As the Federal Government struggles to offload the burden of fuel subsidy, industry analysts argue that subsidy on kerosene can be relieved through conversion to the use of cooking gas. Kunle Kalejaye, assesses developments in the Liquefied Petroleum Gas, LPG sector, as the best alternative fuel.

On October17, 2011 the Minister for Petroleum Resources, Mrs. Diezani Alison-Madueke, during an interactive session with the Senate Committee on Gas Resources, said that Liquefied Petroleum Gas, LPG or cooking gas is the alternative to kerosene.

According to environment experts, this alternative fuel is the cleaner and most suitable for cooking because it is healthier and safer. It is a multipurpose fuel with thousands of applications including automobile use, generators/turbines for power generation and agricultural tools. Since Nigeria is a signatory to the Kyoto Protocol, LPG as the alternative to kerosene will help Nigeria reduce her carbon emission levels.

Nigeria is the second largest producer of LP Gas in Africa, and the sixth largest producer in the World with over 3million Metric tonnes MT annually. However, current per capita consumption of the gas in Nigeria is about 0.8kg/annum. This is the lowest in Sub-Saharan Africa; lower than those of our West African neighbours, who do not produce the product.

Annual LPG consumption in Nigeria for 2010 was 120,000MT, whereas, in Lagos alone, there is a potential market for 1,000,000MT annually. In contrast, Nigeria spends N295 billion on kerosene annually based on current consumption estimated at 2.95 billion litres, while the Federal Government spends about $2billion or N310 billion yearly on kerosene subsidy.

The cost of consumption plus the subsidy brings the total amount spent on kerosene to N605 billion per year.

Case studies in countries like Indonesia, Philippines, Guangdong – China, Brazil and South Africa; all MDG countries indicate how aggressive LPG usage programme (commercial and otherwise) could solve subsidy issues by reducing large expenditure on kerosene.

To overcome affordability issues, Indonesia, for example, initiated a cylinder programme in 2007 and has since, introduced a total of 37.44 million units of 3kg cylinders in the country free of charge. It targeted household consumers and small and medium-scale businesses and withdrew about 3.26 billion litres of kerosene from the market.

IN 2004, Philippines, on its part, confiscated from their rural population 6 million defective cylinders and replaced them at a subsidized rate. The Cylinder Replacement Scheme was funded through revenue generated from Value Added Tax (VAT) on LPG sales.

With a population of 120 million and a market size 413,000 MT, the Chinese City of Guangdong in 1991, implemented an LPG expansion programme which grew the market to 6 Million tonnes within 20years. Today, Guangdong consumes in excess of 10 Million tonnes annually, which is about the same as the annual African LPG demand.

Brazil, with a population of 203 million has 100 million cylinders in circulation and consumes over 5 million tonnes of LPG annually.

South Africa has a population of over 40 million but has a total cylinder population of about 25 million. In 2009, local refineries, supplied over 90% of their current consumption of 370,000 tonnes.

In some West African countries like Ghana and Senegal, consumption of LPG has increased over the years. Ghana with a population of 25 million grew her consumption from 78,000 tonnes in 2005, to 240,000 tonnes in 2010. Senegal, with only 14 million people, consumed some 300,000 tonnes of LPG in 2010.

The market growths across the world confirm the rate at which the developing countries are migrating from the use of kerosene to LPG, in order to reduce carbon emissions and create a healthy living environment for their citizens. This means that Nigerians are being denied of abundant cleaner gas fuel, and are being imposed of hazardous imported kerosene with attendant low health and safety credentials.

In addition, several initiatives from the World Bank and the World LPG Association have resulted in studies and solutions offered to the Nigerian Government without any tangible results. In 2009, a communiqué was issued by the Ministry of Petroleum expressing the desire to achieve a consumption level of 1.5million MT/year by 2015.

In 2010 the Nigerian Senate organised a Stakeholder’s Forum to discuss a roadmap for increased consumption of LPG in the country, but there has been no appreciable improvement to the sector.

There have been other initiatives such as the:

* 2001, World Bank/World LP Gas Association study highlighting opportunities in the LP Gas sector and its recommendations presented to government.

* 2003, World Bank Strategic Roadmap was proposed to government and a Presidential LP Gas Steering Committee was established to implement the recommendations.

* 2004, Study on Nigerian LP Gas Sector Improvement by the International Bank for Reconstruction and Development, IBRD/the World Bank.

* 2006, Report prepared for the Ministry of Petroleum Resources, making recommendations for a Nigerian LP Gas Sector Policy and Regulatory Framework, by NEXANT Inc with the support of the US Trade & Development Agency

* World LP Gas summit held in Lagos in March 2009. One of the issues in the communiqué was an appeal to the Federal Government to implement the findings in the earlier reports.

* Senate Committee on Gas hosted LP Gas Summit in October 2009. One of the issues in the communiqué was also an appeal to the Federal Government to implement the findings in the earlier reports.

* Constant supply of LP Gas to the domestic market since year 2007 through the Nigeria LNG Limited. This singular bold step on the part of the Federal Government has removed untold hardship imposed on Nigerians, by hitherto, no-supply situation but other problems still affect the sector and have created growth and expansion barriers.

* Waiver of import duty and VAT on imported LP Gas was granted in the year 2007; although the authorities have regrettably failed to offer same to locally produced LP Gas.

* In 2011, the current initiative and collaboration between the Nigeria LP Gas Association, World LP Gas Association, NNPC, NLNG, PPMC and the Ministry of Petroleum, on the possibility of injecting 5 million cylinders of different sizes from 3kg up to 18kg. This will be financed from the Ecological Fund and an avenue to reduce carbon emissions and comply with the Kyoto Protocol. It is also expected that LPG appliances/equipment will enjoy a reduction on import duty and other levies.

Against this backdrop, analysts urge the Federal Government to immediately embark on a gradual kerosene-to-gas-conversion programme by investing in gas cylinders and 1/2 face burners.

This is to encourage Nigerians to switch from the use of kerosene and firewood to LP Gas, similar to what was done in other countries like Indonesia, Brazil, India and Malaysia that had similar challenges.

According to experts, the Conversion Scheme will help tackle deforestation, desertification, flooding and other natural disasters which is caused by green house gas emissions.

They argued that the mind set carried by Nigerians that LPG is for the rich only will do no good, as in their opinion, the Federal Government and Nigerians can make a lot of savings by switching from kerosene to LPG. Indonesia in 2010 saved more than $1.65 billion per annum on fuel subsidies. In 2011, it has the potential to save about $3.05billion s shown in the table below: