Tackling Chronic Logistics Challenges in Cooking Gas Supply

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The berthing priority accorded vessels discharging petrol at NNPC’s Apapa jetty, coupled with delays in the arrival of cooking gas vessels from the Bonny Island plant of Nigeria LNG Limited, have continued to lead to the hike in the price of cooking gas by marketers. Ejiofor Alike reports

When former President Olusegun Obasanjo directed the Nigeria LNG Limited to set aside certain volume of Liquefied Petroleum Gas (LPG), better known as cooking gas, produced at the Bonny Island plant of the company for the domestic market, the measure was to bridge the supply gap created by the collapse of the refineries.

The collapse of the refineries, which were the main sources of cooking gas in Nigeria, led to the disappearance of the product from the Nigerian market.

In compliance with the directive, the Nigeria LNG initially set aside 100,000 metric tonnes of LPG for the domestic market yearly.

With the abysmally low consumption of LPG in the country at that period – about 60,000MT yearly – the 100,000MT was more than enough for the domestic market.

Nigerians were initially constrained by the high cost of the product and its accessories, coupled with the misplaced fear of looming dangers in the use of LPG.

But as more awareness is created on the benefits of LPG as a cheaper, cleaner and safer domestic fuel, more households and businesses switched over from the use of coal, firewood and kerosene to cooking gas, thus leading to increasing demand for the product.

To keep pace with the increasing demand, the Nigeria LNG increased domestic supply to 150,000MT yearly and later to 250,000MT annually.

Apart from the 250,000MT from the Nigeria LNG, other companies are also engaged in importation of LPG through the seas and land borders to argument the volumes from the Bonny Island.

However, for a country of 170 million that is supposed to be consuming at least one million metric tonnes of LPG yearly, Nigeria’s current consumption has continued to keep the country’s per capita consumption of LPG far below other countries.

 

Logistics challenge

Despite the huge consumption gap, the biggest challenge facing the LPG sector is not supply as the Nigeria LNG and other importers have stabilised supply; the chronic challenge is in the area of logistics.

The Nigerian National Petroleum Corporation (NNPC) has three jetties in Lagos that constitute the Apapa Jetty – Petroleum Wharf (PWA); BOP and NOJ, all used by vessels to discharge petroleum products.

But only NOJ has facilities to discharge cooking gas and thus dedicated for the discharge of LPG, base oil and other similar products from vessels.

However, NOJ is also used to discharge petrol and other petroleum products from vessels.

So, whenever NLNG brings LPG vessel to Lagos and another vessel is discharging petrol at NOJ, the LPG vessel will either wait and incur huge demurrage or go to NAVGAS terminal, a private jetty and the only alternative jetty for LPG vessels to discharge in Lagos.

Even when NOJ is vacant and NLNG brings in LPG vessel, once a petrol vessel is around the corner, it will be given priority to berth before the LPG vessel “to avoid creating fuel scarcity” as the PPMC and petrol marketers usually claim.

This logistics challenge in the supply of cooking gas has allegedly given the operators of NAVGAS terminal and some officials of the NNPC the opportunity to create monopoly situation by ensuring that when NLNG LPG vessel arrives from Bonny Island in most cases, the NOJ will always be occupied by a petrol vessel, thus forcing NLNG to discharge at the private terminal, thus fueling price hike.

Though the country has not experienced acute scarcity of cooking gas since NLNG intervened in 2007, persistent hike in price occurs whenever NLNG vessel experiences delays in loading at the Bonny Island plant or when the vessel is diverted to a private facility in Apapa as a result of lack of berthing space in PPMC jetty.

NLNG’s General Manager in charge of External Relations, Dr. Kudo Eresia-Eke had alluded to this fact in a statement when he attributed the current hike in the price of the product to what he described as the recent delays in the discharge of LPG vessel at the receiving facilities in Apapa.

He argued that the multi-use terminal at Apapa, which accord berthing priority to vessels discharging other petroleum products had led to a temporary supply disruption.

Eresia-Eke’s clarification came after the company’s dedicated LPG vessel was unable to discharge LPG at the Apapa port from December 29, 2016 to the second week of January as a result of jetty unavailability.

 

International pricing

Another challenge that leads to the escalation of the price of cooking gas in Nigeria is the international pricing of the product by the NLNG.

