…Importation set to drop as price crash looms
-By Eddy Ochigbo & Gideon Osaka
Liquefied Petroleum Gas (LPG) also called cooking gas, is set to be flooded to the domestic market with an additional 240,000 metric tons per annum (mtpa) supply from the Nigerian Petroleum Development Company’s (NPDC) Integrated Gas Handling Facility and Liquefied Gas Storage and Dispensing Plants in Oredo, Edo state.
The IGHF which is said to be the largest onshore LPG (cooking gas) plant in Nigeria and recently commissioned by President Muhammadu Buhari will via its LPG Storage and Dispensing Unit, dispense at full throughput about 330 tonnes of LPG per day which is technically equivalent to 16 standard LPG trucks into the domestic gas market.
The Nigeria Liquefied Natural Gas (NLNG) company, which produces around 5 million metric tons per annum of LPG from its six-train Bonny LNG plant, supplies about 350,000 mtpa of the output for the domestic market (about 40% of the annual domestic LPG consumption requirement).
But in September 2020, the company disclosed plans to increase its dedicated volume of LPG supplied to the domestic market from 350,000 mtpa to 450,000 mt per annum starting from 2021, a move that aims at supporting the Federal Government’s plan to deepen LPG (cooking gas) penetration in Nigeria.
According to the Managing Director, NLNG Limited, Mr. Tony Attah, LPG consumption in Nigeria in 2007 was about 50, 000 mtpa but that figure now stands at about one million metric tonnes per annum.
Valuechain analysis shows that with NLNG increasing its contribution to 450,000 mtpa and the new NPDC’s Oredo gas facility bringing into the domestic market 240,000 mtpa making a total of 690,000 mtpa, domestic LPG supply will grow from the current 45 percent to about 70 percent.
Before now, marketers have lamented that though endowed with natural gas resource, about 60 percent of LPG (cooking gas) used in Nigeria was being imported. Major importers include NIPCO, Matrix Energy, Algasco LPG Services Limited, a subsidiary of Vitol; Prudent, and Hyson among other importers.
LPG is a major source of cooking energy for Nigeria’s upper and middle class but high tariffs on gas equipment and materials, infrastructure and supply chain constraints have impaired the growth of LPG consumption among the lower-class in Nigeria, which is among the lowest LPG consuming countries in sub-Saharan Africa.
However, the inauguration of the NPDC’s IGHF and LPG Storage and Dispensing facilities is a big leap for Nigeria towards improving LPG availability domestically and ultimately lead to a reduction in LPG price and importation.
Built to process over 200 million standard cubic feet per day (mmscfd) of natural gas to the standard accepted by the West Africa Gas Pipeline (WAGP), the NPDC’s IGHF is able to process lean gas spur line to the Escravos-Lagos Pipeline System-ELPS. The IGHL via its LPG Storage and Dispensing Unit, dispenses at full througput about 330 tonnes of LPG per day which is technically equivalent to 16 standard LPG trucks of propane into the domestic gas market.
The facility, wholly-owned and constructed by NPDC – upstream exploration and production subsidiary of the NNPC, is believed to be a game-changer in the oil and gas sector. The LPG Storage and Dispensing Plants are designed to function as waste-to-wealth facility.
LPG marketers told Valuechain that faulty and inefficient supply chain has been the cause of inconsistent pricing of the product, hence the need to change the dynamics of LPG supply chain.
For instance, NLNG produces LPG in Bonny and ship it to Lagos, (Petroleum Wharf Apapa; Rainoil Jetty, Lister Jetty, Apapa and often Stockgap Jetty, Port Harcourt) which is the major receiving point. The same gas from Bonny is now put on trucks and brought down to Port Harcourt as well as other parts of the country for the end-users.
All the three Inland Bulk Terminals are currently located in Lagos, the commercial nerve centre of Nigeria. There are 35 other states plus the Federal capital territory that all gets their domestic supply from Lagos with Bridger and Bobtail Trucks. The states are different distances from the delivery depots which, in turn, differentiate the prices from their counterparts in the different parts of the country.
But in a chat with Journalists during the pre-commissioning of the facility, NPDC’s Managing Director, Engr. Mansur Sambo, revealed that the new Integrated Gas Handling Facility(IGHF) dispensing unit, has made it easier to load a tanker from Benin and deliver to Abuja or other distances, pointing out that the game-changing project would naturally bring down the cost of cooking gas in the country.
President Muhammadu Buhari in his speech at the commissioning added that apart from being the largest onshore LPG plant in Nigeria with the potential of supplying about 20% of Nigeria’s LPG demand, the Oredo Integrated Gas Handling Facility was carefully situated at a corridor proximate to over 80% of Nigeria’s LPG demand source.
