Executive Secretary, National Association of Liquefied Petroleum Gas Marketers (NALPGM) Bassey Essien, tells Assistant Business Editor KELECHI MGBOJI in this exclusive interview that indiscriminate citing of skids in disregard for safety measures constitute a time bomb for host communities, giving tips on how to make the product available to Nigerians. Excerpts….
Nigeria as least consumers of gas
In 2010 for instance, a report that was conducted stated that a country like Senegal with about 10.2 million population, its gas consumption was about 138, 000 metric tonnes for the year. But Nigeria with a population of over 150 million as at the time was not consuming up to 120, 000 metric tonnes for that year.
When you talk of per capita usage of gas, Nigeria was doing about 1kg whereas countries like, Morocco was doing 44kg. Based on that revelation, government came up with the aspiration to increase to about 3.75kg per capita consumption. In that regard, we must be able to consume about 600, 000 metric tonnes per annum.
As we speak today, we are not even there yet. From available data, in 2014, it was put at 310, 000 metric tonnes, which is about 1.5 or 1.7kg per capita consumption. So, the country is still far behind. Considering the huge population of the country, by now we ought to be consuming about one million metric tonnes, not just under 400 metric tonnes that the country is consuming. The issue is about the initial cost of transiting from other energy sources to gas, the fear of gas explosion and the poor awareness.
Indiscriminate citing of small gas plants
In trying to reach out to people in the interior, there are smaller gas plants called skids. These ones also have their capacity, and the least of it costs about N15 million or more. The problem we have with them is that there is so much of indiscriminate citing of skids everywhere. Some are cited in areas that are danger prone. We are planning to take it up with the authorities. Even if they license them, there have to be stringent conditions for the plant because safety is the key thing. No matter how small the quantity of gas is, if anything happens there, the volume does not matter. It is not like fuel which is seen when it is burning. Gas burns with the air.
Sanitising the system and making gas evenly distributed to all terminals
A lot of awareness is being mounted for people to transit from the usual cooking fuel to gas because we know it is a clean source of energy; it burns efficiently, it is not messy, and is presently cheaper with other advantages.
We know the health implications of other sources of energy; we need to destroy farms and forests to get wood. That was the reason government got involved in creating awareness for gas usage. If we have done that to the extent that from 60, 000 metric tonnes being consumed it increased to 150, 000 to 250, 000 and we are targeting 350, 000 metric tonnes, and suddenly the product became unavailable, it is counter-productive due to monopoly and scarcity. It is ironical that a country which has the resources, this product comes from LNG in Bonny in Rivers State, its citizens cannot afford to buy it.
The price being sold by the firm has not changed, so why the sharp rise in price? We thought about it and concluded that there is something wrong somewhere.
Now, there are three terminals in Lagos that have access to this product. These are NIPCO, Nav Gas and PPMC. When the gas-bearing vessels arrive, they berth at the terminal…. from there they move to NIPCO and PPMC. Because Nav Gas is a private terminal, and is strictly for gas, these other ones have the white products and the gas too. Now, if there is a queue for vessels to discharge, in order not to incur cost, they ship operators would convey the product to Nav Gas so as not to incur demurrage. But most times, even the vessel’s berthing schedule could be so manipulated that those things would happen. That was why we raised the alarm. If all terminals have this product, definitely there will be a level playing ground. We know it is a deregulated product, still there has to be a level playing ground. If it is available in one terminal, let it be available in all the terminals. If a firm turns out to be the only firm that has the product, it will dictate the price. In as much as it is difficult to mobilise people to boycott buying the product as a way of protest, even if you try to, there will be some level of sabotage, and so it may not work. But the point is that we are trying to encourage people to embrace the usage of gas, so why take the price out of their reach?
Less than two weeks ago, gas was less than N2.4 million, the next day which was a Wednesday it became N2.6million, by Friday it rose to N3.3million, the next Monday it was N3.5million, and we cried out. Before that week when we raised the alarm, it rose to N3.8 million until another consignment came and they started selling N3.3 million because the other guys were selling N3.8 million. When that guy exhausted his own, the same person who was selling at higher prices brought new consignment and sold at N4.3 million. So at the end of the day, the consumers suffer it all, especially at this inauspicious situation of the economy. We can’t just fold our hands.
