South African Commission Wants Greater Competition in LPG Market

  • Antitrust commission completes 2-year industry investigation
  • Commission recommends end to long-term contracts and renewals

South Africa’s liquefied petroleum gas market should move toward deregulation through measures to spur competition, an antitrust commission recommended after a two-year inquiry into the industry.

"There are structural impediments to competition that may hinder the growth of the LPG industry," the country’s Competition Commission said Tuesday in an e-mailed statement. "There are significant bottlenecks in the regulatory environment which restrict the ability of potential competitors."

South Africa manufactures about 300,000 tons of LPG a year, generating sales of about 1.5 billion rand ($98 million), the commission estimated when it began the probe in 2014. It conducted search and seizure operations at the offices of African Oxygen Ltd., Oryx Oil South Africa, EasiGas Pty Ltd., Liquefied Petroleum Gas Safety Association, KayaGas Pty Ltd. and Totalgaz Southern Africa Pty Ltd. last year.

Some long-term supply agreements have been renewed with the same wholesaler for more than 25 years and may contain unlimited renewal clauses, the commission found. It proposes to shorten contracts, cancel automatic renewals and introduce an allocation mechanism where all wholesalers would bid for LPG volumes. The commission also recommended allocating a minimum percentage of volumes to small wholesalers.

Market participants and interested parties have until June 7 to submit comments on those preliminary recommendations.

Before it's here, it's on the Bloomberg Terminal.