Gas is cleaner, cheaper and safer- Ogbuanu
The President of the National Association of Liquefied Petroleum Gas Marketers (NALPGAM), Mr. Basil Ogbuanu, speaks on the issues surrounding cooking gas in this interview with Simon Ugwu.
Rise in price of Liquefied Petroleum Gas ( LPG)
Well, what is happening is just a reflection of the state of the Nigerian economy. The cost or availability of gas in Nigeria is determined by two factors. In terms of cost, the sole supplier – the Nigerian Liquefied Natural Gas (NLNG) – is using international price benchmark. Even though the off-takers are paying in Naira, the price is being calculated at the dollar exchange rate. You will agree with me that you cannot get the dollar at the interbank exchange rate, so you resort to the black market price. The pricing is done in the international price index, so the scarcity of dollar and the cost of the dollar is the second factor. The third issue is the cost of diesel. The equipment used in gas plants like the pump, in particular, is called three-phase pump and even if you have a power supply which is not always available, the three lines must be available. If it is two lines, you cannot use the power supply. So 85-90 percent of the energy we use to run that plant is provided by the power-generating set. How much is the price of diesel today? From N135, it has risen to N250-N260. So, all these costs are added to the cost of the gas. As a result of the constant usage of the generating set, we incur replacement cost. If you want to run the gas plant very well you must replace your generator at a three-year interval. Today, 27kv generator we used to buy for N1.85 million two years ago is now sold for N4.3 million, almost 200 percent increase. The 45kv generator that used to cost about N2.3 million is N4.9 million now. Pumping machine which used to sell at N500,000is now N1.8 million, N2.5 million, or N3 million, depending on the size. A compressor that we used to buy at the rate of N3 million is about N9 million. So, building the plant is very expensive. If you go further to those who access credit from the banks to do business then you face the cost of fund. All these, put together, reflect what is happening in the price of gas today.
Consistency of NLNG
NLNG, the sole supplier of the gas, has been consistent in making the products available. Even though as we are speaking now, there is a little scarcity but that scarcity is not caused by anybody, it is logistic problem and unavailability of the jetty. For the past four days, the vessel with aviation fuel has occupied the jetty; the LPG vessel which is about 13,000 metric tons is waiting for the aviation vessel to finish discharging. There is nothing they can do but as soon as the aviation vessel leaves, the LPG vessel will start discharging. Then we will be sure of availability but in terms of price, it will not change because it comes at the international market price. This brings mixed feelings to Nigerians because crude oil price is rising which generates more foreign exchange to the country but Nigerians are paying for petroleum products at international market price
Domestic price list
In as much as we appreciate the full deregulation of the LPG and we don’t want the government to come in and regulate LPG again, because of hiccups in the supply chain. The NLNG that is supplying it today is supplying under what we call domestic LPG scheme where a particular quantity is made available for domestic use. We are suggesting if it is possible for them to give us also what we call domestic pricing. So that, that one that has been put aside for domestic use will also be priced in Naira. Though we are paying in Naira, it is at dollar rate. This is not a dollarized economy and this is a Nigerian product. We are asking if it is possible, from NLNG angle or from the government as the government has share in the business, to make that quantity for Nigerian people in Nigerian currency. That is the easiest way to get out of this price issue otherwise when there is winter in Europe the price increases in Europe and you and me who are stakeholders of this products will be paying for what is happening in Europe. In my own opinion, it makes no sense to Nigerian people. The government needs to come in and look at it since it has structured a way that there is a quantity made available for domestic use let there be also a domestic price.
Unavailability of Jetty
Another issue is the unavailability of the jetty at Apapa Port which we discussed earlier. For the past four days, the vessel with aviation fuel has occupied the jetty; the LPG vessel which is about 13,000 metric tons is waiting for the aviation vessel to finish discharging. There is nothing they can do but as soon as the aviation vessel leaves, the LPG vessel will start discharging. If you have another jetty, the vessels will be able to discharge simultaneously. As a result of this, we are calling for multiple jetties to enable other vessels that come in with other petroleum products to discharge on time. There should be the rehabilitation of other jetties that are lying low for a long time.
Customers who shifted to LPG
LPG is still cheaper, cleaner and safer, not minding the current rise in price. So I call on Nigerians to continue with the usage of LPG. Even at the current price of N4,500, it is still less than N180 per litre and the alternative cooking energy is kerosene which is N400 per litre.
We have a slogan in NALPGAM which is three AAA, meaning Awareness, Affordability, and Availability. We have a goal of making sure that there is a gas plant close to all the local government headquarters in Nigeria so that the rural dwellers can access gas for their cooking.
Have Nigerian companies benefitted from the oil and gas business
As I said earlier, NLNG today has been so efficient in supplying the products. Before 2007, when the company intervened in this domestic scheme, we had less than 100 milling plants in Nigeria of which less than 50 were working because of non-availability of the product. As a result of the awareness the association and other government agencies have created about the product, Nigerians have embraced the use of LPG. We have created a lot of jobs. Today as I am speaking with you, we have more than 50 gas plants in Nigeria and there is no gas plant that engages less than 15 workers. So, we have put food on the tables of many families. Moreover, a lot of people have seen reasons why they should be using gas. In India, the country uses up to 18 million metric tons per year. But we are still talking about 300-400 metric tonnes per year here in Nigeria, which means that we have not covered up to 20 percent of the population of this country. So, people are benefiting. If today 50 million Nigerians start using gas, the number of gas plants and the number of players in the gas business will not be enough to service Nigerians.
Government support to Nigerians at entry point and the industry
The entry point means for someone to start using gas, he/she needs to buy cylinder, cooker, regulator and so on, and these products are not produced in Nigeria. In the past, we had two major cylinder producing companies in Nigeria but today they are moribund. If the government can intervene and revive them to start producing cylinder in Nigeria, it will save the foreign exchange spent on importing the items. If we are talking about 50 million Nigerians using gas, we will talk about bringing in more 40 million cylinders into the country. But if we are manufacturing in Nigeria, it will save the nation hard-earned foreign exchange and also provide employment for the teeming youth unemployed. In the short run, before we start producing in Nigeria, the items should be duty-free, say four to five years. The cost of 12.5-litre cylinder today is about N11,000 in the market, the regulator is about N3,000, the cheapest two burner cooker is about N9,000. This is about N23,000. So a worker who earns N18,000 cannot enter into the usage of gas. So, the government should look at the cost of entry so that Nigerians can be encouraged like what happened in Indonesia, where the government asked the citizenry to bring their stoves and take cookers. At least that entry cost is taken away. When the entry point is sorted out, more people will start using gas. We have made the presentation to the government before now. When more people go into the usage of gas, the government will earn more revenue.
