It poses a risk
Concerns raised about Massy acquisition of IGL

Concerns are being raised about the impact Massy Holdings' pending US$140.3-million acquisition of IGL could have on the economy, especially with the joint entity set to have up to 90 per cent of the commercial gas market.

Massy Holdings in December through a release to the Jamaica Stock Exchange announced that its board approved the acquisition of IGL (St Lucia) IBC Limited through its subsidiary Massy Gas Products Holdings. The acquisition is for 100 per cent of IGL, an entity which distributes liquefied petroleum gas (LPG) and manufactures and distributes industrial and medical gases.

But even as the Fair Trading Commission (FTC) examines the deal ahead of its completion, at least one player in the LPG industry is raising issues, though that player declined to speak publicly on the matter at this time.

However, it was pointed out that Massy Holdings through its GasPro brand and IGL, which it is seeking to acquire, currently dominate the domestic and commercial LPG market in Jamaica. An acquisition of IGL by Massy, a source, who requested anonymity to speak freely on the matter pointed out, will result in one entity, Massy Gas Products Holdings, having 85 per cent of the domestic market for LPG and 91 per cent of the commercial market share for the product which is used mostly for cooking in Jamaica.

Jamaica's LPG market as at December 31, 2021.

Section 19 of the Fair Competition Act states that " enterprise holds a dominant position in a market if by itself or together with an interconnected company, it occupies such a position of economic strength as will enable it to operate in the market without effective constraints from its competitors or potential competitors."

There are currently no effective regulations that could be considered enough to constrain the Massy Group in its position of dominance.

"Who should be concerned?" the person went on asking the Jamaica Observer before answering, "Everyone that uses cooking gas including families, orphanages, dormitories, hotels, manufacturers, restaurants and some farmers."

The person said the concern stems mainly from the power Massy will hold to control prices, "particularly price hikes for cooking gas which can easily become more expensive and this can have a ripple effect on the general price of food."

"I don't think people are aware of the impact this acquisition will have on the economy. LPG is a critical input that many industries cannot substitute, so if you have a monopoly situation in the supply of the input, it poses a risk to economic growth in Jamaica."

Efforts to get comments from other players in the industry proved futile.

Chairman of Fesco Trevor Heaven declined comments for this story. Fesco is a petroleum marketing company that is looking to enter the LPG market in April. Colin Karjohn, executive chairman of Petcom, also declined comment. Petcom distributes the Cookie branded LPG.

The Business Observer reached out to Massy Gas Holdings for a comment. Its CEO Rohan Ambersley asked for questions to be submitted for answers, but none was forthcoming before press time.

The FTC could not be reached for comments on the matter either. Calls to the executive director, David Miller, went unanswered.

The LPG market

Liquefied petroleum gas (LPG) is known around the world as cooking gas, propane, or butane. In Jamaica, LPG is supplied in both propane and butane form. Propane is directed to the commercial segment of the market in bulk tanks ranging from 120-10,000 gallons, while butane is supplied to the domestic market in 20, 25, 30 and 100lb cylinders.

For the calendar year 2020, the LPG market was 1,069,149 barrels of LPG (vs 1,133,873 barrels in 2021). Where Petrojam manufactured/imported and supplied to the market 688,366 barrels, and IGL and Gas Pro imported directly 380,83 barrels.

In 2020, the LPG market declined from 1.189 million barrels in 2019 to 1.069 million barrels in 2020 which was mainly as a result of a decline in commercial LPG or propane sales due to COVID-19 restrictions imposed by the GOJ and other governments.

Model of Jamaica's LPG supply chain.
LPG market supply.
Jamaica's LPG consumption.
LPG consumption: Domestic vs commercial use.
IGL and GasPro commercial position.
Filling plant locations.Please note, all graphics were used with the permission of the author..
BY DASHAN HENDRICKS Business content manager

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