Posers Over NLNG’s 100% Local LPG Supply Decision
Last week, Nigeria LNG Limited announced that it was set to supply 100 per cent of its Liquefied Petroleum Gas production to the Nigerian market in line with its mission to help deepen the utilisation of the product in the country. In reaction to the company’s declaration, marketers of the product and industry watchers have raised concerns about the lack of clarity in the statement, arguing that the company had made similar statements in the past, Peter Uzoho reports.
Following the resolution and approval by its board of directors, Nigeria LNG Limited (NLNG) announced last week that it was set to prioritise Nigeria’s domestic market by supplying 100 per cent of its Liquefied Petroleum Gas (LPG) production comprising propane and butane, to the market.
The Managing Director of NLNG, Dr Philip Mshelbila, disclosed the company’s plan in a statement signed by the organisation’s General Manager, External Relations and Sustainable Development, Mr. Andy Odeh.
“Committing 100 per cent of our LPG supply is a major milestone in our journey of domestic gas supply. We supplied our first butane (LPG) cargo into the domestic market in 2007, which helped to develop over the years, the LPG industry in Nigeria from less than 50,000 tonnes to over one million tonnes market size annually by the end of 2020,” Mshelbila said.
He said in 2021, NLNG increased its LPG supply commitment from 350,000mt, equivalent of 28 million 12.5kg cylinders to actual delivery of 400,000mt, equivalent of 32 million 12.5kg cylinders, thereby directing most of its production into the domestic market.
“But this was not enough for NLNG, hence this commitment to do all that we possibly can and supply 100 per cent of our LPG production to the domestic market,” Mshelbila added.
Coming at a time the LPG subsector is enmeshed in crisis resulting from shortage of the product and skyrocketing prices, many believe that such announcement by NLNG would lead to the closure of supply deficit and the crashing of the price of LPG.
Although, the company was yet to respond to THISDAY’s question, as of press time, which sought to know the exact volume the said 100 per cent supply would translate to, it had in 2021 announced an increase in the volume of its annual commitment to the market from 350,000 to 450,000 metric tons, saying, that was about 100 per cent of its butane production.
It added that in 2020 alone, it supplied over 80 per cent of its LPG sales (butane/cooking gas) to the Nigerian market.
However, NLNG pointed out at the time, that its current maximum butane production met about 40 per cent of domestic demand and that the balance was being supplied by other domestic producers or via imports.
It stated that its production alone was therefore not sufficient for the Nigerian market.
This latest announcement by NLNG about committing 100 per cent of its LPG production is coming after years of backlash from the marketers of LPG who had repeatedly blamed it for contributing to the product shortage and price hike.
They have always accused the company of preferring to export the product to other countries to supplying all to the local market.
No doubt, the company’s communication may not be unconnected with the move by the federal government and stakeholders in the subsector to address the crisis witnessed in the LPG space between late 2020 and 2021.
Not comfortable with the latest NLNG announcement of 100 per cent LPG supply to the Nigerian market, marketers, who spoke to THISDAY, questioned the truth in that announcement.
Faulting the liquefaction company, the Executive Secretary of the Nigerian Association of Liquefied Petroleum Gas Marketers (NALPGAM), Mr. Bassey Essien, said the statement by NLNG was not specific about the actual volume of supply.
He said the company had said at a forum last year that it had committed 450,000mt of its butane production to the country and that the company also said the figure was 100 per cent of its production.
Essien wondered why the company would be coming out now to announce that it was set to supply 100 per cent of its LPG production without stating the actual volume.
Asked if that announcement would have any major impact on the already troubled market, Essien said there would be no impact from it as it was the same old story.
Essien said, “What was the volume they said they were putting to the local market? And now they are saying they are going to go 100 per cent, what volume are they anticipating?
“Same last year, at the height of the increase in prices that was everywhere, they said their total production for propane was 450, 000 which they said they had committed to the market. So, if they committed 100 per cent of that last year, and they are telling us now that they are set to do 100 per cent, so what are they saying?
“Let’s wait until they mention the amount. But if it is the same 450,000, then there is nothing to comment on. Let’s forget about semantics. We want to know what the 100 per cent translates to in volume”.
THE INTRACTABLE LPG CRISIS
Nigeria consumes an estimated 1.2 million metric tonnes (MT) of LPG, with NLNG supplying 450,000mt while the remaining 750,000mt is being sourced through importation.
But even as a country that is rich in gas and a major gas producer, with 206 trillion cubic feet (TCF) proven gas reserve, the country ranks among the lowest in gas use.
Nigeria’s average gas production is estimated to be around 8 billion cubic feet per day.
But in all these opportunities, the country continues to be poor in energy use including LPG, which is seen as a clean cooking fuel. The crisis in the nation’s LPG market seem to be defying all measures aimed at addressing it.
Nigerians are still grappling with the challenge posed by hike in the price of LPG which they were thrown into last year, resulting from a number of factors.
The factors include insufficient in-country supply of the product by the NLNG and the rise in oil prices – which is a major determinant of the prices of all fossil fuel products.
Foreign exchange scarcity also made it difficult for importers to continue importing the product, as dollar was no longer affordable to them.
Other factors that impact the product supply and price include high inflationary pressures, and heavy import costs.
Worse still, the announcement by the government that it was going to introduce 7.5 per cent Value-Added Tax (VAT) on imported LPG further destabilised the market, as the marketers, who import the product started panicking and had to stop importation.
