Energy company Sasol Gas says it does not agree with the preliminary conclusion by regulatory authority the National Energy Regulator of South Africa (Nersa) that the maximum price of R120/GJ for full-year 2023 applied for by Sasol is excessive.

The company maintains that, apart from operational cost increases, Nersa should also take into account the risk associated with extensive investments which Sasol is currently making to extend supply and the incentives to develop new resources.

Moreover, Sasol Gas posits that the alternative value for Sasol is that it has the ability to convert gas into other value-added products in its South African facilities, as an alternative to selling this gas to third-party customers.

Sasol Gas says it will continue its engagement in the commentary phase of the full-year 2023 price application and trusts that Nersa will duly fulfil its mandate to determine an appropriate, reasonable and competitive gas price for full-year 2023 in the interests of consumers and gas supply in South Africa.

Sasol says it remains committed to complying with all applicable regulations and cooperating with relevant authorities throughout this process.

Nersa has published Sasol Gas’s Amendment Maximum Gas Price (MGP) Application for the period July 1, 2022, up to June 30 this year, and published its Consultation Document.

It has also published Sasol Gas’ MGP application for the period July 1, 2023 to June 30, 2024 (full year 2024) together with its Consultation Document.

This pricing application has followed the cost-plus 2023 MGP methodology, which Nersa published in February.

As piped-gas prices are regulated by Nersa, Sasol says it welcomes the progress in its MGP application process, and is optimistic that the approval of an appropriate maximum gas price for full-year 2023 will recognise the interests of consumers, while enabling the viability of the supply of gas in South Africa.

Sasol Gas has continued to charge customers at R68.39/GJ from full-year 2022, notwithstanding the additional expenditure and cost increases exceeding 40% that Sasol has faced during this period, the company points out.

It adds that to date, Sasol has invested over $300-million in capital expenditure since 2021 to maintain gas supply from Mozambique to 2026.

Sasol indicates that an MGP needs to be fair and enable ongoing investment in new sources of gas supply.

During the course of 2022, it became apparent that the MGP would increase dramatically, owing to international gas hub prices increasing on the back of post-Covid-19 demand, the war in Ukraine and weather conditions affecting gas demand.

These factors were projected to increase the MGP, determined according to the international gas benchmark 2020 MGP methodology, to R273.43/GJ for full-year 2023.

Sasol Gas says it engaged extensively with Nersa about appropriate pricing in accordance with the then-applicable 2020 MGP methodology. These engagements continued throughout 2022 and resulted in the regulator requiring Sasol to bring a formal price application to resolve the matter.

Sasol Gas explains that gas price regulation in terms of the Gas Act is aimed at determining a competitive price for gas and should strike a balance between the interests of gas suppliers and consumers, while fostering the viability of the supply in South Africa and investment in new sources of supply.

“Sasol’s investments over the past 20 years have offered consumers an alternative energy supply, thereby enhancing competition, consumer choice and, importantly, fostering economic activity and investment in the South Africa economy,” it points out.