• Sunday, February 25, 2024
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BusinessDay

Uncovering LPG market opportunities, penetration

liquefied-petroleum-gas

With huge reserves of 185 trillion cubic feet, the gas sub-sector of the industry signifies enormous potential for not just the operational activities of the government and our forex earnings, but for boosting further the GDP growth and infrastructural development of our domestic economy. This is because the segment undergirds the functioning of our power (electricity generation) supply industry and also the development of the Liquefied Petroleum Gas (LPG) sector, as well as providing strategic support to industries that utilise gas as feedstock and gas-based industrialisation.

Globally, Nigeria is the 6th largest producer of liquefied petroleum gas (LPG) and the second largest on the African continent. Despite this, the country has the lowest LPG utilisation per capita in Africa though potential demand exists of 1.5 million metric tonnes per annum.

Huge proven gas reserves portend opportunities to exploit diverse investment opportunities across the spectrum of the sector. Furthermore, Nigeria’s reserve-production ratio of 55.7 years is above the global average.

Nigeria earned about N68.957 billion from lifting Liquefied Petroleum Gas, LPG, for both export and domestic consumption in 2013, according to the NNPC. In its Annual Statistical Bulletin for 2013, the country lifted about 417,924 metric tonnes.

Currently, national consumption is estimated at 30 percent or 250,000 tonnes. This is low when compared with the production or output of 850,000 tonnes of LPG earmarked for domestic utilization in 2013. This translates to 1.8 kilogram per capita, whereas the West African regional average is 3.5 kilogrammes.

Survey Findings

Subsequently, BusinessDay Research and Intelligence Unit (BRIU) embarked on a survey with regards to LPG consumption in Lagos State. The sample size comprises residents in areas covering the 57 local government areas (LGA) in the state. Consequently, the result of the survey showed a distribution of 55 percent of females and 45 percent of males. In addition, the age range of residents covered were 18 to 30 years (39 percent), 31 to 45 years (46 percent), 45 to 65 years (14 percent) and over 65 years of age (1 percent).

The level of education of respondents comprised secondary school leavers (20 percent), ND/NCE holders (15 percent), Bsc/HND (52 percent), Msc/Phd (11 percent) with the balance of 2 percent being held by other qualifications. The occupations and industries in which the survey respondents worked or operated in; included Media (24 percent), Civil service (23 percent), Trading/Retail (15 percent), Education (10 percent) and Healthcare (2 percent). About 3 percent of the respondents are self-employed and 10 percent are unemployed, while other professions and sectors accounted for the balance of 13 percent.

The average combined monthly income of the households surveyed consisted of 29 percent earning N50,001 to N100,000. About 26 percent made N100,001 to N300,000 while 25 percent realized less than N50,ooo every month. 8 percent of the respondents earned N1,000,000 and above on a monthly basis. Respondents that fell within two income brackets of N500,001 to N750,000 and N750,001  to N1,000,000 shared the balance of 8 percent equally between them.

Fuel Use and Frequency

Overall, when surveyed on the fuel type used to meet cooking and other energy needs, 54 percent of respondents made use of gas; 29 percent utilized kerosene while 13 percent applied electric cookers, stoves and appliances for these purposes. In addition, 3 percent of respondents utilized charcoal in cooking while the balance of 1 percent made use of firewood.

The extensive use of traditional fuels in developing nations presents an obstacle to achieving sustainable development. The challenges comprise availability, accessibility, affordability and cultural preferences, awareness & perception. No doubt, it is important to understand the perception of the customers and how this perception influences purchasing decision with regard to the relationship between fuel usage in meeting domestic needs. Furthermore, for the households who made use of two or more fuel types, frequency of use revealed that Gas was the preferred choice with 54 percent rate of usage; while kerosene followed with 29 percent and electricity was third with 13 percent. Charcoal and firewood brought up the rear with 3 percent and 1 percent respectively. Unsurprisingly, the outcome matched the fuel type used to meet cooking and other energy requirements.

On the brand of cooking cylinder purchased by the households which used gas, 25 percent of the survey responses said they made use of unbranded cooking cylinders and 60 percent utilized branded LPG cylinders, while the balance of 15 percent had no idea what cooking gas cylinder they used (whether local brand or generic).

Brand of Cooking Gas Cylinder and Refilling Outlets

Gas consumption across Africa is on the upswing with its increasing population and rising income, which creates avenue for potential and existing players in the industry to expand within the local economy, the West African region and the African continent as a whole.

When assessed on the size of cooking gas cylinders used by respondents, 41 percent of respondents made use of the 12 kilogram one. 23 percent utilized the 25 kilogram cylinder while 13 percent owned the 5 kilogram cooking gas. 21 percent was shared equally (7 percent each) among those who made use of the 50 kilogram, 6 kilogram and the 3 kilogram cooking gas cylinders respectively. While the remaining 2 percent of respondents made use of other sizes not specified in the survey options.

On the subject of refilling their various gas cylinders, 30 percent of respondents made use of roadside (informal) refuellers to replenish their cooking gas stock. 17 percent refilled their LPG cylinders at Total filling stations while 13 percent restocked at Oando outlets.  Mobil and NNPC accounted for 5 percent and 3 percent of respondents refilling needs respectively. Forte Oil (2 percent), MRS Oil (2 percent) and Conoil (1 percent) represented 5 percent of the balance of branded refillers. The remaining 15 percent of gas cylinder replenishment needs was met via home service delivery.

With respect to frequency of refill, 52 percent restocked their cooking gas every month. 21 percent refueled at least once in two (2) months, while 14 percent of respondents fill their LPG cylinders twice a month. About 9 percent replenished their gas cylinders once in three (3) months while 1 percent of respondents refilled twice in three (3) months. The balance of 3 percent restocked their gas cylinders at other times separate from specified in the survey options.

When surveyed on the average amount expended on gas refill, half (50 percent) of the respondents indicated that they spent about N1,001 to N3,000 every month. An estimated 36 percent allocated expenses of about N3,001 to N5,000 on gas refill. It costs less than N1,000 for about 7 percent of responses to restock their LPG cylinders, while 3 percent spent N5,001 to N7,500 on cylinder refuel. The balance of 4 percent was shared equally between the expenditure brackets of N7,501 to N10,000 (2 percent) and N10,001 and above (2 percent) on restocking their LPG cylinders.  Consequently, there lies significant investment opportunity in the LPG sub-sector. Significant percentage of the Nigerian population depends on liquefied petroleum gas for their cooking and other domestic uses. Furthermore, industries, government parastatals, hospitality establishments, hospitals, the fast food industry, restaurants, bakeries, and so forth, all make use of gas for commercial and business purposes. However, there is room for further investment and expansion to ensure significant penetration of untapped and underserved markets in Nigeria.

Continued reforms in the sector, in line with the Nigerian Gas Master Plan (NGMP) with respect to policies on LPG processing; and across the industry value system will eventually lead to enhanced productivity and yield for potential and existing players.

OMOSOMI OMOMIA