LPG Business Review by All Events Group

ISSUE 05 | OCTOBER 2016 | USD 30 KENSYS GAS RISING AGAINST ALL ODDS BY RONALD NDORO BENEATH THE SANDSTORM SHROUDING EGYPT’S LPG INDUSTRY INTERVIEW WITH FATHI SHAMMA COMBATING COUNTERFEITS THROUGH THE USE OF TECHNOLOGY BY WAMBUGU KARUMA GACARA THE ETHANE CONUNDRUM BY RUDOLF HUBER FOCUS ON BRINGING CLEAN COOKING TO HAITI - THE SWITCH PROJECT BY KALINDA MAGLOIRE

THE ‘SILENT’ LPG AMBASSADOR IN UGANDA AN INTERVIEW WITH EMMANUEL MANGENI, Director/Consultant Ultimate Gas, Uganda

PARTICIPATE IN THE FASTEST GROWING LPG MARKET IN THE WORLD TODAY

LP GAS SUMMIT EVENT CALENDAR

06 – 07 DEC 2016 2ND MIDDLE EAST LPG SUMMIT TEHRAN, IRAN

28 – 01 MAR 2017 4TH ASIA LPG SUMMIT DHAKA BANGLADESH

24 - 25 JUL 2017 1ST LPG VIETNAM FORUM HO CHI MINH, VIETNAM

27 - 28 APR 2017 4TH LPG PHILIPPINES FORUM MANILA, PHILIPPINES

11 – 12 JUL 2017 4TH AFRICA LPG SUMMIT JOHANNESBURG SOUTH AFRICA

T: +65 6506 0965 | F: +65 6749 7293 | E: info@lpgsummit.com | W: www.lpgsummit.com

EDITOR’S

NOTE

Greetings from LPG Business Review: Africa Hello Vincent Choy Managing Director vincent@lpgbusinessreview.com Sheryl Chia Marketing Manager sheryl@lpgbusinessreview.com Ryan Pasupathy Editor ryan@lpgbusinessreview.com Puspo Aurum Creative | Graphic Designer puspo@olifen.co.id Our Address: LPG BUSINESS REVIEW 52 Foch Road, #02-02 Singapore 209274 PT Olifen Global Indonesia 20th Floor, Wisma KEIAI Jl. Jend. Surdirman Kav 3-4 Central Jakarta - Indonesia

everyone!

We have arrived at the end of another year and we hope that it has been a great year for you. Increased supply of gas to the continent through the development of infrastructure projects and the creation of intelligent policies by regulators to support LPG growth across Africa only continue to remind us that the industry is moving along. On our end, we feel it is our duty to continue to support the development of the LPG industry in Africa by sticking to what we know best – that being LPG. In this issue we have interviewed Director at Ultimate Gas, Emmanuel Mangeni for his insight into the Ugandan LPG market as well as Fathi Shamma, an LPG Consultant from Egypt for his views on the situation there. There are also articles on Zimbabwe’s Kensys Gas and an interesting technological development from a young man in Kenya who hopes to bring an end to counterfeit cylinders and illegal refilling once and for all. On top of this, there’s also a case study on the SWITCH project that is bringing clean cooking to Haiti and a write up on the unique role Ethane has in the industry. As always, we hope to improve the market through this platform and look to any and all forms of feedback that you may have. It is our mission to bring the LPG market in Africa closer together through a deeper understanding of each individual market and how everyone can benefit from sharing knowledge and experience with each other. Thanks again for your continued support. We wish you all the best for the remainder of the year and look forward to providing you with more interesting stories as we progress onwards towards a future of clean energy for all.

All rights reserved. No portion of this publication covered by the copyright herein may be reproduced in any form or means – graphic, electronic, mechanical, photocopying, recording, taping, etc – without the written consent of the publisher. Opinions expressed by contributors and advertisers are not necessarily those of the publisher and editor.

Ryan Pasupathy Editor

OCT 2016 | LPG BUSINESS REVIEW | 01

CONTENTS FEATURES: 28

The Ethane Conondrum By Rudolf Huber

Focus On Bringing Clean Cooking To Haiti - The SWITCH PROJECT By Kalinda Magloire

INTERVIEWS: 12

The “Silent” LPG Ambassador In Uganda Interview with Emmanuel Mangeni

Beneath The Sandstorm Shrouding Egypt’s LPG Industry Interview with Fathi Shamma

ADVERTORIALS: 09

KENSYS GAS Rising Sgainst All Odds By Ronald Ndoro

Combating Counterfeits Through The Use of Technology By Wambugu Karuma Gacara

NEWS:

FGE CONFIDENTIAL: STATISTICS: 02 | LPG BUSINESS REVIEW | OCT 2016

WORLD LP GAS NEWS INFRASTRUCTURE

Engineering group Clough won a contract to provide its services to a joint venture in building a LPG terminal in South Africa. Clough has been assigned to construct marine facilities and overland pipelines for the Saldanha Bay LPG Terminal which is being built by Sunrise Energy. - Business News Australia Netco has concluded an offshore gas field project in Nigeria to deliver what it claims is the worldâ&#x20AC;&#x2122;s first steel hulled LPG Floating Storage and Offloading (FSO) vessel. - Oil Review Africa A new Floating Production Storage and Offload (FPSO) is under fabrication in Singapore. The offshore receiving facility, which is 80 per cent complete, will be positioned in Sanzule, in the Western Region of Ghana, where exploration would be done. - Business Ghana The Cameroon Government and the National Hydrocarbons Corporation/Perenco Cameroon/Golar Cameroon and Golar Hilli Consortium have agreed to the installation and exploitation of a floating natural gas liquefaction plant off the coast of Kribi that is to export Liquefied Natural Gas (LNG) and to introduce LPG into the Cameroonian market. - AllAfrica.com

OCT 2016 | LPG BUSINESS REVIEW | 03

NEWS TRADE & SUPPLY CHAIN

Industrial gases and welding products firm African Oxygen (Afrox) is tightening its grip on the LPG market in South Africa after the group sealed several supply contracts worth more than 1 billion Rand. - Independent Online The Minister for Petroleum in Ghana, Mr Emmanuel Armah-Kofi Buah has said that the Government seeks to create demand in low access areas to incentivize private LPG marketing companies to set up there. Last year they distributed 60,000 cylinders, cooking stoves and related accessories to households and they intend to distribute 100,000 by the close of 2016. - News Ghana The Ghana National Gas Company - Ghana Gas has initiated a process to facilitate the switch from the bulk road haulage of LPG to marine transport. Under the initiative, a vessel will shuttle between a Ghana Gas jetty to be constructed at Domule, the tank farm at Bonyire, and the ports of Takoradi and Tema for onward distribution to inland parts of the country. -All Africa Egyptian General Petroleum Corporation now intends to use the newly set up Murabaha facility provided by Apicorp to fund the purchase of LPG from the Arab Maritime Petroleum Transport Company (AMPTC). -Times of Oman

04 | LPG BUSINESS REVIEW | OCT 2016

aiut

Wireless Tank Monitoring the most economical way to manage LPG supplies

Saves LPG distribution costs

Easy to set up

Prevents fraud

Generates automated orders

Radio

GPRS/SMS

38%

Alarm at low LPG level secures delivery on time

Optimization of delivery routes

Hardware/software-pack solution

Wireless, battery powered

Online measurements

Compatibility with wide range of tanks

Mobile communication

www.tankmonitoring.com www.aiut.com • info@aiut.com AIUT Sp. z o.o. ul. Wyczółkowskiego 113, 44-109 Gliwice, Poland Tel: (+48 32) 77 54 000 Fax: (+48 32) 77 54 001

aiut

NEWS

LEGAL & SAFETY

In order to ensure sanity in the sale and marketing of petroleum products, the NPA in Ghana has put in place programs such as the Petroleum Product Marking Scheme (PPMS), Bulk Road Vehicle Tracking System (BRV), Inspection and Monitoring and Outreach Programmes. The programmes wil enable the Authority to view in real time the actual volumes loaded at each depot and discharged at each retail outlet, LPG filling plant and Bulk customer supply points by the BRVs across the country. - News Ghana The deputy permanent secretary in the ministry of energy and minerals of Tanzania, Juliana Pallangyo, made the announcement end July that there will be a new petroleum importation law that will result in government adopting the bulk procurement system. This new law would make it simpler to regulate LPG prices while guaranteeing reliable supply in the country. - ESI Africa The Zimbabwe Energy Regulatory Authority (ZERA) has said that failure by local authorities to make available working space for gas retailers in the country is to blame for delays in formalising the trade. Local authorities are responsible for granting permission to gas retailers to trade at their chosen spaces, however ZERA alleges that such framework does not exist in councils. - The Chronicle Zimbabwe

06 | LPG BUSINESS REVIEW | OCT 2016

NEWS AUTOGAS

The LPG-powered car â&#x20AC;&#x201C; was unveiled by Banner Gas Energy Nigeria as part of activities to mark this yearâ&#x20AC;&#x2122;s Independence Day celebration in Lagos. The cars will not be powered by petrol but by a 17kg LPG cylinder mounted in the car trunk. - Today Nigeria

EVENT & INNOVATION Evans Karuma, 19, of Kenya has created a mobile phone application - The Legit App, that is capable of detecting phony products. The app can scan hair and beauty products, vehicle spare parts, pharmaceutical products, alcoholic beverages, fertilisers and in particular LPG gas and cylinders. - Daily Nation Kenya In Rwanda, the Use of LPG Educational campaign was conducted in urban areas especially in the City of Kigali and the program is ongoing in secondary cities to increase the awareness of the uses and benefits of using the gas. -All Africa

OCT 2016 | LPG BUSINESS REVIEW | 07

4ASIA LPG th

SUMMIT

28 FEB - 1 MAR 2017 DHAKA, BANGLADESH

FREE REGISTRATION AVAILABLE!

