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Investors shun Nigeria’s cooking gas projects

By BusinessNews Staff on December 22, 2014

Local and international players in the Nigeria’s liquefied petroleum gas (cooking gas) subsector are holding back investments in the storage of the product as they do not consider this a profitable venture.

Although the investment opportunities in the gas storage project are huge, many firms are unwilling to go into the business because of the poor penetration of the gas business in Nigeria.

According to the Pipelines and Product Marketing Company, an arm of the Nigerian National Petroleum Corporation, the current adoption of the LPG is 6.8 per cent.

Out of over 250,000 metric tonnes of the LPG produced in Nigeria annually, only 20,000MT or less is properly stored, according to data made available to our correspondent on Friday.

This shows over 92 per cent deficiency in the country’s storage capacity for the LPG.

The Managing Director, PPMC, Mr. Haruna Momoh, listed the provision of dedicated LPG jetties and building of refrigerated storage facilities as investment areas that had not been fully explored.

The Federal Government has thus intensified its appeal to the LPG investors to put their money in the storage business but the investments are not forthcoming.

Some stakeholders have linked the low interest of investors to poor penetration level of the gas business in the country.

The high deficiency in the cooking gas storage, according to investigation by our correspondent, accounts for a high degree of volatility characterising the market all year round.

A brief interference in the supply arrangement is said to almost immediately lead to a differential pricing.

Momoh said there was the need for coastal LPG vessels with adequate capacities on Nigerian waters.

He also stressed the need for private sector involvement in the building of new refill plants.

Momoh said, “Training opportunities in cylinder/accessories repair and maintenance are required alongside new investors with cutting edge marketing and distribution of the LPG.”

Owing to poor investments in the subsector, the Nigerian Association of Liquefied Petroleum Gas Marketers has also raised the alarm that Nigeria is likely to have more cases of the LPG refill skid explosion as recently witnessed in Akure, Ondo State.

The association pointed out that currently, a lot of the LPG refill skids were operating in the country without strict adherence to standards and best practices, with some of the marketers flouting the rules.

The association identified locations such as Igando, Ikorodu and Berger, among others, as susceptible locations in Lagos and accused some of the marketers of indiscriminately constructing gas skids, without strict adherence to safety standards.

The Public Relations Officer of the association, Mrs. Olufunke Eleyinmi, in an interview, said, “Government needs to look at this bad trend. Lives and property are at risk here; and the earlier the situation is put under control, the better it will be for the industry and the country at large.

“The LPG remains the best fuel for cooking, and people should not be discouraged by such strange happenings, which are caused by non-professionals.”

In the same vein, the Secretary, Western zone, NALPGA, Mr. Sunday Ogurinde, said government needed to purge the subsector of quacks so that cases of explosions and accidents would be reduced.

According to him, the LPG business requires a great deal of care, adding the infiltration of quacks in the business leaves the nation and its people exposed to major accidents which may result in death.

Meanwhile, the Nigeria Liquefied Natural Gas Limited said it had subsidised the LPG to the tune of $50m since the commencement of its intervention scheme on the product.

The firm, which currently supplies about 80 per cent of the total cooking gas consumed by Nigerians, said it remained committed to increasing the supply to the Nigerian market.

It also affirmed its commitment to providing the nation with sufficient volume of the LPG based on production operations from its six train facility at Bonny, Rivers State.

The Chief Executive Officer of the company, Mr. Babs Omotowa, said, “The NLNG which currently supplies some 80 per cent of the total cooking gas consumed by Nigerians, has also subsidised the product to the cost of about $50m since the intervention began.

“The NLNG’s intervention in the domestic LPG market began in 2007 with the dedication of some 150,000 metric tonnes of cooking gas annually, in response to an acute shortage of the product in the market at the time.

“Only last year, the company further increased this volume by 66 per cent to 250,000 metric tonnes in readiness to meet the growing utilisation of cooking gas by Nigerians.”

[Punch]

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