• Friday, July 19, 2024
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Cooking gas operators to show land title before getting licence

Cooking gas operators

The Department of Petroleum Resources (DPR), the government agency that regulates the oil and gas sector, has begun sterner enforcement of its regulation which requires entrepreneurs applying for licences to open a Liquefied Petroleum Gas (LPG) plant to include land titles as part of their application.

BusinessDay gathers that the agency will soon clamp down on operators who have operated inside petrol stations around the country and compel them to leave and purchase their own land to operate the business.

These operators were allowed to open their plants in petrol stations because they applied for it as add-on facility designated as auto-gas for vehicle use, according to the DPR. But there are too few autogas vehicles and even fewer auto conversion centres in Nigeria.

And so, operators have taken advantage of this seeming gap to open LPG plants inside petrol stations to sell cooking gas. Smaller businesses have also opened shops inside major city centres, including Lagos, which, analysts say, presents safety hazards as these smaller plants are even set up beside local food vendors who cook with open fire.

Ahmed Damcida, CEO of Energy Culture, said this is another reason for enforcement of the regulation by the DPR as some operators are importing cheap cylinders and skids meant for propane gas into Nigeria when LPG gas used in the country is butane gas.

“This presents safety risk for the country and the DPR should even go a step further to license importers of cylinders,” Damcida said.

The DPR within the last two months has warned it would enforce the rules. In September, during a meeting with the Cooking Gas Skid Proprietors Association of Nigeria, Ogun State chapter, in Abeokuta, Muinat Bello-Zagi, DPR’s controller of operations, warned illegal cooking gas skid operators in the state to either regularise their operations or risk being shut down and prosecuted.

Operators say the DPR now requires them to buy two plots of land to set up an average 20-metric-tonnes-capacity LPG plant. Those operating lower capacity of 5.3 metric tonnes are expected to comply with this directive.

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This land title requirement is capable of tripling the cost for operators. Anyone operating a petrol station or an LPG gas plant in Nigeria has to pay fees for town planning approval (N200,000), fire service approval (N100,000), police report (N50,000) and Environmental Impact Assessment done for two seasons (wet and dry) for around N2 million or more, and a land title.

The cost of acquiring a plot of land in Lagos Mainland, for example, is over N30 million and over N60 milllion on Lagos Island. The prohibitive cost of land will frustrate the business plans of operators who planned to construct an LPG skid doing only 5 metric tonnes.

“The DPR believes that operators have abused the allowance to run their plants inside petrol stations and is now making the rules stiffer; it will definitely cause much stress for us,” said Uwandu Ifeanyi of Kiakia Gas, who runs an online outfit where consumers can order cooking gas.

Analysts fear that stricter enforcement of compliance with DPR guidelines will set back the modest gains Nigeria has made in persuading many people to abandon kerosene stoves for cleaner cooking gas and derail the government’s ambition to have 13 million people use cooking gas instead of wood and kerosene.

LPG adoption in Nigeria has risen from a mere 70,000 metric tonnes 10 years ago to nearly 900,000 metric tonnes by September this year and on course to hit over 2 million metric tonnes next year, according to operators.

The main drivers for this growth have been forward-looking regulatory policies including removal of 5 percent Value Added Tax (this has been removed now) on the product, 30 percent import duty waiver on LPG equipment and appliances by the government, as well as increased advocacy. This has led to a 30 percent reduction in the cost of infrastructure development.