EXHIBITORS

ORGANIZER

SUPPORTING PARTNERS

MEDIA PARTNER

LPG BUSINESS REVIEW

ADVERTORIAL

KENSYS GAS

RISING AGAINST ALL ODDS Zimbabwe needs about

2,200 megawatts of electricity at peak consumption but currently only generates just below 1,300 megawatts. The country relies on imports to fill this gap. Due to ageing equipment, power generation here is often disrupted by frequent breakdowns. In most cases, the generators operate significantly below capacity due to poor maintanence and reliability. There are plans that are underway however, to revamp the Kariba

hydropower station and the Hwange thermal power station in the west of the country to try to solve this problem. Meanwhile, a strategically important fuel like LPG has been a valuable alternative to assist people during these all too frequent and cumbersome power cuts. Historically LPG in Zimbabwe has been predominantly used for camping, farming and other various industrial activities. The distribution of LPG in Zimbabwe prior to 2003

was fully controlled by multinational companies such as British Petroleum and BOC. This is slowly changing however, with companies like Kensys Gas. Kensys Gas is a family owned business with a head office in Harare, the capital of Zimbabwe. The company traces its humble beginnings to 2009 when Kensys Gas commenced operations as a supplier and distributor of a diverse range of products to different industries with LPG as its core.

OCT 2016 | LPG BUSINESS REVIEW | 09

ADVERTORIAL The company saw the rise in demand of the use of LPG by both industry and households due to the incessant power cuts and high prices of other alternative energy sources. Kensys began engaging existing retail distribution outlets and partnered with them for the sale of LPG. The Solution to Poor Supply Zimbabwe is a landlocked country in South-Central Africa without any local refineries or natural gas fields. Therefore, every last drop of LPG has to be imported from South Africa. Recently, there has been some diversification of supply, and Zimbabwe has managed to import from Matola and Beira in Mozambique too. However, with access to only a couple of suppliers, Zimbabwe is very much at the mercy of LPG exporters in terms of pricing. The long term solution to high energy prices in Zimbabwe would be further diversification of gas supplies, and this is looking hopeful as neighboring countries are increasingly finding onshore gas fields that could potentially supply LPG. Kensys Gas has been very lucky however, to be able to partner with companies such as Oryx Energy. Oyrx Energy, one of the major oil

& gas players in the region, has been really supportive of Kensys Gas’s growth by providing a regular supply of LPG to Kensys, and well as providing strategic support in the form of training and by consulting on business models and strategies that have benefitted both companies. Zimbabwe’s energy regulator, ZERA, has also been working very hard behind the scenes in bringing stability and sustainability to the LPG market. They ensure the safe supply of LPG to consumers by enforcing regulations against illegal and cross filling of branded cylinders and also offer regular training to installers and other stakeholders in the industry. With the support of a partner from Germany; FAS FlüssiggasAnlagen GmbH,Salzgitter, a world leading manufacturer and supplier of LPG fittings and components for complete stations for storage, filling and transport of LPG, Kensys Gas has built modern state-of-the-art systems with static storage tanks and 6 scaled automated filling units at their premises in Bluffhill, Harare which is equipped with several LPG transport trucks for local deliveries. Also part of its transport fleet is LPG bulk road tankers with a loading capacity of 24 tonnes each.

10 | LPG BUSINESS REVIEW | OCT 2016

These are mainly used for cross boarder transportation of imports. Through the use of this extensive supply network, the company has over 100 000 cylinders already in circulation. Kensys Gas caters for hotels, restaurants, hospitals, golf clubs, spas, learning institutions and just about anyone that may have an energy need that can be solved with LPG. SWAP ‘n’ GO SWAP ‘n’ GO is the companies’ newly launched program for the safer and more efficient distribution of LPG in Zimbabwe. The program allows anyone to swap empty Kensys Gas branded cylinders at any one of the local SWAP ‘n’ GO outlets located in the country. Not only is it convenient but it is also safer and makes the roll out of cylinders and accessibility to LPG faster. The bottles are always new and people are assured that they have been filled correctly and double leak checked. Zimbabwe has not had an official list of registered LPG installers however; Kensys Gas has taken the initiative by sending out technicians for training so that they are able to recognize certified installers and distinguish them from the illegal refillers. This allows them

ADVERTORIAL to ensure that cylinders brought to be refilled at SWAP nâ&#x20AC;&#x2122; GO outlets are legit and have not been tampered with. Progressing into the Future For a company such as Kensys Gas to have comfort in continuing to invest in cylinders, which are key to growth of the LPG market, the investor has to have comfort that legislation will protect the investment in the form of policies and regulations against illegal refilling and cross-filling, as well as quality standards for cylinders. The Ministry of Energy in Zimbabwe is in full support of the legislation but unfortunately enforcement is lax and still has many areas for improvement. Still compared to just a couple of years ago, the operating environment has improved considerably, and Kensys Gas applauds the Zimbabwe Energy Regulatory Authority (ZERA) for its work thus far, having made great progress in assisting the growth and development of the LPG industry through the introduction of new laws and increasing awareness throughout the rural community. Kensys Gas sees a huge future for the growth LPG market, not only in Zimbabwe but across Africa as a whole. Statistics from ZERA

have shown a significant increase in the use of LPG over the past 5 years and Kensys Gas has also seen a year on year increase (2015 â&#x20AC;&#x201C; 2016) in the volumes of LPG that is being supplied to Zimbabwe. Ronald Ndoro, Operations Manager at Kensys Gas has said that he is very optimistic about the future of LPG in Zimbabwe and that it is his view that targeted awareness campaigns on the benefits and safe use of LPG is the way to drive the industry forward. This will require more support from the government

especially the Ministry of Energy and Zimbabwe Energy Regulatory Authority (ZERA) he says. They play a crucial role in removing the stigma surrounding LPG, especially the myth that it is an unsafe and expensive fuel. This initiative has been pushed by Kensys Gas and has been done so through various mediums such as radio, TV, newspapers & training events. A Message from Kensys Gas At Kensys Gas we aim to be your energy partner and take the load off you. We recognize the key service issues of the commercial sector as reliability and responsive delivery, environmental responsibility, keen pricing and trusted personal relationships. Whether you are using LPG for central heating, cooking with a controllable flame, heating water or a combination of all three, we would like to visit, assess your energy consumption and design a supply system to fit your needs that will optimize efficiency and save you money in the long run. Ronald Ndoro OPERATIONS DIRECTOR KENSYS GAS

OCT 2016 | LPG BUSINESS REVIEW | 11

INTERVIEW THE ‘SILENT’ LPG AMBASSADOR IN UGANDA

INTERVIEW WITH EMMANUEL MANGENI DIRECTOR/CONSULTANT AT ULTIMATE GAS, UGANDA UGANDA LPG MARKET Tell us about your journey towards and throughout the LPG industry. I first interacted with LPG slightly over 10 years ago as a Business Consultant in charge of LPG with Chevron in Uganda. Prior to this I had been playing a role in the general petroleum downstream sector in Uganda as the head of sales and marketing for a local independent firm Hared Petroleum. 4 years down the road

into my career at Chevron in 2009, the company withdrew it’s operations from Uganda and most of Africa and sold to TOTAL. Hence I moved into Total Uganda where I took on the mantle of LPG Manager. It is here that I started spreading my wings in the LPG sector more fundamentally. Even after leaving mainstream employment with Total in 2011, I continued to play an even deeper and more important role in the Uganda LPG sector both as a key driver

12 | LPG BUSINESS REVIEW | OCT 2016

of the local LPG Association (ULPGAS) which I helped in forming, as well as a Consultant and LPG distributor under my firm Ultimate Gas Professionals Limited. What are some of your most notable experiences/ achievements? I had a torrid experience at Chevron where I found that while there was growing demand for its gas, the company had invested very little in supporting logistics to

