Shall we have LPG in a safe and congenial environment?

Shall we have LPG in a safe and congenial environment?
Source: Ghana| Eunice Asiedua Kotoku | Consumer Services Officer, NPA
Date: 23-08-2019 Time: 11:08:26:pm
Hassan Tampuli is the CEO of the National Petroleum Authority

“Fire destruction is one man's job, but fire prevention is everybody's job.”

“Let's blaze the way, to keep the blaze away.”

“Fire is a welcome visitor, but always see it out.”

“Get out quick, before the smoke gets thick!” 

History/Introduction

Sporadic shortages of Liquefied Petroleum Gas (LPG) posed various challenges to the consuming public in time past. This created considerable anxiety for users, be it domestic, commercial or industrial in the year 2013.

The guzzling demand and consumption of Liquefied Petroleum Gas (LPG) by Industry and commercial vehicles was 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 converted their machines from diesel to LPG.

A chunk of general purpose vehicles including saloon cars also resorted to the use of LPG instead of diesel or petrol which was more expensive as compared to LPG. Most of them did this because of the economic benefit they derived from using subsidized LPG rather than diesel or petrol.

LPG shortage

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

As a result of the increased consumption in the industrial, domestic, and commercial sectors of the Ghanaian economy including tourism, the regular daily supply of 700,000 kg has been increased to 833,000 kg in recent times, making 25million kg on a monthly basis. Another major cause of the shortage of LPG on the market in the past was the inadequate infrastructure to store LPG to meet the increasing market demand. The challenge of storage facilities was a major headache for industry players. 

The promotion of the usage of LPG as a policy by Government was to safeguard the forest from depletion. Since the inception of this policy, there have been consistent efforts by Governments to subsidize the commodity so as to make it affordable for use in the homes. The high subsidy on the LPG made it unattractive for investors to venture into it due to late payments of accrued subsidies by government.

The main issue for investors was the uncertainty around a change in policy to remove subsidies - which dampened demand and rendered investments unprofitable. That notwithstanding, pleas from government that made investors invest heavily in it. In spite of this intervention, the country’s energy needs still relied more heavily on wood fuels out of the three main sources, namely wood fuel, crude oil and hydro energy. Wood fuel accounts for 73% of the country’s energy needs, crude oil 20% and 7% for hydro energy.

LPG NEW

These figures confirmed the fact that wood fuel was the country’s biggest source of energy supply employing thousands of people. Among government’s intervention initiatives was 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 was 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 yielded positive results. Urban dwellers, in particular, responded favourably, however, the challenge remained with the rural dwellers who still use wood fuel. More and more citizens started using LPG, this indeed calls for greater efficiency in the supply chain of the product, an issue that is being tackled vigorously by the National Petroleum Authority. 

Rural LPG promotion programme 

The Rural LPG Promotion Programme instituted by the Government aimed at helping to reverse the detrimental effect of the continuous burning of more than 13 million tons of firewood annually. It was expected that through this programme government would improve LPG access in rural areas from 3% in 2012 to 15% by 2020. 

Under the programme, government distributed free 6 kg cylinders, cook stove and all related accessories to beneficiaries in low access and low-income areas in districts across the nation. This was done to enable rural dwellers to switch easily from wood fuels to LPG without paying for the initial investment cost. Government also sought to create demand in these low access areas to incentivize private LPG marketing companies to operate in such areas. 

CRM Cape Coast

The programme was launched in the Garu-Tempane District in November 2013 where 1,500 pieces of 6kg cylinders, cookstoves and related accessories were distributed on a pilot basis. The roll-out of the programme started in 2014 with the distribution of cylinders, cookstoves and related accessories in Tano South, Ajumako-Enyan-Essiam, Tolon and Central Gonja districts. In all, over 100,000 pieces of 6kg cylinders, cookstoves and related accessories were distributed in over 60 districts. This led to an increase in access to LPG from 3% in 2012 to 5.5% in 2014.

Overview of the LPG Industry

The LPG sector in Ghana in recent times is predominantly characterized by importation, production/refining, storage, transportation, marketing and sale of LPG. Ghana sources about 40% of LPG consumed from Tema Oil Refinery (TOR) and Atuabo Gas Processing Plant4, whiles the remaining 60% is imported into the country by Bulk Distribution Companies (BDCs) Imports are received via two main discharge/offloading facilities for LPG namely the Tema Oil Jetty and Takoradi Oil jetty.

