Business Maverick

COMPETITION COMMISSION

Sasol Gas to be prosecuted for excessive pricing of natural gas

Sasol Gas to be prosecuted for excessive pricing of natural gas
(Photo: Waldo Swiegers / Bloomberg via Getty Images)

The Competition Commission has found that Sasol Gas, a unit of petrochemicals giant Sasol, had markups on natural piped gas of up to 72% and that ‘the excessive pricing has continued for almost a decade and is ongoing’. So it’s throwing the book at Sasol, which has challenged the commission’s jurisdiction on this matter.

The Competition Commission has accused Sasol Gas of contravening the Competition Act by excessive pricing of natural gas. The JSE-listed company is the only supplier of natural gas piped in South Africa, and that kind of monopoly often invites scrutiny.

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

“This prosecution stems from three complaints against Sasol Gas which were lodged, in early 2022, with the Commission, by Egoli Gas (Pty) Ltd (Egoli Gas), the Industrial Gas Users Association of South Africa (IGUA-SA), and Spring Lights Gas (Pty) Ltd (Spring Lights). The complainants alleged, amongst others, that Sasol Gas engaged in excessive pricing of natural piped gas in contravention of the Competition Act.”

Sasol sources natural gas from the Pande and Temane gas fields in Mozambique and the commodity is piped from there to the company’s facility at Secunda in Mpumalanga.

The commission said it “relied on publicly available information to assess the prices charged by Sasol Gas to the complainants against the costs of supplying natural piped gas” and that on a “conservative basis” the average markups were as follows:

  • IGUA-SA members were charged an excessive markup of 55%, over nine years from 2014 to 2022;
  • Egoli Gas was charged an excessive markup of 72%, over nine years from 2014 to 2022; and
  • Spring Lights Gas was charged an excessive markup of 59%, over five years from 2018 to 2022.

The commission noted that these excessive prices would generally be passed on to consumers.

It accused Sasol Gas of not cooperating with its probe.

“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,” it said.

The commission said it only had a period of one year under the Competition Act to investigate such complaints unless it was 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… Under these circumstances, and in the public interest, the Commission had a duty to refer the complaint to the [Competition] Tribunal for prosecution before it lapses.”

Sasol confirmed its challenge to the commission’s jurisdiction.

“This jurisdictional challenge is the subject of a legal review application currently pending before the Competition Appeal Court, the outcome of which will determine the ability of the Commission to investigate the gas pricing complaints,” Sasol spokesperson Alex Anderson said in an emailed response to Daily Maverick’s queries.

“Sasol Gas has yet to formally receive the complaint referral. Once Sasol Gas has had an opportunity to consider the referral, we will respond as appropriate,” Anderson said.

The market response to the news was fairly muted – Sasol’s share price in later afternoon trade was only down around 1.5%. Still, against the backdrop of an unfolding cost-of-living crisis, no company wants to be branded for excessive pricing which hits consumers. As is usually the case in such matters, the lawyers are going to be busy with this one, and they don’t come cheap. DM

Gallery

Comments - Please in order to comment.

  • Rob Fisher says:

    RENERGEN
    A natural gas producer near you!
    Much more gas to come in the next year or 2.
    Competition will be most welcome.

    Now if we could just open up the import of LPG!

  • 1957.tonycole says:

    In its haste to provide a judgement, the Competition Commission has got this entirely wrong. They do not have jurisdiction. This is clear from the Act which created NERSA. Secondly the gas price formula was changed several years ago at the behest of the IGUA-SS. Sasol accommodated the users by capping the gas price when the gas price rocketed after Putin invaded Ukraine. Sasol gas are not saints after they colluded with the regulator about 12 years ago to change the basis of pricing. The Gas Users Group won the case against Sasol in the Concourt which led to the revised pricing structure. The IGUA-SA are scoring an own goal. Sasol will simply stop exploring and developing gas supply. None of the contracts will be renewed. They have shot Sasol in the foot forgetting this foot is on their heads.

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