INTERVIEW deliver LPG. I got deeply involved in a couple of project studies which were aimed at rectifying this anomaly but there was no time to implement them as the parent company later decided to withdraw from Africa all together. There was a lot of backlash from the market. At Total I found that there was already a project to grow the storage and cylinder logistics capacity, but only required an experienced personnel to drive the volumes in order to justify the investment. I ably filled that gap and left a couple of years down the road on a high note as far as the sales volumes were concerned. Indeed my campaign locally was recommended for adoption by a number of TOTAL affiliates globally. During my time at Total, I met Dr. Emmy Wasirwa who was in the process of establishing his own independent LPG operation (Wana Energy) from the ground. He was having challenges connecting with support networks within the industry and I tried to help him with a few connections. Later on out of the difficult experiences as

well as recommendations from his global interactions, he coined the idea of forming the Uganda LPG Association (ULPGAS) as a body established to facilitate, support and protect the interests of all players in the Uganda LPG sector. I supported him in the idea and provided back end support since I had been at the top of the industry for the past 10 years and knew all the dynamics. I however knew of the culture in Uganda where the

multinational players completely mistrust and detest independent players. I knew he would have a rough time convincing them (the multinationals) to join in the association initiative, and so I thought to bring the Totalgaz leadership into the fray with a hope that they would take charge of the initiative and run with it to fruition. It only made matters worse. SHELL who had been the bulls in the Ugandan petroleum

OCT 2016 | LPG BUSINESS REVIEW | 13

INTERVIEW

industry quickly smelt a rat and jumped in to avert the oncoming threat to their ‘political’ dominance in the industry. Using a loophole in the way Dr. Emmy was trying to establish his company, they (SHELL Uganda) smartly demonised him and made it unattractive for the other multinationals to engage with him in the initiative. There was a bit of drama which sucked in the Minister of Energy and the WLPGA leadership. But SHELL seemed too powerful for them all even when they (Ministry & WLPGA) were supportive of the idea. Later having sensed that the Ministry, TOTAL and WLPGA had cooled down their resolve to support ULPGAS, SHELL approached the association with a proposal for it (ULPGAS) to operate as a sub-unit under APMP (Association of Petroleum Marketing Professionals) which is the local industry’s lobbying force dominated by the multinationals

under SHELL leadership. With my coordination between the 2 parties, we are today trying to work out an amicable middle ground. The overriding position however is that a national LPG Association should always stand alone and not be cocooned under another association. The whole fracas was a thrilling experience to me. That is the Uganda LPG industry leadership challenge for anybody who wishes to know. My LPG story cannot be fully told without this phase. Nonetheless the association (ULPGAS) took off with a number of independent LPG players subscribed to it and registered a number of remarkable achievements and milestones which are bound to affect even the multinational players who chose to stand by the side. For example the association lobbied government to draft baseline LPG standards which were never in existence in the country. It

14 | LPG BUSINESS REVIEW | OCT 2016

also ensured that the national oil and gas policy which is due for revision soon has fully catered for the LPG sector which was never clearly outlined in the past. It organised workshops and conventions, as well as trainings which staff from all over the industry including from among the ‘protesting’ multinationals attended. Right now the focus is on getting government to fully support the sector by way of planning for a national LPG promotional campaign which would entail supporting investors in the sector as well as developing substantial infrastructure to support growing demand expected to arise from this campaign. The first step in this direction is currently underway with the Ministry of Energy commissioning a baseline national LPG study which is supposed to present the status of the industry and propose solutions and a program towards

INTERVIEW addressing these challenges. When this happens, the flood gates are bound to open up for all sorts of investors going to Uganda. Tell us about your work at Ultimate Gas. At Ultimate gas, I am the Director running the day to day distribution operations with a flamboyant team of young professionals whom I have fully inducted in the trade, as well as the lead consultant on the Consultancy wing. We are a key distributor of TOTAL Gas in Uganda and the only specialised research and consultancy firm for LPG in Uganda and the East African region so to say. We are not the same company as Ultimate Gas in Nigeria. As a consultant I am always in engagement with foreign companies intending to enter the Ugandan market. I give them free basic consultation, but charge a small fee for a detailed study and recommendations for market entry. I do the same for government and we are one of the part of the study firms being consulted by the Ministry of Energy about conducting the baseline LPG study which I talked about earlier. I also network with other industry players in respect of establishing a common playing field in the industry through

a unified association, as well as snaking with other energy stakeholders such as those advocating for clean energy cooking solutions e.g. GVEP, UNCCA (Uganda National Clean Cookstoves Association), among others. I represent ULPGAS on the LPG standards technical committee at the Uganda National Bureau of Standards (UNBS), and I am frequently invited to present developments and the market scenario of the Uganda LPG industry at regional and continental conferences. UGANDA LPG MARKET What stage do you feel the LPG industry in Uganda is in? (developed/developing/ mature) This is strange to say but to me the LPG industry in Uganda is fairly stagnant. Whereas its status clearly falls in the category of â&#x20AC;&#x2DC;developingâ&#x20AC;&#x2122; market, an average 10% annual growth rate from volumes as little as 5,000 Tons in 2005 is nothing to write home about. I sit in conferences where countries which are doing 350,000 Tons per annum are complaining about their industry being small. Does Uganda really exist in this field I ask myself? This is why I resolved to work day and night to get the Uganda LPG industry off its feet and running.

What sort of yearly consumption of LPG does Uganda have? As mentioned above, we are still a long way behind coming from about 5,000 Tons in 2005 when I first joined the subsector to only approx. 13,500 Tons 10 years later in 2015. With a population of 37 million people, this represents only 0.3% LPG per capita. In terms of household uptake based on 5 persons per family, the percentage uptake currently stands at only 1% with a very huge potential if the right actions are taken especially by government in supporting the sector. What is the LPG transport and supply infrastructure like in the country? In terms of LPG transportation, the only means currently in place is by road. While the country discovered some oil and gas resources which are bound to supplement domestic supplies, to-date all of the LPG being consumed in Uganda is 100% imported through Mombasa port in Kenya. Only a fraction of this quantity comes in through the Dar Es Salaam port in Tanzania. Each player does the purchasing and importation through their sister companies or business partners in these 2 ocean bordering countries.

OCT 2016 | LPG BUSINESS REVIEW | 15

INTERVIEW Regarding storage infrastructure, the total capacity as held by all 15 players in the industry at the moment is still slightly under 1,000 Tons countrywide. There is indeed still a lot to be done. And this presents a huge opportunity to specialised players out there as well. Does Uganda face LPG supply issues like many other African nations? Where does Uganda import its LPG from? As clearly described above being a landlocked country, we source all our supplies through our neighbours Kenya and Tanzania. We simply feed from them, and I could say we take up the excess quantities which they secure at any one time. Any upheaval or slight delay of supplies into Kenya or Tanzania, Uganda shall be the worst hit and because we can only get fresh product supplies after the 2 ocean-bordering countries have substantially re-stabilized their domestic market supplies before considering re-export into Uganda. A clear example of this scenario clearly played out during the 2007 Kenyan election violence when we had no LPG supplies in Uganda for

nearly 1 month or more. What is the price of LPG in Uganda? A bottled Kg goes for about $2.6 per kg, that is $40 for a 15kg refill. This is quite high for the average Ugandan hence the small national volumes. But it could be cheaper. The only problem is that given the meagre volumes, the players must charge such an amount in order to recover their investment sank into infrastructure and the transportation charges from the long importation distances covered by the cross-border trucks. Everybody I have told about the Ugandan margins has whistled in the air in amazement. But I donâ&#x20AC;&#x2122;t blame the players given the above sighted reasons for that. It is up to government to come in and intervene by way of boosting public uptake of the product which will certainly increase the volumes and bring down the prices. Which LPG companies dominate market share in Uganda? (How does Ultimate Gas fall into this mix?) By the time I joined the industry in 2005, Shell having been the pioneer of LPG in the country

16 | LPG BUSINESS REVIEW | OCT 2016

controlled over 80% market share. By the time I left Total, I had played a huge role in cutting down on this near-monopoly by more than half. Today Shell and Total together control slightly over 50% of the market share with the rest of the chunk being shared among the other 13 Regional and independent players such as Kobil, Oryx, Hashi, Oil Libya, etc. Is the ruling government supportive of LPG? The ruling government is generally oblivious of the potential of LPG or its impact. In terms of fulfilling the countryâ&#x20AC;&#x2122;s energy demands, it is purely focusing on hydro electric projects which unfortunately keep returning expensive energy for the population. Hence the uptake for its offered energy alternative is literally as dismal as the uptake of LPG which it has not supported at all thus far. However, I have personally made fundamental strides in telecasting this potential of LPG to a few of the ruling government leaders and they have been absolutely amazed and are supportive. It is now down to the

