Cooking gas prices: NLNG, NNPC to ease supply bottlenecks

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SOPURUCHI ONWUKA

Federal government has unveiled plans to arrest the rising prices of liquefied petroleum gas (LPG) in the country and displace use of firewood in Nigerian kitchens.

Part of the process is to dismantle impediments that build cost in the supply channels, inject moiré products into the market and also open up new sources of supply through additional capacity in raw gas harnessing and processing.

The process involves additional investments in strengthening and expanding the country’s LPG distribution infrastructure for enhanced offtake just as the country works with global investors to grow its midstream gas processing facilities.

The Oracle Today reports that the prices of LPG mainly used as domestic fuel kin the country has since increased by nearly 20 percent in the past six months as demand pressure shifted from costly household kerosene to cooking gas.

The rise in kerosene prices from regulated N50 per liter to deregulated range between N250 to N300 per liter proliferated the LPG distribution and retails as marketers enter a new race for evolving transition from liquid to gaseous domestic fuel options.

However, the demand switch from kerosene has also come with demand induced spike in the retail price of LPG across the country as concerns continue to rise about the sustainability and security of supplies in view of low operations level at the nation’s three refineries.

The major source of supply in the country however remains the Nigeria Liquefied Natural Gas (NLNG) Limited which intervened in the supply of cooking gas to the domestic market in 2007 when operating capacity at the local refineries went down.

The intervention with annual 350,000 tonnes of LPG into the Nigerian market under Sales and Purchase Agreements (SPAs) with about 27 off-takers significantly brought down the price of cooking gas from over N7,000 in 2007 to less than N3,500 per 12.5kg cylinder.

NLNG claims it supplied over 1.24 million tons per annum (mtpa) of LPG to the domestic market across 10 year, between 2007 and 2017. The intervention, it stated in its 2018 business report, spurred a steady rise in annual domestic consumption by over 1000% from less than 50,000 tons per annum (50ktpa) in 2007 to 600ktpa in 2017.

Deliveries are made through NLNG’s dedicated vessel chartered for the company’s domestic LPG Scheme to ensure steady supply of products.

There are expectations that NLNG would increase its supply of LPG to the domestic market as it grows her gas liquefaction capacity from 22 mtpa to 30 mtpa with its Train-7 project.

Meanwhile, supply logistics from the export configureofftake facilities of the liquefaction company as well as low reception capacity at local jetties have continued to pose domestic supply challenges and build distribution costs.

Checks by The Oracle Today showed that LPG cargoes from NLNG cannot reach contiguous cities in the South South and South East regions of the country, and normally get stranded off the cost of Lagos, requiring offtakers to charter lightering vessels to reach reception jetties.

A number of indigenous companies are also taking advantage of the bottlenecks to also stake capital in facility development in the distribution chain.

Falcon Corporation, it was gathered is building a high capacity LPG plant in Rivers State to capture distribution enclaves but it is not yet clear how the company’s business plan captures the supply link.

A national committee led by the Vice President of the country was constituted to smoothen processes for deepening local demand of LPG in the country through infrastructural development but expectations from several gas policies and programmes are yet to be realized.

Nigerian National Petroleum Corporation (NNPC) which holds overriding mandates in the petroleum industry declared weekend that government would leverage rising capacity in the midstream gas industry to improve LPG supply for domestic and commercial application in the country while leveraging rising liquefaction capacity of the NLNG Limited to capture greater export income.

Group Managing Director of NNPC, Dr. MaikantiBaru, stated in a presentation delivered for him at a conference in Abuja that government is committed to aggressively growing local consumption of LPG in the domestic market while targeting 10 percent of the global Liquefied Natural Gas (LNG) supply.

He said the corporation was determined to invest in making LPG available to Nigerians to discourage the current trend of using firewood and other unsafe means for cooking, stressing that it was time to bring LPG closer to the people and at affordable price.

He said NNPC was driving expansion of operated LPG storage facility at Apapa from 4,000 metric tons to 8,000 metric tons in the first phase. He added that the corporation was also working on construction of pipelines to deliver LPG to plants in the hinterland and also develop of coastal supply facilities.

“We have also purchased two LPG vessels for export operations through the West African Gas Ltd (WAGL), a joint venture firm, and we have developed a growth strategy plan and gradually providing LPG skids across NNPC Retail outlets,” Dr. Baru stated.

 


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