Growing cooking gas consumption in trying times

Brass Liquefied Natural Gas (LNG) project plans to devote 220,000 metric tonnes (MT) of Liquefied Petroleum Gas (cooking gas) to the Nigerian market when it eventually comes on stream.

The LPG production is part of the plant modification for the Brass LNG project, as contained in the Brass LNG Plant Facilities, exclusively obtained by NEXT on Sunday.

Apart from the two 5 million MT per annum trains with a provision for two additional trains, the project has also been modified to include LPG processing facilities designed with a capacity of 2 million MT annually and Natural Gas Liquids, to be extracted from its gas reserves of 11.6 trillion cubic feet (tcf) at a daily gas intake of 1.7 billion standard cubic feet (bcf) over a period of 20 years.

Brass wants to use the LPG volume as part of its domestic gas obligation as demanded of gas producers by the federal government.

The Brass LNG is a joint venture project located in Brass, Bayelsa State, and was conceived in 2004 as an $8.5 billion natural gas export project designed to export 10 million MT of gas per annum starting from 2011. But the final investment decision that will bring the project fruition has not been taken by the partners.

The current partners in the project include NNPC (with 49% equity), Eni, Conoco Phillips and Total, (each with 17% equity).

The big problem

But the big problem is, "Who will buy?" asks Brass LNG in a country with an estimated population of about 150 million, which ordinarily should not be a problem.

But the question becomes cogent when viewed against the backdrop that the Nigeria LNG, reputed as the world's fastest growing LNG plant, now considering taking a decision on its seventh train, had already devoted 150,000 MT per annum of LPG to the domestic market since 2007, but the market is hardly able to absorb up to 50,000 MT per annum.

Gas reserves

Nigeria is blessed with proven gas reserves of 187tcf of gas said to be of very high grade with no sulphur, placing it as the world's 7th largest gas reserves holder.

The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mohammed Barkindo, in fact estimates that Nigeria's reserves potential could grow to as high as 600tcf, making it the world's 4th largest.

Gas utilisation/consumption

But in spite of this huge natural resource, for which some oil and gas experts describe Nigeria as being more of a gas than an oil producing country, the domestic gas utilisation remains very low, particularly in the LPG sector.

Billy Agha, an Acting Director in the Department of Petroleum Resources (DPR), notes that rather than increasing in view of government's efforts to boost domestic consumption, utilisation levels have actually been dropping.

Mr. Agha notes that utilisation in the first quarter of 2009 dropped to 336.43bcf, down from over 437.50bcf in the last quarter of 2008, just as Mr. Barkindo notes that current consumption could grow from the current low levels of about 50,000 MT per annum, to over 5,000,000 MT per annum.

The DPR boss adds that worried by Nigeria's low per capita LPG consumption, reputed as one of the lowest in Africa, "The FGN/DPR would partner with the World LPG Association and other stakeholders on strategies and ways to develop the sector."

Utilisation/consumption challenges

Inadequate infrastructure has been identified as the major obstacle hindering cooking gas utilisation and consumption in Nigeria, which require the deployment of huge investments in billions of dollars in the areas of transportation, both marine and land, depot and storage facilities, and availability of gas cylinders.

Indeed, Felix Ekudayo, Managing Director, Linetrale Gas Ltd., notes, "Nigeria's cylinder population in all sizes is less than 1 million and government compounds the situation by imposing between 30-50% duty on steel plate but nothing on imported cylinders."

He says further, "Government continues to subsidise competing fuels like kerosene but imposes 5% VAT on domestic LPG but exempts imported LPG thereby placing domestic producers at a disadvantage, and yet they say they want to encourage investment in the sector."

Mr. Barkindo paints a gloomier picture by saying, "Of the 80 LPG distribution companies, only 16 or 20% are still operational today and cylinders are often of a poor quality. There are only 120 bottling plants nationwide with about 60 or 50% of that in Lagos, shutting out most parts of the country, and of the 177 dedicated LPG trucks available only 100 or less are currently operational."

Private investments in LPG

Bode Makanjuola, Managing Director, Le Global Gas, says "investments should focus on cylinder supply, haulage services or trucking, but, most importantly, increasing public awareness on the benefits of gas. If this is done, the market could handle between 6,000 and 10,000MT per month."

Gas is a cleaner and safer form of energy suitable for power, domestic, industrial and automobile uses and also promotes the Kyoto Protocol on green gas reduction, of which Nigeria is a signatory.

Many private sector operators have begun huge investments in every segment of the LPG sector, including diversifying usage.

For instance, Le Global owns two of the three LPG vessels used for ferrying the product from onshore to the depots, while companies like Linetrale and Sahara Energy are investing in depot and storage facilities.

On its part, NIPCO Plc, apart from building a 5,000 MT per annum LPG plant in Apapa is also investing in using LPG for automobiles, currently awaiting regulatory approval.

At a recent demonstration of the LPG auto, now popular in countries like Italy, Australia, India, Argentina, Brazil, the company's Chairman, Bestman Anekwe, noted that LPG is up to 80% less air toxic.

He added that in the above mentioned countries, "the governments are promoting the usage of LPG as automotive fuel by providing subsidies in product and components in a range of 15% to 50%. Also, LPF auto is more cost-effective as while the petrol engine costs N65/L, LPG costs N55/L or N100/kg."