Policy gaps in West Africa stall budding LPG Market

The West African Liquefied Petroleum Gas market is witnessing massive growth spurred by rising cost of basic kerosene used for cooking and increased awareness on the danger of using firewood to the environment but policy has not kept pace with the growth.

Governments in the sub region are yet to articulate a pragmatic policy to sustain the budding market and even when they intervene, the sector has seen only token expression of seriousness to drive growth in the sector.

Big policy initiatives in the areas of encouraging investments in setting up manufacturing plants, storage facilities and jetties, domestic utilisation of gas resources, the promotion of gas-powered vehicles are solely lacking in many West African countries.

A few countries are trying to reverse this trend though a lot still need to be done. Ghana’s former Minister for Petroleum Emmanuel Armah-Kofi Buah recently said the government under the Rural Liquefied Petroleum Gas (LPG) programme will scale up the distribution of free cylinders, cook stoves and related accessories to beneficiaries in low access areas. Media reports said the minister presented 1,000 LPG cylinders, cooking stoves and accessories to beneficiaries in the community.

According to the Minister, the Government seeks to create demand in these low access areas to incentivize private LPG marketing companies to set up there. “In this regard, I am pleased to inform you that last year we distributed 60,000 cylinders, cooking stoves and related accessories to households and we intend to distribute 100,000 by the close of 2016,” he told journalists.

Mahama, Ghana’s former president in a 2014 State of the Nation Address promised that as part of efforts to discourage the reliance on wood as a source of fuel, the government will launch an LPG Promotion Programme aimed at reversing the deleterious effect the continuous burning of some 1million tons of firewood annually is having on the environment. The programme was expected to achieve 50 percent LPG penetration in urban areas and 15 percent in rural areas. Under the programme, 50,000 LPG cylinders will be distributed.

The result of this deliberate policy to increase consumption of LPG has led to considerable increase in its adoption in the country. It is estimated that automobile users of LPG consume about 58
percent of the total annual LPG supply while households, commercial operators and industry together consume the remaining 42 percent. With the coming on stream of a Gas Processing Plant, the country is looking to drastically reduce its LPG import dependency.

Nigeria on the other hand with vast gas reserves is yet to prioritise the resource both for use in transport and domestic cooking. Meanwhile, the adoption of LPG is witnessing record increase. Nigeria’s LPG market has witnessed massive growth from less than 70,000 metric tonnes consumed in 2007 to the current 400,000MT, a 471.4 percent increase within 10 years. Experts say that consumption is set to hit 500,000 metric tonnes by the end of 2017.

Following a recent scarcity that saw retail prices of LPG jump nearly 100 percent, a need for concrete policy to drive the sector in Nigeria and the West African sub region has become very acute. In many countries, besides petrol and diesel, cars run on gas in the form of Compressed Natural Gas (CNG) which is cheaper and cleaner.
“There is a strong economic, environmental and security case for CNG in Nigeria,” says Chijioke Mama, energy analyst and founder of EnergyDatar, an energy intelligence firm. CNG is the cleanest of all fossil fuels since natural gas is composed mainly of methane, burning it produces
carbon dioxide and water vapour, but petroleum produces higher carbon emissions, nitrogen oxides and sulphur dioxide. Burning fuel oil also produces ash particulates that worsen pollution says a CNG united, a blog promoting clean energy.
In Nigeria, adoption of gaspowered vehicles is constrained by inadequate local competence to handle repairs, high cost of conversion of petrol cars to run on gas and limited stations supplying the product in Nigeria, just about 10 supplying fewer than 5000 vehicles. Dearth of gas cylinder manufacturing in the West African sub region is a big factor militating against increased adoption. Ignorance contributes to a situation where millions rely on wood and kerosene for cooking meals which has proven unsafe both for humans and the environment. Armah-Kofi Buah said an estimated 13,700 deaths occur each year in Ghana as a result of exposure to Household Air Pollution (HAP) from cooking, and more than 21 million people are impacted by exposure to HAP each year.

Nigeria’s manufacturing capacity is still low largely due to high cost of steel, power challenges and freewheeling exchange rate that has seen the cost of production hit the roof. Raw materials for gas cylinders are imported and they suffer 40 per cent duties and tariffs.
“We had two cylinder manufacturing plants that shut down because the flat steel became extremely expensive and the cost of production became so high that they couldn’t compete with cheap import,” Dayo Adesina, president of the Nigeria LP Gas Association (NLPGA), the umbrella body of all stakeholders in the Liquefied Petroleum Gas sector in the country. Adeshina called on the Federal Government to put in place intervention funds to encourage the manufacture of cylinders in the country to stem the loss of about $10m being spent annually to import them. The consequence of this situation is increased importation of gas cylinders and the use of expired gas cylinders which pose risk of leakage and endangers life and property.
“We believe there is need for more sensitization of the importance and relevance of the usage of LPG, which is a factor for the pursuit of a cleaner energy that is also affordable in such a time as this where it is expedient for one to minimize expenses,” Basil Ogbuanu, President of Nigerian Association of LPG marketers, NALPGAM said at a recent stakeholder conference. Industry operators call for a policy that will drive the sector. “There is an urgent need for an LPG roadmap in Nigeria that would drive
development and growth in the market, otherwise, there would be limitations to the attainment of the desired position that should be seen,” said Ken Abazie, corporate services and strategy, Techno oil Limited at a stakeholder conference recently.
Nigeria currently relies mostly on gas from NLNG to meet local demand but even that suffers from delays due government’s decision to prioritise petrol in discharge to jetties and limited number of jetties and terminals. “In Lagos, there are three coastal
terminals; Navgas is the biggest (8,000 tonnes); PPMC’s North Oil Jetty has capacity for 4,000 tonnes; and Nipco is 4,500 tonnes. Of those three terminals, only one is a dedicated LPG terminal,” Adeshina saidhighlighting some constraints that need to be critically addressed.