Abuja's ban on LPG exports seeks to stabilise domestic prices as retail cylinder costs continue to rise, writes Adebiyi Olusolape
Nigeria has imposed a ban on exports of its LPG unless sellers cover these with "cost-reflective" imports from 1 November, under new policies aimed at stabilising prices and increasing availability of cooking gas.
State-owned oil firm NNPC and domestic LPG producers "must halt exports of LPG produced in-country or import equivalent volumes at cost-reflective prices" from 1 November, natural gas minister Ekperikpe Ekpo said on 22 October. Nigeria's petroleum regulator NMDPRA will "within 90 days" lead the creation of an LPG pricing framework that is based "on the cost of local production rather than external market indices like those from the Americas or Asia", Ekpo said.
The local pricing framework will have a more general application once it is created, but it is particularly aimed at ensuring imported LPG is cheaper than it would be from either the "Argus West Africa (WAF) netback index, the Mont Belvieu index or the Platts index" should producers choose to continue exporting, a government source says.
Nigeria's LPG market continues to expand but growth has "plateaued a bit within the past two years, specifically this year", largely owing to rising prices, NNPC retail commercial director Lilian Ikokwu says. LPG costs rose by 80pc over January-September, she says. Retail prices for 12.5kg cylinders of LPG for cooking increased by 39pc over January-September, while prices in September were 76pc higher than a year earlier, data from Nigeria's National Bureau of Statistics show. Nigeria's government exempted LPG from value-added tax earlier in the year but Ekpo says "previous efforts" have failed to address "price increases and the hardship they bring to Nigerians".
The country will also develop facilities to "blend, store, and deliver LPG domestically within 12 months", according to Ekpo. These blending facilities are targeted at NNPC and Chevron's joint venture, which produces an LPG mix that is unsuitable for the domestic market and is exported from the Escravos floating, storage and offloading facility in the western Niger delta, a government source says. Blending the Escravos LPG mix to make it suitable for cooking use has been successfully trialled but the political will to enforce it has until now been lacking, according to an industry source.
NNPC has exported six cargoes of the Escravos LPG mix this year, with cargo sizes averaging 24,000t, a company source says — exports from Escavros stand at 181,000t in January-October, according to Kpler. Nigeria also exports propane from NNPC and ExxonMobil's Bonny River terminal, but all four butane cargoes from the terminal, averaging 8,000t apiece, have been delivered domestically, the source says. And propane is exported from NLNG's Bonny Island terminal, standing at about 134,000t in January-October, Kpler data show, with all butane sold domestically. "All LPG exports will cease until the [domestic] market achieves stability and sufficiency," Ekpo says.
