“LPG industry, ripe for heavy investments”

BASSEY ESSIEN, Executive Secretary, Nigerian Association of Liquefied Petroleum Gas (NALPGAM), speaks on the challenges of the LPG subsector of the economy, the potential and the association’s move to increase consumption. AYOBAMI ADEDINNI captured excerpts:
 
With the recent increase in the consumption of LPG in the past 6 years, do you think the industry is prepared in terms of infrastructure and things around it to increase the level of consumption?
For every investment, the aim is for positive growth. We have a population which is approximately about 170 million people and if half of this population is not even using LPG, it means we have not achieved much.
It is why we keep saying in the sub- Sahara Africa region, we are the second largest producer of and yet in terms of per capita consumption, we are the least.
Yes, people argue in terms of building population size, we have much more number of people but all the same that Nigeria being one of the top seven countries in the world endowed with enormous reserve of LPG, we expect that there should be a  commensurate level of consumption that should go with the population.
Sometime ago, consumption was about 70,000 metric tonnes per annum but as we speak today, with all the available resources, It should be over 800,000 metric tonnes which we still feel is very inadequate.
For a country like Nigeria, we should be talking about five million metric tonnes. So we are saying that the industry is growing but more is expected.
Majority of the growth is coming up now, especially into awareness, distribution and privately owned investment, asides the NLNG owned by the government and other stakeholders which, initially its major product, the LPG, was for export
The domestically produced was supposed to come from the refinery but we all know today the issue of the refinery.
This is why NLNG was compelled by the government of President Olusegun Obasanjo to make available a sizeable proportion for local consumption.
We started from 150,000 metric tonnes to the current 350,000 metric tonnes by NLNG. So you can see that we are talking about a consumption going to about 800,000 metric tonnes.
If NLNG is providing 350,000, then where is the balance coming from? The balance is coming from importation. These importations are been done by individuals and privately owned organizations who have equally contributed to the growth of the LPG.
A lot of things are still being put across to the table of the government.
By DPR’s record, there should be over 750 licensed LPG bottling plants and, of course, that there are other illegal ones.
This goes to show that there is growth in the industry. I remember those days   LPG was something that went round the major marketers, about five of them but now it has grown to this level  but  more is still been expected.
This is why we keep saying that government should make available the necessary environment infrastructure to boost the industry.
LPG business is capital intensive and for new people coming into this, they need government’s support. This is because you are trying to make people abandon their traditional ways of cooking and embrace LPG.
Some are not going to do it voluntarily except probably by enforcement from government because you can’t move me from my comfort zone to a different place which may be capital intensive for me.
Government should make available incentives that would encourage people to leave firewood, charcoal, kerosene and come to LPG. But what are these incentives? You know how much a cylinder costs now even a table top burner, hoses and the rest.
For someone who is just starting, for you put all everything together if you are lucky you spend a minimum of N25,000 that is for a conservative one.
And yet somebody gathers firewood to start cooking because the person has nothing to lose. If you now want them to migrate or switch to LPG, there needs to be encouragement.
The encouragement we are talking about is not going to look like those that are not producing in the country are all imported, the government should make incentives attractive for the importers, wave some of the tariffs, customs charges and so on which would now be moved into the ultimate cost of the accessories which makes it difficult for a new consumer to embrace LPG
If government should remove some of these bottlenecks, businesses can come in and the people can afford the starter price. It will go a long way to actually improve and increase the awareness of people that to migrate to LPG.
The roads are bad, trucks are falling down which is a business hazard for insurance companies too because if trucks are falling every now and then, the owners have to make claims.
Until recently, the discharging terminals were in Lagos. Everyone had to come to Lagos and go back. You can see the stress on the roads.
Someone comes to the port and spends days before returning to their state. But now individuals are coming up.
We have depots in Warri, Calabar and Port Harcourt. We expect that if more of these are available, it will reduce the stress of coming to Lagos.
On the issue of cylinders, what are you doing as regards the use of substandard products?
We have the government agency saddled with that. We know what the country is so some of these things could be smuggled in so definitely if you are going through the normal channel, you can’t have a substandard product.
This is why SON is working hard with stakeholders in trying to sanitise the industry.
Recently, there have been cases of explosions of bottling plants, what is NALPGAM doing as regards safety of people and environment?
Before one can have an LPG plant, you must be licensed by DPR. There are conditions you must meet. The state government has statutory requirements that you must meet. They all have a part to play before you are granted license.
The fact that you have a license does not mean you go and do business without being checked. DPR and some agencies in the states go around to ensure there is a compliance with safety requirements.
We have a technical committee that visits plants periodically to ensure compliance. DPR has a standard operating guideline which seeks to regulate operations of LPG plants.
We try to collaborate with all these agencies. We bring anomalies to their attention. They are the ones saddled with the enforcement to either close down or do otherwise.
A lot of people come into the business because they believe once it is oil and gas, there is money. So, because they have money to throw around, they don’t bother about safety precautions.
What’s the percentage share of local investors in the industry?
Before, it used to be major marketers but right now, a sizeable proportion of the plants are owned by Nigerians. The industry has moved to where it is; it is now by the concerted efforts of indigenous investors.
 So, the industry is ripe for heavy investments?
It has always been ripe for heavy investments which is why the federal government had a workshop on unlocking the potentials in the sector because they have seen what is there.
Frankly speaking, if we say a population of 190 million and less than 40 million are using gas, what are we talking about? The investments are there. The only thing needed is the enabling environment to encourage people. Most of the gas been used are in the major cities. An average person in the rural area does not have them.
There are opportunities there, what is need is the right encouragement and incentives.
Asides finance and infrastructure, are there any other challenges the sector is facing?
We used to have a problem with the berthing of the vessels so the vessels can be at the port for several weeks before discharging their products, it will create scarcity and high price. But now it has been taken care of.
Our major issue is that the LNG product comes from Bonny to Lagos and people from Port Harcourt and the east come to Lagos to buy and take back to those areas again. Why should someone leave Bayelsa and River states, come to Lagos and buy what is being produced at his own backyard?
Also, we need to tell you the dredging of our inland waterways is to be able to accommodation.
Another major issue is awareness. If we had enough awareness, there will be a ripple effect in the demands for the products. And once there is a high demand, there will be supply.