ENERGY ANALYSIS 

Ejiofor Alike reports that the perennial hike in the price of cooking gas by some of the off-takers of the product when their major supplier, Nigeria LNG Limited, has not increased the price is a threat to efforts to deepen the local consumption and ensure a safer and cleaner environment

Before former President Olusegun Obasanjo directed the Nigeria LNG Limited to intervene in the supply of Liquefied Petroleum Gas (LPG), better known as cooking gas to the domestic market, the product was on the verge of disappearing from the Nigerian market due to the collapse of the refineries.

The refineries were the major suppliers before militancy in the Niger Delta disrupted crude supply to the refineries coupled with the collapse of the plants over inadequate Turn Around Maintenance (TAM), which made them non-functional.

With the country’s dwindling refining capacity, the marketers of petroleum products concentrated in the importation of petrol, diesel and kerosene, while the supply of LPG was neglected due to the high cost and low penetration in the domestic market.

Apart from the low penetration, which discouraged importers, the absence of reception facilities such as jetties for imported LPG cargoes also discouraged potential importers.

Before NAVGAS built a private jetty for imported LPG vessels in Apapa, there was only one jetty owned by the Pipeline and Products Marketing Company (PPMC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC) for the reception of imported LPG cargoes in Lagos.

The inadequate supply had led to the high cost of the product with 12.5 kg cylinder selling for N8,000, thus frustrating efforts to encourage more Nigerians to use LPG as a safer and cleaner alternative to kerosene, firewood and coal.

Supply stability

With the intervention of the Nigeria LNG Limited in the supply of LPG to the domestic market, the product became readily available in the market with the price of 20metric tonnes LPG stabilising below N3.2million before the Nigerian Maritime Administration and Safety Agency (NIMASA)’s blockade against the NLNG vessels over non-payment of purported levies.

As a local product, the price of LPG is supposed to have crashed below the current levels but the price is always tied to the price at the international market.

Though the marketers pay NLNG in Naira, the price is denominated in dollar and thus, affected by exchange rate fluctuations.

In an interview with THISDAY, the National President of the Nigerian Association of Liquefied Petroleum Marketers (NALPGAM), Mr. Basil Ogbuanu had called for the domestication of the price.

“We want a domestic price because this is a Nigerian product. It is produced in Nigeria. In Dubai, the price of 12.5kg cylinder is equivalent of N150 because they produce it. But in Nigeria, it is N3,000. The 20 metric tonnes that is selling at N3.3million today was just N70,000 as at 1994, when we were buying from the refineries. In 1998, it was N150, 000 but in 2004/2005, it went up to N1.2million. It was in late 2007 that it increased to over 2 million. Let us have domestic pricing. Let us have Nigerian price as in Dubai,” he had explained.

Nigeria’s population of 160 million is supposed to be consuming over one million metric tonnes of Liquefied Petroleum Gas (LPG) yearly but the country’s domestic consumption is less than 200,000mt, apparently due to lack of awareness.

For instance, Algeria with a population of about 20 million consumes five times Nigeria’s yearly domestic consumption.

However, there has been a steady increase in the yearly consumption since the past three years, according to statistics by NALPGAM.

About five years ago, the country was consuming less than 70,000metric tonnes yearly but by 2011 the figure grew to almost 100,000metric tonnes and above 200,000mt by 2015.

When former President Obasanjo directed the NLNG to set aside a certain volume of its output for the domestic market, the company initially made available 150,000 metric tonnes for the domestic market.

But after domestic consumption exceeded 150, 000 mt in 2013, the NLNG increased supply to 250,000 metric tonnes yearly.

Threat of monopoly

Despite the relative stability in supply, the LPG market has faced a continuous threat of monopoly due to the logistic challenges, which some of the offtakers appointed by the NLNG Limited have capitalised on to hike price and frustrate efforts to deepen consumption.

Some of the offtakers include: Hyson, a subsidiary of NNPC; Greenfield Integrated Services; Chimmox Gas; Linetrade; Harik; Bhakor Nigeria Limited; Ultimate Gas Limited; Gasland Nigeria Limited; Algasco (NAVGAS); Gas Teminaling; NIPCO PLc; Forte Oil; Techno Oil; Second Coming Nigeria Limited; PPMC; Banner Energy; and Oando.

In spite of the number of offtakers, only one PPMC jetty is dedicated for the reception of imported cargoes and NLNG vessels that bring the product to Lagos.

The second jetty is a private jetty built by NAVGAS in Apapa and this gives the company the strategic advantage of importing LPG instead of always relying on NLNG for supply.

Unfortunately, the PPMC jetty dedicated for LPG is also used for the discharge of other petroleum products.