INTERVIEW technocrats at the Ministry of Energy to carry this mantle and deliver the service since there is assured political will and support from the top. What are some of the major barriers to further LPG development in Uganda? The biggest barrier if I am to call it one at all has been governmentâ&#x20AC;&#x2122;s silence on the sector. This is however beginning to change, and the government also sees an opportunity of supplementing to the supply base of the product from the small oil resources recently discovered incountry. Otherwise the associated gas, if not re-used as production feedstock, will simply be flared by the licensed oil production firms Tullow, CNOOC and Total. Aside of supplies constraints, regulation, infrastructure and awareness are the other key barriers to development of the sector. And government has got a strong role to play in all of these, and most work hand in hand with the private sector players. If all of these are resolved, then the final puzzle to the equation which is â&#x20AC;&#x153;affordabilityâ&#x20AC;? to the user can be addressed using several measures which have been employed by different countries whose LPG sector has suddenly become vibrant. In your opinion, what are some measures that could be undertaken to solve these issues mentioned above? While government is already underway with these solutions, I can summarise them as creating an enabling environment in respect of policy, standards and regulation, as well as working hand in hand with the private players to address infrastructure and supplies challenges. In terms of mass awareness campaigning, the government of Uganda is one of the heroes in having carried out a concerted campaign which

saw the AIDS prevalence in Uganda drop from an appalling 25% in 1986 to under 7% today. It is indeed capable of using its political and communication structures to cause a fundamental shift in energy usage if it so commits to doing so. On the other hand private companies like the Mobile Telecommunications company MTN in Uganda has single-handedly run massive promotional campaigns in the past which stimulated uptake of Mobile telephony usage in the country from a paltry 100,000 users in 1998 to over 10 million users today out of a local population of 37 million. Hence it is well proven that in Uganda. The masses are quick adopters if they are invited to with the right resources strategically put in place. FUTURE OF UGANDA LPG Other than for cooking, does LPG have potential for any other uses in Uganda in the near future? (Power generation/ Autogas?) Other than for cooking, LPG in Uganda is also used in manufacturing to fire furnaces, in Agriculture to support heating of Chicken houses, in School laboratories and kitchens, for preserving vaccines, among others.

Auto usage or power generation from LPG is still a remote prospect given the meagre supplies volumes and challenges. Even the gas to be gotten from the domestic refinery is likely not to be enough and will require increased importation of additional supplies especially when government undertakes the massive promotion of the product which it thus far seems committed towards doing. What is your overall outlook for the future of LPG in Uganda? In a nutshell, any LPG player from around the region or even the world who looks and makes a decision about investing in Uganda based on its current status quo could be making a big mistake and may come in to play a part when it is a little late. I do believe that there is now full government commitment and momentum towards supporting and enabling the LPG sector and I am quite optimistic that in doing this, and with everything in place 10 years down the road from now, the country shall be doing no less than 300,000 Tons per annum (25% uptake) with a strong possibility of even doing more with different initiatives. (LPG Business Review)

OCT 2016 | LPG BUSINESS REVIEW | 17

INTERVIEW

2ND MIDDLE EAST LPG SUMMIT RESEARCH INSTITUTE OF PETROLEUM INDUSTRIES CONVENTION CENTER 06 – 07 DECEMBER 2016 | TEHRAN, IRAN

FREE REGISTRATION AVAILABLE!

SILVER SPONSOR:

COCKTAIL SPONSOR:

ORGANISED BY:

EXHIBITORS:

MEDIA PARTNERS:

IN–PARTNERSHIP WITH:

18 | LPG BUSINESS REVIEW | OCT 2016

T: +65 6506 0965 | F: +65 6749 7293 | E: info@lpgsummit.com | W: www.lpgsummit.com

SUPPORTING PARTNERS:

INTERVIEW

BENEATH THE SANDSTORM SHROUDING EGYPTâ&#x20AC;&#x2122;S LPG INDUSTRY INTERVIEW WITH FATHI SHAMMA

OCT 2016 | LPG BUSINESS REVIEW | 19

INTERVIEW

Mr. Fathi Shamma, Private LPG Consultant

Egypt looks like a real

powerhouse when it comes to using and producing LPG on paper. The country consumes 4.3 million tonnes of the fuel each year, producing 1.47 million tonnes and importing another 2.18 million tonnes. Gorging on so much of this gas - together with Libya, Morocco and Tunisia, these countries actually make up 68% of the continent’s total LPG consumption!

We decided to speak to Mr. Fathi Shamma, who is a private LPG consultant who has spent much of his time in the LPG industry in Egypt. We were extremely interested to find out more about the industry there and what were the prospects for the future. Fathi Shamma began his career in LPG in 1994 where he worked with Kuwait Oil Tanker Co. (KOTC), LPG branch, which was the only company in Kuwait dealing with LPG till 2010. He told us that KOTC was mainly involved in storing the LPG, and filling of LPG cylinders. He mentioned that KOTC had followed the latest technology at the time and was the second company to apply the technology for the filling process ( carousel ) through the use of mass flow meters. He joined the company as Senior Operation & Maintenance Engineer, following which he became a team leader for Operations & Maintenance, and

20 | LPG BUSINESS REVIEW | OCT 2016

ended off as Team Leader for Technical Support. Throughout his illustrious career he’s been involved in numerous aspects of the LPG business which includes working on maintenance plans for LPG equipment and storage tanks and pipelines, reviewing and verifying the specifications of LPG cylinders and witness the manufacturing the LPG cylinders, LPG semi-trailers trucks, preparing the EPCs for new projects, carrying out HAZOP and risk assessment for LPG facilities and terminals as well as also designing and preparing technical specifications for new LPG plants. Beneath the Surface Fathi told us that the situation in Egypt however is not all as rosy as it seems. Just by looking at the numbers you’d think that the Egyptians have a thriving LPG industry filled with government support and private enterprise involvement of all shapes and forms. Apparently, the industry there is still in the developing

INTERVIEW

phase and needs a lot more effort from the stakeholders if it wants to continue down its path towards greatness. Fathi says that many LPG operations in the country are not making use of the latest technologies that are available and often times do not have a focus on safety. Taking the focus away from safety can be extremely detrimental to the future growth and development of the industry as once accidents become a common thing, it will surely dissuade the public from finding other uses of the gas. Fathi said that LPG infrastructure is quite decent and they make use of a large virtual network that involves a huge fleet of around 400 LPG supply trucks that do the ferrying from terminal to filling plants to distributors. The problem here is that the distribution system is described as inefficient due to frequent and persistent supply shortages and exaggerated waiting times in long

queues to get cylinders. Supply issues have resulted in numerous protests in 2015 against the price of LPG on the black market as consumers were as paying as much as LE60 per cylinder and that many factories were manipulating the weight of the cylinders. On top of this, the usual culprits that plague the industry are apparent here as well - with high entry costs, limited awareness from the general public and poor safety practices across the industry. Government Support The government has sought to solve this issue by pushing their â&#x20AC;&#x153;Egypt Household Natural Gas Connection Projectâ&#x20AC;? which aims to replace household consumption of LPG to grid connected natural gas. The government has invested USD 500 million into the project. This initiative away from LPG does not bode well for the growth of the LPG industry there. The

government has been slowly moving along with their plans to expand the gas grid through this project which is in aim of connecting another 2.5 million households to switch over from LPG use to natural gas. As of 2015, it is expected that the project reduced LPG demand in Egypt by roughly 132,000 tonnes a year as another 333,000 households have been connected to the gas grid across the country. It is unknown if the Government will continue down along this path in support of natural gas over LPG but if they do, it is not very encouraging to say the least. The government has also been working on tackling the problems of corruption and black market sales of cylinders but with limited success. From the Muslim Brotherhood goverment to the new Egyptian Armed Forces led government, there is still a lack of clear strategy for LPG. Fathi tells us that the government support

OCT 2016 | LPG BUSINESS REVIEW | 21

INTERVIEW

system is present and should work, however it only works on paper and the reality of the situation is very different. He says that this is the biggest problem faced by him in trying to develop and improve the LPG business in Egypt. Fathi told us that on his side he too has worked hard to try to improve the situation in Egypt for the better. He said that, I worked very hard to try to improve safety and efficiency in Egypt. I tried to introduce Alpha Process Control Co. from the UK to the gas companies in Egypt, emphasising on the benefits of filling process coupling, showing tremendous improvements in safety and cost savings that can be gained through the system. My efforts were in vain however, as the mentality of the people defeated the process. There was very little interest in improving things from the government and main players in the industry.”

