The Federal Government of Nigeria has given its consent to local operators in Nigeria’s oil and gas industry to supply Liquefied Petroleum Gas (LPG) to the country’s domestic market.
The aim is for these marginal field operators to address issues concerning availability of LPG.
The Programme Manager, National LPG Expansion Plan in the Office of the Vice President, Dayo Adesina, Programme Manager, made it known that two marginal field operators had already signed up to the programme.
Many other operators have indicated their interest to join the LPG programme.
This was disclosed by Adesina at a Webinar session tagged ‘Nigeria LPG Assembly’ organised by Oil Trading and Logistics (OTL) Africa Downstream Expo in collaboration with the “National LPG Expansion Plan” (Office of the Vice President of Nigeria), Nigeria Liquefied Petroleum Gas Association (NLPGA), Nigerian Gas Association, Nigerian Association of Liquefied Petroleum Gas Marketers (NALPGAM), Women in LPG Nigeria (WinLPG Nigeria), Standards Organisation of Nigeria (SON) and the World Liquefied Petroleum Gas Association (WLPGA).
The OTL is an international event that brings operators in the downstream and midstream of the industry together to deliberate and collaborate on salient issues bothering it with proffered solution on the sub sector of the industry across the globe.
Concerning unbundling of the country’s under-explored LPG market space, Adesina acknowledged that there was an urgent need to domesticate the country’s source of supply in order to solve the challenges affecting availability and supply of the product. Nigeria has an arrangement where the Nigeria Liquefied Natural Gas Company (NLNG) supplies over 50% of its domestic LPG need, while the rest is imported to guarantee a level of product availability, affordability and accessibility.
The LPG Programme Manager noted that with about “900,000MT per annum consumption rate in Nigeria, at less than 5% adoption rate in a country with an estimated 200 million people, the potential for LPG growth could be severely hampered by its unavailability.”
Also speaking, Brenda Ataga, National Project Coordinator, LPG Expansion Programme in the Office of the Minister of State for Petroleum Resources, said that in support of resolutions aimed at improving availability of LPG in Nigeria, government was also developing a strategy to support onshore production of the product.
According to Ataga, “We conducted an audit of all inland production facilities and have come to realise that coastal development of LPG facilities is not in tandem with investments occurring inland. Therefore, as more facilities come on stream, it is clear that the LPG market in Nigeria will gradually evolve from coastal depots to inland production plants.”
She was of the view that government’s intention to implement the LPG Cylinder Recirculation Model as a strategy to break the bulk entry costs which have hindered transition Nigerians. Brenda noted that government would support manufacturers and investors who want to produce LPG onshore with access to cheap finance.
Nuhu Yakubu, President, Nigeria Liquefied Petroleum Gas Association (NLPGA), emphasised on the need to ramp up in-country production of LPG to address availability, pricing and diversification of usage.
He stressed that locating LPG terminals in production areas would reduce the cost of the products in the domestic market given that transportation, which is a key element in LPG pricing, constitutes 35% of price calculations.
“We are barely at 10% penetration in Nigeria and if just 50 % of the population were to switch to LPG we would invariably revert to importing 95% of our domestic demand of the product. We must bear in mind therefore, that deepening the Nigerian LPG market will only happen when alternative application of the product is encouraged,” Yakubu said.
Audrey Joe-Ezigbo, President, Nigerian Gas Association (NGA), also speaking, highlighted the fact that the tendency was to focus on upstream gas within the Nigerian Gas Policy narrative and advised that the time had come to implement the LPG policy within the broad context of gas.
“Nigeria has always been an oil centric country and we only discovered gas by accident while prospecting for oil. Until the Associated Gas Framework agreement was signed in the 1990s, gas utilization was low and focus has been mainly on the Associated Gas,” she said.
The NGA President added that “LPG as a sub-product of gas has also suffered from the same lack of focus. However, Section 8, subsection 8.4 of the National Gas Policy clearly encapsulates a broad LPG policy with very clear goals and objectives which speak to increasing domestic utilization of LPG for domestic purposes, power generation, agriculture, industrial application and auto gas. It also addresses issues around cylinder manufacturing, and safety regulations among others.”
