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Tuesday, 11 July 2023 19:41

Competition watchdog finds Sasol charged excessive prices for gas.

By Lehlohonolo Lehana.

The Competition Commission has referred a complaint of excessive pricing of natural piped gas against Sasol Gas to the Competition Tribunal.

The commission said it found that Sasol Gas extracted mark-ups of up to 72%. The excessive pricing has continued for almost a decade and is ongoing, it said.

Natural gas is used as an alternative source of energy to electricity and is used by industrial, commercial and domestic customers. Sasol Gas is the only supplier of natural piped gas in South Africa and supplies gas to gas traders and end-users in the country through a network of transmission and distribution pipelines.

Sasol Gas sources natural gas from the Pande and Temane gasfields, in Mozambique, through an 865-km-long pipeline that transports the gas from Mozambique to Secunda. Publicly available information indicates that the Pande and Temane gasfields in Mozambique are likely to start declining in 2025 and are likely to be depleted between 2029 and 2030.

The commission relied on publicly available information to assess the prices charged by Sasol Gas to the complainants against the costs of supplying natural piped gas. This information consists of the gas landing cost information that Sasol Gas provides to the United States Securities and Exchange Commission each financial year and information recorded by the South African Revenue Service in its Trade Statistics Data, reflecting the value and volume of natural gas imports from Mozambique.

Given the landed cost of the gas molecule and the trading cost, the commission found the average mark-ups per gigajoule by Sasol Gas to the three complainants, on a conservative basis, to be excessive.

Further, the commission also found that Sasol Gas' excessive pricing to gas traders and industrial customers ultimately affected the pricing to the end consumers, as gas traders and industrial customers generally pass these costs to consumers.

Sasol Gas did not provide the commission with the relevant information it had requested during its investigation. Instead, Sasol Gas elected to file a review application in the Competition Appeal Court (CAC) challenging the Commission's jurisdiction to investigate the three complaints. 

"However, the Competition Act only affords the commission a period of one year to investigate a complaint lodged by a member of the public unless extended by the complainant. In this case, the one-year period has already lapsed, and one of the complainants has indicated that it is not amenable to granting any further extension pending Sasol Gas' jurisdictional challenge in the CAC."

Under these circumstances, and in the public interest, the commission said it had a duty to refer the complaint to the tribunal for prosecution before it lapses. 

"The commission is of the view that this matter requires expeditious resolution. If the commission is hindered by the conduct of respondents from referring complaints from members of the public to the Tribunal timeously, the rights of complainants to have their complaints heard and to obtain relief from the Tribunal will be negatively affected," it said.

Responding to the commission's referral, Sasol said that it is yet to formally receive the referral and will issue a response in due course.

In the meantime, the group reiterated that it is challenging the commission’s jurisdiction on the matter – the outcome of which will determine the commission’s ability to investigate gas pricing complaints.