LPG in Ghana: From Crisis to

50% Access: Issues and Options

Presentation
to the
Stakeholder Committee
by
Energy Commission.
7th September 2011
Outline of Presentation
Introduction
What Are the Issues?
- Increasing demand
- Increased Use by Motorists
- Inadequate Infrastructure Storage facilities, Transportation & Access
What are the Options: Policy Interventions?
Conclusions and Recommendations
Introduction
LPG has become a major fuel for
heating and cooking in all sectors of
the economy
It is most important in the urban areas
especially the cities and big towns
Over 80% of households in Accra
Tema use LPG (EC Survey 2010)
from 22% in 2000 (GSS)
LPG use in the rural areas is also
increasing EC Survey Results
Inform
al
Sector
Reside
ntial
(Nation
al)
Reside
ntial
Rural
Reside
ntial
Urban
Accra-
Tema
Educat
'nal
Institut
ions
Guest
Houses
&
Hotels
Restau
rants
EC 2010 7.4 39.6 23.2 49.2 85.7 33.0 67.5 82.0
GSS 2000 6.2 1.1 11.8 22.4
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
P
e
r
c
e
n
t
LPG Use by Sector (%)
Sector Number of Respondents
Hholds 4,219
Offices 230
Stores & Super Markets 908
Educational Institutions 118
Guest House & Hotels 200
Informal Industry 1,441
Formal Industry 21
Chop Bars & Restaurants 768
Hospitals 179
Total 8,084
What are the Issues?
Consumption has increased about
five-fold from 45,000 tonnes in
2000 to 220,000 tonnes in 2009
but declined to 178,000 tonnes in
2010
The reduction in consumption in
2010 was as a result of frequent
shortages in supply
45
42.5
50
56.3
65.7
70.5
88
93.3
117.6
220.6
178.4
0
50
100
150
200
250
T
h
o
u
s
a
n
d

T
o
n
n
e
s

(
'
0
0
0

t
o
n
n
e
s
)
Consumption
Maximum
Production
Capacity of
TOR
Average
Production
from TOR
Production
2008 2009 2010
('000
tonnes)
('000
tonnes)
('000
tonnes)
Production
(TOR)
54.6 14.0 31.6
Imports 67.8 150.6 148.0
What are the Issues?
37%
63%
Vehicular Use
Hhold & Others
Frequent shortages in recent times
long queues of people & taxis
- Increasing demand
- Increased use of LPG in vehicles (taxis
mainly)
- Inadequate supply infrastructure
(storage, transportation, distribution
retail outlets or filling stations)
EC survey in 2008 showed 37% of LPG
consumption was in transport sector
Safety concerns explosions and fire
during the transportation, storage and
use of LPG
Increasing demand/consumption
Increasing demand (averaging over
40% per year increase in demand
between 2000 and 2010)
Increased use of LPG in vehicles
has increased with more vehicles
converting to LPG (taxis mainly)
45
42.5
50
56.3
65.7
70.5
88
93.3
117.6
220.6
178.4
0
50
100
150
200
250
T
h
o
u
s
a
n
d

