IWD 2021 Nigerian Women in Energy ChooseToChallenge

By Ikenna Omeje and Jerome Onoja

Biomass is the major energy source in Nigeria, contributing about 78 percent of the country’s primary energy supply. According to the International Centre for Energy and Environmental Development (ICEED), over 70 per cent of households in Nigeria use firewood as a source of cooking energy,

With Federal Government’s plans to aggressively promote the use and development of Liquefied Petroleum Gas (LPG) market in Nigeria, some of these concerns would soon be a thing of the past.

Though the government is trying to accelerate LPG penetration, but this rooted culture of using firewood, sawdust and charcoal as cooking energy sources over a cleaner and safer LPG is likely going to continue if issues around enabling laws, LPG infrastructure, gas pricing, among others are not addressed.

Speaking with Majorwaves Energy Report in November 2019, the Executive Secretary, Nigeria Liquefied Petroleum Gas Association (NLPGA), Mr. Olakunle Taiwo Oyebanjo, bemoaned low patronage of LPG, popularly known as cooking gas in the country, saying that only 10 percent of Nigerians use LPG for cooking.

However, Nigeria is not alone in this. As at 2018, around 3 billion people, according to the World Health Organisation (WHO), still cook using solid fuels (such as wood, crop wastes, charcoal, coal and dung) and kerosene in open fires and inefficient stoves, adding that most of these people are poor, and live in low- and middle-income countries.

WHO said, “These cooking practices are inefficient, and use fuels and technologies that produce high levels of household air pollution with a range of health-damaging pollutants, including tiny soot particles that penetrate deep into the lungs. In poorly ventilated dwellings, indoor smoke can be 100 times higher than acceptable levels for fine particles. Exposure is particularly high among women and young children who spend the most time near the domestic hearth.”

Noting the negative impacts of these cooking practices, WHO said that “3.8 million people a year die prematurely from illness attributable to the household air pollution caused by the inefficient use of solid fuels and kerosene for cooking.”

Giving the breakdown of the 3.8 million deaths, WHO said 27 percent are due to pneumonia, 18 percent from stroke, 27 percent from ischaemic heart disease, 20 percent from chronic obstructive pulmonary disease (COPD), and 8 percent from lung cancer.

SETTING UP COST FOR A PLANT

As at 2017, it costs an average of N250 million to construct an LPG plant in Nigeria. Most of the equipment for construction comes from Asia, Europe and America, and considering the current exchange rate and inflation pressures, it is expected to be higher now than it was 3 years ago.

Apart from the construction costs, there are other approvals from government agencies that are mandatory in setting up an LPG plant. These verifications include the Department of Petroleum Resources (DPR) approval, which costs about N20,000 per 100 Metric Tons; the Environmental Impact Assessment (EIA); Town Planning approval; Fire Department approval; and a Police Report. Summarily, these approvals are estimated to cost about N5.4 million extra.

INCENTIVE FOR INVESTORS VERSUS DISCOURAGEMENT ARISING FROM VARIOUS POLICIES The Federal Government in October 2019, confirmed the removal of Value Added Tax (VAT) on LPG in Nigeria, a measure it said was targeted at growing the LPG sector.

Speaking on the efforts being made by the Federal Government to deepen LPG penetration, the Vice President, Prof. Yemi Osinbajo, in 2019 had explained that

and 73 percent adoption in 10 years (33.3m households).

He said, “We believe that the subsector can create up to 2 million new direct and indirect jobs in Nigeria. Our determination to prioritise the LPG sector development culminated in the Federal Executive Council’s approval of the National Gas policy in 2017, with dedicated input for the enhancement of the LPG sub-sector. Our driving vision has been to transform the subsector from a commodity sector based on export to a value creation sector based on domestic utilisation and industrialization.”

Also, according to the President of NLPGA, Mr. Nuhu Yakubu, in his address at the 2019 Nigeria LPG Summit, the policies and incentives

British Chamber of Commerce (NBCC), said with Nigeria being a gas country and having a proven reserve of about 203TCF, it was time to use the product to drive the nation’s human capacity development and economic growth.

of the Federal Government have led to over 30 percent cost reduction for infrastructure development.

He noted that the removal of 5 percent VAT and 25 to 30 percent import duty waiver on importation of LPG equipment and appliances, has given investors a reason to invest in the Nigerian LPG market.

he said.

To support the Federal Government’s effort to deepen LPG penetration in Nigeria, the Managing Director, Nigeria Liquefied Natural Gas (NLNG) Limited, Engr Tony Attah, in November last year, promised to increase its allocation of LPG to the domestic market from 350, 000MT to 450, 000MT by 2021.

