The status of the LP gas industry in South Africa

The LP gas industry in South Africa forms a small but vital part of the liquid hydrocarbon industry as a whole. About 600 000t/a is produced, against a demand of the order of 350 000t/a plus an export demand of about 150 000t/a, with the balance being consumed by the refineries themselves. Imports are slowly growing as the facilities for coastal storage are created, but these facilities are small so that the cost of imports is unduly high. There are five major wholesalers in the market, and several smaller players who have entered the scene recently. Distribution is not particularly efficient, and the product effectively doubles in price between the refinery gate and the retailer. There seems to be a degree of anticompetitive behaviour in the market, where companies use the need to ensure proper handling of their gas cylinders to restrict entry. The Department of Energy has long has a policy to encourage the wider use of LP gas, but the lack of supply has limited the Department´s effectiveness in pursuing its policy. More widespread use is also hindered by local fire regulations, as lack of familiarity with LP gas leads to over-estimation of the hazards associated with its use. If the supply constraint were to be removed, there seems little doubt that LP gas would find wider use in South Africa.