BUSINESSDAY ANNUAL OIL & GAS ROUNDTABLE Growing the Nigeria LPG Market: A role for Public &

Private Players

Sanmi Famuyide Head, Origination & Client Coverage, FBN Capital September 2012

What is LPG?
.Liquefied Petroleum Gas (LPG) is primarily a mix of hydrocarbon gases Propane and Butane often used as a fuel source by households and light industry Main sources of LPG are Natural gas processing 67% Crude oil refining 33%

The Nigeria LPG market so far

LPG industry comprises of the players in the Originally, LPG was only available from the coastal refineries of PH and Warri. Distribution largely restricted to Lagos and to towns close to the supply sources 1980s The commissioning of the butanization depots in the mid1990s coincided with successive shutdowns at the NNPC Butanization project stalled 2000 marketing and distribution chain traders and shippers; road haulage contractors; and manufacturers/vendors of LP Gas cylinders, tanks appliances and ancillary equipment The impact of local refineries or gas processors yet to be felt to the extent expected

1960s

1990s

Today

growing awareness of social and environmental problems associated with the dependence on woodfuel, FGN initiates a butanization program and authorized NNPC to construct a network of strategic LPG with PPMC operating

PPMC relinquished the sole right to import LPG and simultaneously restricted the use of its berthing facilities. LPG prohibitively expensive for the majority of consumers.

Current State of the LPG Industry

Africa: 10kg per capita

Nigerias LPG Consumption is

SSA: 2.1kg per capita

insignificant when compared to the Africa average of 100,000 metric tonnes per annum or 0.5kg per capita is: 20 times smaller than the Africa average 100 times smaller than the North Africa average
N. Africa: 50kg per capita Nigeria: 0.5kg per capita

Source:

FBN Capital Research, World Bank, WLPGA

LPG market development challenges

Inadequate storage infrastructure has resulted in supply chain constraints for bulk LPG Even in the absence of import tarrifs, import parity prices nearly doubles the FOB price

Source: BusinessDay, World Bank

LPG market development challenges

Domestic consumers have depended on low-volume high-cost imports which impacts retail price and have naturally switched to kerosene, which has significant subsidy
Price of LPG versus Kerosene (Energy Equivalents)

Kerosene Retail LPG 1 Kg N100 (ex-depot) N 275 (retail) N 180 N75 (subsidised) 1.5 Litres

New-to-gas consumers require ~N9,000 for a rudimentary cooking appliance (3kg cylinder + stove unit) versus N300 for firewood; N600 charcoal tripod; and N1,000 for kerosene stove.
Source: BusinessDay, World Bank

Nigeria LPG a history of recommendations

2001 World Bank /WLPGA study

2003 World Bank Strategic Road map; Presidential LPG Steering Committee

2008 WLPGA summit held in Lagos communiqu agreed to implement recommendations

2009 Senate Committee on Gas hosted LPG summit

2011 CEO Round Table 10 years after WB/WLPGA study

Source: WLPGA

Roles for both public and players alike

Policy & Regulation Ensure there are no Tax differentials that impede growth of LPG market Technical Standards & regulation in line with modern industry practise Availability & Distribtn. Introduce new alternative sources of LG supply Improve evacuation at the refineries Rehabilitate the NNPCowned depots Debottleneck inland and coastal transport Safety & Standards Resolve issues related to cylinder ownership, filling and maintenance Ensure safety needs are addressed and initiate consumer safety awareness program Access to the Poor Use relevant knowledge and experience to micro-finance / consumer credit schemes Evaluate smaller/lighter cylinders Source affordable LPG Appliances Investment Needs Construct additional primary storage depots in major cities Increase filling plant for demand growth areas Set up cylinder maintenance / manufacturing facilities Institutional Develpt. Ensure a fully empowered LPG Association Work with designated regulatory authority in developing specific standard and codes

Source: World Bank

Thank You

Sanmi Famuyide Associate Director & Head, Origination & Client Coverage Email: sanmi.famuyide@fbncapital.com Telephone: +234 706 418 9855