Sadly, this VAT introduction announced by the government is yet to be applied to the LPG import cost as at today, after causing hardship to Nigerians.
The development led to the price of LPG hitting the rooftop, as the cost of a 12.5kg cylinder refilling unit rose to over N9,000 in the third quarter of 2021 as against N3,400 sold in the first quarter of the same year.
At a point, a number of the consumers, mostly the low-income earners, who could no longer afford the gas, had to resort to firewood, charcoal and sawdust as a cheaper alternative. Though, with huge health and environmental impact on them.
LPG PRICES STILL ON THE RISE
Contrary to the notion in some quarters that prices of LPG had started coming down, the NALPGAM executive secretary said prices had continued going up as at last Friday.
Essien decried the continuous rise in the prices of the commodity, saying prices are now rising by N500,000 per truck, every day.
He also alleged possible manipulation of LPG supply system by some persons which could be causing the continuous increase in prices, despite the claim that the 7.5 per cent Valued-Adddd Tax (VAT) on imported LPG had not been activated yet.
He said the cost of a truck load of LPG at the depot had risen to over N10.10 million last Friday, debunking the notion that prices had started dropping.
According to him, they were buying the product at around N10.10 million per truck, even higher than what they were buying the previous weeks.
Essien said when the product was coming down some weeks ago, it did not come down to below N9.5 and N9.6 million per truck, adding that the price was rising higher at the moment at the LPG terminals.
At the retail level, a 12.5kg cylinder refilling unit rose from about N3,400 early 2021 to as high as over N9,000, depending on the location. It is still selling at above N8000, THISDAY learnt.
However, at the depots, a truck load of the product rose from about N4 million to over N10 million.
Essien said: “The cost of a truck was around N9.6 million, N9.5 million and suddenly it went back to N10.10 million with extra N550,000 just yesterday.
“When it was going up, it was going up at the rate of N200, 000 to N500,000. The one it came down last week (penultimate week), it was coming down at N50,000. But suddenly, yesterday (last Friday), it went up by N550,000.
“May be, somebody along the line is manipulating the system, or some people along the line are not telling us the truth. The marketers buy what the terminals sell to them. So, what is going on at the terminals?”
He frowned on the inability of the government to categorically state its position on LPG VAT, pointing out the terminal owners were using that as an excuse to keep hiking the prices.
“Government said they want to start VAT, customs duties and yet, they said have not even started implementing it. So, why is the price high?
“Ask NLNG how much they are giving this product to the terminal owners or the off-takers, so that we know why it is expensive as that. Why did it increase by N550, 000 per truck yesterday?”, he said
He expressed displeasure over government’s weakness in addressing the LPG crisis in the country, pointing that the federal government keeps saying it was working towards bringing down gas price without being specific about what it was doing.
He said prices would only come down if there was a sustained increase in volume of LPG going to the market, either through importation or through supply by the Nigeria LNG Limited.
VAGUE 100% LPG SUPPLY Resolve
Announcing the plan to dedicate 100 per cent of its LPG production to the Nigerian market, NLNG’s Managing Director, Mshelbila, said the decision was in line with the company’s mission to support the deepening of cooking gas utilisation and adoption in the country.
He said the milestone was coming just three months after the company supplied its first propane cargo into the domestic market and had developed a scheme to sustainably supply propane for usage in cooking gas blending as well as in agro-allied, autogas, power and petrochemical sectors of the Nigerian economy to further deepen gas utilisation in Nigeria.
These initiatives, according to him, were designed to increase LPG availability in Nigeria, diversifying its uses and support the Federal Government’s Decade of Gas initiative.
NLNG is currently the highest single supplier of LPG into the domestic market, with an estimated 400,000 metric tonnes supplied in 2021.
Mshelbila said the announcement marked the company’s strong commitment to the continued growth of the domestic LPG market and its passion to increase utilisation of one of the most versatile energy sources in the world.
He added that the company was ardently following up on the commitment it made in March 2021 at the NLNG-sponsored pre-summit conference of the Nigeria International Petroleum Summit (NIPS) 2021, organised by the Federal Ministry of Petroleum Resources, to support the Decade of Gas declaration by the federal government.
He said, “We are driven by our vision to remain a globally competitive LNG company helping to build a better Nigeria and are making a reality of our collective dreams that one day we can switch all cooking fuels to gas, and power our vehicles with gas as encapsulated in the government’s National Gas Expansion Programme and the Autogas Policy.
He further said that the company was inclined towards helping to build a strong economy based on the gas resources that Nigeria is abundantly blessed with.
He stated that natural gas could help drive the economy by providing cooking gas for homes, supporting industrialisation, powering mobile cell sites and complex transportation systems.
Mshelbila added that natural gas could also help the country by impacting food supply through its usage for fertiliser production and increasing power supply to both homes and industries while reducing the country’s carbon footprint.
According to him, gas, as the cleanest of the fossil fuels, has become an essential energy source to be reckoned with during this energy transition period.
Pointing out that other countries were revolutionising their energy industry to cut down on carbon emissions drastically, Mshelbila noted that Nigeria should not be left out in this drive, considering its abundant gas resources.
He said “gas is essential for life and living at the moment, because it can support everything we will need to develop our economy and create better living standards for Nigerians. We need to change the narrative, and NLNG is being pragmatic about it”.