Subsidies In 2013, the government attempted a subsidy reform by implementing a smart card system that would allow the poorest consumers to continue to benefit from subsidies. Under the new ration card program, each household would receive a monthly cash allotment on the smart card, which could be used to redeem any of the subsidized commodities including LPG. The actual price of a cylinder in Egypt is roughly LE70 but only costs consumers LE8 after the subsidy. Unfortunately, street vendors control the price due to the inefficient supply and take advantage of shortages to jack up the price of the gas. Moving Forward In moving forward towards the future, Fathi tells us that the biggest issues that need improvement

22 | LPG BUSINESS REVIEW | OCT 2016

in the country are training LPG professionals and staff in the best practices for handling and distribution of LPG and getting them updated with the latest codes (NFPA 54 and 58) and cycling out the older generation of professionals with a new and younger workforce with a fresh perspective on things. He goes on to say that despite being Egyptian and being wholly invested in the LPG industry, he feels that the future for the industry in the country at this point is not clear and will need tremendous amounts of effort to effect a real change. He says that this figurative ‘sandstorm’ over Egypt’s LPG industry is the unfortunate reality of the situation as all LPG infrastructure in the country is antiquated and needs to be inspected and checked according to new codes and safety regulations. (LPG Business Review)

ADVERTORIAL COMBATING COUNTERFEITS THROUGH THE USE OF TECHNOLOGY By WAMBUGU KARUMA GACARA

The counterfeit menace has

been one with the world ever since the evolution of industrialization. It based itself as the easiest and most convenient way of making money then, and still is now. Counterfeiters simply have the easiest job; all they have to do is copy your packaging, get as close as they can to the ingredients used, supply their product to the market at a cheaper rate and there

you have it (supply creates its own demand). An average consumer wouldnâ&#x20AC;&#x2122;t know the difference between the real and the fake product. Companies facing these issues have been rolling out anticounterfeit campaigns but to no gain. My personal view is that weâ&#x20AC;&#x2122;ve been doing this all wrong. Technology is really the only way to solve this pertinent issue. The

possibilities that come along with technology are immense and all it takes is critical thinking. When I speak about technology, I speak geared specifically to mobile technology. The mobile phone coverage in Africa as a whole is experiencing a major boom with regards to coverage. According to an article in The International business times, October 2015, the mobile phone industry contributed

OCT 2016 | LPG BUSINESS REVIEW | 23

ADVERTORIAL more than $100 billion to the regionâ&#x20AC;&#x2122;s economy and that shows us the upward growth and trend is currently exceeding other industries. Coverage, especially in urban areas has reach a whopping 68.66%. The statistics go further to indicate that 93% of all Africans have access to mobile phones. In Kenya alone, the mobile and internet penetration stand among the highest in Africa at 83% and 58% respectively according to Jumia Kenya (online mobile phone retailer) making the country the 21st most connected population in the world. The LPG industry as well is no stranger to the problem of counterfeiting. In fact, key players in this industry have been suffering in silence. Majority of companies are very reluctant in admitting this since it may have grave consequences in terms of revenue generation through sales. They would therefore prefer for it to remain a closed door discussion and not come out and admit it openly. To top it all off, the bodies in charge of dealing with counterfeit problems in majority of African countries have been infiltrated with graft and the usual political bureaucracy that makes it impossible to deal with counterfeits. As far as consumers may be aware, these products may actually just be owned by their political class. The problem in Kenya is just as bad, to the extent that 7 out of 10 gas cylinders sold are illegally refilled, implying that 70% of our coverage is illegal. This means that all the legitimate companies operating in Kenya are fighting over only 30% or less of the market share. That is a very small market indeed, considering majority of the users of LPG are the middle class with very few in the rural areas adopting this method and option for charcoal and wood instead. The LPG industry must borrow a leaf from other industries that are leading the war against counterfeits, sighting an example

Sample portal showing searches performed by consumers. (real-time data)

of a company such as mPedigree. In markets such as Ghana, Nigeria, Kenya, India, and others, they support consumer goods companies that deal with pharmaceuticals to build a smart and robust supply chain for delivering critical products to consumers. What such a company has done is to specialize in that particular space (pharmaceuticals) and sensitize the public on its usage to ensure proper utilization through mobile technology. Recent data with regards to the real issue we face here is quite vivid. Investors are slowly shunning the idea of joining the LPG sector. The problems are just too many and the solution isnâ&#x20AC;&#x2122;t too obvious. The normal annual cycle of a gas cylinder should be 6 times and above but the current rates stand at less than 1 cycle a year with the remaining cycles left to illegal re-fillers which can be up to more than 7 times due to the fact that they donâ&#x20AC;&#x2122;t fill the cylinders to the required weight therefore its life in the household is shortened. Therefore giving us the implication that for every gas cylinder a brand fills in a year, a counterfeiter has filled 7 (1:7). With such data, it makes things evident that no one in their right mind should even think

24 | LPG BUSINESS REVIEW | OCT 2016

of investing in this industry. This should not be the case, especially when the industry is one that is building up the society and solving many health and environmental issues all at once. Another common trend that has been seen is the number of counterfeit sellers for LPG. There has been a significant rise in unauthorised dealers mostly in heavily populated areas. In this sense we are talking of areas of both formal and informal settlements (suburbs). Most households would rather purchase a gas cylinder nearer their location rather than travel far distances simply to exchange a gas cylinder. The Energy Regulatory Board should be at the fore-front in eliminating this kind of trade since it ends up frustrating the rightful owners of the cylinders. As African countries, we must recognise that our entry points are not well guarded and we must acknowledge that counterfeits will be with us for as long as the problem is not fixed. We as part of the private sector therefore have no choice but to grab the bull by the horns. A standard regulatory body formed by companies that deal with LPG can utilise data retrieved from the consumers themselves

ADVERTORIAL

through the use of algorithms. This is a simple term to study consumer behaviour. In as much as we may advocate for the use of field officers to monitor counterfeits through the supply chain, we must begin to recognize who between the two (consumers and field officers) will be the biggest earners. By reducing the amount of counterfeit losses by at least 4.6% monthly, LPG companies in the next 4 years will have dealt with the issue of counterfeits eating into their profits. By the end of the 4 years we project a 76.7% reduction. All these strategies are based on consumer knowledge ensuring that each and every client buying LPG products, will have to validate the details of the gas cylinder before purchasing. Mobile technology therefore should be the top solution to this problem. Through adopting this kind of technology, a brand should be looking to cover a larger spectrum of supply due to the already high mobile phone (smartphone) coverage already existing. The solution we seek to provide in the LPG industry in regards to the problems major LPG firms face; 1. Illegal refilling of gas cylinders by counterfeiters 2. Management of gas cylinders throughout the supply chain (inventory management). With those two perspectives in sight and bonding that with technology, we seek to assign every

gas cylinder that rolls of a brands production line with a spectacular and distinct Quick Response (QR code) that is encoded together with a serial number. This means that every QR code (also known as a matrix bar code) will be different from the latter. QR codes simply provide both consumers and brand owners with a way to access information quicker than manually transmitting the same information. Beyond the mere convenience to the consumer, the importance of this capability is that it increases the conversion rate by coaxing interested prospects further down the conversion funnel with little

delay or effort. Conversion rate in this sense will imply to the degree of consumer satisfaction that a brand guarantees its clients. Every brand receives a Business portal where they are able to access aggregate events such as exact locations where searches are being performed and for what particular product within the range of a brand. This poses a very crucial means of accumulating data about consumer trends and the possibility of where counterfeiters may be within the scope of operations. QR codes have vast uses since they can be applied in any part of the world. It is a mode of technology that is quickly gathering wind with the rapid improvements in technological operations. For this to be a success, LPG firms must sensitize the public, particularly their customers on the use of the QR Codes. The codes are stuck onto the cylinder using a sticker detailing the Brand credentials plus a warning not to buy the gas cylinder from unauthorized retailers. The codes are given a lifetime of 5 searches which after surpassing the limit, the QR code will be deactivated for safety

OCT 2016 | LPG BUSINESS REVIEW | 25

ADVERTORIAL

3 SIMPLE STEPS TO BEGIN TACKLING COUNTERFEITS 1. Assign Every Cylinder with QR Code 2. Log in to Business Portal 3. Have Constant Tracking and DATA on Every Cylinder

purposes and will therefore be rendered invalid. Brands can then geographically tag the location of a scan performed through the mobile application. This will imply that a brand can trace its cylinders through the supply chain. The complexity of the information contained on the QR codes is solely the decision of the brand. Essentially, the QR code should display the flowing details when scanned; 1. Product is genuine. 2. Product has no recall. 3. Product description and a product image. 4. Any further details that a brand may want to display. 5. Aggregation details of the time it left the production line, useful life duration, warnings, and cautions. What this does, is to inform the consumer of the details of the gas cylinder and assures them that the cylinder is genuine. That way, any gas cylinder that does not have a

QR Code should be rendered as questionable and therefore must not be purchased by a consumer. On the retail side, every authorised dealer must be connected to the Business portal through an API. This will then allow them to cater for the inventory by marking gas cylinders as sold, returned and dispatched back to factory. This then allows a brand to manage its inventory and monitor trends of cylinder usage according to locations. Once returned, the QR code on the gas cylinder is de-activated to ensure that even if it finds its way back to the market, it cannot be validated. It will therefore give a consumer an authentication failed notification to ensure no purchase is transacted. Again, once taken back to be refilled, the QR code is re-activated. The sequence of activation or deactivating may sound like a hectic issue but is cost effective in the long run The LPG industry and lubes in general must re-think the strategies

26 | LPG BUSINESS REVIEW | OCT 2016

we use in order as to enjoy fully the privilege of operating a business. Legit Authentication Systems is currently working with local LPG manufacturers to streamline the illegal refilling of gas cylinders that are causing millions of losses to local firms, mostly those involved in petroleum products. We picked this industry due to the fact that no efforts have been made both by the Government through the Anti-counterfeit authority as well as private sector representatives. We therefore decided to concentrate on this industry. We see ourselves as key parties in the long run and have been on the forefront with the issue. Previous efforts to partner with relevant bodies such as the Anti-counterfeit authority (ACA), Kenya bureau of statistics (KEBS) and the Kenya Association of Manufacturers (KAM) have proved futile due to the politics involved with counterfeit markets. (LPG Business Review)

