The failure of the regulatory authorities both in the oil and gas sector as well as at the state level to provide adequate oversight is fueling the rapid spread of illegal Liquefied Natural Gas (LPG) outlets in residential areas across the country.
LEADERSHIP Sunday gathered that following the gradual change of Nigerians from wood, charcoal and kerosene to cooking gas, retail gas selling has become a lucrative business, with entrepreneurs trooping in their numbers to cash on the opportunity.
This however comes with its own risk, as there have been a series of gas explosions in Lagos, Ogun, Osun and some other parts of the country in recent times, leading to several casualties.
Finding by this paper showed that most of these retail gas outlets are sited in residential areas, which negates oil and gas regulations.
With lucid implementation of the regulations, most traders ignored the risk and concentrated more on the profit of the business, thereby endangering people’s lives.
In Africa, Nigeria is regarded as the fastest growing LPG market due to its humongous population currently put at a little above 200 million people.
With the declaration of a ‘Decade of Gas’ on March 29, 2021 by the minister of State for Petroleum Resources, Chief Timipre Sylva, an initiative aimed at fully harnessing the country’s huge gas resources, Nigeria is expected to begin the journey to new energy transition.
Under the initiative, Nigeria is expected to fully transition its household energy mix to LPG which no doubt will accelerate efforts to curb carbon emission.
This, of course, will also provide consumers with a cheaper and more effective alternative energy source and this is already coming with the steady increase in LPG adoption numbers in the domestic market.
Experts see this as a challenge because illegal operations are already creating environmental and safety challenges, as the fast-expanding market cannot be achieved without the adoption of strategic policies to address regulatory bottlenecks and the infiltration of illegal market operators.
The executive secretary/CEO, Nigerian Association of LPG Marketers, Bassey Essien, who spoke with LEADERSHIP Sunday, identified regulatory lapses as giving impetus to thriving black market operations.
He said, “Our association worked assiduously with the defunct Department of Petroleum Resources. The agency has a set of regulatory requirements and statutorily saddled with the responsibility to issue operating licenses.
“We also engage with various state government agencies but what we see today is inefficiency in the system where some individuals with connections circumvent the law.
“Anytime we observe and identify illegal operations, we make an official report to concerned agencies but sustainable enforcement becomes a major challenge”.
According to Essien, these illegal operators with backing of the authorities will return to business after they have been shut down.
On his part, the coordinator of the Lagos office of the National Emergency Management Agency (NEMA), Ibrahim Farinloye, who also spoke with our correspondent, agreed with Essien.
In his response, Farinloye said residents of communities where these illegal operations take place usually call attention of the agency to that effect.
“We have had opportunities alongside other federal and state government agencies to shut down operations of those illegal operators but they usually return to the illicit business after a while.
“In Ketu and Oregun areas, we have confronted some reputable companies who conduct their business outside the prescribed regulations but they go behind to soften actions that ought to have been taken against them”.
They argued that an impactful growth will require addressing issues such as under-regulation in domestic LPG markets.
Experts also noted that while the growing LPG adoption rate undoubtedly holds huge promise for Nigeria’s clean energy agenda, government appears not to be ready for large-scale LPG adoption in its domestic market.
The lapses, they said, is due to a number of bottlenecks, including a low level of regulation of the LPG retail market, shortage of LPG facilities, and an unresolved cylinder crisis in the country.
The president of Fire Disaster Prevention and Safety Awareness Association of Nigeria, an advocacy group, Dr Ahmed Badanga, said Nigeria’s LPG retail market is largely unregulated.
Badanga said government is, however, trying to rectify this issue with the Petroleum Industry Act (PIA).
He also observed that there is no data to show what the country has lost to fire outbreaks involving illegal operators in the industry.
“We tried after launching our National Fire Statistics Data, to collate data associated with huge losses in the industry but the federal fire service could not sustain the initiative.”
While the LPG has a wide variety of uses, ranging from automotive fuel to chemical feedstock, its primary use in Nigeria has been domestic.
Statistics show that LPG currently constitutes about 5 percent of Nigeria’s household energy mix and this is increasing daily.
Nigeria’s domestic consumption of LPG reportedly increased from 250,000 metric tonnes in 2013 to over one million metric tonnes 2020 an increase of over 300 per cent within seven years.
This rapid increase in LPG adoption is a major indicator of Nigeria’s position as one of the fastest-growing LPG markets not only in Africa but globally.
As part of the measures to support the federal government’s efforts to deepen domestic gas supply and economic growth, Nigeria LNG is reducing LPG exports and increasing supplies to the domestic market.
NLNG managing director, Philip Mshelbila, told participants at an industry conference in Lagos recently that the NLNG is now increasing supply to domestic market to 450,000 mt per annum.
He said it is supplying 250,000 mt/year to the domestic market and exporting the balance of its output to Western markets.
NLNG, a venture involving the state-owned NNPC and Shell, Eni and TotalEnergies, produces around 7 million mt/year of LPG (propane and butane) from the six trains.
