DPR-LPG-Forum-press 3

DLPG SCHEME: THE JOURNEY
SO FAR!
Presentation By Mr. Norbert Shialsuk to the 1st
Nigerian LPG Summit Organized by The
Department of Petroleum Resources on the 12th &
13th October 2009 @ ICC Abuja

CONTENT
  OBJECTIVE AT BEGINNING OF SCHEME
  Achievements
  Challenges
  Solution: LPG Almighty Formula
  Role of NLPGA
  Way Forward
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NigerianLPGSummitbyDPR-Journey
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OBJECTIVES OF THE DLPG SCHEME
  Supply LPG From Nigerian Production in Bonny
  Which was impossible prior to now
  Bridge Supply Logistic Gap btw Bonny & Lagos
  Eradicate Scarcity of LPG
  Reduce Hiked Prices; Make More Affordable
  Improve Infrastructural Imbalance
  Reintroduce LPG and Create Awareness
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BRIDGING THE LOGISTIC GASP…
Bonny River
Terminal
BW Saga in STS with
LPG/C Blue Gas
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  Objective at beginning of Scheme
  ACHIEVEMENTS
  Challenges
  Way Forward
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ACHIEVEMENTS
  Retail Price Dip – from N10,000 > 2200 per
12.5kg
  Market Stability
  Sustained Supplies; cutting scarcity
  Restored Confidence attracting New Investments
in LPG
  New Filling Plants Springing Up
  Old Plants Revived
  Customers more sensitized; Expectant
  Fruitful Partnership between NLNG and the 6
Off-takers
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  Achievements
  CHALLENGES
  Way Forward
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CHALLENGES: BERTHING DELAYS
STS
OPS
VESSEL LOAD
DATE
DISCHA
RGE
DATE
TIME INV.
DATE
20 Blue Gas 03-10-08 17-10-08 14 Days 02-11-09
21 Blue Gas 18-10-08 29-10-08 11 Days 17-11-09
22 Blue Gas 29-10-08 14-11-08 14 Days 28-11-09
23 Blue Gas 18-11-08 25-11-08 8 Days 17-12-09
27 Mayfair 20-03-09 08-04-09 20 Days 19-04-09
28 Mayfair 21-04-09 14-05-09 24 Days 20-05-09
29 Super
League
08-05-09 11-06-09 34 Days 07-06-09
30 Mayfair 27-05-09 29-06-09 33 Days 26-06-09
31 Super
League
20-06-09 20-08-09 61 Days 19-07-09
36 Mayfair 29-07-09 31-08-09 33 Days 28-08-09
40 Mayfair 03-09-09 17-09-09 15 Days 02-10-09
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CHALLENGES: MARKET INSENSITIVITY
  OPIS Mont Belvieu Upward Trend
  Local Ex-Depot Prices Remain Constant
  Retail Prices on an Upward Trend due to
speculation by Rogue Traders/Distributors
  Off-takers taking all the RISKS; Rogue Street
Traders Taking all the PROFIT (See next Slide,..)
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LAST MILE BOTTLENECK = CYLINDERS
  However, bottleneck is
no in cylinders:
  Even though Offtakers
sell ex-Apapa depot at
N1,200 and ex-plant at
N1,500 – N1,750, road
side retailers still sell
at approx. N2,500 –
N3,500 per cylinder!
  Roadside and Retail
Gross Margins are
70–100% Today!!
11
Cylinder Price Ex Plant