THISDAY gathered that on several occasions, NLNG vessel was diverted to NAVGAS as the PPMC jetty was occupied by another cargo that brought in petrol.

It was gathered that each time NLNG vessel is diverted to NAVGAS terminal, the company discharges most of the product into its facility and hike the price.

It was even alleged that the company connives with officials of PPMC to ensure that the PPMC jetty is always occupied so as to give the company the sole advantage of receiving NLNG vessel and creating monopoly in the market.

Investigation also revealed that even after NLNG has discharged another vessel at the PPMC jetty after the price hike, the other offtakers that receive the product will retain the high price for quite sometimes.

For instance, recently the marketers raised the alarm over the artificial hike in the price of the product from N2.4 million per 20 metric tonnes to N3.5 million within five days.

Executive Secretary of NALPGAM, Mr. Bassey Essien had said in Lagos that with the artificial hike in the price of 20 Metric tonne cylinder, the price of 12.5kg cylinder had also gone up from  N2,700 between N3,500 and N4,000 within one week.

Essien called on the federal government to intervene and stop the hike, adding that unlike the prices of other petroleum products, which are paid in dollars, the price of LPG is not paid in dollar, hence there was no reason for the price hike.

According to him, the Nigeria LNG Limited, which supply LPG to the domestic market, collects Naira from the marketers.

He further argued that the current scarcity of foreign exchange in the country has no effect on LPG because the product is produced locally and not imported.

He accused some officials of the Pipelines and PPMC and NAVGAS of conniving to hike the price of LPG supplied by NLNG.

According to Essien, the PPMC officials had diverted the NLNG’s LPG vessel to NAVGAS terminal instead of allowing it to discharge at PPMC jetty for all the marketers to receive supply.

“Gas is supposed to be readily available in all the major terminals in Lagos but today, only one company has gas because some people have hijacked the NLNG domestic supply scheme. On Thursday last week, they increased the price from N2.4 million per 20 MT to N2.6 million. On Friday, it was increased to N3 million and on Monday, it was increased to N3.5 million and if nothing is done, they will increase it to N4 million. The company did the same thing last year to exploit Nigerians when it was the only company that had LPG but when other companies received product, it quickly crashed the price to N1.9 million,” he had explained.

He accused NAVGAS of exploiting Nigerians with the connivance of PPMC and called on the federal government to intervene to stop the hardship being experienced by LPG users.

Essien argued that the artificial hike could discourage people from using LPG, thus hampering federal government’s efforts to ensure cleaner environment.

But when contacted, the Managing Director of NAVGAS, Mr. Ian Brown had told THISDAY that he had earlier explained the cause of the hike to the marketers in a meeting.

According to him, the hike was due to the current situation in the country, stressing that the market size of LPG in Nigeria is 300,000MT, while NLNG supply less than 200,000MT.

THISDAY gathered that NLNG prices LPG in dollar and allow the marketers to pay the Naira equivalent.

So, any rise in the cost of dollar potentially increases the price of LPG.

But Essien insisted that NAVGAS wanted to hide under deregulation to create artificial scarcity and hike price to shortchange Nigerians.

The marketers noted that since NLNG that provided the gas did not increase the price and since the gas price was not paid in dollar, NAVGAS had no reason to increase the price.

Also when contacted on the allegation that the PPMC deliberately schemed out other companies to favour NAVGAS, the Manager in charge of Marine Transport Department (MTD), Offshore Programme and Operations at PPMC, Mrs. Onabu had told THISDAY that the Major Oil Marketers Association of Nigeria (MOMAN) was in charge of scheduling vessels that berth at PPMC jetty and not her office.

Ogbuanu however told THISDAY at the weekend that NAVGAS has successfully bridged the supply gap by also importing LPG.

“NLNG makes available 250,000 Metric tonnes yearly to the domestic market but the country consumes more than that. If not because of NAVGAS, the country would have been experiencing shortage of supply but NAVGAS has bridged this gap by also importing instead of relying on NLNG. As I am talking to you now, NAVGAS is discharging 9,000 metric tonnes,” Ogbuanu explained.

The federal government should as a matter of urgency address the challenge of logistics facing the LPG market so as to curb the monopoly in the business.

Apart from safety concern, most households in Nigeria are discouraged from using LPG because of the high start-up cost of cylinders and other accessories.

So, creating monopoly in the market just to hike the cost of the product will further worsen consumer apathy and weaken efforts by the federal government to ensure green and safer environment.

For President Muhammadu Buhari’s administration to achieve its target of reducing Nigeria’s greenhouse gas (GHG) emission by 20 per cent by 2020, his administration should quickly address the logistics challenges that fuel monopoly in the LPG business, so that more Nigerians will switch over from the use of dirty fuels such as kerosene, firewood and coal to the use of cooking gas.