The president who spoke virtually at the commissioning of the IGHF and LPG Processing and Dispensing Plants, built and operated by the NPDC, in Oredo, Edo State, disclosed: “The Oredo Integrated Gas Handling Facility and its associated NGLs depot will be delivering 240,000 metric tons of commercial grade Liquefied Petroleum Gas and Propane. It will also deliver about 205 million standard cubic feet per day of lean gas to the domestic market. In addition to its import substitution benefits that brings us a step closer to self-sufficiency in LPG production and also supporting the growth of small and medium enterprises in the host communities, this project will create hundreds of direct and indirect employment opportunities for our teeming youths (both skilled and unskilled).
According to him, the project was a follow-up to the commitment of the administration towards making Year 2020 Nigeria’s Year of Gas: “At the turn of the Year 2020, this administration made solemn declarations to the Nigerian public over its plans to expand the gas sector footprints by scaling-up the development and utilisation of Nigeria’s abundant Natural Gas Resources to help spur industrialization, provide clean and efficient energy for transportation and household use while increasing our exports into the international market. It is on the backdrop of this commitment that the Year 2020 was dedicated and embodied as Nigeria’s Year of Gas”.
The president explained that his administration has followed through with actions that have translated those plans into tangible projects with monumental value additions to the Nigerian Economy.
“We accomplished key gas infrastructure projects like the OB3 and ELPS 2 and flagged-off the Construction Phase of the 614 km AKK Pipeline Project,” he remarked.
While maintaining that it was indeed not a coincidence that the completion and commissioning of the gas infrastructure projects in Year 2020 followed the wrap-up of Year 2019 with the Final Investment Decision (FID) for NLNG Train 7, the president enthused: “We are exiting Year 2020 with yet another milestone of commissioning the Oredo Integrated Gas Handling Facility LPG Processing and Dispensing Plants which will also support the on-going drive towards providing alternative auto fuel under the National Gas Expansion Program initiative.”
On his part the Minister of State for Petroleum Resources, Timipre Sylva, reiterated that the project highlights the commitment of NNPC in eliminating gas flares while increasing Nigeria’s value realisation from gas.
“The entire LPG and propane production is targeted at the Nigerian market, further affirming the conscious efforts of NNPC and the Nigerian government in growing its participation in the LPG value chain to boost domestic supply, lower prices and deepen LPG penetration to safeguard our environment”, the minister added.
In his remarks, Group Managing Director of NNPC, Mele Kyari, said the President’s clear directives to the Ministry of Petroleum Resources and the NNPC were that “we must deepen domestic gas utilisation and monetisation and provide a platform where Nigerians can benefit from the enormous gas supplies that we have so that job and prosperity can be created and by implication, bring peace to the country.”
He explained that the facility was designed, constructed and delivered with the highest application of Nigerian content and the contractor is a wholly Nigerian company which demonstrated the capacity of Nigerian companies to handle ‘complex’ projects.
Speaking shortly before the unveiling of the Liquefied Petroleum Gas (LPG) Storage and Dispensing Plants in Ologbo, an elated Governor of Edo State, Mr. Godwin Obaseki, stated:
“Today we are making history again. We are commencing a domestic gas revolution, starting here in Ologbo. Over the decades we’ve explored for gas in Nigeria but had been unable to pipe the gas and export same abroad. That has changed in 2020. NNPC is now exploring for gas in the Oredo fields, which accounts for one the largest gas reserves in the country. It is indeed heart-warming that the NNPC has thought it wise and proper to use the gas for our domestic economy.
“For us in Edo, we are blessed because apart from the agricultural resources we have, we also have the benefit of energy, particularly gas. And we are talking full advantage of this natural endowment and in doing so, we would continue to collaborate with both local and international investors to ensure that we take full benefit of this natural asset”.
The governor added: “Ologbo has been designated as a special economic development zone because historically it has been a area of production and great potentials”. While thanking the NPDC management, Obaseki called for a review of the gas sales agreement years ago, to reflect the reality of the current market forces.
Given the enormous advantages provided by the facility, the governor said, “the issue of peace in the state and host communities should not be taken for granted because without peace there can’t be any meaningful development”.
“However, you can’t have peace, if there is no justice. You can’t have peace if you don’t integrate the people in your development effort. So be rest assured that we would work with the federal government to make Ologbo and Edo a gas hub that would definitely attract other investors to come and take advantage of the investment”, Governor Obaseki summed up.