The National Energy Regulator of South Africa (Nersa) has reaffirmed Sasols monopoly in the South African piped gas industry through its latest consultation document, which highlights the ongoing inadequacy of competition in the market. The document, now open for public commentary, underlines that Nersa will continue to set maximum gas prices due to the lack of sufficient competition.
This development follows a recent Constitutional Court ruling that rejected Sasols appeal in a long-running legal dispute with the Industrial Gas Users Association of South Africa (IGUASA) and Nersa concerning gas price regulation. On July 24, Sasol announced plans to appeal a North Gauteng High Court ruling, which deemed Nersas method for setting maximum gas prices unlawful. The court, siding with IGUASA, criticised Nersas reliance on international benchmarking, arguing that it was inappropriate given Sasols market dominance and disconnected from actual costs in the South African context.
In response to the courts decision, Nersa has revised its pricing approach, moving to a cost, plus methodology that calculates the maximum gas price based on Sasols costs.
Despite legal challenges and shifts in pricing methodology, the energy giant remains the dominant supplier, controlling the flow of gas to local customers via the 865 km Rompco pipeline from its fields in Mozambique.
Essentially, this monopoly has not changed in 25 years, Jaco Human , Executive Officer of IGUASA says. He acknowledged that while this new method has introduced greater price stability, it remains in its early stages, and its long-term effectiveness is yet to be seen.
The hope for market diversification rested on significant gas discoveries by TotalEnergies off the Southern Cape. However, that is now off the table, says Yelland. The potential competition vanished when TotalEnergies deemed the project economically unviable and decided to abandon it.
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