Oil Marketer Blames High Cost of Cooking Gas on Inadequate Infrastructure, FX Scarcity

*Advocates phased removal of fuel subsidy

Peter Uzoho

Founder and Chief Executive Officer of Hyde Energy Limited, a downstream oil and gas company, Mr. Oladimejj Edwards, has attributed the high cost of Liquefied Petroleum Gas (LPG), popularly known as cooking gas, to the inadequate supply, storage, and distribution infrastructure as well as scarcity of dollars in the market.

Edwards, also called on the incoming administration to adopt a phased deregulation of petrol pricing to lessen the inevitable pains that would be suffered by the Nigerian populace when the government eventually decides to do away with the wasteful petrol subsidy.
The Hyde Energy CEO, made the assertions in Lagos, during a parley with journalists, where he rolled out the companies upcoming plans and initiatives for deeper penetration into the LPG and lubricant markets.

He explained that the infrastructure deficit and the foreign exchange scarcity were responsible for the low consumption of LPG in Nigeria, compared to some countries on the African continent.
For the past two years, the cost of LPG has been on the rise, with the prices recording over 200 per cent increase, and resulting to many households switching back to kerosene, firewood and other dangerous energy sources.

For instance, refilling the 12.5 kilogram LPG cylinder, which is the commonest amongst the middle class, has been costing between N9,800 and above N10,000 for past two years.

“I agree with you that lack of infrastructure has been why LPG is relatively more expensive than it should be. But you will agree with me also that over the years, the reason why LPG consumption volumes have almost quadrupled since 2018 is simply because of the fact that more and more infrastructure keeps on coming on ground, it takes time.

“We were at the lowest per capita consumption of LPG on the continent. In fact, we are still lower than Ghana, which has a population of 60 million and per Capita consumption because of the lack of infrastructure and that infrastructure.
“Bear in mind, a skid is a piece of infrastructure, a filling plant is piece of infrastructure, a bottling plant is a piece of infrastructure, a dredger is part of the infrastructure and of course, the jetty.

“But ultimately, it is this integration back to the gas field that will ultimately bring down the absolute price of LPG overtime and it will happen”, Edwards said.
On petrol subsidy removal, he called on the incoming administration to adopt a phased deregulation of petrol pricing to lessen the inevitable pains that would be suffered by the Nigerian populace when the government eventually decides to do away with the wasteful petrol subsidy.

Edwards, said subsidy removal and total deregulation of the downstream sector of the oil and gas industry has been a 20-year old conversation and that there was no need for further delay about the removal of the uneconomic policy.
Unfortunately, he said Nigeria missed several opportunities in which it would have removed the subsidy where the cushion of the increased price would have been easy on the Nigerian population.
With the facts today, he noted that ditching petrol subsidy had become inevitable and that the challenge the country has was two-fold, including the absolute price of oil and the exchange rate.
He opined, “So, as my personal opinion and as a private citizen, I believe in phased deregulation because we are also in life with human beings who have different needs. A phased deregulation will be easier and also help the government retrieve some cash and also easy on the population.
“But one of the things I would advocate is that the pressure groups or government pressure groups should ensure that whatever commitments government make as palliatives should be met and if I were them, I would focus on some typical areas -education and health, and it’s not just education as a word, there should be a deeper meaning to investment in education.”
According to him, as long as there was high oil prices and a weak naira, the price of petrol at the filling stations would be high, adding, however, that as investments were  happening within the country and there was an increased demand for naira, the value of naira was expected to go up and ultimately affect the price.
Noting that about 50 to 55 per cent of LPG consumed in-country was still imported, with its foreign exchange component in the mix, Edwards said that was part of the things the in-coming government has to manage, especially as far as the economy is concerned.
He said when investments in infrastructure went up and the naira was strengthened, the prices of petroleum products would start to come down over a period of five to seven years.
By that time, he explained that infrastructure investment of today would have been amortised, debts paid, and marketers would start dropping prices.
He said those making those investments were investing with borrowed funds, adding, “everybody must get paid along the value chain. But over time, once they have been amortised, you certainly start to see an improvement in price.
“But also, with the Dangote Refinery coming on stream, you will also start to see at least, a massive availability of petroleum products, but I cannot speculate on what the price will be because he will have his own financial model because he also has to run his plant, pay his debts and so on.”