SHIFT IN VALUE CHAIN FROM 2008 TO 2009
12

CHALLENGES: CYLINDERS > DEPTH
  Nigeria’s Population: 140 million
  Nigeria’s Cylinder Population
  All sizes: Less than 1 million (Approx. 500,000)
  Capacity 500,000cylinders x 12.5kg = 6,250,000kg
  6,250,000kg = 6,250tons
  Annual Capacity = 6,250t * 12months = 75,000tons
(Assuming Users fill once a month)
  Shallow Market
  Focus Investments on Cylinders; Distribution
 To ACHHIEVE 1MTPA? NIGERIA
REQUIRES 40M CYLINDERS!
 Equivalent to N200bn
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MARKET DEPTH: SA
  S. African Population: 25 million
  S. Africa cylinder population
  Large Cylinders (9kg & above): 5.5 million
  Small Cylinders (below 6kg): 7 million
  TOTAL 12,5M CYLINDERS
  Local Refinery Supply 370,000tons in 2007
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CHALLENGES:
ROGUE TRADERS
  Short Filling
  Rusty Cylinders
  Price Hiking
  Shoddy Practices: HSE Concerns
  Regulatory Oversight
Not Adequate at this level
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CHALLENGES: ILIQUIDITY
  Constrained Cash Flows Due to Huge Logistic
Costs
  Limited Cash Available for Investment in
Infrastructure
  No Bank Funding
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CHALLENGES: OTHER
  Disincentive to Investment
  Dual licensing/Regulatory Agencies – DPR/SON
  SON Certification Hurdles
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  Achievements
  Challenges
  SOLUTION: LPG ALMIGHTY FORMULA
  Way Forward
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LPG ALMIGHTY FORMULA…,
C A R X2
Where:
C = Cylinders
A = Awareness
R = Regulation
X2 = Exponential Growth in LPG
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  Massive Injection of Cylinders
  40 Million Cylinders Required to reach 1MTPA
  Private Investment or
  Government Funding
  IF Private Investment
  Then Specialization of Cylinder Valves
  Protection of Investment; Guaranteed ROI
  IF GOVT. FUNDING
  Then Standard Valves Remain
  NLPGA Recoups Cylinder Charge From Members
  Remittance to Government per cylinder sold
C
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ASIAN EXPERIENCE: “C”
  CYLINDER EXCHANGE PROGRAM
  INDONESIA; kerosene-LPG-conversion program
  3kg Introduced since 2007 = 37.44million Units
  Govt. Aim = To Reduce Large Kerosene Subsidy
  Target = Household Consumers and Small-and-Medium
Businesses (UKM).
  Equivalent Kerosene Withdrawn = 3.26m kilolitres
  Target Distribution exceeded by 10%
  PHILIPINES;
  6million defective Cylinders Confiscated and Replaced at
Subsidized Rate to Rural Poor
  Exclusive filling of Cylinders owned, marked/branded
permanently by Marketer
  Cylinders funded through LPG revenue generated from VAT
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  Massive Awareness Campaign: TV; Radio; Print!
  Campaign must be nationwide
  Costly Advertising; Huge Budget
  Promoting LPG as SAFE; AFFORDABLE;
ENVIRONMENTALLY FRIENDLY
  Public Education on S.A.F.E. USAGE
  Individual Company’s efforts are limited and
focused on target markets where interest lies
  Govt. has General Public Interest
  Public ‘trusts’ the Government; so Govt. Leads
Education in LPG
A
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LPG
INDUSTRY
DPR
• Single Regulator to
Supervise Sector;
Drive Policy; Enforce
SAFE Standards;
license
• NLPGA To Develop
Standards in line with
WLPGA Codes; Train;
Certify Specialists;
Certify S.A.F.E
Appliances &
Distributors; Advise
DPR
• NLPGA:DPR Must
Work Hand in Hand
• Regulation is KEY to
Growth
NLPGA
R
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AND ALL OTHER THINGS SHALL BE ADDED,…
  If Our C+A+R goes well then, Investments Will
flow into;
  Haulage Trucks (No Roads)
  Filling Plants
  Appliances and accesories
  Terminals; etc..
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  Achievements
  Challenges
  ROLE OF NLPGA
  Way Forward
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ROLE OF THE NLPGA: SA EXPERIENCE
  Develop Standards and Codes that are consistent
& Evolve with Technology
  Establish Training Institutes and Certifying All
Trained LPG Specialists for the Industry
  Certify LPG Distributors
  Certify SAFE Cylinders & Appliances
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SA LPGA EXPERIENCE:
CERTIFICATION & TRAINING
CERTIFICATE of
COMPLIANCE
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SA EXPERIENCE: DEALER CERT
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SA EXPERIENCE – ROLE IN PUBLIC
AWARENESS
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SA EXPERIENCE: LPG EDUCATION
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  Achievements
  Challenges
  WAY FORWARD
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WAY FORWARD…
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CHINESE EXPERIENCE
  Guangdong undertook significant private
investment in LPG Investment
  Government funded 35m Cylinder Exchange
  Population: 120m
  LPG Imports / Consumption
Guangdong
imports/
consumes as
much LPG in a
month as Africa
does in a Year!!
Type of Investment Number off Capacity
Primary Terminals 7 487,000 tonnes
Secondary Terminals 35 98,000 tonnes
Bottling Plants 690 140,000 tonnes
1991 2007
413,000 tonnes 6 million tonnes
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WHAT THE OFFTAKERS ARE DOING?
  Le Global C-Gas
  Cylinders; Distribution
  Chimons Gas
  Trucks; Cylinders; Terminal
  Harig - Gas Club
  Cylinders; New Filling Plants; Distribution; LPG
Terminal
  Linetrale – Gas Terminalling
  New FILLING Plants; LPG Terminal
  Hyson – Algasco/Navgas
  New 8,000Ton Terminal ETC Q1 2010
  All are individually designing Awareness
Campaigns
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WHAT THE GOVT. SHOULD BE DOING?
  New Fiscal Regime
  Cylinders (Exchange) Fund Program
  Mass Awareness Campaign (NOA)
  Outlaw Firewood
  Unification of Regulation Codes; One Supervisor
as against 2
  NLNG Local Pricing of LPG
  Avoid subsidies to competing Fuels
  Removal of 5% VAT on Domestic LPG (Imported
LPG is not taxed!)
  Removal of 30-40% Duty on Steel Plate for
Cylinders
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END…,
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