The Tema Oil Jetty is linked to TOR depots and private storage depots owned and operated by BDCs, via a network of pipelines. The Takoradi Jetty on the other hand directly connects the discharge vessel into trucks via a skid. The Tema Oil Jetty and Takoradi Oil Jetty record throughputs of about 77,000Mt and 25,000Mt per month, respectively. 

The overall domestic storage capacity for LPG is estimated at about 17,000Mt. TOR owns about 43% of the total storage capacity and the remaining 57% owned by a BDC, an OMC and GNGC6. The main modes of product transportation are pipelines and Bulk Road Vehicles (BRVs). Currently, there is a 6inch pipeline and about 250 BRVs used in the transportation of LPG.

Challenges in LPG Sector

There are a number of challenges with LPG distribution in the country. The current distribution model consists of Bulk Distribution Companies (BDCs) importing LPG into their storage facility, LPG Marketing Companies (LPGMCs) buying the product and transporting same to their company-owned or dealer-owned refilling plants. Individuals who own LPG cylinders go to the refilling plants to fill same when empty. 

NPA CRM forum in Bolga

Vehicles (both private and commercial) also come to the same refilling plants to buy autogas, while bulk supplies are done directly to the facilities of the bulk customers. There are a number of challenges associated with this LPG distribution model, some of which are as follows:

Quality, Safety and Security

In Ghana, it is estimated that 33% of all burn cases are caused by LPG explosions with 44% of all mortalities related to explosions caused by LPG. These incidents occur mainly in refill outlets and homes. The safety of the industry mainly relies on sound engineering principles; regular, rigorous and thorough inspections, maintenance, recertification and (as necessary) scrapping of old domestics cylinders. However, the current distribution model falls short of many safety standards.

The transportation of LPG from the bulk supply point (BDC Depot) to refilling plants for onward distribution to households compounds these safety challenges, as it allows for the mushrooming of stations in or close to residential communities. Due to regulatory challenges, some of these stations are sited in areas with high commercial activities and busy human traffic. This model of distribution of LPG poses a great risk to the communities and human life in case of an accident.

The new Recirculation Model 

The new value chain for the recirculation model will begin with bulk Distribution Company which deals in the imports, storage and distributes in bulk to the LPGMC’S and bottling plants. The bulk Transporter transports LPG in bulk from BDCs storage to bottling plants, a bulk customer facility or to autogas retail outlets.

With the new addition of the chain, the Bottling plant will procure LPG from BDCs and resells to LPGMCs, Refills cylinders for LPGMCs. They then test the cylinders and undertake maintenance of cylinders with major defects to the manufacturing and maintenance facility.

The LPG Marketing Company (LPGMC) will procure LPG from BDCs for supply to autogas outlets and bulk commercials customers, own and brand cylinders, transport refilled and empty cylinders, manage the entire supply chain between BP and consumers and maintain the cylinders.

NPA CRM forum in Bolga

Job Creation

Direct job creation is estimated to be over 4,500 in relation to new jobs under the actors of the new value chain, and door to door delivery service. This does not affect current jobs of LPG Bulk Transporters, LPG Bulk Distribution Companies, and LPG Bulk Storage companies.

The Cylinder Recirculation Model of LPG distribution will be implemented fully.  The relevant licenses will be issued and safety protocols will be keenly observed to ensure the safety of the good people of Ghana while increasing access to LPG for domestic, commercial and industrial use from the current 25% level to 50% by 2030.

The policy, will not only prevent potential loss of lives but also protect the assets of retailers. This is because most LPG incidents were recorded during the point of transfer of the products from the BRV to the retail storage facility. In line with section 2 (2e) of the NPA ACT 691 Act 2005, to achieve the objectives, the Authority shall; protect the interests of consumers and Petroleum Service Providers.

This, therefore, mandates the Authority to protect the interest of not only consumers but also the interest of petroleum service providers across the downstream value chain. In accordance with its mandate, the implementation of the CRM Policy was careful to ensure both consumers and retailers are not disadvantaged in the policy implementation.

One of the key objectives of the policy is to increase LPG penetration from 24% to 50% by 2030. This is aimed at ensuring an increased demand in LPG consumption which translates into more for LPG retailers through an expanded customer base. Let’s support the policy to bring LPG related incidents to the barest minimum.