South Africa’s anti-trust body said on Monday liquefied petroleum gas (LPG) producers should cap supply agreements at several years as deals lasting longer favoured big wholesalers and deterred new competitors entering the industry.
The Competition Commission launched an inquiry in 2014 within the LPG sector, where 90% from the wholesale industry is shared between Afrox, Easigas, Totalgas and Oryx Energies.
LPG, key to cook, is produced at South Africa’s five refineries with competition from imports tied to regulations and inadequate infrastructure which make importing the fuel costly.
“The commission found the long-term supply agreements which is available from the refineries to large wholesalers have generated some extent of competitive advantage,” it said inside of a report.
Some LPG relates to wholesalers has been renewed for upwards of Twenty five years as well as some had unlimited renewal clauses, it said, adding the terms had helped large wholesalers maintain their position “in spite of new entries.”
The commission recommended a cap of Ten years on contracts as well as scrapping of automatic renewal clauses. It said the latest measures should really be implemented between 2017 and 2019.
The Competition Tribunal provides the final say on recommendations.
The owners of refineries producing LPG, mainly to be a byproduct, really are a venture of Sasol and Total, Engen, state-run PetroSA, a venture of Shell and BP , and Chevron, which happens to be selling its South African assets to China’s Sinopec .
