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Suresh Kumar, the Managing Director and Chief Executive Officer of NIPCO Plc, has indicated that the upcoming Dangote refinery, along with other local refineries, is expected to help lower cooking gas prices. He expressed concern that over 60 percent of the cooking gas consumed in Nigeria is currently imported.
Recent investigations by our correspondent revealed that cooking gas prices have reached N1,500 per kilogram in various retail outlets across Ogun and Lagos States as of Sunday.
In Abuja, the average cost to refill a 12.5kg cylinder of cooking gas has risen by 41.6 percent, now standing at N17,000 in different locations. This is a significant increase from N12,000 in July and N11,735 in January 2024.
This dramatic price hike reflects ongoing market trends and poses potential challenges for consumers who depend on LPG for their daily cooking needs.
In August, the Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, assured that efforts would be made to reduce the escalating cost of cooking gas. He mentioned plans to convene regulators and gas producers to explore strategies for cost reduction.
However, a recent market survey conducted by our correspondent on Sunday indicated that prices have not decreased; in fact, they have continued to rise.
Analysis shows that in the Lokogoma area of the Federal Capital Territory, the price has reached N17,000, marking a 41.6 percent increase from the N12,000 charged by vendors just three months ago, translating to a cost of N1,400 per kilogram.
In Kubwa, the price of the product has increased to between N16,200 and N16,500, up from the previous charge of N12,000. In contrast, in the outskirts of Bwari, Kurudu, and Jikwoyi, it is being sold for N1,300. Some major distributors continue to offer the product at prices ranging from N1,300 to N1,400, depending on the specific location.
Ola Oresanya, the Commissioner for Environment in Ogun State, previously indicated that many individuals might turn to charcoal for cooking if the price of LPG continues to escalate. During the recent National Conference of the Nigerian Association of Liquefied Petroleum Gas Marketers 2024 in Lagos, Kumar highlighted the inadequacy of local LPG production and urged the Federal Government to incentivize Chevron to convert a greater portion of its propane output into butane.
He noted that currently, less than 40 percent of the 1.5 million metric tonnes consumed domestically is produced within the country. This underscores the necessity for the government to encourage companies like Chevron to increase their conversion of propane to butane, which is more appropriate for household use.
In response to inquiries regarding the rising costs of LPG amidst a mix of local and imported supplies, the managing director expressed hope that prices would decrease as domestic production improves, particularly with local refineries sourcing crude oil domestically.
“With the Dangote refinery and other facilities now procuring crude oil in local currency, we anticipate an increase in the volume of locally produced LPG, which should subsequently lower the price of the product,” the managing director stated.
He further added that there is optimism that dependence on imported LPG will diminish, positively impacting domestic pricing. Enhanced local production is expected to make LPG more affordable by reducing vulnerability to foreign exchange fluctuations and international pricing trends.
According to him, increasing local production would also attract additional investments in infrastructure such as pipelines, storage, and bottling facilities, as well as expand retail outlets and LPG depots.
Recent evaluations indicate that the current downstream infrastructure can support an annual capacity of up to 5 million metric tonnes. This positions us well to manage the anticipated increase in production from both associated and non-associated gas fields within the nation, stated the Managing Director. He called on the government to implement incentives that would stimulate investments in gas processing.
He noted that NIPCO, which has been active since 2004, originally entered the market as a distributor of petroleum fuels. However, he highlighted that the company's long-term goal has always been to establish itself as a leader in the marketing and distribution of liquefied petroleum gas (LPG).
Kumar explained, "Our approach has been influenced by Nigeria's substantial gas reserves, exceeding 200 trillion cubic feet. We are convinced that optimizing the country's gas consumption is crucial, particularly through the promotion of LPG for domestic use and compressed natural gas (CNG) for industrial and transportation applications."
He further underscored the company's commitment to infrastructure development, pointing out that NIPCO has significantly expanded its LPG operations over the years. "In 2008, we launched an LPG facility in Apapa with a capacity of 5,000 metric tonnes. Today, that facility has been enhanced to over 20,000 metric tonnes, thanks to strategic collaborations with our subsidiaries."
"We have also introduced LPG tankers and set up numerous stations throughout Nigeria to facilitate easy access to cooking gas for households across the country," Kumar added. He elaborated that while LPG is vital for residential use, CNG will be instrumental in powering industries and revolutionizing the transportation sector.
The managing director remarked, "When NIPCO first entered the market, Nigeria's domestic LPG consumption was approximately 50,000 metric tonnes annually. However, the last 16 to 17 years have been transformative. The market has expanded from 50,000 metric tonnes to nearly 1.5 million metric tonnes per year."
Kumar highlighted that, despite recent growth, there remains considerable untapped potential in Nigeria's liquefied petroleum gas (LPG) market, noting that fewer than 60 percent of the country's 200 million residents have adopted LPG usage.
“Our goal is to capitalize on these opportunities and elevate the nation’s LPG consumption from 1.5 million metric tons to levels that better reflect a population exceeding 200 million,” he stated.
He emphasized the necessity of collaborating with the Nigerian Midstream and Downstream Petroleum Regulatory Authority and other key stakeholders to eliminate gas flaring in the country. He pointed out that significant investments are required to capture and process flared gas, aiming to boost domestic supply from the current 1.5 million metric tons to a minimum of 5 million metric tons annually.
The NIPCO leader recognized that the demand for LPG in Nigeria has remained relatively flat, primarily due to the high costs associated with the product.
“The elevated prices have hindered consumption growth, but this is a temporary issue. As more participants enter the gas processing industry, we expect a market correction in the near future,” he remarked, expressing confidence that the market will stabilize over time.
He called on the Federal Government to provide support for local refineries, including the Dangote Refinery, to enhance domestic gas production.
“It is essential for the government to assist these refineries in their initiatives to significantly boost LPG output. This support will help reduce retail prices and improve accessibility for Nigerians,” he concluded.