Nigeria’s shifting LPG marketMay 13, 2021
Auwalu A. Ilu, CEO of Ultimate Gas, talks to The Energy Year about the policies and incentives Nigeria has implemented to propel gas utilisation and how the country’s LPG market is shifting. Ultimate Gas is an integrated LPG supply chain company carrying out offtake, bottling, supply and distribution as well as marketing of LPG equipment and appliances.
What policies and incentives has the government implemented to propel gas utilisation?
The federal government has introduced programmes and schemes such as the import duty exemption on LPG equipment, the gas flare commercialisation scheme, the gas expansion programme, the Nigerian Gas Transportation Network Code, the Central Bank of Nigeria intervention fund for LPG, the removal of value-added tax on LPG and the AKK pipeline project.
What export-import dynamics define the Nigerian LPG space, and how are these shifting?
It is very unfortunate that Nigeria LNG Limited and NNPC (its equity from ExxonMobil) can only supply a fraction of their LPG volumes to the domestic market. They export the majority of their volumes.
The domestic market has continued to grow from about 40,000 tonnes per annum in the ‘90s to about 1 million tonnes last year, with 60% of this being imported. It does not seem logical to be importing and at the same time exporting LPG.
In the last 10 years, we have seen a lot of investments in LPG plants, skid plants, LPG terminals, transportation Bridgers, cylinder manufacturing and other LPG equipment and appliances. We now have around 15 terminals dotted across the country, about 900 LPG plants and thousands of skids and add-ons, and there are many more in the pipeline.
What questions surround the viable establishment of LPG, LNG and CNG in Nigeria?
In my opinion, for LPG, CNG and LNG to be viable for autogas, the price of petrol has to be fully deregulated.
To what extent is the administrative levy on LPG from the Petroleum Products Pricing Regulatory Agency (PPPRA) disincentivising the sector?
It simply means an added cost of LPG for the consumer. There is major talk in the industry on this issue. For at least the last 20 years, LPG has been a deregulated product, as such it should not be regulated by PPPRA. I understand the Nigeria LP Gas Association has instituted legal action against them.
What journey has Ultimate Gas taken in the local LPG market, and what seeds are you sowing for the coming years?
We started with a 130-tonne LPG bottling plant in Kano 25 years ago and have grown to be a fully integrated value chain from offtake and transportation to bottling, distribution and the sale of LPG appliances. We are one of the leading LPG players in the country and are currently working on a coastal terminal.
What inroads are you making in the distribution side of the business?
We have invested heavily in the logistics side of the business, where we have added more LPG Bridger trucks (propane rated) to our fleet, injected thousands of branded cylinders and cookers and leased some plants, and we are building more.
How will your future LPG terminal boost Ultimate Gas’ position and end storage constraints?
It will increase our market share and add to the nation’s storage and holding capacity.
What dynamics and challenges do you see in B2B and business-to-consumer (B2C) models?
The ability to effectively manage client relationships is paramount for the success of business-to-business transactions. Business-to-consumer on the other hand is more challenging because you are interacting with many different people at the same time and they have to be satisfied so you can enjoy repeat business.
We take LPG to people’s doorsteps, offering cylinders of 3 kg, 6.25 kg, 12.5 kg and even 50 kg. However, there is a challenge with the delivery, because the average Nigerian owns their own gas cylinder, and does not want to let go of it. This means we have to pick the cylinder up, refill it and deliver it back to the end user. This reduces the number of customers that can be serviced in a day.
How have perceptions of LPG changed, and what approach are you taking to community engagement?
Until two or three years ago, people were of the opinion that LPG was dangerous. However, this perception is shifting as there is more awareness on the benefits of gas. Over time and through word of mouth, a lot of people have begun to switch to LPG, especially those at low-income levels. People are realising that it is a much cheaper, healthier and cleaner cooking option.
Gas is not very expensive, but cylinders can be, so we have rolled out a payment plan to make the transition easier for our customers.
We are a business that cares about people and the environment, so is important for us to impact the community and there is no better way than ensuring that people are cooking in a cleaner and safer way.