Good Tidings for Nigeria’s LPG Sector

The efforts being made by some Nigerian companies to increase the fleet of vessels dedicated to bringing Liquefied Petroleum Gas into the country and other African nations will markedly enhance the product’s availability in the country. Also, it will also boost the current push by the government for cleaner fuel adoption through the “Decade of Gas” agenda and attract more investments in complex areas of the Nigerian oil and gas industry, writes Peter Uzoho.  

The Nigerian Liquefied Petroleum Gas (LPG) market is set to witness improvements in the supply of the product, popularly known as cooking gas, which had been in short supply for decades despite the abundant gas resources in the country. 

Last Monday, the Nigerian National Petroleum Company (NNPC) Limited and its partner, Sahara Group, announced that they had taken delivery of two 23,000 cubic meters (CMB) LPG carrier vessel from the Hyundai Mipo Dockyard (HMD) in Ulsan, South Korea. 

In the same week, Wednesday, precisely, another indigenous shipping company, Temile Development Company, signed a dual contract with the same HMD, a foremost global manufacturer of mid-sized carriers, for the construction of new 23,000CBM LPG carrier vessel.

The contract also involved the Nigerian Shipping Management Limited, a shipping subsidiary of the Nigeria LNG Limited, which was contracted to supervise the construction of the vessel to ensure it meets specifications and international standards.

With the two developments, it will not be out of place to say that the country’s LPG sector is set to witness remarkable relief as these vessels, when operational, will help to ramp up the supply of cooking gas in Nigeria. 

Marketers and consumers of LPG in the country have been groaning and lamenting the scarcity of the product and its rising cost both at the international market and at the retail outlets since 2020.

Inadequate number of LPG vessels owned and managed by Nigerian companies had been fingered as part of the factors responsible for the insufficient supply of the product to Nigerian market. 

Nigeria’s daily LPG consumption is 1.2 million metric tonnes (MT) with 750,000mt, representing 60 per cent imported by oil marketing companies and 450,000mt, representing 40 per cent supplied in-country by the Nigerian Liquefied Natural Gas (NLNG) Limited.

The federal government plans to increase the country’s LPG consumption to 5 million MT by 2025, banking on several initiatives and opportunities including an increase in the number of LPG carrier vessels owned by indigenous firms and chartered to Nigerian companies as well. 

NNPC VESSELS DELIVERED

NNPC and Sahara Group had on Monday last week taken delivery of two 23,000 LPG vessels at the HMD Shipyard in Ulsan, South Korea.

The new vessels, MT BARUMK and MT SAPET, THISDAY learnt, had increased NNPC and Sahara Group’s investment to over $300 million, approaching the JV’s $1 billion gas infrastructure commitment by 2026. 

The fleet previously comprised MT Sahara Gas and MT Africa Gas and all the four vessels were built by HMD.

Announcing the Sahara development in a statement, the Group Managing Director of NNPC, Mallam Mele Kyari, to have said that the two companies had plans to add another 10 vessels in the next 10 years to enhance Africa’s transition to cleaner fuels.

According to the statement, WAGL Energy Limited, the joint venture (JV) company between NNPC and Oceanbed, a Sahara Group company, were driving NNPC’s five-year $1 billion investment plan announced in 2021 to accelerate the decade of gas and energy transition agenda over the period. 

Speaking at a large crowd of representatives at the shipyard when the vessels were being taken by the NNPC and Sahara, Kyari disclosed that three additional new vessels were being finalised.

“We have a target of delivering 10 vessels over the next 10 years. The NNPC and our partners stand out with integrity in our energy transition quest and our commitment environmental sustainability is unwavering,” the GMD said.

Kyari, according to the statement, said the vessels were critical to driving the federal government’s commitment to the domestication of gas in Nigeria through several initiatives and increasing seamless supply in compliance with the mandate of President Muhammadu Buhari.

The initiatives, including the LPG Penetration Framework and LPG Expansion Plan were  geared towards encouraging the use of gas in households, power generation, auto-gas and industrial applications in order to attain five million metric tonnes of LPG consumption by 2025.

