NIPCO MD appeals to FG to support local gas producers, marketers to reduce cost of LPG

…As company aims to boost LPG consumption to 5mmt

The Managing Director/ CEO of NIPCO Plc, Suresh Kumar has appealed to the Federal Government to increase its support for local gas producers, gas processing companies and marketers to reduce the cost of Liquified Petroleum Gas (LPG).

Kumar made this known at the just-concluded National Conference of the Nigerian Association of Liquefied Petroleum Gas Marketers (NALPGAM) 2024, held in Lagos.

Speaking on the activities of the company in the gas sector, he said, “At the time NIPCO entered the market, Nigeria’s domestic LPG consumption was around 50,000 metric tonnes (MT) annually.

“However, the past 16 to 17 years have been a remarkable journey. Today, the market has grown from 50,000 MT to approximately 1.5 million MT per year.”  

Despite the growth, the MD pointed out that significant potential remains untapped.

“We believe that less than 60 percent of Nigeria’s 200 million population has embraced the use of LPG.”

“This highlights the immense opportunities within the market and underscores the need for more investments in gas processing, storage, and marketing to serve this large population,” he said.  On the company’s vision, the MD said, “Our vision is to harness these opportunities and grow the country’s LPG consumption from 1.5 million MT to levels more appropriate for a population of over 200 million people.

“We must work with the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and other stakeholders to end gas flaring in the country.

“Substantial investments are needed to capture and process flared gas to increase domestic supply beyond the current 1.5 million MT to at least 5 million MT annually.”  The MD further revealed that local production of LPG remains inadequate. “Currently, less than 40 percent of the 1.5 million MT consumed domestically is produced locally.

“This is why the government must encourage companies like Chevron to convert more of their propane output into butane, which is more suitable for domestic use,” he explained.  

According to him, boosting local production would attract further investments in pipelines, storage, and bottling facilities, as well as expand retail outlets and LPG depots across Nigeria.  

“Our latest assessments show that the existing downstream infrastructure is capable of handling up to 5 million MT annually. This means we are ready to accommodate increased production from both associated and non-associated gas fields within the country,” the MD said.  

He urged the government to introduce incentives to encourage investments in gas processing.

“The key to unlocking the full potential of Nigeria’s gas resources lies in incentivizing investors to venture into gas processing,” Kumar said.

Responding to questions about the pricing of LPG amid a blend of local and imported supply, the Managing Director of NIPCO Plc expressed optimism that prices would decline as domestic production improves.

“With the Dangote Refinery and other refineries now sourcing crude oil in local currency, the volume of LPG produced locally is expected to increase, which will, in turn, drive down the price of the commodity,” the MD explained.

He added, “There is hope that the reliance on imported LPG will decrease, which will positively influence the prices at which the product is sold domestically. Greater local production will make LPG more affordable since it reduces exposure to foreign exchange fluctuations and international pricing dynamics.”

The NIPCO MD acknowledged that demand for LPG in Nigeria has been relatively stagnant due to the high cost of the product.

“The current high prices have limited consumption growth, but this situation is only temporary. With more players entering the gas processing sector, we anticipate a market correction soon,” he stated.

In the long term, the NIPCO MD expressed confidence that the market would stabilise. “We believe that with increased competition and expanded production, the market will find a balance,” he said.

He also urged the federal government to support local refineries, including the Dangote Refinery, to boost domestic gas production.

“It is crucial for the government to back these refineries in their efforts to significantly increase LPG output. This will drive down retail prices and make the product more accessible to Nigerians,” the MD noted.

Suresh expressed optimism for more growth opportunities in the LPG market with the administration of President Bola Ahmed Tinubu giant strides especially with the current fiscal measures aimed at addressing final product cost in the sector.

According to him, the optics are good for the affordable cost of the product if all the measures being put in place come to fruition and basic raw materials for cylinder production like steel are addressed frontally to attain lower cost of the material which is a key component in the use of LPG for domestic cooking.