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Yaoundé - 25 April 2024 -
Energy

Industrial gas: GDC announces supply cut for industrial clients opposed to 20% price hike

Industrial gas: GDC announces supply cut for industrial clients opposed to 20% price hike
  • Comments   -   Wednesday, 23 August 2023 16:24

(Business in Cameroon) - Gas supplier Gaz du Cameroun (GDC) is still defying official orders to suspend its price-hiking decision. Indeed, after a meeting held on July 13, 2023, in Yaoundé, the Minister of Commerce Luc Magloire Atangana ordered the suspension of GDC’s plan to increase the price of industrial gas by 20%. In its June and July 2023 invoices to clients, GDC went ahead and applied the 20% price hike, overlooking government orders. It is now threatening to stop supplying industrial companies opposed to the price hike. 

In an e-mail sent on August 22, 2023, to the executives of the thirty or so industrial companies it supplies natural gas to in the Douala-Bassa industrial zone, GDC announces the decision will become effective on September 1, 2023.  If the companies concerned fail to pay the 20% surcharge on their June and July 2023 invoices, they will have to submit a request for direct negotiation with the gas company. The 20% surcharge demanded by GDC represents the proportion of the tariff increase, since, according to sources close to the matter, industrial companies continue to pay their consumption at the initial tariff in respect of the government’s decision to suspend the price increase unilaterally decided by GDC. 

Fruitless negotiations

According to our sources, the discussions held in recent weeks between GDC and the union of industrial gas consumers have proved fruitless with the gas company showing its resolve to implement the price increase despite the government’s order. According to an executive of one of the industrial gas consumers, by seeking direct discussions with each of its customers, the Victoria Oil & Gas subsidiary hopes to create fault lines within the Industrial Gas Consumers Group, which is firmly opposed to the rate hike. The disunity caused could weaken the protesting bloc, we learn.  

The July 13, 2023, consultation meeting held in Yaoundé was supposed to have cleared the air about the pricing decision. At the meeting, the government was represented by Minister of Commerce Luc Magloire Mbarga Atanga and state-owned oil and gas companies. Consumers were represented by industrial companies supplied by GDC and their union. The third party was GDC, the sole producer of processed natural gas in Cameroon. During the meeting, GDC argued that the government was confusing the text applicable to its business by implying it had to get its pricing decisions approved before implementing it, per decree no. 2023/232 of May 4, 2023, laying the guidelines for the application of the Petroleum Code no. 2019/008 of April 25, 2019. 

Challenging price approval requirements

The gas company’s executives informed that the provisions of the 2019 Petroleum Code and its 2023 implementing decree do not apply to them. According to them, GDC is bound only by the provisions of the investment agreement signed in 2009 with the State of Cameroon. In response to that argument, the Minister of Commerce pointed to a provision of the said investment agreement which requires GDC to negotiate any pricing decision with the government (through the National Hydrocarbons Corporation) before implementing it in the domestic market.  

Based on that provision, Minister Mbarga Atangana suspended the pricing decision. He then invited GDC to comply with enforceable regulations by either seeking approval of the pricing decision or opening negotiations as the 2009 investment agreement requires. 

GDC, which has a monopoly over industrial gas distribution, seems resolved not to comply with that invitation. We are likely to see new development in this case because, in June 2021, when cement company Cimencam was insisting on increasing cement prices, Minister Luc Magloire Mbarga Atangana went as far as threatening to close its facilities. 

Brice R. Mbodiam

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