Cooking gas demand rises on 100% supply by NLNG
By Jeph Ajobaju, Chief Copy Editor
Demand for cooking is roaring back to pre-pandemic levels on the promise by the Nigerian Liquefied Natural Gas (NLNG) to supply 100 per cent to the local market, instead of shipping some quantity abroad, which has contributed to price increase.
Liquefied Petroleum Gas (LPG), popularly called cooking gas, has been going up in price since December 2020 riding on the combination of import tariff hike, dollar scarcity, and reintroduction of 7.5 Value Added Tax (VAT) by Abuja.
The price of a 12.5kg cylinder refill has risen 186 per cent since December 2020.
The rise in demand has added to the price increase since the decision of the NLNG board on 13 January to supply all its production to the domestic market.
Environment Minister of State Sharon Ikeazor explained on 10 January that the decision of NLNG would curtail the use of firewood and charcoal for cooking and bring relief to forests.
NLNG explained that its core product is LPG, a byproduct of LNG, stressing that all its cooking gas is now sold in Nigeria.
Cooking gas marketers said the news has stoked demand as well as price.
The average price of a 12.5kg cylinder refill in January 2022 is ₦10,000 up 186 per cent from N3,500 in December 2020.
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Concerns in the market
Liquefied Petroleum Gas Retailers Association of Nigeria (LPGRAN) Chairman Michael Umudu said although the decision by NLNG is welcomed, it has raised concerns in the market.
“We should be conscious of this time, for after the announcement was made we recorded a slight increase in LPG price. So we have to welcome that announcement with caution,” he told The PUNCH.
“If they (NLNG) will match their words with action, it will be fine. This is because the 100 per cent they are talking about, will it meet the local demand for LPG?
“Even if it meets the current demand of about 1.2 million metric tonnes per annum, which I doubt, there will be an upsurge in demand, just like we are experiencing now. Again, we should be concerned about the factor of competition.”
“This is because with the announcement, if care is not taken, some of the importers who started importing, leading to a reduction in price for about a month before that decision, may decide to stop imports believing that they will not be able to compete with NLNG.
“And if NLNG is not fit to supply the product, it can equally cause more problems. However, the decision is welcomed and NLNG should be commended for it.”
Umudu said logistics should also be addressed, stressing that even when cooking gas consumption was very low about 10 years ago there was still logistics challenge.
“So we need to know how they [NLNG] are partnering their off-takers to ensure that their product can easily get to the market.”
NLNG spokesman Eyono Fatayi-Williams disclosed in October last year that the volume of cooking gas produced by the firm could not meet local demand because LNG is its core product, not LPG.
“The maximum amount we can now give, which is the maximum production volume, is less than what the entire country needs. We are not the only producer of LPG but we can only give 450,000 MT [metric tonnes],” she explained.
Supply depends on what NLNG gets from upstream
The volume of cooking gas that NLNG will supply locally will depend on the amount of feed-gas supplied to the firm and its byproduct.
“The LPG we produce depends on the feed-gas that we get. Now by feed-gas, I mean the gas we receive from upstream companies. We are like a refinery in the midstream,” an NLNG source, who did not want to be named, told The PUNCH.
“So we buy gas from upstream companies, refine the gas, freeze it, get our LNG, which is the main product, get the byproducts, which are LPG and condensates, and sell. We don’t explore for gas, we buy it.
“LPG is a byproduct, so what we have assured the country is that anything we bring out in terms of LPG is going to the Nigerian market.”
What will happen to NLNG’s international market? he was asked.
He replied: “We are an export company because that is how the company was built to operate; we get gas, monetise it for the country, and sell.
“So the product for export is LNG and it is on this product that we have agreements with our buyers. For the byproducts we just take them to the market and sell because they are byproducts, you never know whether you will get them or not.”
Nigeria consumes about 1.2 million mt of cooking gas annually. NLNG produces about 450,000 mt and has promised to supply all of it to the domestic market.
Marketers and other players import about 65 per cent, and 35 per cent is produced locally with NLNG the major producer.