Soala Ariweriokuma, general manager, economic research and data management department, Nigerian National Petroleum Corporation (NNPC), who spoke with FEMI ASU at a recent event in Abuja, stressed the need to promote the use of liquefied petroleum gas (LPG), also known as cooking gas, in the country, citing countries like Indonesia and Brazil as success stories.
Excerpt: Access to energy services is a big challenge in Nigeria. What do you think are the necessary things that we should do to ensure energy access for development of our economy?
Energy access is key, and of course, if there is no access to energy, the consumption will be low. And when the consumption is low, the economic benefits cannot be derived. For energy access to be a reality, government has to provide first of all the resource that will be consumed. In the Nigerian situation, a lot of people rely on the use of firewood and kerosene. Now, let’s start with firewood. Firewood is one source of carbon dioxide emission and Nigeria by virtue of its production processes, the upstream sector is known to produce a lot of carbon into the atmosphere, which is injurious to the ozone layer, and government have been making effort to curtail it and even to bring it to zero level. In the case of energy access, we are advocating that there must be a shift from the use of firewood and kerosene to cleaner forms of energy such as LPG or compressed natural gas, this is what is being advocated. And for that to happen, we must have the resource available and then of course it must be matched by the capacity of the consumers to procure it or get it for their own use. This has to be encouraged and unless that is done, of course energy access will be low. Our LPG consumption is very low, even lower than countries in West Africa that are not producing oil. Therefore, there must be a conscious effort on the part of the Nigerian government and other stakeholders to ensure that people begin to use gas on a wider scale to bring about deeper penetration of energy in the Nigerian economy.
What is actually hindering the consumption of LPG in Nigeria?
There are a number of factors. First of all, the price of the commodity is high because the supply is not sufficient. Now, realising that constraint, government now negotiated with some of the producers, Nigerian LNG and some IOCs, to provide LPG in the Nigerian economy and they accepted. And as we speak we have upwards of 400 metric tons of LPG allocated for the domestic market. But of course, that is only one aspect of it, because if you allocate, then you must have the discharge mechanism for this commodity to be now safely taken and distributed to the consumers, that has not been done. In other words, we do not have sufficient terminals, neither do we have enough storage facilities or the pressurised transportation vehicles that can take the commodity from the source to the ultimate consumers. So, unless that is really configured and placed in a manner that will be efficiently engaged, you will find that the low utilisation and consumption will persist.
The operators of LPG say the subsidy on kerosene is actually boosting the use of kerosene and that people are not going to switch to LPG. What is your take on this?
That is a good argument really because the use of kerosene is not economical. In fact, the government is buying the commodity at a very high price and giving it to consumers at a very low price, which is not economic. And of course, in terms of health conditions, kerosene is also not good for domestic use. Kerosene produces fumes that are injurious to health and that is one condition for which it must be discontinued. For people that have respiratory diseases, the use of kerosene is injurious, especially for women and children, and these are the categories that suffer more from the use of kerosene. Therefore, government must consider the substitution of kerosene with LPG for the purpose of saving costs in terms of procurement and distribution to the consumers and also for the health risks that it constitutes. And in fact, research has shown that kerosene produces more carbon than gas. The level of carbon production per unit of quantity of consumption is quite high and it is for that reason that it is being advocated that kerosene must be substituted completely with LPG.
What are those things that you will recommend to promote the use of LPG in Nigeria?
The use of LPG in the Nigerian society will thrive, but we must adopt some of the techniques that were adopted by countries that have made success of the use of LPG in their countries. Take Indonesia and Brazil for instance, these are two countries that have successfully transited from the use of kerosene to LPG and the governments realising the importance of this transition in terms of the subsidy that was placed on it and the gains that will be derived if the substitution was achieved. They took very concrete steps in doing that. First of all, in the case of Indonesia, they decided they were going to transit from the use of firewood and kerosene to LPG and for that reason, they engaged the national oil company, Pertamina, to be responsible for that programme. They told them to execute the substitution of kerosene to LPG and they were compensated for whatever cost that was involved. This was the way they did it: they now took a census of the households in particular region. Once the households were known, they then decided that they were going to distribute 3kg cylinders with cooker to every home in that particular region at no cost to the consumers. They also provided gas in the cylinders to start with. It is when that quantity finishes that they would be required to use their own money to buy gas. They did that and did it for many homes. For a particular region, the moment they finished the distribution of the cylinders and the cookers to the households in those areas, and then ensured that the replacement gas was available, they now stopped supplying kerosene to those areas and so they decided to rely on gas. That technique worked and I tell you today Indonesia has a savings of $3 billion annually from that transition from kerosene to LPG. So, this is something that should be an encouragement for the Nigerian government and then NNPC to undertake for us to transit from the use of wood and kerosene to LPG so that we can expand the market for gas. In the context of what is happening in the United States with the shale gas, which is coming in large volumes, we need to engage our gas in a proportion that can sufficiently compensate for the shortfall of our export of LNG to America and to Europe. We have the population in Nigeria and our initial studies in-house in NNPC indicate that if we push for greater penetration of LPG in the commercial, industrial and domestic sectors, that we will be in a position to sufficiently mitigate the impact of the shortfalls of LNG exports to the US and elsewhere. So, we have a task to push this area and ensure that we really fully monetize the use of gas in the Nigerian economy. Nigeria LPG Boost Studies Source: http://businessdayonline.com/2014/07/how-to-boost-use-of-lpg-in-nigeria/