…An insider’s Observation

For some time now, sporadic shortages of Liquefied Petroleum Gas (LPG) has posed various challenges to the consuming public. This has created considerable anxiety for users, be it domestic, commercial or industrial.

The high demand and consumption of LPG by Industry and commercial vehicles has been identified as the major cause of the shortage of the commodity on the market. For example, most of the Industrial companies who use heavy duty machines for their operations have converted their machines from diesel to LPG. A chunk of general purpose vehicles including saloon cars have also resorted to the use of LPG instead of diesel or petrol which is more expensive as compared to LPG.

Most of them have done this because of the economic benefit they are deriving from using LPG rather than diesel or petrol.

LPG usage in a growing tourism industry has also contributed to the shortage of the product on the market. Hotels, restaurants and most of the chop bars which cater for the tourism industry have converted their kitchens to the use of the cleaner LPG fuel for cooking. Car rental operators, whose services are mostly patronized by tourists, have also converted to the use of LPG.

As a result of the increased consumption in the industrial, domestic, and commercial sectors of the economy including tourism, the regular daily supply of 800 tonnes has been increased to 1,000 yet consumption appears to supersede supply.

Another major cause of the shortage of LPG on the market is the inadequate infrastructure to store LPG to meet the increasing market demand. The challenge of storage facilities has been a major headache for industry players. This has limited the quantity of LPG that Tema Oil Refinery (TOR) and LPG importers can store in the country.

At peak production, the TOR produces about 25 percent of the total market demand. Even though the National Petroleum Authority,( NPA) is capable of working with bulk suppliers and distributors to deliver up to six weeks stocks, it is unable to do so due to limited storage capacity of about one week national consumption.

The promotion of the usage of LPG as a policy by Government is to safeguard the forest from depletion. Since the inception of this policy, there has been a consistent effort by Government to subsidize the commodity so as to make it affordable for use in the homes.

For instance, between January and June this year, Government has subsidized LPG price up by Ninety one million, six hundred and forty three thousand, three hundred and eighty two cedis (GH¢91, 643,382 million), which represent about 36 per cent of the import cost. The high subsidy on the LPG must be managed in order to make it attractive for investors to venture into it.

The main issue for investors is the uncertainty around change in policy to subsidize – which could dampen demand and render any investment unfinanceable.

In spite of this intervention, the country’s energy needs still rely on three main sources, namely wood fuel, crude oil and hydro energy. Wood fuel accounts for 73 percent of the country’s energy needs, crude oil 20 percent and 7 percent for hydro energy.

These figures clearly confirm the fact that wood fuel remains the country’s biggest source of energy supply, employing thousands of people.

Among the Government’s intervention initiatives has been the setting up of a gas cylinder manufacturing company in the country, Ghana Cylinder Manufacturing Company, to manufacture gas cylinders locally and make them available to the public at affordable prices.

Another measure to encourage private sector participation is by way of investment in the storage and distribution network of petroleum products including LPG throughout the country. This led to the springing up of over 362 private gas Refilling Plants nationwide and offering employments to tens of thousands of people. This was also in line with government’s programme of employment generation and poverty reduction across the country especially in the rural areas.

The programme to encourage people to switch from the use of wood fuel to LPG has yielded positive results. Urban dwellers in particular have responded favourably, however the challenge remains with the rural dwellers who still use wood fuel. More and more citizens have started using LPG, this indeed call for a greater efficiency in the supply chain of the product, an issue that is being tackled vigorously by the National Petroleum Authority (NPA).

What are the constraints?

The NPA would like to draw attention to the following constraints with the delivery of LPG in Ghana. These constraints are mainly in the supply chain and are as follows:

1. Berthing Constraint Ghana’s only oil jetty located in Tema is ‘a single multi-user’; this means that the, same oil jetty serves all Ghana’s petro-chemical needs. For instance, the jetty is used by TOR for the discharge of LPG and export of Naphtha and Residual Cracked Fuel Oil; Tema Lube Oil also uses the same jetty for the import of Base Oil, whereas some Bulk Distribution Companies (BDCs) use it for the import of all ATK and some other petroleum products which are also in high demand. These factors result in a tight schedule with very little or no-room for slips in laycan-(exact dates of arrival for vessels).

2. Pumping Constraint:

The single LPG pipeline from the Jetty to TOR is approximately 5km in distance and 6inch in diameter. This small diameter pipeline only allows a flow-rate of 70 to 80mt an hour which takes between four to five days to deliver an average parcel of 5000mt of LPG.

3. Storage:

TOR can store almost 6,500MT and this is currently the whole capacity of the entire country.

4. Delivery Constraints: Under normal circumstance, TOR can discharge about 800mt of LPG to the market per day. However in times of shortages, it stretches to about 1000MT per day, by working extra hours such as weekends to meet the high demand. It must be noted that this must be done with all the safety concerns in mind.

The Way Forward:

The peculiar nature of Ghana’s LPG supply cycle as enumerated above is such that a disruption of two (2) days in the cycles causes shortages of five to seven days. This is the reason why even though products are being supplied to the market currently, pockets of shortages still exist in some parts of the country

The Ministry has equally asked BOST to advice on how to accelerate the project to have a Barge System at both Tema and Takoradi Ports which will directly dispense LPG to the Oil Marketing Companies (OMCs). This strategy will be independent of the jetty and free from delays arising from queues.

NPA is also liaising with the Association of Oil Marketing Companies (AOMCs) to ensure that LPG companies encourage supply of LPG to the Northern, Upper East and West regions and Brong Ahafo-which records the most acute shortage of the commodity. The Authority is also working with TOR to ensure that vessels with LPG berth weekly to deliver the product.

As part of the remedial measures taken by the NPA to mitigate the shortages and its effects on consumers, NPA has given out licenses to Private firms to resolve the LPG problem.

This includes a Barge System (a floating storage unit) at Takoradi Port which will directly dispense LPG to the OMCs. This strategy will be independent of the jetty and free from delays arising from queues and should commence by October this year.

The Ministry of Energy has tasked TOR to submit cost proposal for expanding the pipelines and other modifications for speedy implementation.

There are also a number of medium to long term measures in the pipe line. Currently under construction is a 5000mt capacity tank farm and Gantry that can supply 1000mt a day in Tema by Fuel Trade; this is expected to be completed by the second quarter of 2013.

The Ghana Gas Company’s Processing Plant is also expected to come on stream by the third quarter of 2013. When all these initiatives are completed, incidents of LPG shortages could be only a chapter in the history books.

*By Eunice Asiedua Kotoku, Consumer Services Officer, NPA.*