As Kerosene Becomes Scarce, Oando Lures Low Income Earners to LPG

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A combination of inherent health implications, prohibitive cost and artificial scarcity of kerosene is all that is needed for Oando Marketing Plc to push for the adoption of Liquefied Petroleum Gas, otherwise known as cooking gas by the low income earners, reports Festus Akanbi

The management of Oando Marketing Plc may have cashed in on the rising cost of kerosene in the country to renew its bid to push for the adoption of Liquefied Petroleum Gas (LPG) by household owners in the country. According to the plan, the company is working hand in hand with some microfinance institutions to make the use of LPG popular among low end of the market spectrum as regulatory authorities expressed frustration in their quest to force down the price of kerosene in the country.

Cooking with Tears

A random market survey conducted by our correspondent in Apapa, Oshodi, Ikeja and Ojodu areas of Lagos last week confirmed the recent complaints of kerosene users on the uneven distribution and prohibitive costs of the product, a major household fuel for cooking among low income earners in Nigeria. THISDAY checks, for instance, showed that apart from the relative scarcity of the product, a litre of kerosene was sold for prices ranging from N125 to N140 per litre depending on where the product was purchased. However, considering the pronouncements of both the regulatory authorities in the oil industry and key members of industry operators, there seems to be no end in sight to the twin problem of poor supply of the products and the attendant indiscriminate fixing of the price by marketers.

The first major challenge is the difficulty of halting the diversion of the product meant for domestic use in homes to the aviation industry. This was recently confirmed by Petroleum Resources Minister, Mrs. Diezani Alison-Madueke, at a recent Town Hall Meeting in Lagos, where she held marketers responsible for the scarcity, which has seen pump price of the product jump from N50-a-litre to over N160-a-litre in some states of the country.

However, the blame game has continued as the Financial Secretary, Independent Petroleum Marketers Association of Nigeria, South-west Zone, Alhaji Adebisi Bada, attributed the hike in kerosene price to the fact that the product was being imported by independent marketers at high costs. According to IPMAN official who said Nigerians should not expect a sharp reduction in the current price of the product, the price differential in retail outlets is due to the marketers sourcing for the products on their own since the NNPC was no longer supplying the product to the Mosimi depot.

Nigeria’s Gas Potential

Nigeria is estimated to hold proven gas reserves of well over 187 trillion cubic standard feet and it’s ranked 7th in global production. Sources said the gas reserves are three times as substantial as the crude oil reserves. However, Nigeria’s consumption is put at an abysmal 0.4kg per capital, the lowest in West Africa. Data released by industry operators showed that the penetration rate of LPG in Nigeria is estimated at 0.4kg per capita, and total consumption at 60,000 metric tonnes/ annum versus its potential capacity of 580,000 metric tonnes/ annum given the average consumption of 3.8kg per capita.

To fully maximise the gains of this untapped potentials, Oando Marketing Plc said it is investing N2 billion to upgrade its facilities to support the supply chain to ensure products are available at all times. The company said it is poised to drastically drive the aggregate demand for Liquefied Petroleum Gas, otherwise known as cooking gas, in the country with the launch of fresh initiatives to spur domestic consumers on utilisation of the clean fuel. One of the tasks set for itself is to encourage millions of low income households to switch from their traditional cooking fuels, such as firewood, saw dust, coal and even kerosene to Liquefied Petroleum Gas (LPG) or cooking gas, by introducing the 3kg LPG cylinders.

Consequently, the company has launched its LPG cylinder project, known as O – Gas, for low income households and this involves the sale of 3 kg cylinder and burner to those at the lowest end of the market with the support of microfinance institutions to alleviate the initial cost of purchase.

A statement from the company last week described the 3kg cylinder and burner as a clean source of fuel for domestic cooking and heating and an alternative to charcoal and firewood fuels responsible for 100,000 indoor air pollution related deaths.

Listing the benefits of the campaign, Chief Executive Officer of Oando Marketing Plc, Mr. Abayomi Awobokun, said, “The advantages of LPG are numerous. First and foremost, it is a clean energy. This gas project supports the federal government’s clean energy initiatives. It helps to reduce the emission of harmful gases to the environment. In addition to that, gas also helps to prevent indoor pollution. As you know, indoor pollution kills 100,000 people yearly. Indoor pollution is caused by dirty fuels used in the homes. So, the health benefits are immense, in addition to the environmental benefits. It is also cheaper.

“We are also setting up specialised gas dealers that we call O-Gas dealers. Already, we have 15 in Lagos and they will be selling to retailers. This ensures that LPG is available close to every home and at the end of every street. We have started it and within the shortest time, you will find our cylinders and bottles everywhere,” he added.