PARTICIPATE IN THE FASTEST GROWING LPG MARKET IN THE WORLD TODAY

LPG PHILIPPINES

FORUM 2017 THE FUTURE OF LPG IN THE PHILIPPINES 27 - 28 April 2017 CHARDONNAY BY ASTORIA MANILA, PHILIPPINES

ORGANIZER

MEDIA PARTNER

LPG BUSINESS REVIEW

T: +65 6506 0965 | F: +65 6749 7293 | E: info@lpgsummit.com | W: www.lpgsummit.com

FEATURE

THE ETHANE CONUNDRUM Some time ago, I have written about the LPG tidal wave that hits us mostly from the US and how it shakes the world to its foundations. LPG (Propane and Butane in whatever mixing

proportion you happen to like it) are already a pretty exotic market when compared to crude and other refined produces. Most of the developed world has moved on to either natural gas or other

28 | LPG BUSINESS REVIEW | OCT 2016

forms of energy in order to get what one can get from LPG too. But there is more fringy even enter the world of Ethane. Ethane is a petroleum gas that will readily condense into a liquid if some pressure is applied to it. It is also much easier to liquefy than Methane as much higher temperatures will suffice. And, at the top of the Natural Gas Liquids chain with its two carbon atoms and the 6 hydrogens, itâ&#x20AC;&#x2122;s a pretty darn clean hydrocarbon as well. It looks and feels much like its brethren Propane and Butane

FEATURE as its also very similar to them when it comes to its physical and thermodynamic properties. However, it also is a real fringe product that had little value outside the petrochemical world where it is a much-appreciated feedstock for ethylene production. Using it for power production was a no-no so far as volumes were not sufficient to warrant the effort of cranking up application development and a specific supply chain. That’s starting to change as the fracking revolution has made copious amounts of ethane available - so much in fact that the price for the ton of the product has crashed on the world market. Most of the new ethane produced hails from the US where it is a byproduct of shale oil and gas production. US infrastructure was not built in order to deal with those enormous volumes of ethane and it will take some time to adjust that by building new facilities. In the meantime, the pressure in the Gulf of Mexico stays on. In principle, Ethane can be used for power production just like any other Natural Gas Liquid. Only the limited amount available - so far - did not justify the cost of building up supply chains and market applications. This begins to change as the pressures in North America push local power producers to try using Ethane as super clean fuels for their Combined Cycle Gas Turbines. A trial in West Virgina tries just to do that. A local generator, Moundsville Power, plans to build a power plant using GE CCGT that runs on a blend of Natural Gas and Ethane. The reasons are simple - infrastructure to ease the Ethane glut in the US is still insufficient which means that in pockets in the Marcellus shale the Ethane glut is so severe that some producers must absolutely get rid of it in order to preserve cash flow from Naural Gas and the heavier

hydrocarbons. In this sense, Ethane is a trashy product that produces more hassle that good. Considering how clean a fuel Ethane is, this is a hard one to swallow for an environmentally minded energy man. Export infrastructure as well as specific Ethane tankers are under construction now and are bound to enter service soon. The first ethane export from the US has gone to Norway and unsurprisingly serves as feedstock for the Petrochemical industry. But there is no reason why exported Ethane could not be used for power production. Why would anyone want to do that? Two reasons: Firstly, Ethane is cheap, real cheap. On a USD/MMBtu FOB USGC basis, Ethane is almost exactly half as expensive as Propane and more than half as expensive as Butane. It’s also only half as expensive as the really very dirty HFO and less than a third of the cost of MGO. This is strong stuff even in a lower price

world we are in now as it can be expected that shale gas will expand even further reinforcing the glut. Secondly, GM claims that CCGT’s can run just as well under pure Ethane as they do under Methane. I imagine that some retooling would be required but my non-engineering mind expects that this will be limited in scope. Why is that important? Let’s come back to one of my favorite patches of the energy world Africa. I have written extensively on the South African energy conundrum and its nasty consequences and how LNG would help the country mightily. The blowback is that except for FSRU’s, there is no quick road to LNG imports as terminals will have to be developed and the paltry local market also needs to develop absorption capacity as crazy as this sounds in an energy starved country such as South Africa.

OCT 2016 | LPG BUSINESS REVIEW | 29

FEATURE

This means that any energy import venture would have to go hand in hand with some form of IPP scheme in order to have offtake secured immediately. It just so happens that South Africa is one of the hardest business environments with its stifling business attitude and its copious

political overgrowth of regulation and affirmative action programs as well as suffocating red tape and bureaucracy. Starting things off with some Ethane importing scheme plus CCGT and converting to Methane later on the same hardware when LNG finally

RUDOLF HUBER Rudolf is an entrepreneur and consultant active in the “gas based fuels and energy” industry. He is the founder of countless initiatives all with the aim to promote a gas based economy and affordable environmental protection. He is a professional business developer and negotiator who is involved in all aspects of the LNG and the LPG business. He is also very actively promoting green technologies that work well with gas based technologies. Rudolf has helped secure first Regasification capacity for his former employer EconGas at the GATE terminal in 2007 and holds a Masters degree in Commercial and Taxation law from the Jean Monnet faculty in Paris. He also runs a number of blogs, among them www.lng.guru and www.lng.jetzt.

30 | LPG BUSINESS REVIEW | OCT 2016

works out might be a sensible path to go. And who knows, this might be a model for many African countries that want to join the Natural Gas bandwagon but for one reason or another, cannot do it out of the box. But in the meantime, there is closer fish to fry for wannabe US exporters - the Caribbean with its myriad islands. LNG would do those islands good but developing the kind of infrastructure that would allow even the tiniest speck of inhabited land to be served with LNG will take a little while. Ethane from the US might be a good idea as it’s quicker to develop and distances from the source are short. Eventually, it will be Natural Gas and its cool brother LNG that will take the throne but in some fringe markets, Ethane might wanna make the first push away from HFO and diesel towards a gassier energy paradigm. (LPG Business Review)

PARTICIPATE IN THE FASTEST GROWING LPG MARKET IN THE WORLD TODAY

4th Annual

AFRICA LPG SUMMIT 2017

11 -12 July 2017 Johannesburg, South Africa

Birchwood Hotel & Conference Centre

FREE REGISTRATION AVAILABLE!

EXHIBITOR:

ORGANISED BY:

MEDIA PARTNERS:

T: +65 6506 0965 | F: +65 6749 7293 | E: info@lpgsummit.com | W: www.lpgsummit.com

FEATURE

Focus on The Bringing Clean SWITCH Cooking to Haiti Project

SWITCH for a better futureâ&#x20AC;Ś This case study looks at the project driven by SWITCH on how to break the barriers to clean cooking in Haiti. SWITCH is a social marketing and manufacturing enterprise whose goal is to

improve livelihoods, protect the environment, preserve health, create jobs and empower women by substituting propane to charcoal as a cooking solution. The objective is to set a DURABLE and profitable mechanism that allows most Haitian households

32 | LPG BUSINESS REVIEW | OCT 2016

to permanently convert to LPG, therefore improving their livelihoods and their environment and bringing market based solution to an urgent national problem with the support of remittances from the Haitian Diaspora. The unique SWITCH business model is to sell

FEATURE LPG stoves, with cylinders, to the Haitian diaspora to be delivered to their family in Haiti. This solution overcomes the primary barrier to entry to using LPG for most Haitian families which is the cost of their LPG starter kit. THE LPG MARKET IN HAITI Haiti is an early stage market importing 28,000 tons of LPG per year compared to one million tons in the neighbouring Dominican Republic, which has the same population. • Haiti covers a total area of 27,750 km2 and has a population of around 10 million • Annual consumption is around 2.8kg per capita • Haiti is the only country in the Americas with less than 5% penetration of LPG • 2 million households (95%) cook exclusively with wood charcoal

BARRIERS TO LPG ADOPTION, EXPANSION AND INVESTMENT A combination of several powerful factors mean there are considerable barriers to adoption of LPG: • Limited purchasing power (76% of the population with less than 2 USD per day) • No credit mechanism • Very old cylinder park • Lack of regulation • Weak distribution network to exchange bottles • Government cannot massively subsidise THE MISSION The goal of SWITCH is to set a durable and profitable mechanism that allows most Haitian households to permanently convert to LPG and consequently improve their quality of life and environment. THE SOLUTION

SWITCH proposes an integrated approach to achieve profit with a purpose. • Set a durable and profitable mechanism that allows most Haitian households to permanently convert to LPG therefore improving their livelihoods and their environment • Manufacture/assembly for the best price and best reaction to demand • Offer a complete kit to reduce costs, a starter kit at 160 USD • Create a national distribution network through participating petroleum station (no exclusivity - vicinity is key) • SWITCH “machann manje Kwit” (street vendors), orphanages and schools • SWITCH – Charcoal free villages • SWITCH – Diaspora • SWITCH – Corporate backed lending The Manufacture SWITCH manufactures one and two-burner stoves for street Assemble the imported household model. Manufacture the stands for the table top model. Street Vendor Programme

