NLNG’s intervention in bridging LPG supply gap

Energy crisis remains a notable feature of many economies in the last one year with many seeking alternatives that will aid accessibility, reliability and cost efficiency. To achieve this, access to gas has become non-negotiable, even if it requires government adjusting policies. Leveraging the intervention of the NLNG, the Federal Government hopes to improve access to cooking gas and reduce net emission from other cooking fuels. FEMI ADEKOYA writes.

Globally, gas remains at the epicentre of energy crisis and rising inflation, with all eyes on gas producing countries for increased supply and long-term contracts to ensure not just accessibility but reliability.
For gas producing nations like Nigeria, this is an opportunity to expand market access and maximise opportunities in upstream industry for gas production.

With a domestic policy that encourages Liquefied Petroleum Gas (LPG) consumption, many Nigerians have in recent times embraced the use of LPG, known as cooking gas, encouraged by its speed in cooking and low health risk.
However, a persistent increase in the cost of cooking gas is now threatening to force average Nigerians to return to charcoal and firewood, with all their well-known health hazards.

Indeed, since the beginning of 2022, the price of gas has soared beyond the reach of the common man.

To address the challenge of cost, NLNG, last year, committed to supplying 100 per cent of all its LPG production (butane and propane) to the domestic market despite feed gas and market challenges.
NLNG’s Managing Director/Chief Executive Officer, Dr. Philip Mshelbila, at a recent forum, listed the challenges which have slowed the utilisation of LPG in the country including the inability of the market to completely absorb NLNG’s propane production, leading to its sparse export of propane to avoid tank-top situations at its plant.

He said: “When we made that commitment last year, the intention was that every molecule of butane and propane that we produce in our facility will come into the domestic market and since then we have made every effort to keep to that since January 2022. We have been successful in achieving supply of 100 per cent of our butane production.

“We have not been able to reach 100 per cent with propane, not because we don’t want to but because the market capacity to absorb the propane is just not there. We intend that all the butane and all the propane that we produce goes into the domestic market whether propane is being used to blend with butane as cooking gas, used as autogas, or used in industry to generate power”.

Indeed, the Minister of State for Petroleum Resources, Timipre Sylva, has continued to reiterate Nigeria’s readiness and positioning to become a major gas supplier to Europe following the global energy crisis caused by the ongoing conflict between Russia and Ukraine.

Indeed, the NLNG said it has cumulatively supplied over 2.4 million tonnes of liquified petroleum gas (LPG), popularly known as cooking gas, into the domestic market, in the last 15 years.

The company said the continued supply of LPG under the NLNG Domestic LPG (DLPG) Scheme, spurred a steady rise in yearly domestic market consumption in a market that was below 50,000 tonnes per annum in 2007 to over one million tonnes per annum in 2021 and still growing.

NLNG said it currently supplies about 80 per cent of the local domestic cooking gas currently and is looking forward to committing 100 per cent of its LPG supply for domestic use, which will be a major milestone in the journey of domestic gas supply.

Established on May 17, 1989 as a Limited Liability Company, the NLNG was set up to harness Nigeria’s vast natural gas resources and produce Liquefied Natural Gas (LNG) and Natural Gas Liquids (NGLs) for export.

Liquefied Petroleum Gas (LPG) popularly known as cooking gas is a very clean versatile and environmentally friendly fuel, an essential commodity for life and living, convenient, portable energy source that is easy to transport and store. It’s produced from petroleum refining of crude oil and extraction from natural gas with varying uses ranging from heating purposes, production of aerosol propellant, input to petrochemical industry and as a refrigerant.

The policies of the Federal Government initiated in 2005 leading to the 2007 intervention, has aided supply sustainability in the industry today, having opened up and broadened the LPG domestic market that witnessed transformation from 2004 till date.

Producers (notably NLNG) dedicated a certain quantity of LPG for the domestic market. 15 years after the NLNG’s intervention in the supply of LPG to the domestic market under DLPG Scheme, the programme has generated over 250,000 jobs in the sector and created the much-needed foundation for what has grown over 1000 per cent.

Not only has it helped reduce the use of dirty fuel sources for cooking, it has also stimulated growth in the industry by guaranteeing LPG supply, availability, affordability and enabling the development of a value network for a sustainable ecosystem towards a better Nigeria.

Giving an overview of its achievements in the last 15 years, the company said that in 2003, Nigeria was producing large quantities of LPG but this quantity was exported, while domestic consumption came mostly from import. Export production of LPG was substantial but nothing was reserved for the domestic market due to inability to accommodate small vessels at loading terminals at NLNG and other export points.

The Federal Government set up a Presidential Steering Committee on LPG (under the chairmanship of the Special Assistant to the President on Petroleum Matters) Alhaji Ja’afaru Parki, which carried out studies in conjunction with the World Bank.

In 2004, the Federal Government through the Presidential Steering Committee took conscious and deliberate positive actions and policy framework to change the existing conditions thus it directed LPG producers to accommodate lighter vessels to supply the domestic market.

Specifically, the Domestic LPG industry study commissioned by NLNG in 2016, projects growth of up to three million tonnes per year in 2026, subject to the implementation of various intervention programmes across the value chain. NLNG intensified its advocacy drive with the government, aimed at facilitating the implementation of specific industry and policy initiatives necessary for the attainment of this projected market growth and development.

Regardless of the milestones in the LPG industry, there remains a high demand of cooking gas in the country, outstripping supply, which has created sharp increases in the price of LPG.

To mitigate this price surge, the NLNG said the LPG supply chain needs to be improved with more producers increasing the quantity of LPG to the domestic market; encouraging private entrepreneurs to embark on natural gas processing Implementation of flare out programme (NGFCP); ensuring that petroleum refineries are revamped and functioning and reducing/waiving import duties and levies on LPG assets such as equipment, chemicals, among others.

The company also called on the Central Bank of Nigeria to ensure disbursement of loan facilities from a special gas fund (National Gas Expansion Programme Framework) to competent investors in the LPG value chain.

On his part, President of Nigerian Association of Liquefied Petroleum Gas Marketers (NALPGAM), Oladapo Olatunbosun, said NLNG remained committed to meeting domestic demand.

Olatunbosun further stated that the association had been assured by NLNG to keep producing LPG based on the feed gas it received from its gas suppliers, as production was expected to pick up after the flood receded.

The NALPGAM president also cautioned middlemen (Terminal owners/off-takers) in the LPG value chain not to take advantage of the hysteria in the market.