• Thursday, May 30, 2024
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Lagos gas explosion revives concerns about weak LPG retail business regulation


Nigeria’s quest to replace dirty fuels with Liquefied Petroleum Gas (LPG) may be a success story having grown over a thousand percent within the last 10 years. But the inability to properly regulate the retail aspect poses a grave and growing danger.

The recent explosion at Abule Ado, a Lagos suburb, according to Ibrahim Farinloye, spokesman for the National Emergency Management Agency (NEMA), was triggered when a truck hit some gas canisters stacked up in a gas processing plant near a pipeline in Abule-Ado area of Lagos.

The explosion, which led to over 17 deaths, injury to hundreds of others, destruction of over 100 houses, rendering thousands homeless and the burning of many vehicles, revives concerns about lax regulation that has seen hundreds of LPG retail shops springing up on street corners against extant rules.
The Department of Petroleum Resources (DPR), a government agency that regulates the oil and gas sector, last year said it would ramp up enforcement in the sector.

In September, Muinat Bello-Zagi, controller of operations, DPR, during a meeting with Cooking Gas Skid Proprietors Association of Nigeria, Ogun State chapter in Abeokuta, warned illegal cooking gas skid operators to either regularise their operations or risk being shut down and prosecuted.

But few months later, it released new rules requiring entrepreneurs applying for an LPG licence to include land titles as part of their applications.

Some operators said buying two plots of land to set up an average LPG capacity of 20 metric tons could cost over N60 million in many parts of Lagos, and would triple their business cost in addition to carrying out environmental study that could cost above N2 million.

Operators, who had hitherto run their businesses from inside petrol stations exploiting a loophole in the rules that allowed an LPG plant in a petrol station as add-on facility for auto-gas vehicles, were ordered out of petrol stations.

Some operators questioned the motives of these rules, which did nothing to check the rampant opening of LPG skids in city slums.

As the fires simmer at Abule-Ado, recall that a similar explosion occurred on January 4 at Sabon Tasha area of Kaduna metropolis, which led to the deaths of many people.

The DPR, following an investigation, found that the explosion was caused by illegal decanting (transfer) of LPG into another cylinder.

Paul Osu, DPR head of public relations, said the department would continue to monitor and sensitise members of the public on the safe handling of petroleum products to prevent the occurrence of such incidences.

However, BusinessDay investigation shows that the pronouncements have remained mere intentions. Many retailers are still opening LPG skids on street corners, sometimes next to local restaurants where food is cooked on open fires.

Ahmed Damcida, CEO of Energy Culture, had told BusinessDay that safety should be a key reason to enforce rules, as some operators were importing into the country cheap cylinders and skids meant for propane gas, when LPG gas used in the country was butane gas.

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

Nigeria’s LPG consumption has seen remarkable increase from a mere 70,000 metric tons to nearly 900,000 metric tons by September 2019, and on course to hit over 2 million metric tons before the end of 2020.

The main drivers for this growth have been the removal of 5 percent Value Added Tax on the product and a 30 percent import duty waiver on LPG equipment and appliances by the Federal Government.

This has led to a 30 percent reduction in the cost of infrastructure development, providing increased investments into the sector.

Some of these investments include in cylinder manufacturing by Techoil, discharge of domestic gas by the NLNG into the Niger Delta region and the construction of new terminals. Operators say new terminals skids are being constructed across Nigeria to receive gas trucked from Lagos.

There have also been increased advocacy by stakeholders, including government agencies, and perceived value in the sector by investors leading to a bigger push for adoption, which has seen many Nigerians substitute kerosene for LPG.