Target: 8,000 à 10,000 street vendors Strategy: Three types of stoves accesssible for a lower price than current market price. Payable over a year period. Current partners: ICTP/ USAID, Recho PAW, ACME To date: 725 street vendors Charcoal free villages Target: 2,750 social housing Our approach: Integrated solution, cylinder warehouse on site, social engineering, training Current partners: Government of Haiti, USAID Already converted: 1150 This project also serves as a pilot to draw lessons for LPG penetration strategy for the rest of the country. Diaspora There are over three million Haitians living abroad, especially in Florida, home to over 400,000 first generation Haitians. This diaspora is a powerful entity, having a sense of modernity and are concerned by the environment in their home country. The SWITCH Diaspora programme aims to tap into their purchasing power. SWITCH will offer a complete starter kit, costing 160 USD (premium) to be remitted

OCT 2016 | LPG BUSINESS REVIEW | 33

FEATURE to family in Haiti. SWITCH will create a national redeeming network with petrol stations and other retailers and facilitate a ‘top up/exchange’ programme through remittances. CORPORATE BACKED LENDING • Financing the acquisition is key for the working classes • Haiti has no credit bureau and very low credit portolio • SWITCH partners with a bank to offer a green credit • Employers can enroll their employees for ten monthly payments • Employers guarantee monthly payments by direct withdrawal from payroll • Current partners: Banque Populaire Haïtienne (BPH), Media Mind Marketing, Groupe Rainville of Canada and Valerio Canez FACT • 2% of forest left in Haiti • 30 million trees cut per year • 3 million Haitians live abroad • Using LPG can help a family save 180 USD per year DISTRIBUTION AND REFILL STRATEGY • Exchange Policy (allows us to be in the hearts of bidonvilles) • The first phase of this projects targets urban areas only • Adapted and pervasive network as a priority: petroleum station throughout the country, hardware stores in • secondary cities and small franchised shops with trained staff and a minimum of 25 bottles in populous areas • Small local franchisee to build on guarantee of safety and integrity to retain its customers BURNER & CYLINDER INVESTMENT AND

MANAGEMENT For this major LPG substitution programme, SWITCH have ensured, through research and focus groups, that a stove is developed that is adapted to the constraints, habits and realities of living, and cooking, in Haiti. To increase consumption for families with low incomes, consumers have access to affordable small-scale products best suited to their levels of daily income. EDUCATION AND SENSITISATION SWITCH success and durability depends not only on the support of the Haitian diaspora but also on the adoption of LPG as the primary cooking method. To this end, education and sensitisation are key to the success. • Beneficiaries receive correct training on safety measures and on how to cook with LPG at all kit collecting points, before they take it home • Building synergies to maximise the impact of communication • Matching eargerness to move up the social ladder with efficient awareness raising on environmental and economic benefits

34 | LPG BUSINESS REVIEW | OCT 2016

• and safety norms • Charcoal is more expensive and unsustainable (currently a household uses two cans of charcoal per day, 1.50 USD. LPG use is 1 USD per day so potential savings of 175 USD per year) AN EXCEPTIONAL ENERGY • LPG is an exceptional energy that can help the shift towards a low carbon economy because of its significantly lower greenhouse gas emissions. • Cooking with LPG also decreases the number of people at risk of the adverse health effects from indoor air pollution. • Fuel gathering consumes a great deal of time for women and children, limiting other productive activities and taking children away from school. • With households switching to LPG this will also contribute to gender equality and help empower women, freeing up women’s time for income generation and education. 10. ACKNOWLEDGEMENTS Kalinda Magloire Chairman of the Board, SWITCH SA (LPG Business Review)

ITâ&#x20AC;&#x2122;S LIGHT!

EASY TO LIFT, CARRY AND GO. FOR YOUR BUSINESS AND YOUR CUSTOMERS. Hexagon Ragasco is the leading manufacturer of lightweight composite LPG cylinders. With over 9 million units in circulation worldwide, our cylinders have the best safety record in the industry and will not BLEVE. The lightweight, corrosion-free and translucent construction makes them an user-friendly alternative to traditional heavy steel cylinders. Distributing Hexagon Ragasco cylinders represents a great opportunity for you to build customer satisfaction and increase market share. To find out how we can help you grow your business, meet us at one of the international events where we will be present in 2015. Visit: www.hexagonragasco.com/events

FGE CONFIDENTIAL Market Feature— Trafigura at Corpus Christi “The first VLGC has loaded at the Trafigura dock at Corpus Christi.” The correct name since the Trafigura/Buckeye merger acquisition in

fact has been Buckeye Texas Partners. This company has been exporting LPG out of Corpus Christi in small ships since 2015. Shipments have averaged 40-45,000 tons per month in 2016. This week has marked a quantum leap on their LPG export program, as they have shipped out a VLGC from their refrigerated storage at the dock. The BW Tucana completed loading its cargo last Sunday and is bound for West Africa. Two years ago we had expected Occidental from their terminal at Ingleside to have been the prime LPG exporter at Corpus Christi. An initial start-up in May 2015 was said to have been delayed by the rains. However, it turned out that the converted pipeline, intended for the movement of LPG to the dock, developed leaks and was not serviceable. The Occidental LPG export program never happened. So Buckeye Texas Partners is the main LPG exporter there now.

Market Feature— Oil Price Uncertainties “Oil prices are down. But maybe this is only temporary.”

Where are oil prices going at the moment?

This summer has been crushing for the oil bulls. Oil prices lost 15% in July, and August has kicked off with prices crashing through key technical support levels. Managed money net shorts are rising and CTAs are adding their own downward momentum. Brent crude prices are now testing the $40/bbl level. Prompt supply and demand balances have disappointed the oil bulls. However, the fundamentals are trending in a very different way to last year. Rebalancing is underway on the supply side of the ledger. Last year saw market oversupply contributing to the price crash late in the year. This year the supply/demand outlook looks balanced going forward. This suggests that there will be a bounce back in prices.

36 | LPG BUSINESS REVIEW | OCT 2016

Pemex and LPG “Pemex is acting to preserve its LPG market share within Mexico.” The year 2016 has not been a good

year so far for Pemex. Its refineries in Mexico, hobbled by a variety of problems, are operating at lower and lower run rates. The government slashed the company’s downstream maintenance budget by 17%. And Pemex itself has been offering for sale stakes in its refineries, storage, facilities, and ships in order to pay its past-due bills to suppliers. Yet within this deteriorating situation Pemex is spending heavily on rebates to LPG dealers in order to protect its LPG market share within Mexico. The Mexican LPG Story in 2016 January 2016 marked the entry of private companies into the Mexican LPG import business, ending the monopoly position that Pemex had previously enjoyed. A number of Mexican companies did enter the LPG importation business. But there was initially no coordination with MexGas, the LPG trading arm of Pemex, which continued to run its own LPG import program with little modification or heed as to what the private companies were doing. The outcome was, by April 2016, that all available LPG storage in Mexico had been completely filled, with the product getting backed up on the supplying pipelines—including the main Cactus to Guadalajara line. Pemex even exported propane from Pajaritos to Europe in May.

FGE CONFIDENTIAL

US Butane Trends “Butane exports out of the US have been been steadily rising.” We normally think of the US as a

propane exporter. Indeed propane has accounted for almost 90% of the US LPG exports in the past. But butane production in the US is also— thanks to shale gas—rising and more has been getting onto the export market. The table following shows (in kb/d) the recent trend in butane sales. Note that the biggest butane market remains refinery use, strongly influenced by the refinery blending of normal butane into gasoline to make the winter grades of gasoline (with their higher vapor pressure specification). The changeover begins on September 15. During the summer US refineries will produce a 200 kb/d surplus of normal butane that is generally stored

for use as winter blending. Some also goes to petrochemical and export markets. During the winter/high RVP blending period, refineries and blenders will swing to a deficit situation, in which they blend more normal butane into motor gasoline. So they are then pulling butane from storage and purchasing additional butane barrels from gas processors. The recent trend has been to squeeze more butane into the gasoline pool. There is of course an economic incentive for them to do this—the price differential between gasoline and butane. However, this price spread—at 85 cents per gallon in August - has been at its lowest point at this time for the past five years. It remains to be seen whether

US Butane Outlets 2014-2016 Jan-June (kb/d)

2014

2015

2016

Refinery use

324

330

358

Other domestic sales

168

197

215

Exports

114

Total

558

619

687

US Butane Exports, Jan-June 2016 Thousands ton

Jan-Mar

Apr-June

Latin America

450

467

Europe

167

117

Africa

550

258

Asia

817

917

Total

1,983

1,758

a lower price spread will mean less butane blending and push more butane into the petrochemical or export market. Butane Exports this Year The chart below shows the monthly trend of US butane exports so far this year and the destination of these cargoes. Much of the trade patterns shown is reflecting existing trade patterns—the Ferndale US butane exports on the West Coast going to Asia, some smaller butane exports on the East Coast going to Europe, and Gulf Coast exports (mainly from Enterprise) going to Pemex in Mexico. But some reflects new emerging butane trades that will become more evident when 3Q 2016 export data is complete: • Butane exports have begun from Marcus Hook on the East Coast. Two 10,000 ton lots were loaded, one in June and another in July. • The VLGC BW Carina began slow-loading butane at the terminal onSeptember 1. • Total loaded a butane cargo at the Targa dock on the Adriatic Gas onSeptember 4. This vessel is expected to discharge in Le Havre in France. • While Trafigura has loaded a butane cargo on the BW Tucana at itsCorpus Christi terminal. This vessel is bound for West Africa. Africa has in fact been taking increasing volumes of US butane. The start-up of the Nederland export terminal last year has meant a step-up in US Gulf butane export availability. Shell began supplying Turkey with propane/butane cargoes last year and has continued to do so this year. Some Shell cargoes are even reported as ending up in India. Enterprise has had less interest in butane exports. The company is a big buyer of normal butane to feed its isomerization units to make isobutane for the Gulf Coast market. This isomerization demand takes priority over butane exports.

