There is currently a surge in the demand for Liquefied Petroleum Gas, popularly called cooking gas, leading to marginal price hike following the recent decision of the Nigeria Liquefied Natural Gas company to channel all its LPG into the domestic market.
On January 13, 2022, the Board of Directors of NLNG Limited approved the supply of 100 per cent of the company’s LPG production (Propane and Butane) to the Nigerian market.
Also, the Minister of State for the Environment, Chief Sharon Ikeazor, said on Monday that the initiative would bring relief to Nigeria’s forests by curtailing the use of firewood and charcoal.
Speaking on the impact of the NLNG announcement on the sales of cooking gas, marketers of LPG told our correspondent on Wednesday that the move had triggered a surge in demand, which warranted a slight hike in price.
This came as the gas producing firm explained that its core product was Liquefied Natural Gas and that LPG was only a byproduct of LNG, stressing that all its cooking gas was now sold in Nigeria.
Reacting to this, the National Chairman, Liquefied Petroleum Gas Retailers Association of Nigeria, Michael Umudu, stated that though the decision by NLNG was welcomed, it had raised some concerns in the market.
He said, “We should be conscious this time, for after the announcement was made we recorded a slight increase in LPG price. So we have to welcome that announcement with caution.”
Asked what could have warranted the price hike, he replied, “If they (NLNG) will match their words with action, it will be fine. This is because the 100 per cent they are talking about, will it meet the local demand for LPG?
“Even if it meets the current demand of about 1.2 million metric tonnes per annum, which I doubt, there will be an upsurge in demand, just like we are experiencing now. Again, we should be concerned about the factor of competition.”
Umudu added, “This is because with the announcement, if care is not taken, some of the importers who started importing, leading to a reduction in price for about a month before that decision, may decide to stop imports believing that they will not be able to compete with NLNG.
“And if NLNG is not fit to supply the product, it can equally cause more problems. However, the decision is welcomed and the NLNG should be commended for it.”
Umudu further noted that issues of logistics should be addressed, stressing that even when LPG consumption was very low some 10 years ago, there was still the challenge of logistics.
“So we need to know how they are partnering their off-takers to ensure that their product can easily get to the market,” the LPG retailers chairman stated.
In October, the spokesperson of the NLNG, Eyono Fatayi-Williams, told our correspondent that the volume of LPG produced by the firm could not meet Nigeria’s demand, as she explained that LNG was the core product of the firm and not LPG.
The maximum amount we can now give, which is the maximum production volume, is less than what the entire country needs. We are not the only producer of LPG but we can only give 450,000MT,” she had stated.
It was, however, gathered on Tuesday that the volume of cooking gas that would be supplied domestically by the NLNG would depend on the amount of feed-gas supplied to the firm and its byproduct.
“The LPG we produce depends on the feed-gas that we get. Now by feed-gas, I mean the gas we receive from upstream companies. We are like a refinery in the midstream,” an impeccable NLNG source, who spoke on condition of anonymity, stated.
The official added, “So we buy gas from upstream companies, refine the gas, freeze it, get our LNG, which is the main product, get the byproducts, which are LPG and condensates, and sell. We don’t explore for gas, we buy it.
“LPG is a byproduct, so what we have assured the country is that anything we bring out in terms of LPG is going to the Nigerian market.”
On what would happen to the company’s international market for LPG going by the recent decision, the source said, “We are an export company because that is how the company was built to operate; we get gas, monetise it for the country and sell.
“So the product for export is LNG and it is on this product that we have agreements with our buyers. For the byproducts we just take them to the market and sell because they are byproducts, you never know whether you will get them or not.”
Nigeria consumes about 1.2 million metric tonnes of cooking gas annually, while the NLNG produces about 450,000MT and has promised to supply all of it into the Nigerian market.
Some marketers and other players in the LPG space import about 65 per cent of the product into the country, while 35 per cent is produced locally, with the NLNG being the major producer.