Price difference between Nigeria where consumption rate is low and other African countries where consumption is higher
The usage is not as a result of cost, it is awareness. That is what is principally responsible for the difference in consumption rate. Some of those governments, they went out of their way to give incentives to encourage people to use gas. Some offered gas cylinders, gas cookers, etc to make their citizens embrace it. You know how costly it could be for a bachelor who is starting life newly to buy cylinder, cooker, the regulator, hose and then fill the gas. All these put together will cost about N20, 000 or more compared to a kerosene stove with kerosene that costs about N3, 000. But in most other countries, they subsidise the cost to encourage people to use gas. In Nigeria, for instance, VAT was being paid at a point but after a presentation was made to the government, VAT was removed. Yet import duties are paid on the accessories that are imported and the importers will have to make a profit margin, all these still add to the cost borne by end users. In other countries, they went out of their way subsidising these things to get consumers used to it. The incentives have to be there to make people stop using wood, charcoal, and kerosene.
Gas costlier in Nigeria than in the countries importing from Nigeria.
Initially, when LNG was exporting gas they made sure that local consumers bought at the same international price. But with the domestic supply scheme, the local dealers pay in local currency. So it is not as if the price was increased. It is the same price the past few months, so why should there be sudden sharp rise in prices. It is as a result of epileptic supply.
Now, the PPMC has said they are going to revamp some other jetty that has been probably in the pipeline for a long time. If that jetty is put into proper usage, vessels can berth there. By the time we have about two or three vessels in a month, nobody will be talking about scarcity.
The scarcity is not limited to Lagos but in actual fact, Lagos is where it is happening. The ship berths here, a lot of customers from other parts of the country come to Lagos to lift their supply. They used to take delivery from Port Harcourt Refinery but you can’t trust their supply. You can lift once but will never see it again for a long while. So, everything happens here. Customers come from the North, East and South; so it all happens in Lagos.
Role of other stakeholders in distribution chain like the Mobil, Conoil, Total, etc
In one of our meetings recently, somebody from among those major marketers said that Mobil has just inaugurated a plant somewhere in Snake Island to boost production and maybe enhance gas supply. We hope when that one comes on stream, it will help to improve supply. If everyone is getting supply from the same source, and it is distributed to everybody from that same source there is bound to be supply crisis as we are witnessing now. But if they have their own terminal, and it is big enough, once the market is awash with the product, the consumers will be the ones to determine the price. They, too, have the issue of pricing because it affects everybody.
Prices going back to where they were before the scarcity
You know the Nigerian system, when price of something goes up it often hangs there. But it is a market that has already been deregulated. So, it is not as if we are going to fix the prices. If supply is higher than the demand, prices will certainly come down. We are very optimistic that prices will come down once supply improves because the forces of demand and supply play critical role in determining the price.
Relationship with Lagos State Government where most members operate
Lagos State seems to set the pace for every other state to follow. Even though DPR has given you the licence to operate a plant, the government will still ask you to do environmental impact assessment. They will still ask you to meet some conditions provided in their own state law. So you have to meet those conditions for you to take off. And when you meet those conditions, there are periodic inspections to make sure there’s compliance here and there. Since you are here to do business, it behoves you to fall in line with the requirements of your host community. So, what we do here in the association is that if a pronouncement comes and we feel we are not comfortable with it, we meet the government and discuss with them and arrive at a common ground.
Our membership is voluntary. To that extent, once we see a new plant we approach the owner to make him know why he should belong to the association. Within our membership, we have a self-regulatory system to make sure that our members don’t fall out of line of what is expected of them within the host community. Based on that, we have a very good relationship with the government.
Business capital intensive
This is one of the reasons why we are coming up with a resource Centre. At the Centre, we have everything starting from the feasibility study to take off.
There are so many factors that go into the business, land and other resources. You need to acquire the land and the cost depends on where you are setting up the business. It is capital intensive because most of the materials needed to take off are not even produced here. They are imported including the filling machine, specialised tanks which are unlike petrol tanks, the truck itself. If you are lucky to get a truck with all the gadgets it comes with for N12million you have tried. That’s why we kick when there is any development threatening to cripple the business. You don’t invest over N50million in a business and suddenly you cannot sell to recoup your investment. If the investor has taken a bank loan, how does he pay back the capital with its interest not to talk of making profit? It is actually capital intensive.
However, the cost of the business can come down if government could do away with import duties on the equipment. Some people pay as much as 35 per cent duties. If government can do something about import duties as incentive to grow the sector and encourage gas usage among the populace, it will definitely bring down the cost of gas.
Stakeholders have made a proposal to that effect. The initial proposal was during the period when gas was being imported, and it resulted in VAT exemption on gas but not on the accessories. But right now, the talking point is the removal of import duties on the equipment and accessories so as to make gas usage more affordable. The presentation has been made to government, and stakeholders are still following up on that. When government removes duties on gas equipment and accessories the cost of getting equipment and the price of gas will come down.