Benefits to health/Environment

Numerous discussions on sustainable livelihood have identified the need to switch households from the heavy reliance on biomass and solid fuels like firewood and charcoal as household fuels to cleaner alternatives like cooking gas and natural gas. Eighty percent of the estimated 36 million households in Nigeria have been projected to rely on biomass and solid fuel for cooking and heating.

With solid and conventional fuels implicated in indoor air pollution (IAP) and deforestation, it is no surprise that the attendant effects are prevalent in the country. IAP has been identified as the third most prominent cause of death in Nigeria, while the country is currently losing about 400,000 hectares of forests annually to incessant exploitation of forest resources.

Reports said the impact of this forest loss (36% of forest since 1991) is more pronounced in the North where desertification and erosion are perennial challenges.

The Manager, Liquefied Petroleum Gas, Oando Marketing Plc, Mr. Yemi Oreagba, recently said the company’s latest initiatives would reduce the cost of converting from kerosene to cooking gas as well as enhance a cleaner environment.

The initiatives, according to an official of the company, includes the Pay-As-U-Gas system, which allows consumers to buy any quantity that he or she can afford at a point in time, while the other is aimed at reducing the sizes of gas cylinders to instill affordability.

He said the company had discovered that the main challenge in LPG business today is infrastructure in term of cylinders, which has made the cost of switching from kerosene to cooking gas to be on the high side. He therefore expressed the company’s determination to eliminate this cost-gap and make cooking gas available to the Nigerian masses.

“For us, we believe that to get over this challenge, we need to come up with initiatives that allows people to pay for the cylinders over a period of time; allow them to buy any quantity they can afford at a point in time.

“The other system, which is currently in the pipeline, is to get smaller size cylinders so as to reduce the refill cost. We have gone quite far in this arrangement, which is aimed at importing smaller cylinders and empower the micro franchisees to sell to the public and get their money spread over a period of time. This would reduce the burden of the initial investment on the consumers,” he said.

He continued: “We are in a position to do this because of our current infrastructure. As you know we have over 600 retail outlets around the country. We have numerous transporters and we have warehouse and well-equipped staff to support the realisation of the initiative. We want the Nigerian populace to understand that LPG is a safer, cleaner, friendlier and cheaper source of fuel compared to kerosene and firewood.”

Oba Rilwanu Akiolu, who received the products recently, praised Oando Marketing Plc on its innovative efforts and called on the people of Lagos State to adopt the use of Liquefied Petrol Gas.

According to experts, if government embraces LPG, Nigeria requires estimated 20 million cylinders to switch from kerosene to LPG thereby saving the government over N760 billion annually that is expended on the unsustainable kerosene subsidy that has several health implications for the people.

Investment in Infrastructure

The company said in order to meet up with anticipated upsurge in demand in the forthcoming year, its plant in Warri was recently upgraded from an initial storage capacity of 150 metric tonnes to 270 metric tonnes. In addition, the plant’s filling capacity has been increased from 1440 (12.5kg) cylinders per day to 3,200 (12.5kg) cylinders per day by the acquisition and installation of state of the art containerized LPG filling equipment.

The upgraded Warri plant also has the capacity to load a bridging truck (20mt) in an hour, which amounts to 8 trucks per day (160mt per day) and about 43,200mt/yr. LPG is delivered to the plant via pipeline from the PPMC Warri depot.

Another LPG plant is that of Lyushi LPG filling plant located at plot B301, Idu industrial layout in Nigeria’s capital city, Abuja. Engaging strategic partnership as a tool to enhance LPG growth and market development, OMP entered into a franchise agreement with Lyushi and upgraded the plant to enable her effectively service her ever widening customer base.

The Lyushi plant now has the capacity for bulk loading, which was previously absent. The plant is equipped to load 4 bridging trucks (20mt) a day without disturbing the cylinder filling.

In Lagos, the Oando Apapa LPG filling plant is located at Oando terminal 1, 8 Kayode Street, Marine beach road, Apapa Lagos. This plant has two storage tanks with a combined storage capacity of 110metric tonnes and a filling capacity of 480 cylinders a day totaling 1620mt/yr.

The filling platform is currently undergoing expansion for the installation of containerized LPG filling equipment in readiness for the arrival of about 500,000 cylinders in Q1, 2012. sWith the expansion of the plant filling capacity, it will be expected to fill 3,200 (12.5kg) cylinders per day. The containerised semi-automated cylinder filling equipment to be installed will be fitted with 8 electronic cylinder filling machines, each capable of filling 50 cylinders (12.5kg) an hour which will amount to 9,720mt/yr.

In : Energy

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