SA regulator to rule on Mozambique gas pipeline tariff this month

Author: Zitamar
Date: 2017-02-08

ROMPCO, the company that operates the pipeline running from Sasol’s gas fields in Inhambane to South Africa, will know whether its application for a tariff price hike has been accepted by the National Energy Regulator of South Africa (NERSA) by the end of February.

ROMPCO, a joint venture between South African energy company Sasol (50%), iGas, the South African state agency for the development of the gas industry (25%), and Mozambique’s state-owned Companhia Moçambicana de Gasoduto, or CMG, (25%), wants to raise the tariff charged to South African customers to recoup investments made in an extension to the line that entered operation earlier this year.

A public hearing reviewing ROMPCO’s application for a baseline tariff of ZAR 49.87 per gigajoule (GJ) for gas shipped along its new 127 km ‘Loop Line 2’ (LL2), was held on 26 January, Nomfundo Maseti, NERSA regulator member told Zitamar News on the sidelines of the Infra-Gas Projects Mozambique conference in Maputo on Tuesday.

NERSA’s gas subcommittee will meet on 6 February to discuss the application and the regulator will make a final decision on 26 February, she said.

ROMPCO spent $210 million building the 24 million gigajoules per annum (MGJ/a), 22 inch LL2 that connects to the existing 865 km Mozambique-Secunda Pipeline (MSP), increasing the capacity of the line to 212 MGJ/y.

However, the tariff price hike NERSA is now reviewing only covers part of the cost of the expansion, as in the short term only part of LL2’s capacity will be used by customers in South Africa.

“ROMPCO applied for the LL2 tariff on the basis of a notional 18 inch pipeline that would add only 10 MGJ/a of capacity instead of the 24 MGJ/a capacity that the 26” LL2 added,” a ROMPCO spokesperson told Zitamar on Monday.

“ROMPCO therefore assumes risk on 12% of the capital, meaning that if no further volume would ever flow through the MSP utilising the spare capacity of LL2, then ROMPCO will not receive a return on investment on the 12% of capital,” the spokesman said.

Once more than 10 MGJ/a of gas is flowing through the pipeline, ROMPCO has asked NERSA to allow for a capital adjustment, to bring the 12% capital back into the asset base and calculate a new tariff. “This would be in addition to the volume adjustment of the tariff, with more volume lowering the tariff. ROMPCO has indicated though that in real terms the tariff will never increase from the base tariff of R49.87/GJ,” the spokesman said.

Should additional volumes from LL2 be sold into Mozambique, rather than South Africa, ROMPCO will approach NERSA for the tariff to be readjusted..

The current average transmission tariff for gas delivered to South Africa along MSP is about ZAR13/GJ.

If the ZAR49.87/GJ tariff is approved – and the expected additional 10 MGJ/a is supplied to customers in South Africa – the average transmission volume will increase to about ZAR14.80 GJ/a.