To meet the rise in the supply volume, NLNG said it had increased the number of offtakers to 43 from the initial six contracted in 2007.
Nigeria’s domestic LPG demand is projected to grow to 3 million mt/year by 2026, from 1 million mt now, according to government estimates.
The chief executive of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, said Nigeria requires up to $2.7 billion to revamp LPG and other gas distribution infrastructure in the country.
Oil producers have said they are prepared to channel investment in building the needed infrastructure to boost Nigeria’s domestic gas supply.
The managing director of Shell Nigeria Gas, Ed Ubong, said while much of the gas from Shell operated Gbaran-Ubie field which produces about 864 MMcf/d of gas is for export, the company is building infrastructure to deliver the gas to local industries.
“Shell is investing in gas portfolio that will increase supply for Nigerian and international customers via an expanding network of plants, pipelines and export terminals,” Ubong said.
Only recently, the Standards Organization of Nigeria (SON), embarked on a nationwide surveillance on cooking gas cylinders/LPG vessels to ascertain those that have undergone SON certification before installation as required by regulation.
The surveillance exercise, it stated, is to identify the brands of cooking gas cylinders/LPG vessels with capacity, year of manufacture/fabrication and locations.
The agency said it would also use the exercise to certify/approve compliance and evacuate and destroy uncertified/expired cylinders/LPG vessels, ensure that cylinders/LPG vessels equipment in the markets for consumers by plants and retailers were certified, in addition to also certifying /approving storage vessels for owners with operations permit among others.
The director-general of SON, Mallam Farouk Salim, at a workshop in Lagos, said it was as a result of the discovery that the agency is deepening its partnership with other regulatory agencies to raise the level of awareness of expiration date and requalification markings on LPG cylinders.
According to him, oil and gas is an area where the standards are crucial, emphasising the need for stakeholders in the industry to adhere strictly to standards to prevent avoidable destruction of lives and property.
“We have, over the years, collaborated with the industry. We are looking forward to cooperating with the industry regulatory agencies because there are so many areas of collaboration where we could partner such as certification of vessels, checking of the quality of diesel, petroleum products and checking metres to dispense accurately.
“These are all areas where we used to work together before and ordinarily before a vessel can carry products, they had to get certification from SON to ensure that their integrity is up to standards. We are all aware of how vehicles explode and could destroy over 100 lives at once.” he said.
He further said he was looking forward to working with the new executives of the regulatory bodies of the Petroleum Industry Act (PIA) on areas where there is overlapping interest to protect the Nigerian consumers.
He restated the agency’s commitment to supporting local industries, saying that it would create employment opportunities for the nation’s teeming unemployed youths and wealth creation, stressing that when standards are compromised, it destroys the country’s ability to have functional industries is destroyed.
The Head of LPG, SON, Williams Okpeh, represented by the Principal Standard Engineer, Ayiyi Akinwale, at the forum in Lagos, said Nigeria is a leading country with tremendous natural gas reserves, stating that from the latest publication, the current estimate of Nigeria gas reserves is over 120 trillion cubic feet with 50/50 distribution ratio between Associated Gas (AG) and Non-Associated Gas (NAG), but stressed that only a small fraction of this quantity is currently being utilised.
He also said used cylinders should not be imported into the country, saying that LPG cylinders must be identified with the manufacturer’s or importer’s name/logo.
He lamented over the lack of cylinder test stations in the country
Around February last year the federal government had set a two-month deadline for marketers and dealers of LPG to weed out illegal and roadside dealers amongst themselves before the government commences full clampdown on unregistered and unlicensed gas sellers.
Experts see LPG decanting as increasing the risk of explosion but the practice continues to be widespread, with unregistered roadside gas refilling shops dotting all over the country decanting LPG to consumers. The prevalence of illegal LPG operators has not only culminated in immense losses for gas investors; it has also endangered the lives of Nigerians.
It is also observed that Nigeria’s LPG cylinder value chain has been largely disorganized, and this has posed a major threat to safety and quality compliance.
Nigeria currently operates a customer-controlled cylinder distribution model, which involves the full purchase and ownership of cylinders by consumers. Under this model, consumers only have to buy cylinders and refill them at intervals.
However, the operation of this distribution model has been severely hampered by the lack of adequate monitoring of the quality of the cylinders circulating the Nigerian market.
The SON has urged gas plants to reject expired or substandard LPG cylinders when brought for refilling.
The organisation said many gas cylinders, should be rejected at refilling points or destroyed to forestall explosions and injuries.
The Agency said this would go a long way in preventing incidents of cooking gas explosions across the country with the attendant injuries, loss of lives and property.
SON observed that, unfortunately, some persons still smuggled used cylinders into the country, refurbished and sold them as brand new to unsuspecting Nigerians.
Some also embark on the local fabrication of cylinders without following the prerequisite safety standards and requirements.
However, in a move to address these anomalies, the federal government in January 2020, announced the transition of the domestic LPG market from a customer-controlled distribution model to a marketer-controlled model.
This marketer-controlled model involves a system where marketers retain ownership of the cylinders and assume full responsibility for cylinder testing.