Attah, who made the announcement during a webinar organised by the Oil and Gas Group of the Nigerian-

He had said: “In 2007, the total consumption of LPG in Nigeria was about 50, 000MT. Today, it is about one million metric tonnes and NLNG’s contribution is 350, 000MT.

“We have approached our board to get a mandate to increase NLNG’s contribution to 450, 000MT from next year. That is a very positive contribution from NLNG.”

However, despite these incentives, there are also some discouragements. For instance, NLPGA in September last year, kicked against moves by the Petroleum Products Pricing Regulatory Agency

In a directive to its members, the association stated: “It has come to the attention of the Executive Committee that the PPPRA has continued to circulate directive to levy administrative fee on LPG despite the product being deregulated.

NLPGA further stated, “It is noteworthy, that in spite of fluctuating foreign exchange rates and a COVID-19 battered economy, the stakeholders have managed to stabilise the general affordability of the product in order not to overwhelm an already pauperised population.

“This feat of maintaining price stability at huge cost to operators amidst massive investment in infrastructure has been made possible because of LPG being a fully deregulated product.

“Equally exciting are several measures in order to further catalyse sectoral growth through such actions as: the waiver on VAT on LPG and LPG equipment; waiver on import duty on importation of LPG equipment; and, quite recently, the various strategic consultations to deepen gas utilisation by strengthening Autogas (LPG/ CNG), Gas to Power applications and initiatives.

“In fact, the declaration of 2020 as the “Year of Gas” by the Minister of State for Petroleum Resources was an added impetus to the drive to achieve gas expansion.”

If allowed, the levy could jeopardize the National LPG Expansion Plan, the National Gas Expansion Programme and other important schemes of the Federal Government.

SAFETY STANDARD & ENLIGHTENMENT

A major concern in the Federal Government’s drive to deepen LPG usage in the country, in line with the National Gas Policy, is the adulteration and low standard sales and distribution of LPG components.

The current aggressive campaign for the use of LPG by the Federal Government in recent years and the increasing adoption of LPG by Nigerians, has led to proliferation of gas plants and roadside retail outlets.

In January this year, the PPPRA in a statement said the domestic consumption LPG, exceeded 1 million Metric Tonnes (MT) in 2020.

It said the consumption rate made 2020 the first year in the nation’s history when LPG consumption reached the 1 million MT threshold.

“Nigeria consumed 840,594.37 MT LPG in 2019, indicating an increase of 60.5 per cent over 635,452.061MT recorded in 2018,” the statement said.

“This steady and sustained pattern of growth culminating in the over one million metric tonnes of LPG domestic consumption milestone in 2020 has placed the country 1st in West Africa and one of the leading LPG consuming nations on the continent.

“With this laudable feat, the country is on track to meet the five million MT by 2022 target, set in the Nigeria Gas Policy (NGP) of 2017,” it said.

This increasing rate of consumption has also encouraged influx of cylinders. With the challenges at the country’s border, some shylock importers have continued to import expired and substandard gas cylinders, which are used cylinders that are corroded without any indication of expiry dates. “ In 2018, the Nigerian Customs

for further action in a brief ceremony at the Federal Operations Unit (FOU) Zone A office of the NCS in Ikeja, Lagos state.

Fear of imminent accidents resulting from the use of sub-standard cylinders could scare potential users of gas and undermine efforts to encourage Nigerians to switch over from biomass and other dirty energy sources such as kerosene to the use of gas, which is cleaner, cheaper and environmental-friendly.

In addition, there is low sensitization campaign on how to identify substandard or fake cylinders. SON could do a lot more in this regard. Effort should be made by SON to educate Nigerians on what to look out for when purchasing a cylinder, such as the date of manufacture, capacity of the cylinder and most importantly the SON logo and unique serial/identification number displayed on the cylinder to ensure traceability in the case of eventuality.

INFRASTRUCTURE

The

which will increase household LPG consumption from 750,000 tons to two million tons by 2021 through increased general acceptability and awareness, among others.

In line with its target, it constituted the National Liquefied Petroleum Gas Expansion Plan, to advance consumption of gas in-country.

According to the Programme Manager, NLPG plan, Mr. Dayo Adeshina, in an interview with The Nation last year,

In production sector, he said that about $500 million is required to build the infrastructure for LPG production from associated gas, including liquefied natural gas and natural gas liquids, while in product transportation sector like rail, shipping, including other vessels as operated by the NLNG, NNPC, Inland Waterways and Railways, an estimated $1.5 billion is required for the infrastructure.