OCT 2016 | LPG BUSINESS REVIEW | 37

FGE CONFIDENTIAL

Recent US Ethane Developments “Ethane earlier this year had sold at a premium to Henry Hub gas. Now it is back to parity and below.”

US ethane exports began in March this year when the JS Ineos Intrepid loaded the first ethane cargo out of the Marcus Hook terminal on the US East Coast. The vessel headed for the Ineos steam cracker in Rafnes, Norway. Since that time ethane shipments have run at 2-3 cargoes per month, all to Rafnes. August should mark a new development—the start-up of the new Enterprise ethane export terminal at Morgan’s Point on the Gulf Coast. This had been planned for August 1, with Ineos lifting the first cargo. Their vessel—the JS Ineos Insight – was in place to loadthe cargo on the first Friday of August. However,

due to ongoing maintenance work at the Enterprise dock, the vessel has now departed to load at Marcus Hook. Meanwhile the JS Ineos Intrepid is programmed to arrive at Morgan’s Point around August 20. Ethane Trends At present, ethane remains in surplus and it is estimated that some 30-40% of producible ethane in the US is being rejected—i.e., put back into the gas stream. For the most part, ethane prices on the Gulf Coast were trading pretty close to parity (i.e., a ratio of 1.0) with Henry Hub gas prices in 2015. That ratio and

Feedback Do you have comments, questions, or opinions on this piece or issue? We would appreciate your feedback. Send us your feedback or comments to FGE@FGEnergy.com

38 | LPG BUSINESS REVIEW | OCT 2016

various pipeline transportation constraints encouraged a lot of this rejection. Then in the spring of 2016, two interesting things happened. First, natural gas prices dropped precipitously in March through May, but ethane prices held relatively steady at about 18.5 cents/gal over this period. When gas was very cheap (well below $2.00/mmBtu), it might have put a lot of downward pressure on ethane prices, but that pressure seemed minimal. In May, higher ethane prices relative to gas moved a lot of ethane from rejection to recovery. Ethane production from gas processing hit an all-time high of 1.4 mmb/d that month. However, US ethane cracking levels have remained around 1.1 million b/d. As a result, ethane inventories rose sharply. According to the EIA, US ethane inventories hit a record of 45 million barrels in May. Since that time, Henry Hub gas prices have risen, ethane prices have weakened, and the ethane-to- gas price ratio has corrected itself. Rumor has it that the shippers out of Morgan’s Point had been buying up export barrels and building inventories prior to the terminal starting up. Once these needs had been covered, they backed off. Spot ethane on the Gulf Coast, which had traded close to 25 cents/gal in early June, was down to 16.75 cents/gal in early August (which is below gas parity).

STATISTICS LPG Consumption

% Household Use

Argentina

1414k MT

68%

2480k MT

0 MT

1066 MT

Australia

3.64M MT

21.51%

29.06%

8.72%

2.01M MT

440k MT

1243k MT

Austria

2.09M MT

29.2%

39.37%

19.38%

0 MT

68k MT

22k MT

Belgium

192k MT

40.63%

17.19%

19.79%

0 MT

1.743M MT

732k MT

Bolivia

330k MT

95%

330k MT

1k MT

0 MT

Brazil

7329k MT

71%

29%

5484k MT

1845k MT

0 MT

Canada

3.53M MT

6.24%

42.3%

8.75%

4.79M MT

106k MT

3.112M MT

Chile

1214k MT

77%

22%

0.8%

261k MT

1045k MT

9k MT

China

21.80M MT

66.81%

24.27%

2.7%

3.27M MT

928k MT

Columbia

481k MT

87%

571k MT

0 MT

92k MT

Costa Rica

114k MT

46%

47%

6.1%

3k MT

115.18 MT

0 MT

Croatia

156k MT

34.74%

11.03%

36.09%

43k MT

124k MT

Cuba

118k MT

60%

40%

58k MT

93k MT

0 MT

Cyprus

52.2k MT

71.15%

11.86%

0 MT

49.56k MT

0 MT

Denmark

236.41k MT

6.69%

15.52%

162.69k MT

73.72k MT

138.72k MT

Dominican Republic

790k MT

43%

52%

29k MT

727.5k MT

0 MT

Ecuador

1047k MT

91%

231k MT

821k MT

0 MT

Egypt

4.342M MT

99.4%

0.6%

1.475M MT

2.184M MT

0 MT

El Salvador

260k MT

71%

29%

14k MT

188k MT

4k MT

Estonia

7.4k MT

36.2%

39.4%

1.9%

0 MT

12k MT

3780 MT

Finland

344k MT

1.16%

97.67%

293k MT

10k MT

Georgia

16.6k MT

85.54%

12.65%

0 MT

16.9k MT

0 MT

Ghana

251.8k MT

48.5%

43.5%

31.60k MT

148k MT

0 MT

Guatemala

255k MT

81%

18%

0 MT

351k MT

104k MT

India

15.603M MT

83.95%

7.2%

4.03%

2.213M MT

Ireland

128k MT

35%

12%

92k MT

26k MT

Jamaica

100k MT

39%

0 MT

71.71k MT

0 MT

Japan

16.3M MT

49%

30%

3.1M MT

13.2M MT

Macedonia

61.031k MT

14.88%

6.89%

68.5%

24.416k MT

40.949k MT

2.667k MT

Country

% Industrial Use

% Transport Use

Produced LPG

Imports

Exports

OCT 2016 | LPG BUSINESS REVIEW | 39

STATISTICS LPG Consumption

% Household Use

Malaysia

2.558M MT

24.32%

4.77%

621k MT

396.46k MT

384.956k MT

Mexico

8625k MT

78%

10%

6658k MT

2692k MT

0 MT

Netherlands

4.192M MT

6.35%

64.65%

0.52%

1.599M MT

4.013M MT

1.427M MT

New Zealand

145k MT

40.15%

36.35%

6.57%

155k MT

6760 MT

14k MT

Nicaragua

82k MT

90%

18k MT

57k MT

0 MT

Norway

1.04M MT

<1%

84.93%

<1%

6.98M MT

233k MT

6.142M MT

Panama

359k MT

96%

0 MT

359k MT

0 MT

Paraguay

85k MT

79%

20%

0 MT

79k MT

0 MT

Peru

1687k MT

56%

35%

1766k MT

0 MT

231k MT

Portugal

821k MT

48%

16%

369k MT

541k MT

68k MT

Poland

2.29M MT

13.26%

6.5%

73.26%

340k MT

1.999M MT

229k MT

Puerto Rico

102k MT

85%

15%

45k MT

Serbia

362k MT

9.57%

17.07%

65%

202.21k MT

164.4k MT

14.167k MT

Seychelles

342k MT

68%

32%

0 MT

3428.84 MT

South Korea

7.998M MT

9.03%

30.75%

50.18%

1.739M MT

5.705M MT

70k MT

Spain

1592k MT

67%

25%

1443k MT

331k MT

84k MT

Sweden

310k MT

1.27%

90.33%

<1%

1.142M MT

347k MT

Thailand

6.898M MT

29.13%

7.70%

26.3%

5.462M MT

2.025M MT

10.107k MT

Ukraine

589k MT

4.58%

1.19%

91.85%

500k MT

361k MT

Uruguay

124k MT

88%

12%

89k MT

45k MT

7k MT

Venezuela

2969k MT

38%

2972k MT

0 MT

998k MT

Country

% Industrial Use

% Transport Use

Produced LPG

Imports

Exports

*Information correct as of Jan 2016 1 Metric Tonne (MT) of this product

Energy equivalent

1 Metric Tonne (MT) of this product

Energy equivalent

LPG

1.13 toe

LPG

1.714 Mtce

We are working on growing and developing a more comprehensive LPG statistics database. If you have such data, let us know, we would love to get in touch with you. We can be reached at ryan@lpgbusinessreview.com.

40 | LPG BUSINESS REVIEW | OCT 2016