T
o
n
n
e
s

(
'
0
0
0

t
o
n
n
e
s
)
Consumption
Maximum
Production
Capacity of
TOR
Average
Production
from TOR
Production
Increased use of LPG by motorists
Vehicular Consumption of LPG -2007 Regional breakdown of Vehicular Use
37%
63%
Vehicular Use
Hhold &
Others
Region
Total Regional
Consumption
Vehicular
Consumption
Proportion of
Vehicular
Consumption
(000 tonnes) (000 tonnes) (%)
Greater Accra 54.6 25.4 46.52
Central 1.38 0.02 1.45
Eastern 2.43 0.47 19.34
Western 4 1.1 27.50
Volta 8.37 0.93 11.11
Brong-Ahafo 2.7 0.86 31.85
Ashanti 7.38 1.18 15.99
Northern 0.86 0.13 15.12
Upper East 0.65 0.27 41.54
Upper West 0.28 -
Total 82.65 30.36 36.73
Increased use of LPG by Motorists
EC Survey in 2011
covering 200 taxis
indicated that the daily
consumption of LPG
per taxi ranges between
20 and 70 litres.
Average Daily
Consumption per taxi
of the surveyed sample
is 34.14 litres.
Daily LPG Consumption by Taxis in Accra-Tema EC Survey
0
10
20
30
40
50
60
70
80
22 2 2 1 1 2 3 17 1 36 2 11 1 1
L
i
t
r
e
s
/
D
a
y
Frequency
Sample Daily Cons Average Daily Cons
Revenue Loss due to Replacement of Gasoline
with LPG
The Ex-Depot Price of LPG (GHp85.5187/kg) is lower than
the Ex-Refinery Price (GHp98.1983) by GHp12.6796 (13% of
Ex-Refinery). This is the first major concern for NPA
regarding the LPG Price Build-Up especially for the
importation of LPG.
1 kg of LPG contains the energy equivalent of 1.41 litres of
gasoline.
By replacing 1 kg of LPG the equivalence in the price build-up
is for 1.41 litres of gasoline.
Government revenue loss per kg of LPG used to displace
gasoline is estimated at between GHp51.356/kg or about 49%
of the current price of LPG of GHp104.76
Revenue Loss Analysis
LPG Consumption, litres /day 20.00 32.00 34.14 40.00 70.00
LPG Consumption, kg/day 11.20 17.92 19.12 22.40 39.20
Gov't
Revenue on
LPG
Gov't
Revenue on
Gasoline
Equivalent Difference
Revenue
Loss
Revenue
Loss
Revenue
Loss
Revenue
Loss
Revenue
Loss
(GHp/kg) (GHp) (GHp) GHc/day (GHc/day) (GHc/day) (GHc/day) (GHc/day)
Excise Duty 0.725 3.92 3.195 0.3578 0.5725 0.6108 0.7157 1.2524
Debt Recovery Levy 5 11.28 6.28 0.7034 1.1254 1.2006 1.4067 2.4618
Road Fund 0 8.46 8.46 0.9475 1.5160 1.6174 1.8950 3.3163
Energy Fund 0 0.071 0.071 0.0080 0.0127 0.0136 0.0159 0.0278
Exploration Levy 0 0.141 0.141 0.0158 0.0253 0.0270 0.0316 0.0553
LPG Promotion Levy 0 0 0 - - - - -
Cross-Subsidy Levy -18.404 7.05 25.454 2.8508 4.5614 4.8664 5.7017 9.9780
Primary Distribution Margin 0 3.525 3.525 0.3948 0.6317 0.6739 0.7896 1.3818
BOST Margin/Bulk Storage Margin 0 4.23 4.23 0.4738 0.7580 0.8087 0.9475 1.6582
Total Taxes, Levies, Margins &
Subsidies -12.68 38.676 51.356 5.7519 9.2030 9.8184 11.5037 20.1316
Days per year of work 310 310 310 310 310
Gov't Revenue Loss/taxi/year (GHc) 1,783.08 2,852.93 3,043.72 3,566.16 6,240.78
Inadequate Infrastructure for LPG Distribution
Number of Filling Stations By Region % of Filling Stations by Region
0
20
40
60
80
100
120
N
o

o
f

L
P
G

F
i
l
l
i
n
g

S
t
a
t
i
o
n
s
2011
2007
Inadequate Infrastructure for LPG Distribution
Access to LPG Filling Stations by Region
Region Population
Average
regional
Hhold
size
No. of
filling
stations
(2011)
Pop/Filling
Station
Hhold/Filli
ng Station
Gt.
Target
Index
Greater
Accra 3,909,764 4.6 113 34,599.68 7,522 1.00
Eastern
2,596,013 4.6 38 68,316.13 14,851 1.97
Volta
2,099,876 4.7 16 131,242.25 27,924 3.71
Central
2,107,209 4.4 41 51,395.34 11,681 1.55
Western
2,325,597 4.7 26 89,446.04 19,031 2.53
Ashanti
4,725,046 5.3 53 89,151.81 16,821 2.24
Brong Ahafo
2,282,128 5.3 30 76,070.93 14,353 1.91
Northern
2,468,557 7.4 5 493,711.40 66,718 8.87
Upper East
1,031,478 7.2 4 257,869.50 35,815 4.76
Upper West
677,763 6.4 3 225,921.00 35,300 4.69
Total
24,223,431 329 2.13
National
Average 73,627.45 25,002
0
20
40
60
80
100
120
N
o