Other sectors include storage, manufacturing, bulk breaking and bottling, which will require investment of $500 million; bulk breaking and bottling, where major marketers and small and medium enterprises (SMEs) can operate, an investment of $750 million purchasing of cylinders, refilling of LPG in smaller cylinders and bottles, estimated 10,000 trucks and about 3000 filling plants is required; distribution and marketing, $800 million investment is required; while investment in end-users infrastructure will require $2 billion.

VIRTUAL PIPELINES

In 2018, Nigeria made a giant stride in the drive for optimization of the nation’s vast gas resources with the

execution of a novel contract between the Nigerian National Petroleum Corporation (NNPC) and a private firm for the activation of virtual gas pipeline network for power generation.

The project which would be facilitated through the installation of Mini-LNG plants is designed to supply, in the first instance, about 84 million standard cubic feet of gas per day (mmscf/d) by transporting gas from production fields using customized cryogenic tankers to areas that are not easily accessible through pipelines.

The innovative gas supply technique would also further develop Nigeria’s energy sector and consequently help revitalize the manufacturing, textile and housing sectors through provision of affordable energy source.

The project was initiated in line with President Muhammadu Buhari’s Economic Growth Recovery Plan (ERGP) which in part aims to accelerate non-oil revenues, improve transportation infrastructure, drive industrialisation, stabilise the macroeconomic environment, achieve agriculture and food sufficiency and ensure energy sufficiency.

PROLIFERATING LPG FACILITIES NATIONWIDE

In recent years, a number of LPG facilities have been built while others are ongoing. Some of these projects include Rungas Cylinder Manufacturing plant, Technoil LPG terminal and Rainoil LPG facility.

Rungas Prime Industries partnered with The Nigerian Content Development and Monitoring Board (NCDMB) in 2019, to establish Africa’s first Composite Cylinder Manufacturing Industry

The groundbreaking ceremony for the project, which is located at Polaku, Bayelsa State, was held in August last year.

The plant is expected to begin full operations this year, and will produce 400,000 type 3 LPG composite cylinders at minimum capacity and 1 million at maximum capacity per annum.

In March, Minister of State for Petroleum Resources, Chief Timipre Sylva, officially inaugurated the company’s second plant at Alaro City in Lagos.

Meanwhile, Techno Oil Limited in November last year commissioned a landmark 8,400-tonne capacity LPG Coastal Terminal at Kirikiri in Apapa, Lagos, which now puts the total number of LPG depot in the country at 12.

The facility is the fifth of such a terminal to be built in Lagos, Nigeria’s economic hub, which is also home to leading private oil and gas companies.

The automated LPG terminal was built by CAKASA Nigeria Ltd. in collaboration with a foreign technical partner that signed a deal for the building of the terminal on Nov. 4, 2016.

Also, in June 2019, Vice-President Osinbajo commissioned the company’s cooking gas manufacturing plant, also located in Lagos. The cylinder plant has a 5 million annual production capacities and the biggest of its type in West Africa.

Similarly,

“Rainoil in August last year, also launched an LPG facility with a tank capacity of 8000 metric tonnes at Ijegun, Lagos.

The facility also offers a fleet capacity of about 40 LPG trucks that would ensure product distribution to bulk buying customers owning LPG filling facilities.

CARBON CREDIT

LPG has a comparatively lower ratio of carbon to hydrogen when compared to other hydrocarbons. Its use for energy as against other sources helps reduce greenhouse gas emissions while improving the livelihoods of communities, preserving biodiversity and wildlife. Consequently, major projects in the supply chain of LPG ought to generate carbon credits.

With the awareness of several globally functional carbon markets, capital investments for retrofitting equipment in order to enable the use of LPG, ought to be financed through certified emissions reduction (CER) credits under the clean development mechanism (CDM) system as sponsored by the United Nations or some other similar schemes.

The CDM allows emissions reduction projects in developing countries to earn CERs, each equivalent to a ton of CO2, that can be traded and sold, and used by industrialized countries to meet their emissions reductions targets under the Kyoto Protocol.

“A typical scenario where a

The Peru conversion is the first fuel switch to pass CDM muster because RYCOPESA came up with a methodology that can serve as a reference price for carbon. The LPG conversion project is the brainchild of RYCOPESA, a wholly-owned Peruvian subsidiary of Repsol,

CONCLUSION

The opportunities with gas in Nigeria is endless. From investments to deliberately mine the resource, through processing, distribution, export, infrastructure, manufacturing of cylinders, erecting plants and retailing, the willing investor has a wide array of options to invest in one of Africa’s gas rich provinces. However, there’s an urgent need to convert existing policies to enabling laws in order to elicit the confidence every investor needs in a growing market.