The policy will compel the oil majors to meet domestic demand for cooking gas by declaring force majeure on foreign contracts, focusing on supplying the domestic market, investing in storage facilities and gas infrastructure, and denoting prices in local currency.
The oil majors must by law invest in gas infrastructure, such as gas trucks, pipelines, and other essential facilities, is essential to promote domestic gas utilization.
They should also be involved in reticulation, which involves the distribution of gas through pipelines to end-users, is a critical aspect of gas infrastructure development.
We must make regulation that will compel them to identify the locations of gas storage facilities and expand the extent of their coverage in Nigeria and contribute more to gas distribution networks.
The oil companies should also tailor their investments to have a more significant positive impact on the lives of the people in their host nations. This engagement should not be limited to employment alone but should be focused on utilisation of the cooking gas in Nigeria.
What are the immediate action plans that can be adopted to spur this directive?
The Minister of Gas must also expand the scope of his directive to address issues of profiteering and prioritize domestic utilization of cooking gas in Nigeria. This signifies a crucial step towards promoting social welfare and economic development.
For several decades there have been disparity between the wealth accrued by oil majors and the challenges faced by Nigerian citizens, especially in terms of health issues related to carbon emissions and environmental hazards.
Billions of Dollars have been made by the oil majors from their activities within the Nigeria’s gas industry without rectifying the imbalance in the gas supply chain locally.
It is high time that the government also recognise cooking gas as a social good rather than a luxury item, to ensure universal access to this essential commodity in Nigeria.
NIMASA and NPA should also be compelled to denominate their levies and duties imposed on cooking gas in Naira, particularly in light of increasing production volumes and declining domestic consumption trends.
The local gas producers like NEDO Gas Processing Company, owner of the Kwale Gas Gathering (KGG) facility in Delta State, must also explain to Nigerians why they are selling 20MT of cooking gas for as high as N20 million, even when their exposure to foreign exchange is limited.
This form of pricing methodology even for locally produced cooking gas have led to fluctuations in consumption patterns, with a decrease in domestic consumption despite increasing production volumes.
In the last three to four years, when 20MetricTonnes (MT) of cooking gas was sold for N3 million, Nigerians were consuming 1.3million, immediately the price increased to N9 million per 20 MT, the consumption trend dropped to below 1 million, and has continued to decline further now that the 20MT of the commodity has skyrocketed to over N20million.
It is important to note that the resolution of the local supply shortfall hinges on the Minister and industry regulators enforcing regulations and overseeing the production levels of Kwale, Oredo, and other key companies contributing to cooking gas production.
This oversight should extend to monitoring the collective output of these local producers alongside the cooking gas volumes produced locally by major International Oil Companies (IOCs) like Shell, ExxonMobil, Eni, and others.
It is on record that the Exxon Mobil and Chevron exported more than 700,000mmt of cooking gas out of Nigeria in the 2022 financial year, as reported in their annual statements for that period.
However, it is likely that these figures were underestimated, indicating a potentially higher export volume.
Allowing such significant amounts of cooking gas to be exported out of Nigeria, especially when there is a shortage domestically, will further strain the Naira.
This situation has transformed these companies and their cohorts within Nigerian gas industry into a dominant force in Nigeria, because the country is forced to make Dollar available to them to import what was originally produced within the country’s borders.
Is there a necessity to import cooking gas into Nigeria given our current consumption levels? The answer is a resounding NO.
As consumption rates increase in the future and attract more investors, potential supply challenges may arise, necessitating proactive planning.
Presently, considering our consumption compared to domestic production, there is no justification for importing cooking gas into Nigeria.
Any claims of importation should be substantiated with detailed import records for scrutiny of the commodity source.
It is unacceptable for International Oil Companies (IOCs) to justify their actions by citing infrastructure limitations to meet domestic demand. This assertion is unfounded, especially considering their longstanding presence in the industry.
Collaboration between a few individuals and IOCs in such practices does not reflect the intelligence of the entire Nigerian populace.
Companies like Shell Petroleum Development Company should demonstrate their efforts to enhance domestic gas utilization and supply, addressing the continued export of Butane/Propane despite local demand.
Cooking gas prices in neighboring West African countries are notably lower than those in Nigeria, highlighting the need for decisive action by the Minister of Petroleum Resources Gas to safeguard the populace against exploitation and ensure fair pricing for this essential commodity.
Apart from the issues listed above why is the price of cooking gas now going as far as N1500 per KG?
