LPG VAT Removal: A Boost for Low Carbon Economy

-By Yange Ikyaa

The Nigerian Association of Liquefied Petroleum Gas Marketers (NALPGAM) recently commended the Federal Government for the removal of VAT on Liquefied Petroleum Gas (LPG).

Its President, Mr Nosa Ogieva-Okunbor, confirmed that the Federal Government had signed the approval of VAT removal on LPG and gazetted same.

According to him, clamour for VAT removal from domestically produced LPG otherwise known as cooking gas has been of perennial concern to members of the association.

“We express our profound gratitude and thanks to the Federal Government and all relevant government agencies for listening to our pleas to remove VAT from LPG products sourced locally.

“We also want to use this opportunity to thank and appreciate the Department of Petroleum Resources (DPR) for the timely directive stopping the inappropriate and indiscriminate installation of skid plants in petrol stations,” Ogieva-Okunbor said.

He said the directive that all skid plants in filling stations be dismantled and removed was apt considering the huge danger and risk to the public in the operations of LPG skid plants in filling stations.

He, however, appealed for a proper and thorough implementation of the directive across the country.

He also pleaded with the government to create a more conducive and enabling environment for investors in the industry particularly now that deepening the consumption of LPG in the country had become of major interest to the government.

He said marketers were also geared toward ensuring the success of the programme by complementing the efforts of the government.

“We therefore appeal for a reduction on import duty on LPG equipment and accessories.

“The increased awareness of LPG usage has seen consumption in Nigeria growing from 50,000MT in 2007 to over 600,000MT in 2018 with more indigenous investments in LPG bottling plants.

“This will further ensure that majority of Nigerians enjoy the convenience of the proximity of LPG refill or exchange points.

“We implore the Federal and State Governments to initiate a well funded social welfare programme to expand usage of LPG,” he said.

There is a global target to end gas flaring by 2030, but in Nigeria, the target is set for 2020, just one year away from now and about 10 years earlier than the UN target.

About 22 million tonnes of carbon dioxide is emitted by Nigeria yearly, making the country to lose approximately $500 million in emission credit value, as indicated by data from the Nigerian Gas Flare Commercialization Programme (NGFCP.

This amount of gas, if harnessed, could power two to three liquefied natural gas trains and if used for power, we could generate around 3,000 megawatts of electricity.

Oil companies in Nigeria produce over 4 billion standard cubic feet of gas per day, but government figures say nearly 80 per cent of the associated gas produced by the oil companies is currently utilized, with the rest re-injected into the earth to increase well pressure or simply for disposal. The companies contend that setting up gas harnessing, processing, storage, transportation and marketing infrastructure would be more expensive than wasting it in flares.

Approximately 700 million standard cubic feet of gas is burnt in the open daily at 178 sites, causing tons of carbon dioxide to be emitted into the atmosphere, a gas globally blamed as a key contributor to global warming and climate change.

The Federal Government is currently working on a piece of legislation, through the Department of Petroleum Resources (DPR), to compel petroleum product marketers to set up gas filling plants in all their petrol stations across the country.

This directive is aimed at deepening the use of LPG across the country, in addition to promoting the issue of clean energy, as well creating employment opportunities.

The regulation is expected to increase cooking gas selling points across the country by about 10,000 or about the same number of filling stations in Nigeria.

Also, the Federal Government, through the Ministry of Petroleum Resources, is already working with stakeholders across the LPG value chain, and has set a target to build at least one gas filling plant across all the 774 local government areas in the country within the next three years.

A total of 735 Million Standard Cubic Feet of gas per day (mmscfd) was delivered to gas fired-power plants in November 2018 compared with October 2018 where an average of 627mmscfd was supplied, according to data sourced by Valuechain from NNPC.

Details of the report contained in the NNPC Monthly Financial and Operations Report for the month of November, 2018 released today showed that out of the 212.93 Billion Cubic Feet (bcf) of gas supplied during the period, a total of 123.29bcf of gas was commercialized, consisting of 36.14bcf and 87.15bcf for the domestic and export market respectively.

The release said this translated to a total supply of 1,204.76 mmscfd of gas to the domestic market and 2,905.06 mmscfd of gas supplied to the export market for the month, implying that 57.91% of the average daily gas produced was commercialized while the balance of 42.09% was re-injected, used as upstream fuel gas or flared.

The total gas supply from November 2017 to November 2018 stood at 3,071.13bcf out of which 466.44bcf and 1,317.77 bcf were commercialized for the domestic and export market respectively.

