Two Sasol Gas customers opt out as regulated pricing regime begins

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Londiwe Buthelezi

AT least two Sasol Gas customers have opted to be disconnected since the petroleum firm migrated from its market value pricing (MVP) methodology to a pricing regime prescribed under the Gas Act on Wednesday.

The National Energy Regulator of SA (Nersa) member responsible for piped gas, Nomfundo Maseti, said the indication was that three more customers could choose to have their piped gas supply cut off.

The two who were disconnected on Wednesday – the day of the transition from MVP to regulated pricing – are industrial users consuming gas for their own operations and only procured small volumes.

One of them was no longer interested in using gas after the change in the pricing regime while the other had only been using gas as a back-up.

“We haven’t received any complaints because those disconnected did so of their own will,” Maseti said.

While some customers had declined to sign new agreements because they were not happy with the terms of the contracts, Maseti was not sure if there were any gas distributors among them.

Afrox Gas said it sourced only liquefied petroleum gas from Sasol and since this price was already regulated by the government the pricing changes would not affect the company or its customers.

Sasol Gas said yesterday that it had concluded new contracts with 98 percent of customers. The company confirmed that supply to two customers had been decommissioned but said all others had valid agreements.

“At this stage we are not aware of any customers who are considering migrating to other energy sources,” it said.

Sasol Gas was confident that its prices were competitive with other forms of energy in South Africa and with international gas prices.

The company buys and markets domestically more than 150 million gigajoules of natural gas a year, produced in Mozambique, as well as methane-rich gas produced in Secunda. It distributes the gas to 550 industrial and commercial customers in the country.

Sasol’s exemption from the Gas Act for its Mozambique pipeline ended when its 10-year agreement with the Mozambican and South African governments expired on Tuesday.

Maseti said all Sasol Gas customers wanted to migrate from the MVP regime as there was a consensus that this pricing approach would not sustain the sector and was having a negative impact on the downstream industry.

However, some companies had wanted cost-plus pricing for gas, which Nersa could not determine as it did not set the actual price for gas, only the price ceiling.

Cornelis van der Waal, an energy analyst at Frost & Sullivan, said gas was poised to play a major role in the South African energy space, so it made sense that companies would want to get the best deal on their gas contracts. However, it was a little concerning that some companies had opted not to negotiate new contracts with Sasol.

Still, changing Sasol’s pricing method to comply with the Gas Act was unlikely to cause a mass exodus from gas use.

“With the threat of stricter environmental laws looming over big emitters, I don’t see many gas users going to coal. Converting to any other energy source would be difficult because… it’s a technical conversion and there are capital costs involved,” Van der Waal said.

On opening access to its gas pipelines, Sasol said no one else had gas to pump into the Mozambique conduit at present.

But Maseti said a number of companies had approached Nersa to learn about the legal requirements for using that infrastructure.

“Some may have approached Sasol and it told them there is no gas. But companies that have gas in Mozambique have approached us,” she said.

Van der Waal said while the entry of more players into the gas market should be encouraged, “if nobody is knocking on Sasol’s door asking for access, what does it matter if they open up access?”


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