Sunrise Energy, struggling operator of an LPG (liquid petroleum gas) import terminal in Saldanha Bay that supplies the Western Cape, said the Strategic Fuel Fund’s (SFF) takeover of gas importer and distributor in business rescue Avedia, will result in Sunrise having to close its doors.
This was according to RBB Consulting economist, Jacob Muller, who yesterday presented the economic case to the Competition Tribunal that the proposed merger of Avedia’s operations with that of the state-owned SFF should be prohibited.
He said the likelihood of Sunrise having to shut its 5 500 metric ton capacity LPG storage and terminal facilities in Saldanha Bay if the Avedia deal went ahead, would result in less competition, in an unnecessary duplication of facilities and less gas import capacity being available to the province.
There would also likely be a limited or no impact on gas prices for consumers, as these were determined by regulations and based on other factors, apart from storage and import costs.
Because Avedia has been in business rescue, its 2 000 metric tons jetty-based import facilities in Saldanha Bay have not been in operation this year.
Sunrise has an agreement with Vita Gas, which pays to use all of Sunrise’s capacity, although in terms of petroleum industry regulations, Sunrise is obliged to also make some of its facilities available to other gas companies.
In a separate matter the Competition Commission last month referred Vita Gas to the Competition Tribunal after finding Vita Gas guilty of restricting access to Sunrise’s import facility, and the commission sought administration, declaratory and interdictory relief against Vita Gas.
Muller said the likelihood of importers supplying SFF/Avedia with very large gas-tanker vessels, as opposed to smaller tankers currently being used, would mean the SFF/Avedia’s jetty-based facilities together with various incentives granted to gas importers, would result in most importers using the SFF/Avedia facility, because it would cost less and be based on greater volumes than using Sunrise’s facilities.
He said their data showed it would not be feasible for Sunrise to meet its largely fixed, overhead costs and debt obligations by lowering tariffs to meet the increased competition, while there were also plans to increase the Avedia’s capacity to accommodate increased demand in the future.
Ethel Teljeur, an energy expert from Lungisa Energy appearing on behalf of Avedia said, however, Sunrise had not made a profit. It already held a monopoly in the province, and it was unfair that “competition processes are being weaponised” to protect it, as its lack of profitability was a factor of its agreement with Vita Gas, not due to the proposed Avedia/SFF merger.
She said data showed there was sufficient demand for both the Avedia and Sunrise facilities, and in fact unmet demand was evidenced by the shortage of gas in the province to consumers almost every winter.
Teljeur said it was highly unlikely that very large gas-tanker vessels would ever call at Saldanha Bay as these had 40 000 tons capacity, and would need to berth for a very long time at great expense in the port to be able to offload in Saldanha Bay, even if enough storage capacity was constructed.
She said if the Avedia/SFF deal went ahead, their data showed it might take Sunrise at least four years to reach the gas volumes that Sunrise had attained in 2021.
Teljeur said assuming the SFF/Avedia deal went ahead, it might take Sunrise four years to reach its 2021 volumes again. She said Bidvests’ LPG facility in Richards Bay had a large capacity of some 20 000 metric tons, and even this facility did not use large gas vessels to offload gas.
Muller said it was not inconceivable that these very large tankers would stop at Saldanha Bay and offload at one of a number of stops in South African ports.
Teljeur said that while natural monopolies were an accepted fact in South Africa’s petroleum and energy sector, the gas import and storage sector was not one of those examples, and competitive forces needed to prevail in the sector.
BUSINESS REPORT