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CAPE TOWN - Liquefied petroleum gas (LPG) company Avedia Energy is set to commission its R240 million Saldanha Bay plant.

The facility was now open for business, said the company’s managing director Atose Aguele in an exclusive interview at the company’s LPG-handling facility.

Business Report visited the facility recently.

In South Africa, some LPG is produced from local refineries, and additional product is imported into the country and received via sea.

Aguele said the company, which was established in 2007, would initially use a ship-to-truck and truck-to-plant method when importing gas to its storage facility, which was at this point the most cost-effective method.

Asked why they opted for this method instead of using a pipeline, which is generally a much cheaper and more efficient option, Avedia director Susan Anne Dean said the company had no pipeline of its own and they would have to use the Sunrise Energy pipeline.

However, Dean said despite the more efficient pipeline being known to be a cheaper option, the rates charged by Sunrise outweighed the ship-to-truck option.

“Using a pipeline, we would transport 500 tons of product per hour compared to the ship-to-truck and truck-to-plant’s 22 tons per hour, and it is still more economical for us to use the truck,” she said.

Addressing costs

Aguele said the company was in the process of addressing the pipeline costs.

The prices paid by consumers for imported LPG are dependent on the cost of the product, the sea freight, cost of storage and handling, plus final distribution.

Seaborne LPG is traded globally, and one of the major international pricing benchmarks is the Saudi contract price (CP). The CP is published monthly and the March 2017 CP prices for propane and butane, the main components of LPG, were $480 (R6260) and $600 a ton, respectively.

Avedia’s R250m facility has a 4000 ton capacity. In the sub- Saharan region, the most recent significant terminal was opened in March 2014 in Mauritius. This 15000 ton capacity facility was built by Petredec at an equivalent of about R600m.

When the product is handled through an import terminal, throughput charges are a common means that terminal operators recover capital costs.

In October 2012, the Department of Energy (DoE) released a discussion document on the review of the maximum refinery gate price. In that white paper, the DoE proposed a fee of R350 a ton for storage and handling at coastal terminals.

Aguele said Avedia had proposed a storage tariff with an optimum throughput of R400 to R500 a ton.

Globally, the current throughput tariffs vary from about $20 to $40 a ton.