o
f

L
P
G

F
i
l
l
i
n
g

S
t
a
t
i
o
n
s
2011
2007
Policy Interventions
Pricing Approach
Equalisation of prices between
LPG and the alternative fuels
(Gasoline and Diesel)
Set price of LPG equal to the
price of Gasoline or Diesel based
on their energy densities
(GHp/GJ)
Motorist will not see any benefit
between LPG and the alternative
fuels
LPG incl
Cross-
Subsidy
LPG excl
Cross-
Subsidy
LPG inclu
other
levies on
Gasoline
LPG Price
@
Gasoline
Energy
Equivalent
LPG Price
@ Diesel
Energy
Equivalent
104.76 123.16 136.42 214.09 195.39
0.00
50.00
100.00
150.00
200.00
250.00
G
H
p
/
k
g
Comparative Ex-pump Prices of LPG (GHp/kg)
Pricing Approach
Other attractions are that:
- Govt revenues will be enhanced
- Levies and margins will be increased to
provide funds for expanding LPG storage,
transportation and distribution
- LPG Promotion levy should be re-introduced
to enhance availability, access and use
Pricing Approach Analysis
LPG Price
including
Subsidy
LPG Price
excluding
Subsidy
LPG incl
same levies &
Margins as
Gasoline
Gasoline Diesel
LPG Price
Gasoline
Equivalent
LPG Price
Diesel
Equivalent
Price Build-up of LPG GHp/kg GHp/kg GHp/Kg GHp/litre GHp/litre GHp/kg GHp/kg
Ex-Refinery price 98.1944 98.1944 98.1944 108.8600 118.9287 98.1944 98.1944
Excise Duty 0.7246 0.7246 0.7246 2.7800 1.8000 2.7000 1.8000
Debt Recovery Levy 5.0000 5.0000 5.0000 8.0000 8.0000 8.0000 7.9000
Road Fund 0.0000 0.0000 6.0000 6.0000 6.0000 7.0000 7.0000
Energy Fund 0.0000 0.0000 0.0500 0.0500 0.0500 2.0000 2.0000
Exploration Levy 0.0000 0.0000 0.1000 0.1000 0.1000 1.0000 1.0000
LPG Promotion Levy 0.0000 0.0000 0.0000 0.0000 0.0000 6.0000 8.0000
Cross-Subsidy Levy -18.4042 0.0000 0.0000 5.0000 -2.6967 0.0000 0.0000
Primary Distribution Margin 0.0000 0.0000 2.5000 2.5000 2.5000 10.0000 7.0000
BOSTMargin/Bulk Storage
Margin
0.0000 0.0000 3.0000 3.0000 3.0000 20.0000 15.0000
Total Levies, Margins &
Subsidies
-13.4042 5.0000 11.1500 19.1500 11.4533 24.0000 25.9000
Ex-Depot 85.5148 103.9190 115.5690 136.2900 137.6820 154.8944 147.8944
UPPF 6.3000 6.3000 5.3000 5.3000 5.3000 9.7000 9.0000
Marketers Margin 4.4128 4.4128 5.8700 5.8700 5.8700 9.5000 9.0000
Dealers Margin 3.4532 3.4532 4.6100 4.6100 4.6100 10.0000 9.5000
LPG Filling Plant Costs 4.7753 4.7753 4.7753 0.0000 0.0000 15.0000 10.0000
Distribution Compensation
Margin
0.3000 0.3000 0.3000 0.0000 0.0000 15.0000 10.0000
Distribution & Marketing
Margins
19.2413 19.2413 20.8553 15.7800 15.7800 59.2000 47.5000
Indicative Maximum Price
(GHp/kg, GHp/litre))
104.7561 123.1603 136.4243 152.0700 153.4620 214.0944 195.3944
GHc per GJ 23.17 27.24 30.17 47.35 43.21 47.35 43.21
Policy Interventions
Pricing Approach - Limitations
Domestic consumers will lose
benefit of subsidy and face over
17.6%increase in LPG price
(from GHp 104.76/kg to GHp
123.16/kg)
At the extreme the price of LPG
will increase from GHp104.76 to
GHp 214.09/kg) if the pricing is
based on the equivalent energy
cost of gasoline
At the extreme, the price of LPG
will be increased by 104%
Higher LPG Price will lead to a
shift to cheaper fuels (firewood &
charcoal) for heating and cooking
More woodfuel use and perceived
over exploitation of forest
resources for energy
LPG Price
including
Subsidy
LPG Price
excluding
Subsidy
LPG incl
same levies
& Margins
as Gasoline
Gasoline Diesel
LPG Price
Gasoline
Equivalen
t
LPG Price
Diesel
Equivalent
Price Build-up of LPG GHp/kg GHp/kg GHp/Kg GHp/litre GHp/litre GHp/kg GHp/kg
Ex-Refinery price 98.1944 98.1944 98.1944 108.8600 118.9287 98.1944 98.1944
Excise Duty 0.7246 0.7246 0.7246 2.7800 1.8000 2.7000 1.8000
Debt Recovery Levy 5.0000 5.0000 5.0000 8.0000 8.0000 8.0000 7.9000