“This is another epoch-making achievement for the NNPC and Sahara Group, and we remain firmly committed to delivering more formidable gas projects for the benefit of Nigeria and the entire sub-region,” Kyari stated.

The partners explained that MT BARUMK and MT SAPET were WAGL and Sahara Group’s injection into the JV and that WAGL was shoring up its gas fleet and terminal infrastructureb

Sahara Group has continued to make remarkable progress in the construction of over 120,000 metric tonnes of storage facilities in 11 African countries, including Nigeria, Senegal, Ghana, Cote d’Ivoire, Tanzania, and Zambia, among others.

Executive Director, Sahara Group, Mr. Temitope Shonubi, said with the new vessels, NNPC and Sahara were set to promote and lead Africa’s march towards energy transition.

“WAGL has successfully operated two mid-sized LPG Carriers MT Africa Gas and MT Sahara Gas in the region in keeping with global standards, delivering over six million CBM of LPG across West Africa. With the new vessels we are set to promote and lead Africa’s march towards energy transition,” Shonubi said.

Nigeria’s Ambassador to South Korea, Ali Magashi, who represented the federal government, noted that Buhari deserved commendation for the Petroleum Industry Act (PIA), which he said, would reposition the NNPC to explore more projects with partners like Sahara Group.

The partners also explained that the name of one of the vessels, ‘BARUMK’, was derived from the combination of the name and initials of the late NNPC GMD, Dr. Maikanti  Baru, in memory of his immense support towards gas development in Nigeria. 

The other vessel, ‘SAPET’,  was named after the Sahara – Petroci -the Ivorian National Oil Company’s JV LPG Company, SAPET Energy SA, which is currently constructing the phase one of a 12,000MT LPG storage facility in Abidjan, with expansion plans to achieve 30,000MT in phase two. 

The JV, the statement further explained, emerged from WAGL’s trading relationship with PETROCI, dating back to 2014.

In Cote D’Ivoire, Sahara said it has invested over $405 million since 2014 into facilitating the supply of LPG to give over 26 million Ivorians access to safe and reliable access to the product.

LPG is the fastest growing petroleum product in sub-Sahara African over the last decade, with forecasts indicating that LPG will grow at 7 per cent Compound Annual Growth Rate (CAGR) over the next 15 years.

It has been projected that increased uptake of LPG will reduce net Green House Gas (GHG) emissions and pressure on forest reserves, thereby increasing environmental sustainability.

TEMILE’S NEW VESSEL 

While the news about NNPC and Sahara Group’s acquisition of new LPG vessels was yet to settle, another indigenous firm, Temile Development Company announced last Wednesday that it had signed a dual contract with the same HMD for the construction of its second 23,000CMB LPG/NH3/VCM carrier vesVESSE

Also as part of the dual contract, Temile awarded the NSML, the shipping arm of the Nigerian LNG Limited, the supervision of the building of the facility.

NSML is an integrated maritime services company providing a wide range of top-notch maritime and shipping services including training, manning, fleet management and consultancy services. 

The dual contract award took place at the signing ceremony held at the World Gas Conference (WGC 2022) in Daegu, South Korea.

Temile is a 100 per cent wholly owned Nigerian company which five years ago began its marine and offshore operations, with a vision to revolutionise the shipping business in Nigeria. The company’s fleet comprises of 16 offshore vessels, acquired within the last 10 years.

The new carrier would boost the company’s effort in servicing an on-going time charter LPG contract with NLNG.

The LPG carrier vessel is the second that is being constructed by the Temile Development Company and is a sequel to the first vessel which was delivered in 2020 currently chartered to Nigeria LNG Limited for domestic LPG supply.

The first LPG vessel delivered in 2020 and the newly awarded were part of a two-vessel-building project valued at over $120 million which was earlier signed in 2018. 

