A usual trip to my local gas stockist a week ago left me frustrated and disappointed.
I had been used to experiencing localised gas stockouts over winter for the past few years, but my local gas stockist informed me that his supplier has told him that this would be resolved, as there will be multiple sources of supply of gas as a result of new import facilities coming online to resolve the supply issues.
This year in particular, we relied heavily on gas for our cooking and heating needs, especially over winter.
But this year my experience is that it has been exceptionally difficult to get gas, as a result of the continued supply issues that I was informed about from my local stockist.
I even tried alternative stockists, but the issue was the same – “My supplier is not able to provide me with sufficient stock in line with my orders, and I receive partial or no supply at all.”
I then decided to try to understand where the roadblock was with the “multiple sources of supply”. There seemed to be no reason for these stockouts.
Like myself, many people have sought to invest in appliances and gas bottles to help deal with the load shedding, but were now finding that these expenses did not yield the expected result, as a result of the gas not being readily available.
My research told me there was a sole source of supply of gas (LPG) in the Western Cape.
The local refinery has not produced gas as a result of production issues for about two years, and there was only one import facility supplying gas to the Western Cape market, even though two facilities have been built.
These are operated by Sunrise Energy and Avedia Energy. Sunrise Energy seems to operate as a monopoly player in this space, and this facility clearly does not supply the demand for the Western Cape. Sunrise Energy claims to have a “licensed monopoly” that has been provided by TNPA.
However, neither TNPA nor the Ports Regulator have supported this claim. If fact a Ports Regulator judgment issued in September 2020 indicated the following: “For some strange reason Sunrise had been seized with the notion that its Section 56 agreement with the TNPA had afforded it an exclusive concession in respect of LPG import and storage in the Port of Saldanha, and that it was not obliged to afford third party interconnection.
It said as much when, in September 2017, it objected to Avedia’s application to the National Energy Regulator of South Africa (NERSA) for an amendment to its licence conditions relating to its storage facility. NERSA dismissed Sunrise’s objection by stating that Sunrise’s position promoted a monopoly in respect of LPG importation, and that NERSA was averse thereto and that it was obliged to promote competition.
In acting as it did, NERSA stated that it was “enhancing the security of the supply of LPG into the country in general and in the Western Cape in particular”.
My research further led me to understand that Sunrise Energy is not able to reliably receive ships carrying gas either due to ships arriving late or weather conditions, which prevent Sunrise Energy from being replenished.
I found that Sunrise has constructed an MBM (multi-buoy mooring) facility for offloading which the local suppliers have come to indicate is not reliable.
Even in 2021, it was reported that Vitol (Sunrise’s only customer) issued a force majeure citing poor weather conditions, which was preventing offloading at the MBM, as well as two facility malfunctions the year before.
The Sunrise Energy facility is reported to have cost R1.3 billion, which makes this the most expensive 5000 MT facility in the world, while not offering the best efficiency and reliability as a result of the construction of an MBM, which Sunrise claims TNPA required it to be constructed.
So why is Avedia Energy not able to supply gas as well?
I then found out that Avedia Energy supplied gas to the market between August 2017 to mid/end 2018, and was then prevented from doing so, which left Sunrise to operate as a monopoly.
My research also showed that Sunrise has been challenging Avedia to try to prevent Avedia from operating, but Avedia has been successful in defending its right to operate against all Sunrise Energy’s attempts, at the Ports Regulator and NERSA.
Avedia was to have been allowed to connect to a pipeline owned by Sunrise Energy, but this appears to have not taken place as yet, which means Avedia cannot receive gas from ships.
Its seems Avedia is being obstructed from connecting to this pipeline to prevent a second source of supply of imported gas, an issue which was well ventilated at the Ports Regulator.
Avedia has received an offer from the SFF (Strategic Fuel Fund) to purchase a share in the business.
A last step in this process was to receive Competition Commission approval.
A recommendation from the Commission to the Competition Tribunal was submitted providing a motivation to approve the transaction, which would seem an obvious conclusion given the operation of a monopolistic player in the space and the chronic supply issues.
But this process by the Tribunal has been delayed as Sunrise Energy has applied to intervene in the proceedings, and this was subsequently granted on a limited basis. The reasons for allowing a monopoly player to be involved is not known.
I have also managed to find out that SFF has the approval to construct an LPG pipeline of their own, which it would allow any third party to utilise to receive gas. While this is great news for us consumers, it seems that this is the issue: a monopoly player that seeks to delay this transaction which will lead to an improved gas supply.
My thoughts then also began to question the level of pricing which we are then charged as consumers, in an environment where a sole supplier exists (Sunrise Energy has just one supplier of LPG who uses the facility). Are we the consumers not being prejudiced as a result of the actions of a monopoly player?
I would like to believe that a body such as the Competition Commission will place the interests of the consumers at the forefront of its decision-making.
The current electricity constraints seem set to continue for a long time, and as domestic consumers, gas is the obvious choice to minimise the impacts in all households. This can only however become an ideal solution if there is gas readily available, and here in the Western Cape it is a tragedy that a second facility exists, but is not allowed to operate as a result of the actions of a monopoly player.
SFF and Avedia Energy could not be reached for comments. My local gas stockist however claims his suppliers are expecting that an approval for their deal will result in an immediate improvement in the supply of gas, as well as create a competitive market that will result in improved pricing, something that all consumers will be grateful for.
BUSINESS REPORT