Road Fund 0.0000 0.0000 6.0000 6.0000 6.0000 7.0000 7.0000
Energy Fund 0.0000 0.0000 0.0500 0.0500 0.0500 2.0000 2.0000
Exploration Levy 0.0000 0.0000 0.1000 0.1000 0.1000 1.0000 1.0000
LPG Promotion Levy 0.0000 0.0000 0.0000 0.0000 0.0000 6.0000 8.0000
Cross-Subsidy Levy -18.4042 0.0000 0.0000 5.0000 -2.6967 0.0000 0.0000
Primary Distribution Margin 0.0000 0.0000 2.5000 2.5000 2.5000 10.0000 7.0000
BOST Margin/Bulk Storage
Margin
0.0000 0.0000 3.0000 3.0000 3.0000 20.0000 15.0000
Levies, Margins & Subsidies -13.4042 5.0000 11.1500 19.1500 11.4533 24.0000 25.9000
Ex-Depot 85.5148 103.9190 115.5690 136.2900 137.6820 154.8944 147.8944
UPPF 6.3000 6.3000 5.3000 5.3000 5.3000 9.7000 9.0000
Marketers Margin 4.4128 4.4128 5.8700 5.8700 5.8700 9.5000 9.0000
Dealers Margin 3.4532 3.4532 4.6100 4.6100 4.6100 10.0000 9.5000
LPG Filling Plant Costs 4.7753 4.7753 4.7753 0.0000 0.0000 15.0000 10.0000
Distribution Compensation
Margin
0.3000 0.3000 0.3000 0.0000 0.0000 15.0000 10.0000
Distribution & Marketing
Margins
19.2413 19.2413 20.8553 15.7800 15.7800 59.2000 47.5000
Indicative Maximum Price
(GHp/kg, GHp/litre))
104.7561 123.1603 136.4243 152.0700 153.4620 214.0944 195.3944
GHc per GJ 23.17 27.24 30.17 47.35 43.21 47.35 43.21
Policy Interventions
Regulatory Approach
Enforce existing Regulations on
LPG use in vehicles Road
Traffic (Use of LPG)
Regulation, 1994 (LI 1592)
LI 1592 provides for
examination, issue of
certificate and registration in
respect of suitability of LPG
fittings in vehicles
It also provides for a sticker
which is renewable every six
(6) months or (12) months
LPG incl
Cross-
Subsidy
LPG excl
Cross-
Subsidy
LPG inclu
other levies
on Gasoline
LPG Price
@ Gasoline
Energy
Equivalent
LPG Price
@ Diesel
Energy
Equivalent
104.76 123.16 136.42 214.09 195.39
0.00
50.00
100.00
150.00
200.00
250.00
G
H
p
/
k
g
Comparative Ex-pump Prices of LPG (GHp/kg)
Policy Interventions
Use of Legislative Instruments
Use LI 1592 as vehicle to
rationalise the use of LPG in
vehicles
Mandatory inspection and
certification and issue of sticker
Cost of sticker (annual) should
be equivalent to:
- the difference in prices,
including Govt revenue losses,
between LPG and Gasoline; or
- the cost of the cross-subsidy on
LPG at the minimum
LPG incl
Cross-
Subsidy
LPG excl
Cross-
Subsidy
LPG inclu
other levies
on Gasoline
LPG Price
@ Gasoline
Energy
Equivalent
LPG Price
@ Diesel
Energy
Equivalent
104.76 123.16 136.42 214.09 195.39
0.00
50.00
100.00
150.00
200.00
250.00
G
H
p
/
k
g
Comparative Ex-pump Prices of LPG (GHp/kg)
Policy Interventions
Use of Legislative Instruments
Average use of LPG by taxi is
estimated at 34 litres per day
Cost of sticker could be
calculated on the basis of:
- Cross-subsidy in price build-
up
- Govt Revenue Losses
- Energy Equivalent Pricing
The calculations do not
include administrative costs
for DVLA services
Loss/kg
34
Litres/day
Taxi
40
Litres/day
Taxi
GHp/kg of LPG GHc/year GHc/year
Cross-Subsidy
Loss 18.4042 1,090.85 1,277.99
Gov't Revenue
Loss 51.3559 3,043.97 3,566.15
Energy
Equivalent
Pricing Loss 109.3383 6,480.70 7,592.45
Policy Interventions
Use of Legislative Instruments - Limitations
Difficulty with implementation
Experience with LI 1592 and
many others not too good
Administrative costs could be
high and should have to be
accounted for in cost of sticker
LPG fillings station attendants
not cooperating
Apathy from the police with
respect to regular inspection of
vehicles and institution of
spot fine
Loss/kg
34 Litre/day
Taxi
40
Litre/day
Taxi
GHp/kg of
LPG GHc/year GHc/year
Cross-Subsidy Loss 18.4042 1,090.85 1,277.99
Gov't Revenue Loss 51.3559 3,043.97 3,566.15
Energy Equivalent