It is essential to recognize that the recent surge in the price of cooking gas to N1500 per KG over the past three months is primarily attributed to the fluctuating value of the Naira. Being an international commodity, producers aim to maximize profits by aligning prices with international benchmarks.
The Nigerian Liquefied Natural Gas (NLNG) operates under this principle, adjusting prices based on exchange rate fluctuations. For instance, when the FX rate rose to N1800 per dollar, the cost of the commodity increased accordingly.
NLNG previously supplied this product to the domestic market for under N9 million per 20MT. However, with the currency depreciation, the price surged to over N20 million per 20MT, reaching N19 million in February at an FX rate of N1400.
Any further depreciation of the Naira against the dollar could lead to additional price hikes. In a scenario where there is ample supply of the commodity, market forces of demand and supply dictate pricing.
However, continued exportation by producers may disrupt the balance, leading to demand challenges that could drive retail prices higher. Without intervention, there is a risk of prices escalating to N35 million per 20MT if this trend persists.
If the Minister enforces the directive prohibiting the export of the commodity, it can prevent a supply crisis and potentially avoid price hikes beyond the affordability of the less privileged. This action would contribute to enhancing the standard of living for Nigerians.
Ensuring a consistent supply is crucial to prevent prices from soaring to as high as 45 million. The excessive focus of International Oil Companies (IOCs) on earning dollars could exacerbate the situation.
It is imperative not to allow the dollarization of prices for every commodity in Nigeria. The call is for these products to be sold in Naira locally, eliminating the need for Nigerians to seek dollars to purchase goods produced within Nigeria.
The persistence of this issue over time can be attributed to corruption among government officials, civil servants, and industry regulators, prioritizing personal interests over the welfare of the Nigerian populace.
What measures can be adopted to ensure compliance with this directive?
The effective implementation of the Minister’s order to halt the exportation of cooking gas in Nigeria is crucial.
Despite the illegality of exporting charcoal under Nigerian laws, the practice persists, with charcoal being processed and shipped from various locations in Nigeria for export, often through clandestine means such as smuggling containers out of airports at night.
If the enforcement of the ban on cooking gas exportation is not taken seriously, there is a risk of the product being smuggled through porous borders.
So, in order to make the policy successful, the regulatory bodies and the Minister’s enforcement team must demonstrate a strong commitment to arrest of the situation and sanctions.
Specifically, the cessation of butane and a designated volume of propane exportation should be enforced, those are the only certain forms of gases should be restricted for export.
Additionally, while urban areas in Nigeria predominantly use cooking gas, many rural communities still struggle to afford this energy source.
What actions are being taken by NALPGAM and other relevant stakeholders, aside from the government, to address the impact of International Oil Companies (IOCs) on the market?
NALPGAM and other stakeholders are actively engaged in mitigating the impact of International Oil Companies (IOCs) on the market by promoting enlightenment and awareness among the populace.
Through initiatives like those led by the National Orientation Agency (NOA), efforts are being made to educate people on the importance of government policies, combatting illegal activities, and increasing consciousness regarding the manipulation of cooking gas prices by certain groups.
There is need for aggressive sensitization for the adoption of cooking gas in communities like Kwale, Eket, Egbaoma, Oredo, and others where gas is produced, to reduce their reliance on charcoal and firewood for cooking.
Gas producers should also be compelled to implement measures to promote the use of cooking gas among residents. The host communities should also be informed about their rights and privileges. This is why we need to enhance awareness and education within host communities to address the exploitation by oil majors currently prevalent in Nigeria.
How would you evaluate the performance of the Minister of Petroleum Resources (Gas) in the last six months?
The Minister’s genuine intentions to create an impact are evident, as with many public servants who aim to do well, but often find themselves surrounded by misguided advisors.
Last year, we raised concerns about the activities of certain groups, prompting the minister to convene a meeting with producers to prevent cooking gas price hikes. That was why the price of cooking gas in December 2023 was below N1000 per kg.
Currently, these same gas market cabals have faced challenges in obtaining dollars at the prevailing exchange rate for gas imports, resulting in unsold inventory due to currency fluctuations.
Their profit margins on cooking gas are now minimal, because they are experiencing significantly lower profits compared to pre-foreign exchange (FX) crisis levels.
Previously, these importers could realize around 80 percent profit margins, acquiring gas at N9 million/20MT and selling it for approximately N18 million/20MT.
However, since the FX crisis where the exchange rate reached N1600 to a Dollar, marketers’ margins have notably decreased.
NALPGAM will continue to monitor their activities to ensure that domestic utilisation of cooking gas is given serious priority. This is how we can remain in business.
