Demand for Liquefied Petroleum Gas, popularly called cooking gas is currently experiencing a surge, leading to marginal price hike due to the recent decision of the Nigeria Liquefied Natural Gas company to channel all its LPG into the Nigerian market.
The Board of Directors of the NLNG Limited had on January 13, 2022 approved the supply of 100 per cent of the company’s LPG production (Propane and Butane) to the Nigerian market.
Speaking on this development on Monday, the Minister of State for the Environment, Chief Sharon Ikeazor said that the initiative would bring relief to Nigeria’s forests by curtailing the use of firewood and charcoal.
Marketers of LPG admitted that the NLNG announcement on the sales of cooking gas 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 by-product 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.
READ ALSO: NLNG Suspends Export of Cooking Gas
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.
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 by-product.
“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.
Explaining 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 by-products we just take them to the market and sell because they are by-products, 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.