She confirms that mainstreaming of LPG has occurred but Nigerians have to come to terms with the fact that they need to do more with LPG to exploit its potential as an agent of economic transformation.
In his contribution, Oladapo Olatunbosun, Deputy National President, Nigerian Association of Liquefied Petroleum Gas Marketers (NALPGAM), said “LPG pricing is still high in Nigeria because we have not been able to domesticate our gas supply.”
Olatunbosun identified alternative uses of LPG as critical drivers for developing the industry and increasing domestic usage. According to him, “There are other uses of LPG which have been neglected due to issues around supply. Investors are numerous and members of my association have contributed over NGN200 billion in the provision of plants and other LPG accessories and they are willing to do more if the product is available for other applications which is where the volumes are needed.”
He also queried the logic behind gas importation in Nigeria, whereas the country possesses the largest deposit of gas in West Africa and is the largest exporter and importer respectively. He commended NLNG for recently increasing its quota of LPG supply to the domestic market and urged other oil producing companies to domesticate their gas and create opportunities for investments in other areas of LPG usage.
For Michael Kelly, Deputy Managing Director, World LPG Association opined that “The simple most important factor in getting an LPG market to grow is to establish clear government regulations that are backed with appropriate sanctions to encourage investment and help the market to self-police.”
Speaking further, he said, “The obvious next step for LPG expansion in Nigeria is to expand its application beyond cooking. But to be able to do this, you must leverage the existing infrastructure available for cooking gas and build on a robust, stable, dynamic, and regulated market.”
He added that ‘LPG to Power’ is a no-brainer for Nigeria, and advised the country to emulate Ghana, which is currently building the world’s biggest LPG power plant of 400MW capacity. He also encouraged LPG for Auto-gas and suggested that the best strategy for its implementation would be to start with fleets like taxis, police cars, and mass transport systems. This, he said, would encourage increased demand, investment in facilities, competition and favourable pricing. He added that Nigeria was also the perfect candidate for LPG in agricultural applications considering the size and potential of the agro-business in the country,
Concerning the issue of awareness and penetration of LPG to rural areas, Joy Shaiyem, Nigeria Coordinator, Women in LPG Nigeria noted that the sustainable supply of LPG to rural areas is hindered by factors such as access roads, inadequate infrastructure, cultural biases and affordability among other issues.
She stated thus, “It is a complex problem as the LPG market in rural areas is not attractive to private sector investors because uptake is low, risks are high and the bottom-line does not add up. This is where we need the government to step in and create incentives for private investors.”
Shaiyen noted that women are critical to LPG development because over 80% of Nigeria’s domestic LPG consumption goes for cooking alone. Putting that in context, she averred that in a country of 200 million people with 10% penetration, 49% of the remaining 90% that have no access to LPG are women. This means that about 58 million Nigerian women do not have access to LPG. “It is a huge number and something must be done about it,” she emphasized. Adding that awareness to drive growth must involve all of the stakeholders including government, private sector, and regulatory bodies, as regulation is very critical for rural areas.
On LPG regulation, Nwaoma Olujie, State Coordinator, LPG, Standards Organisation of Nigeria (SON) noted that standards are an integral part of safe LPG operations globally.
Olujie disclosed that “SON certifies LPG accessories in line with international best standards and with 44 offices scattered across the 36 states, it is in a good position to monitor and enforce the safe use of cylinders and other accessories. SON is working with investors to set up cylinder test centres for cylinder re-certification, while reiterating that second-hand cylinders are prohibited.”
It will be recalled that the Minister of State for Petroleum Resources, Chief Timipre Sylva had emphasised in several fora that Nigeria is more of a gas nation than oil. With the dwindling price of crude oil, the country now focuses more on gas.
Experts in the oil industry are also of the view that gas is an enabler that will boost the Nigeria’s economy. Therefore, LPG will go a long way to address so many issues with regards to cleaner energy.