at its Holborn site and to the pipeline that connects the Holborn site to the Bridgetown Port, “except at prices that are significantly less favourable to the extent that the prices do not correspond with the service to be delivered”.
The FTC has directed SOL to take steps that would allow BNOCL to honour its supply contract with BLPC and the Bridgetown Port without causing any disruption in the continuous supply of heavy fuel oil to either party.
Within six months, SOL must restore its supply inputs to BNOCL that would allow BNOCL to honour its supply contract to its clients to the level it did before the removal of the tank at Holborn. As an interim measure, SOL must “immediately provide BNOCL unrestricted access to Tank #3 (50 000 [barrel] HFO tank)” within one month.
Additionally, SOL must submit bimonthly progress reports, immediately revert the throughput fee to the amount that existed before the removal of the tank, and “start repairs to the Holborn-BPI pipeline within six months and complete those repairs within 18 months of the start of repairs”.
The FTC explained that these directives aim “to return the subject markets to a baseline condition that would have prevailed had it not been for SOL’s anticompetitive conduct”.
SOL has been given the opportunity to respond to the measures and timetable, with the commission to determine their acceptability.
The potential appointment of a monitor to oversee SOL’s compliance with the decision represents a significant step in ensuring the company adheres to fair competition practices. This move demonstrates the FTC’s efforts to maintain a level playing field in the energy sector.
The FTC’s decision has not only immediate implications for SOL and BNOCL but also broader ramifications for the energy market.
emmanueljoseph@barbadostoday.bb
