Gas prices set to go up 15 percent

Egoli Gas, which buys gas from Sasol and distributes it to more than 10 000 customers in Johannesburg, said this week that prices could go up 25 percent to 30 percent next month when it makes its annual price revisions. However, Egoli managing director Johan van der Schyff said the company planned to absorb half of the increase, which meant residential customers in Johannesburg could see increases of about 15 percent. He said the company had to carry some of the increase, or face pricing itself out of the market. Van der Schyff said that customers were probably in for a shock as many were unaware that gas prices moved in tandem with oil prices worldwide. Egoli would be able to foot part of the bill this year but Van der Schyff warned that it might not be able to do the same next year if oil prices remained high. Sasol, which supplies the gas directly or indirectly, said last week its gas division had recorded a 66 percent higher operating profit last year. It said this was “primarily driven by higher selling prices and moderate sales volume increases”. Sasol Gas managing director Hans Naude said yesterday that Sasol priced its gas in line with the “logical alternative energy carrier” ‘ the source of power customers were most likely to use in the absence of gas. Examples are diesel and illuminating paraffin. Naude said the prices of these fuels, which are oil-based, had also increased considerably in line with crude oil price hikes. Sasol realised that these increases were steep, said Naude, but he also said most gas users had been not seen any increases in the past year because tariffs changed annually in most cases. Gas prices paid by industrial customers vary according to volumes purchased, among other things. Industrial users are already facing steep gas price rises. Companies such as tile maker Ceramic Industries have already seen hikes in excess of 40 percent. Some of the largest industrial companies buying gas from Sasol include Mittal Steel, Highveld Steel & Vanadium, Sappi, Columbus Stainless, Alusaf, Nampak Glass and Scaw Metals. Sasol completed the construction of a pipeline to transport and supply natural gas from Mozambique to the South African market in 2004 at a cost of about US$1,2 billion in the expectation that demand would increase. The group, which has also converted some its own operations to use gas, said last year that South Africa was a small consumer of natural gas as a percentage of its total energy requirements. It expected that this percentage would rise. “This presents Sasol Gas with opportunities to increase sales of environmentally preferred natural gas,” it said in the Form 20-F business overview that it has to submit every year in line with New York Stock Exchange listing requirements. ‘

March 2006
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