Government analysts are saying growth in Nigeria is around 7-10%. In the LPG sector, we are seeing 15-20%

Ian BROWN Managing Director NAVGAS

Nigeria LPG market growth

March 1, 2017

TOGY talks to Ian Brown, the managing director of Navgas, about the new administration, growth in the LPG sector in Nigeria and the changing retail market.

Navgas is an LPG terminal owned by VTTI and Nidogas. Located in Lagos, the facility has been operating since 2010. As of February 2017, the 14-by-30-metre reinforced concrete piles were in and the pile caps were being cast for the company’s 21-month project to expand its storage from 8,000 tonnes to about 11,000 tonnes. The first 14 containers were on site and the pile leg installation was expected to start at the end of the month.

• On the government: “We have no problem with the new administration. They are pragmatic, and there is a desire there to get things done while at the same time trying to reduce the risk of corruption.”

• On downstream demand growth: “Government analysts are saying growth in Nigeria is around 7-10%. In the LPG sector, we are seeing 15-20%. Bear in mind that the reason behind this is basically the affordability of kerosene, compared to LPG, which had been an elitist product but has just recently become more affordable.”

• On marketing: “Traditionally, the smallest quantity of LPG that could be supplied for a refill was the 12.5-kilogram cylinder at a cost of NGN 3,000 [USD 9.44]. Now you can buy 3 kilograms for NGN 1,000 [USD 3.15]. It broadens the market.”

• On consumers: “Currently the main consumers are in the urban centres and consist mainly of households, for cooking. Future developments will include gas-to-power from propane, which will come from the development of the inland gasfields.”

 

Besides touching on these topics, TOGY talked at length with Ian Brown about the company’s project to expand the capacity of its terminal and storage facilities, the LPG market and the new government. Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with Ian Brown below.

What is driving the growth of the LPG market in Nigeria?
The government is now pushing the use of LPG because it is a cleaner, healthier and more efficient fuel which, apart from the initial set up, is cheaper than kerosene. It has a controllable flame and is useable instantaneously, making it more time efficient.
Government analysts are saying growth in Nigeria is around 7-10%. In the LPG sector, we are seeing 15-20%. Bear in mind that the reason behind this is basically the affordability of kerosene, compared to LPG, which had been an elitist product but has just recently become more affordable.
Traditionally, the smallest quantity of LPG that could be supplied for a refill was the 12.5-kilogram cylinder at a cost of NGN 3,000 [USD 9.44]. Now you can buy 3 kilograms for NGN 1,000 [USD 3.15]. It broadens the market. Then there is the refills. You can take your own cylinder along, and if you have only got NGN 500, you buy NGN 500’s worth.
Currently the main consumers are in the urban centres and consist mainly of households, for cooking. Future developments will include gas-to-power from propane, which will come from the development of the inland gasfields.

What are the current demand growth scenarios for this commodity?
The new government policy, unveiled by the vice-president this year, is planning for 4 million households to convert to LPG over the next two years, 10 million households within five years, and 21 million households over the next 20 years, from approximately 2.5 million now.
This equates to a total demand for LPG of 600,000 tonnes in two years (50% growth), 1.6 million tonnes in five years (400% growth) and 3.4 million tonnes in 20 years (850% growth).
This is desirable as Nigeria is a gas rather than oil province, having four times as much gas reserves as oil, in barrels of oil equivalent. It will reduce capital flight, improve the environment and reduce the country’s carbon footprint.
This is going to require massive infrastructure investment in marine facilities, gas-processing plants, bottling plants, trucks and cylinders, as well as end-user equipment such as stoves and burners.

How are you addressing demand growth?
We have the biggest LPG distribution terminal in West Africa. We are expanding the terminal’s capacity by about another 40%, taking the storage capacity from around 8,000 tonnes to about 11,000 tonnes. It is expected to be a 21-month timeline. The project is designed to try and keep up with the growth of the country.
As of February 22, 2017, the 14-by-30-metre reinforced concrete piles are in and the pile caps are being cast. The first 14 containers have arrived and the installation of the pile legs is expected to commence the week starting February 27.

Who do you purchase LPG from?

Initially we bought it exclusively from NLNG. The Nigerian market currently has a size of 400,000-450,000 tonnes per year. NLNG currently have an allocation of 250,000 tonnes for this market.
Navgas has had to import to cover this shortfall. Currently we are at around 200,000 tonnes, or 50% of the market, so we shifted to 50-50 NLNG and imports.

Have you seen good support from the new administration?

We have no problem with the new administration. They are pragmatic, and there is a desire there to get things done while at the same time trying to reduce the risk of corruption. But, they are doing what they can, and there has been and will be a definite improvement.

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