LPG operators in court battle over pricing
SUNRISE Energy has hauled its competitor, Avedia Energy, into court over what it terms an “unfair advantage”, because the latter offloads liquefied petroleum gas (LPG) at “substantially lower prices”.
Sunrise, Africa’s largest open-access LPG import and storage facility, runs a R1.02 billion terminal at Saldanha. It is a public-private sector partnership between Mining, Oil and Gas Services (Mogs) and the Industrial Development Corporation (IDC).
Avedia Energy’s R240 million Saldanha Bay facility is a privately owned company funded by its owner and managing director, Atose Aguele.
In its application, Sunrise said it stood to suffer enormous irrecoverable financial losses if Avedia were permitted to continue to offload LPG at the Saldanha quayside. It wants the court to block “further authorisations for it to offload LPG” at the quayside.
Apart from Avedia, the respondents cited in the matter are the Harbour Master of the Port of Saldanha, Transnet National Ports Authority (TNPA) and the National Energy Regulator of SA (Nersa).
Sunrise raised concerns about “decisions taken by TNPA and the Harbour Master that have authorised Avedia to offload LPG from ships at the quayside for transfer to road tankers and subsequent delivery to its storage facility; actions by Avedia in offloading LPG from ships to tankers at the quayside port; the licence granted by Nersa to Avedia to operate its storage facility; and the licences granted by Nersa to Avedia for the construction of its storage facility and its related pipeline”.
In the founding affidavit, Pieter Coetzee, the chief executive of Sunrise Energy, said: “Avedia’s offloading of LPG at the quayside threatens the economic viability of the Sunrise facility.”
Sunrise said it would not have, among other things, undertaken the construction that it had if it had known that the TNPA would allow Avedia or any other party to import LPG at the berth.
Sunrise wants the court to order that the storage facility operating licence granted to Avedia by Nersa is invalid and that Avedia’s operation of its storage facility is unlawful, as well as an interdict prohibiting Avedia from operating its LPG storage facility unless it has a valid operating licence from Nersa.
Sunrise is also seeking an interdict prohibiting the TNPA and the Harbour Master from granting any further authorisations to offload LPG at the quayside and prohibiting Avedia from offloading LPG at the quay.
Coetzee said “the fact that Avedia has offered LPG at a substantially lower throughput fee than Sunrise Energy is able to offer – as a result of Avedia’s ability to offload over the berth – has already resulted in the diversion of business from the Sunrise Energy terminal”.
Coetzee said Southern Energy Trading (SET), which had an exclusive supply agreement in place with Sunrise, had breached that agreement and bought LPG from Avedia.
“Sunrise Energy had also been in discussions with SET to enter into a long-term supply agreement. SET has recently signalled that it is reluctant to enter into such an agreement, given that it can obtain LPG more cheaply from Avedia.”
Sunrise claimed that Avedia – which has offloaded about three consignments of LPG at the berth – did not need to recover substantial capital costs associated with constructing an offshore offloading facility, because it used portable, relatively inexpensive offloading equipment.
“It is able to offload LPG at a far cheaper throughput fee than Sunrise Energy is able to and can, therefore, offload its LPG at substantially lower prices. It gives Avedia an unfair advantage.” Sunrise said its fees were determined by the tariffs approved by Nersa.
According to Sunrise’s affidavit, Nersa had approved separate tariffs for Sunrise’s loading facility and storage facility, which were structured to enable Sunrise to realise a return on its investment.
In an interview earlier this year, Avedia director Susan Anne Dean said that, because the company did not have its own pipeline, it would have to use the Sunrise pipeline. However, Dean said although the more efficient pipeline was a cheaper option, the rates charged by Sunrise outweighed the ship-to-truck option.
Avedia’s Aguele expressed the hope that the tariffs charged by Sunrise for using its pipeline would be revised in the near future to make the supply of LPG cheaper, which would result in lower prices for consumers.
In South Africa, some LPG is produced from local refineries, and additional product is imported and received via sea.
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.