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Liquigas Malta has been constantly faced with rising international LPG prices ever since October 2010 just a few months after it started its operations in Malta.
It is important to explain the reasons behind the price increase of recent months so that customers can understand that these are directly related to international market prices, and not to any other cost factors.
One point that needs to be clarified immediately is that LPG is a different product from natural gas. Natural gas comes from natural reserves and is distributed through pipelines directly to households and other end-users, as is the case in most of Europe.
Liquefied petroleum gas (LPG) is totally different product that is mainly transported by ships, trains and trucks and then distributed in cylinders to households, as is the case in Malta. The price of LPG remained consistently high, since the latter is partly a bi-product of the petroleum industry.
The Euro’s weakness against the dollar has also contributed to the price increases since LPG is purchased in dollars. Meanwhile, ongoing speculation on the international market continued to fuel the negative situation.
Since October 2010, the international LPG price has not only never gone below $800 per tonne in any single month but hovered around an average of $950 per tonne and this year (2012) has not gone below the $1,000 per tonne mark.
At times, the international price increases were so high – as can be seen from the Platts table above – that Liquigas Malta was faced with the most difficult challenge of having no other option but to ask for a price increase after submitting the commercial workings to the Malta Resources Authority (MRA) in order to prove that such increases were justified. Each time, Liquigas proposes a new pricing structure, this has to be set according to an MRA’s price mechanism formula and the authorities verify any increases.
There were other instances during the last 12 months when Liquigas Malta absorbed the increased international costs itself. This happened on a number of occasions when no price increases were announced at the beginning of a month.
Liquigas has adopted a very prudent purchasing policy as the Company is fully aware that today it is operating in a totally open and competitive market, and that the price of its product and service is neither protected nor subsidised by Government – but that such a price has to compete commercially.
Moreover, customers today are more careful about their own energy costs and selling LPG at higher prices is definitely not the Company’s best option, but it is the only viable option dictated by the ruling and persistently high international prices.
Liquigas has endeavoured to identify alternative sources of supply outside Europe to mitigate the impact on domestic LPG pricing, while keeping a contingency plan in place to acquire LPG from Italy or France to guarantee continuity of LPG supply in Malta.
Liquigas Malta stresses that guaranteeing supply to the Maltese market remains its main priority.
Liquigas is also looking forward to the period when the company’s storage capacity will double when the new €20 million LPG plant is completed later on this year. The facility in Benghisa will reduce the Company’s vulnerability to forces outside its control and guarantee adequate supplies for Malta even in difficult wintry conditions.
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