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South Africa Anti-Trust Body Wants LPG Supply Deals Capped at 10 Years

Source: Reuters 4/24/2017, Location: Africa

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South Africa's anti-trust body said liquefied petroleum gas (LPG) producers should cap supply agreements at 10 years as deals lasting longer favoured big wholesalers and deterred new competitors entering the market. The Competition Commission launched an inquiry in 2014 into the LPG sector, where 90 percent of the wholesale market is shared between Afrox, Easigas, Totalgas and Oryx Energies.

LPG, widely used for cooking, is produced at South Africa's five refineries with competition from imports limited by regulations and inadequate infrastructure that make importing the fuel costly. "The commission found the long-term supply agreements offered by the refineries to large wholesalers have resulted in some degree of competitive advantage," it said in a report.

Some LPG deals with wholesalers had been renewed for more than 25 years and some had unlimited renewal clauses, it said, adding the terms had helped large wholesalers maintain their position "regardless of new entries."

The commission recommended a cap of 10 years on contracts and the scrapping of automatic renewal clauses. It said the new measures should be implemented between 2017 and 2019. The Competition Tribunal has the final say on recommendations.

The owners of refineries producing LPG, mainly as a byproduct, are a venture of Sasol and Total, Engen, state-run PetroSA, a venture of Shell and BP, and Chevron, which is selling its South African assets to China's Sinopec.

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