A further breakdown of the report indicated that gas – Injected, fuel gas and gas flared – stood at 1,286.92 bcf.

The November report, the 40th edition in the series, announced a trading surplus of N2.06billion which represented a laudable improvement of 116% over the previous month’s deficit of N12.66billion. This increase in performance month-on-month was primarily attributable to improved efficiency of the Nigerian Petroleum Development Company’s (NPDC) operations.

NNPC also posted a total crude oil and gas sale of $668.57 in November, 2018 which is 26.13% higher than the previous month. Crude oil export sales contributed $574.95 million (86.00%) of the dollar transactions compared with $425.00million contribution in the previous month.

Export gas sales amounted to $93.62 million in the month.

The November 2017 to November 2018 crude oil and gas transactions indicated that crude oil & gas worth $5.97 Billion was exported.

In the downstream sector, the NNPC has continued to assiduously monitor the daily stock of Premium Motor Spirit (PMS) to achieve smooth distribution of petroleum products and zero fuel queue across the nation.

To this end, a total of 1.62bn litres of PMS, translating to 54.0mn liters/day, were supplied for the month.

In November, 2018 a total of 197 pipeline points were vandalized; out of which six pipeline points failed to be welded and two pipeline points were ruptured.

The situation improved from the 219 vandalized points recorded in October 2018, with Mosimi-Ibadan, Ibadan-Ilorin and Aba-Enugu accounting for 58, 35 and 34 points respectively or approximately 29%, 18% and 17% of the vandalized points respectively.

While Atlas Cove-Mosimi accounted for 13%, Warri-Kaduna and PHC-Aba accounted for 8% each and other locations accounted for the remaining 7% of the pipeline breaks.

The execution of Final Investment Decision (FID) on the development of the 4.3trillion cubic feet Assa North/Ohaji South Fields (ANOH) in OML 21 between NNPC and its Joint Venture partners among, INCLUDING Shell Petroleum Development Company (SPDC), Total Exploration and Production Nigeria (TEPNG) and Nigeria Agip Oil Company (NAOC) WAS ANNOUNCED IN February 2019.

The project, when fully developed, would add about 600million standard cubic feet of gas per day (mmscfd) to the national gas grid with capacity to expand to 1.2billion cubic feet per day, while another 197 million stock barrel (mmstb) of Condensate will also be realized.

Dr. Baru said the successful completion of the multi-faceted project which is an integral part of the 7-Critical Gas Development Projects, would be dependent on a number of critical success factors and enablers which include synergy and team work between NNPC and all the key stakeholders. He also thanked stakeholders for signing the FID on the ANOH Project after being on the drawing board for 14 years.

He said the corporation and its JV partners have worked on all the issues and have developed a sustainable strategy to develop the considerable gas resources in Assa North-Ohaji South Fields.

“Finally, I will like to conclude with immense compliments to the NNPC, Shell Petroleum Development Company (SPDC), Total Exploration and Production Nigeria (TEPNG) and Nigeria Agip Oil Company (NAOC), project teams and other critical stakeholders as we enter into the next major phases – Engineering, Procurement and Construction (EPC) of this project”, he said.

The NNPC helmsman said the corporation would continue to leverage on available expertise and capital from its global outreach to accelerate and deliver on first gas from the project between the last quarter of 2019 and the first quarter of 2020.

NNPC has already engaged two world-class project management consultants (DeltaAfrik/Worley Parson & Crestech/Penspen) who will work with NNPC JV Partners and other stakeholders to achieve set project deliverables. In addition, NNPC Project Management Teams are expected to strengthen oversight functions by ensuring prompt decision making and timely approvals.

Mr. Osagie Okunbor, Managing Director SPDC and Country Chair, Shell Companies in Nigeria, operators of the ANOH project, said Shell was committed to the successful implementation of the project.

Osagie, who commended the resilience, diligence and enthusiasm of the project team, emphasized that the ANOH project would offer immeasurable opportunities for Nigerian firms to benefit from engineering, procurement and construction contracts.

He also announced the inauguration of boards to administer the Global Memorandum of Understanding (GMoU) for the two clusters of the project to the tune of N1billion for development projects within the host communities for the next five years.

Nicholas Terraz, Managing Director of TEPN, and Lorenzo Fiorillo, MD, NAOC, also aligned their companies with the NNPC’s aspiration of ensuring timely completion of the project.