Second market inquiry focuses on energy sector (LPG)

south_africa

“Highly regulated” liquefied petroleum gas at center of second sectoral Commission inquiry

According to the South African Competition Commission, the agency has issued “Terms of Reference for the market inquiry into the Liquefied Petroleum Gas sector”:

The Commission has today issued the Terms of Reference (ToR) for the LPG market inquiry. The ToR formally launches and outlines the scope of the inquiry.
The Commission is initiating the inquiry because it has reason to believe that there may be features of the sector that prevent, distort or restrict competition. The Commission hopes that the inquiry will assist in understanding the state of competition in the LPG sector.

It comes on the heels of the first market inquiry into private healthcare, on which AAT has reported extensively.

The full Terms of Reference are available online here.  The market inquiry is expected to begin this month and is expected to be completed by October 2015.

According to the Terms of Reference, the objectives of the market inquiry include:

  • Analyzing the current regulatory pricing framework with the aim of determining whether regulation could be improved in order to limit the exercise of substantial market power by market participants;
  • Examining whether the supply bottlenecks in the liquefied petroleum gas industry may serve to create circumstances or incentives that serve to distort, prevent or lessen competition;
  • Determining whether features currently prevalent in the market increase costs of switching to a prohibitive level when customers seek to switch between resellers of liquefied petroleum gas;
  • Assessing the extent of the barriers to entry and general competition dynamics at various levels of the supply chain within the industry; and
  • Making recommendations that may serve to improve the state of competition.

The Commission has identified the participants in the market inquiry process as including business enterprises within the liquefied petroleum gas chain, such as manufacturers, wholesalers, distributors and retailers, other related enterprises, end-users, government departments, public entities, regulatory authorities, industry associations and any other stakeholders that may be able to provide information relevant to the market inquiry.

BDLive reports that approximately “300,000 tons of LPG is manufactured in SA annually, generating turnover of about R1.5bn. Six refineries, Sapref, Sasol Synfuels, PetroSA Synfuels, Enref, Chevref and Natref produce and supply LPG.

Major resellers such as Afrox, Easigas, BPSA and Total Gas distribute it bulk or in a repackaged form. Afrox, Easigas and Sapref also imported at least 6,100 tons of LPG through facilities in Richards Bay, Port Elizabeth and Durban.”

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