(Business in Cameroon) - Gaz du Cameroun decided to maintain its 20% tariff increase, despite the government’s opposition. The company’s MD Éric Friend sent a letter last June 6 to the President of the industrial gas consumers association confirming the information.

“We refer to your letter dated May 29, 2023, in which you express your complete opposition to the recently announced price hike. We take note of your concerns and are sensitive to them. However, GDC will stick to its decision due to the highlighted increase in operational costs stated in our letter dated May 15, 2023. We would greatly appreciate your support on this matter and hope to continue providing you with low-cost, clean, and reliable energy of Cameroonian origin," Éric Friend wrote.

The local subsidiary of British Victoria Oil & Gas (VOG) is therefore turning a deaf ear to the government’s injunction to suspend the price increase, due to non-compliance with the country's regulations.

Approval procedure

In a letter sent to GDC's MD on May 30, 2023, the Minister of Trade, Luc Magloire Mbarga, reminded the latter that “Per the relevant provisions of Decree No. 2023/232 of May 4, 2023, establishing the implementation modalities of Law No. 2019/008 of April 25, 2019, on the Petroleum Code, the price of natural gas sold on the domestic market is subject to prior approval. Therefore, you are requested to suspend your decision to increase prices and provide me with the technical file for review”. This means that by unilaterally raising the prices of natural gas, GDC has violated the existing regulations in Cameroon. Article 115, paragraph 2(a) of the petroleum code's implementing decree, dated May 4, 2023, states that "the market price of gaseous hydrocarbons sold on the domestic market is subject to prior approval by the Minister in charge of prices," which is the Minister of Trade in this case.

The approval process requires economic operators seeking to raise their prices to submit all necessary justifications for the proposed increase. Based on the justifications provided, the government can either reject the proposal, reduce the proportion of the increase, or approve it entirely.

Inflation

GDC said it took this price increase decision, the first in 10 years, to adjust to the recent significant rise in production costs resulting from the global economic situation. This decision was taken after the government extended the special tax on petroleum products (TSPP) to natural gas. As per this move, industrial companies are required to pay a CFA70 levy for each cubic meter of gas consumed. Also, the Electricity Regulatory Agency (Arsel) raised its tariffs by almost 30% for energy-intensive industrial companies in January 2023. The following month saw a significant increase of 15.8% to 36.5% in the prices of super, diesel, and kerosene.

The explosion in energy costs in Cameroon's industrial sector since the start of 2023 is likely to lead to even higher production costs for companies throughout the year. Consequently, this will exacerbate the inflation already observed on the market since the outbreak of the conflict between Russia and Ukraine in February 2022.