Poor infrastructure regulation causes LPG crisis in Western Cape
CAPE TOWN - The recent shortage of liquefied petroleum gas (LPG) in the Western Cape is a crisis caused by the poor regulation of infrastructure as well as the inadvertent existence of a monopoly structure pushing prices much higher than they should be, according to experts.
The Department of Mineral Resources and Energy reported that the recent shortage of LPG was due to weather-related and refinery issues, which was confirmed by Sunrise Energy, which owns and operates the LPG terminal at the Port of Saldanha.
However, LPG experts have stated that this particular shortage was mainly because of a technically inadequate multi-buoy mooring. Once the swells are large, ships cannot berth.
“The problem is that they have built a gold-plated facility there, but the gold-plated facility doesn't work. It has wave action which is too big, it’s exorbitantly expensive and the people that pay for all this are the LPG users of the Western Cape.
“There was no need for the facility to be gold-plated in the first place. The Sunrise facility is just a gold-plated white elephant and you have got to ask yourself why,” said a source within the industry, who preferred anonymity.
Sunrise Energy chief executive Pieter Coetzee said the terminal was not gold-plated at all, and was well-engineered and constructed to the highest safety standards. “It is also commercial propane rated - not many LPG terminals are. There was no benefit whatsoever to Sunrise Energy, as the terminal owner and operator, to have constructed a terminal at a cost higher than was absolutely necessary. Our terminal throughput costs are on a par with other, similar terminals internationally,” he said.
Coetzee further said, as a matter of fact, the Sunrise throughput tariff equated to only 6 percent of the total LPG price that the consumer paid.
The source said the Sunrise facility was built in such a way that it was exposed to wave action that causes damage to the import facility, which meant that when the weather got bad it could not operate.
Coetzee said bad weather had prevented a replenishment vessel from offloading LPG on July 8. “The shortage that was experienced about two weeks ago was caused by extreme weather; the vessel could not enter the harbour for safety reasons as determined by the Transnet National Ports Authority (TNPA). Sunrise agree to the principle of ‘safety first’.
“As a secondary issue, one of the mooring buoys was damaged during the extreme weather, but was repaired within two days after the weather subsided. LPG distribution resumed after that and the Sunrise terminal operated on a 24-hour basis to be able to supply the market again. To illustrate the effects of the extreme weather, the TNPA had to stop the loading of a VLCC, unberth it, and take it out of the harbour for safety reasons during this time as well,” he said.
Responding to questions, George Tatham, the managing director at Southern Energy Trading, said LPG supply should not have been a problem in the first place, because the Western Cape had two import facilities. Tatham said the problem was that the existing competing terminal, owned by Avedia Energy, was not being allowed to operate.
Avedia Energy could not be drawn to comment.