The news confirmed THISDAY’s report last Tuesday that the Nigerian firm was going to sign an agreement with the South Korea shipbuilder for the construction of the second vessel. 

The Executive Secretary of the NCDMB, Mr. Simbi Wabote, had given the hint  while speaking at the just-concluded Nigerian Content Midstream and Downstream Summit in Lagos.

He had said that the agreement signing for the vessel construction between the two companies would be one of the key highlights of the World Gas Conference holding at the week in South Korea.

He added that the vessel owned by a local indigenous company would further enhance the supply capability of the LPG across the country. 

He explained that the agreement for the first vessel was signed in 2018 and that the vessel was delivered in 2020, noting that agreement for the second vessel was a sign of self-propelled growth for Nigerian indigenous companies in the midstream and downstream sectors of the oil and gas industry.

“As you may be aware, the World Gas Conference is holding this week in South Korea. One of the key highlights at the event is the signing of the agreement  construct the 2nd LPG Vessel owned by a local indigenous company to further enhance the supply capability of the LPG across the country. 

“Agreement for the first vessel was signed in 2018 and the vessel was delivered in 2020. I am pleased to note that agreement for the second vessel is being executed which is a sign of self-propelled growth for our indigenous companies in the midstream and downstream sectors of the industry”, Wabote had stated.

However, in a statement issued after the contract signing ceremony, the Chief Executive Officer of Temile Development Co, Alfred Temile, said the new carrier vessel to be constructed was a high-end specification vessel which has been designed by NSML in accordance with bespoke requirements using HMD’s highly efficient eco-design.

Temile said the new LPG carrier was expected for delivery on July 26, 2023 at HMD in Ulsan, Korea, adding that the development demonstrates the company’s commitment and support to the Nigerian Local Content Act and establishes their confidence in local capacity to deliver international acceptable standards.

He said: “We are delighted to execute the construction of our new LPG carrier with HMD, bringing onboard NSML to supervise the construction. As an indigenous company, this demonstrates our commitment and support to the Nigerian Local Content Act and as well establishes our confidence in local capacity to deliver international acceptable standards.

“Working with HMD again makes us feel in very safe hands as we are confident that this eco-design/cleaner fuel vessel shall be constructed in line with international best practices and industrial regulations thereby creating a space for the vessel in the international gas supply value chain.

“Having taken delivery of our first LPG carrier vessel which is currently chartered to Nigerian LNG Limited for domestic LPG supply, we look forward to taking delivery of this new carrier in July 2023 to make an addition to the global gas supply industry”.

EVIDENCE OF LOCAL CAPACITY GROWTH 

The two developments occurring in a space of few days were a reflection of manifest growth of local capacity in the Nigerian oil and gas industry and its linkage sectors.

The moves further signal  investment inflows into the Nigerian oil and gas industry resulting from the enactment and application of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act and the Petroleum Industry Act (PIA).

Commenting on this, Hyundai, NSML deal, the Executive Secretary of NCDMB, Wabote, congratulated Temile and saluted the initiative in investing in an area that was regarded as off-limits for local players. 

In a video message delivered to the agreement signing ceremony, Wabote described the accomplishment as evidence of significant growth in capacity and confidence of local companies to play in the international arena and in complex areas of the oil and gas industry.

He indicated that the agreement signing event and subsequent construction and supervision of the contract align with the Board’s strategic plan of maximising the potential in the midstream and downstream sectors of the Nigerian oil and gas industry.

According to him:“This project clearly supports our LPG penetration initiative in Nigeria and will further close the gap in LPG penetration in Nigeria.”

He stated further that the project would bring invaluable local content opportunities in technology and innovation, human capital development and research and development.

The executive secretary commended Hyundai for the work it was doing at the Brass Shipyard and other investment projects in Nigeria that will support the repair of vessels. 

He also applauded NLNG for the strategic initiative of deploying 100 per cent LPG to the local market to close the gap in respect of LPG penetration in-country, adding that the company has helped in reducing cost as well as creating a cleaner source of energy for Nigerians.