Marketers have blamed the high cost of the product to the sale of the product in Nigerian market at the international price, as well as the payment of associated costs, otherwise called agent fees, in dollars.

With the pricing of the product based on the fundamentals at the international market, marketers argue that the current high price is also fueled by the rising price of crude oil and the high cost of forex.

“NLNG produces LPG locally but the domestic price is based on the price in the international market. That is why when there is winter in Europe and the price of gas goes up, Nigerians are also made to pay the high price even though there is no winter in Nigeria,” one of the marketers had told THISDAY.

Another marketer, who also spoke off record, had also stated that as long as NLNG hinges the domestic price on the international market fundamentals, the current high cost of dollars will escalate the domestic price of gas.

“The high cost of dollar and high cost of crude are responsible for the current price hike. Unless there is domestic pricing, Nigerians will continue to pay the international market price, despite the fact that it is a local product,” the marketer said.

In a recent interview with THISDAY, the President of the Nigerian Association of LPG Marketers (NALPGAM), Mr. Basil Ogbuanu had also blamed the price hike partly on international pricing but pointed out that the “good news is that the product is available in the market.”

“Unless the pricing template of LPG is changed, Nigerians will continue to be affected by the international pricing. The good news is that intervention of NLNG has solved the problem of supply,” he added

He argued that the scarcity of foreign exchange should not have affected the price of cooking gas in the country because it is a local product and not an imported product.

The NLNG, through its spokesman, Eresia-Eke, had also admitted that the company’s domestic LPG price is based on an international price index plus 50 per cent of the shipping cost of delivering the product to receiving facilities in Lagos.

According him, that price is invoiced in Naira at the prevailing official interbank exchange rates.

“The reality of this is that although LPG is produced and consumed locally, the product like crude oil, is an internationally traded commodity with an international price benchmark, open to global demand and supply pressures,” he added.

Eresia-Eke had, however, pointed out that NLNG mitigates the impact of price variations by continuing to subsidise the cost of transporting about 40 per cent of total domestic market share, which it supplies from its production facility in Bonny Island.

 

Addressing the bottlenecks

While some LPG marketers are creating awareness on the benefits of LPG usage and also addressing the problems of inaccessibility to cylinders and other accessories, there is need for the challenge of inadequate berthing spaces for LPG vessels to also be addressed to arrest frequent hike in presence, which hinders efforts to deepen LPG usage.

For instance, Techno Oil’s LPG cylinder manufacturing plant being built in Lagos would be completed this month.

Also recently, Techno Oil and CAKASA Nigeria Limited signed a deal for the construction of an automated LPG terminal to be completed in less than 20 months.

The 12,000-metric tonne capacity terminal to be financed by Access Bank Plc, would be the largest of its type in West Africa.

Managing Director of Techno Gas and Power, Mr. Collins Onyeama, had revealed that the facility being built at the Kirikiri coastline at Apapa, to boost LPG storage in Nigeria, would be completed in November 2018.

He said that the project would be handled by CAKASA in partnership with a leading European firm that had handled similar facilities in Nigeria and other African countries.

The Managing Director of CAKASA, Mr. Yaro Balami said when completed, the berthing space on the terminal would receive 15,000 metric tonnes LPG vessel.

NIPCO Plc had also assured that its additional 5,000 metric tonne-capacity LPG storage facility under construction to boost domestic supply of cooking gas in the country, would be completed in August this year

Spokesman of the company, Mr. Taofeek Lawal told journalists during a recent tour of the facility in Apapa that the project would be completed in August this year.

“When completed, the company will have a total of 9,500 MT of LPG storage capacities. So far, over 110,000 man hours has been spent on the project. This 5,000 MT LPG storage facility will grow and boost cooking gas availability in Nigeria,’’ Lawal explained.

 NLNG had also committed to continue to work with stakeholders, including offtakers and terminal operators, to eliminate bottlenecks and improve operational efficiencies to ensure product availability and help correct market price distortions.

“We are also engaged with other public and private stakeholders along the domestic market value chain to stimulate price stability and growth. In conclusion, NLNG remains fully committed to the goals of ensuring LPG supply availability, reliability and affordability which are key for the development and growth of the Domestic LPG market. It is in this regard that the NLNG Board recently approved an increase in the LPG dedicated for supply into the domestic market from 250,000 metric tons to 350,000 metric tons annually,” Eresia-Eke had said.