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LPG price soars as NIMASA/NLNG dispute ends

By on July 31, 2013

The dispute between the Nigerian Maritime Administration and Safety Agency, NIMASA, and the Nigeria Liquefied Natural Gas Company, NLNG, over levy may have ended, but the impact lingers as the price of Liquefied Petroleum Gas, LPG, also known as cooking gas, has soared.

A visit to some gas plants by our correspondent in Lagos revealed that although available, but the product is being sold at a very high rate.

Before the NIMASA/NLNG dispute, a 12.5kg cylinder of LPG sold for N3, 000. However, the dispute resulted in artificial scarcity, which led to a price hike by marketers who sold the same quantity for between N4000 and N5,000 depending on the plant and location.

Since the NLNG paid off $140 million to NIMASA, investigations further revealed that only the South Western part of the country has got some reprieve with LPG availability, particularly Lagos and Ogun states, while the rest of the country wait for their turns.

Recall that marketers were forced to go to Niger Republic for LPG to cushion the effect of scarcity created by the NLNG and NIMASA’s dispute.

Additional 100MT released

To address the shortfall, NLNG said it has increased the quantity of LPG supplied to the Nigerian Market to 250,000 metric tonnes (MT), up from 150,000MT

The company said in a statement that: “This (67%) increase will enable ample stock of the alternate fuel and promote the use of cooking gas – necessary for its salutary effects on the environment, including its role in controlling deforestation.

It also noted that the NLNG currently provides over 70% of cooking gas used in Nigeria, adding that the current increase arose from its recent survey of the domestic market, which showed that domestic LPG consumption had exceeded 150,000MT, a demand which was less than 60,000MT when NLNG intervened in 2008 with domestic supply of cooking gas.

The statement further read: “Increased usage of LPG in the domestic market helps reduce environmental despoliation; create employment from new business opportunities; reduce respiratory health problems attributable to wood smoke and reduce poverty:  low LPG usage is an index of poverty.”

The Managing Director, NLNG, Mr. Babs Omotowa, was quoted as saying that true to its vision to help build a better Nigeria, the company is able to increase its supply of domestic gas.

He added that the assurance of steady supply should increase investors’ confidence in the cooking gas industry, an industry which currently needs investments in storage, transportation, and cylinders.

Omotowa also expressed the hope that the domestic market will grow even beyond cooking gas, to low-cost retrofitting of cars, to use both gasoline and natural gas; as LPG is less expensive than petrol.

NLNG is a Nigerian Joint Venture company whose shareholders are the Nigerian National Petroleum Corporation (49%), Shell (25.6%), Total LNG Nigeria Limited (15%) and ENI International (N.A.) S.a.r.l (10.4%).

Pays $160m in levies, loses $475m in revenues

In another development, the NLNG said it had paid $140 million in protest arising from its dispute with NIMASA. This is in addition to the $20 million paid earlier to the Agency.

It also said in another statement: “In addition, NLNG has agreed to pay, again under protest, the levies as they become due until a judicial ruling on whether these payments are justified can be obtained,” NLNG said in a statement.

The company maintained that it is exempt from such levies under a law setting out conditions for Nigeria’s LNG industry.

NLNG spokesman, Mr. Kudo Eresia-Eke, said: “Owing to the NIMASA blockade which persisted in spite of court orders, the company has lost revenues of over N76 billion ($475 million), 65 percent of which belongs to the federal government, which has thus lost about 50 billion naira in dividends, taxes, etc.”

The NLNG noted that the blockade that began on June 21 also cut into cooking gas supplies in Nigeria because the facility produces LPG as a byproduct.

With the 10,000MT of LPG allocated to Lagos on a monthly basis, President of Nigeria LPG Association, NLPGA, Mr. Dayo Adeshina, admitted that LPG supply in the country is still low but hoped the situation will improve.

“The 10, 000MT of LPG that was discharged at the Lagos port was distributed only in Lagos that means there is still shortage of supply of the product in other parts of the country.

“Before the blockade, the Lagos bond vessel was fully loaded, and as soon as it was lifted, the vessel sailed down to Lagos and discharged its content. Already, a vacuum has been created during the three weeks dispute.

“We hope the situation will come back to normalcy within next week and the half but for now I don’t know when the next vessel will arrive Lagos port. If the vessels depart bonny Island today, it takes a day or two to hit the shore of Lagos,” he said.