Scramble for Gas Supply in Western Cape Amid Corporate Dispute

After Vita Gas, a subsidiary of Dutch commodity trading giant Vitol, terminated its contractual arrangement with Sunrise Energy, the import terminal facility in the Western Cape region is scrambling to secure a supply of liquefied petroleum gas (LPG).

Vita Gas, which imports LPG through Saldanha and has Vitol as a shareholder, stated that it had walked away from the contract due to ongoing litigation pursued against it by Sunrise Energy, rendering its position “untenable.” Sunrise Energy, the company in charge of running the import facility in Saldanha, on the other hand, stated that while it was seeking changes to the contract with Vita in order to open up the facility to other players, it never intended to stop doing business with the company.

LPG is primarily used for home heating by commercial customers such as restaurants and hospitals, as well as residential customers. Winter increases demand for LPG due to cold weather, and the Western Cape region faces additional supply constraints due to Cape storms and deep-sea swell conditions that impede vessel access to the Saldanha port. The closure of refineries such as PetroSA’s Mossgas and Chevron’s Milnerton plant has left the region heavily reliant on imports, which are only available via Saldanha Bay.

Although the Milnerton plant has been restarted and is now owned by Glencore’s Astron Energy, the South African Petroleum Industry Association (Sapia) reports that it produces far less LPG, primarily for Astron’s internal consumption. As a result, imports via Saldanha account for roughly 99% of the Western Cape’s LPG supply.

Vita Gas announced on Friday that it would no longer challenge Sunrise Energy’s decision to terminate its contract for the long-term use of the Saldanha Bay LPG import terminal. Despite disputing the validity of Sunrise Energy’s arguments, Vita Gas admitted that the prolonged and ongoing legal proceedings against them had rendered the situation untenable. However, Vita Gas expressed regret and offered to continue supplying LPG via the terminal for a limited time, subject to Sunrise Energy’s prior agreement, acknowledging that this decision may cause short-term supply issues for local distributors.

Sunrise Energy CEO Rajen Singh called Vita’s move “surprising” and “deceptive.” He revealed that Vita had only recently informed Sunrise and gas wholesalers that a vessel carrying LPG was due to arrive at the terminal. Singh stressed that having advanced notice would have allowed Sunrise and the gas wholesalers to make alternative supply arrangements. He proposed that Vita strategically emptied the facility and abruptly terminated the contract.

While Sunrise Energy does not profit from LPG trading, it is the region’s sole import facility for LPG supply. Singh stated that the company felt morally obligated to bring in another supplier to fill the gap, ensuring that end users do not suffer as a result of Vita Gas’s decision to cancel the contract without prior notice. Fortunately, another supplier will bring in a vessel within the next few days, pending favourable weather conditions, averting a supply shortage in the region.

Sapia’s Head of Security of Supply, Siganeko Magafela, emphasised the importance of market engagement with the new supplier in order to negotiate price agreements. The Western Cape will keep a close eye on the situation as it works to ensure a consistent and reliable supply of LPG to meet the heating needs of commercial and residential customers, particularly during the winter season.

Finally, the termination of Vita Gas’s contract with Sunrise Energy has triggered a scramble to secure LPG supply in the Western Cape region. As various stakeholders navigate this corporate dispute, the focus remains on ensuring a continuous and sufficient flow of LPG to meet the heating demands of the area’s businesses and households.