Pricing Loss 109.3383 6,480.70 7,592.45
Policy Interventions
Infrastructure Development
Build more bulk storage
facilities TOR, BOST and
private sector
Increase bulk storage capacity
nation wide by about 100,000
tonnes from current
Facilitate bulk transportation
business by fiscal incentives
waiver of import duties on
new Bulk Road Vehicles
(BRVs) Used BRVs do not
qualify
LPG BULK STORAGE FACILITIES IN GHANA
Capacity,
tonnes
No. of
tanks
Capacity
per tank,
tones
Cost per
tank , US$
Total Cost,
US$
Existing (TOR) 9,800 6 1,633 3,910,416 23,462,495
Existing GOIL 200 4 50
Planned Additional
(TOR)
13,440 8 1,680 4,975,000 39,800,000
Planned Additional
GOIL
6,000 1 6,000
Recommended National 100,000 60 1,680 4,975,000 298,500,000
Policy Interventions
Infrastructure Development
Build more filling
stations to increase
access
About US$ 21 million
required to bring up
access nation wide to
Greater Accra level
Increase bulk storage
capacity nation wide by
about 100,000 tonnes
from current level of
less than 10,000 tonnes.
(Expected Jubilee Field
production is 300,000
tonnes per annum).
Region Population
No. of
filling
stations
(2011)
Hhold/Fil
ling
Station
Gt.
Target
Index
Stations
Reqd to
meet Gt
Target
Additional
Stations
Reqd to
meet target
Investment
Reqd
(GHC)
Greater Accra 3,909,764 113
7,522
1.00 113 0
-
Eastern 2,596,013 38
14,851
1.97 75 37
2,669,120
Volta 2,099,876 16
27,924
3.71 59 43
3,128,223
Central 2,107,209 41
11,681
1.55 64 23
1,634,115
Western 2,325,597 26
19,031
2.53 66 40
2,867,653
Ashanti 4,725,046 53
16,821
2.24 119 66
4,723,158
Brong Ahafo 2,282,128 30
14,353
1.91 57 27
1,963,936
Northern 2,468,557 5
66,718
8.87 44 39
2,836,374
Upper East 1,031,478 4
35,815
4.76 19 15
1,084,545
Upper West 677,763 3
35,300
4.69 14 11
798,601
Total
24,223,431 329 2.13 290 20,907,126
Policy Interventions
Infrastructure Development - Limitations
Major limitation is financial
resources
Encourage private sector
fiscal an financial incentives
Ensure adequate margins for
operators in the business:
- Bulk storage, transportation,
and distribution
LPG incl
Cross-
Subsidy
LPG excl
Cross-
Subsidy
LPG inclu
other levies
on Gasoline
LPG Price
@ Gasoline
Energy
Equivalent
LPG Price
@ Diesel
Energy
Equivalent
104.76 123.16 136.42 214.09 195.39
0.00
50.00
100.00
150.00
200.00
250.00
G
H
p
/
k
g
Comparative Ex-pump Prices of LPG (GHp/kg)
Conclusions & Recommendations
Conclusions
LPG has become a major
fuel in the national energy
mix.
The sector is facing
challenges:
- Shortages in supply
- Safety concerns
A number of options are
available to address the
challenges but each has its
limitations
Key Recommendations
To deal with the issues of
shortages deploy a two-
prong approach
- Price Build-up to account
for cross-subsidy and Govt
revenue loss
- Regulate by certification
and sticker at a sticker cost
high enough to bring the
total cost of LPG to the
equivalent of Gasoline in
energy terms
Conclusions & Recommendations
Conclusions
Access is limited owing to
inadequate infrastructure
across the whole LPG value
chain
LPG has become a major
fuel in the national energy
mix.
Safety Concerns
Key Recommendations
Encourage both public and private
sector investments in LPG infrastructure
Introduce Bulk Storage Margin high
enough to attract Investments
Deploy fiscal and financial instruments
to incentivise investor
Use tax waivers and increased margins
in the price build-up to encourage
operators to invest
Re-Introduce LPG Promotion Levy and
use to finance infrastructure in Public
Institutions, door to door LPG
distribution, public awareness on safety
etc.
Develop & Enforce Safety Regulations
Thank You for your attention