Liquefied Petroleum Gas (LPG) is a proven clean, safe, healthy and efficient fuel for cooking and other purposes: including industry, transportation, agriculture, power generation and refining. Although widespread access to LPG is limited today in many developing countries including Ghana, LPG has presently become the fuel of choice for domestic purposes in many households of the world.
In recent times LPG has become an economical and environmentally friendly fuel option for industries, transportation and power generation. Hundreds of millions of people use LPG worldwide for their various fuel needs.
According to the World LPG Association, total global production for 2015 was 284 million tonnes; 9 percent of this production was used in transportation, 7 percent in refineries, 1 percent in agriculture, 11 percent in general industry, 28 percent in the chemical industry and 44 per for domestic purposes, which include lighting, cooking and heating. In Africa, 84 percent of all LPG consumption is for domestic purposes.
Liquefied Petroleum Gas -Butane (LPG) is the most widely available environmentally-friendly alternative fuel in the world. In 1989, the Ministry of Energy, promoted the use of LPG as a fuel with two clear objectives: The short-term objective was to eliminate the flaring of LPG at Tema Oil Refinery (TOR), while the long-term objective was to ensure households that use charcoal and firewood for cooking adopt the use of LPG. The programme was implemented mostly in urban areas throughout the country using the Cylinder Recirculation Model (CRM).
The full liberalisation of downstream segments of the petroleum value chain in Ghana since 2009 has been followed by an increase in the number of LPG refilling plants and the distribution of filled LPG cylinders to customers. LPG has become an important fuel that drives a number of economic activities.
Its consumers are in three categories: namely domestic consumers who use the commodity mainly for cooking; commercial consumers use it as fuel for transportation and commercial cooking, such as in hotels, hospitals and schools; while industrial consumers use it mainly for industrial activities.
Today, there is relatively high demand for LPG in Ghana. In response to this demand, LPG marketers and refilling plants have also increased significantly, such that there are currently over 600 refilling plants and over 3,000 LPG handlers across the country. The current annual LPG penetration level in the country stands at 25 percent, with an annual average growth rate for LPG usage of about 13.4 percent. However, even with the current growth rate in access to LPG, there still has to be a deliberate effort by government to guide this increase in consumption and improve upon safety in supplying the commodity.
The current market structure of LPG has accessibility and availability challenges, which does not adequately support the vision of expanding LPG use and access nationwide. Again, the growth in refilling plants and activities of handlers have brought issues of quality, safety and security, and lack of expertise to the fore.
Also, lack of funds for initial investment on the part of consumers has also contributed to low demand for LPG; because in some cases willing consumers are unable to fund the switch. Again, there has been over 10 LPG-related accidents in the last 5 years – all due to non-adherence to safe LPG discharge procedures.
In view of these challenges, government decided in 2017 to implement a new LPG policy to promote LPG and pursue aggressively an increase in access toward 50 percent by 2030.
The Cylinder Recirculation Model is a LPG marketing model that involves filling LPG cylinders at large refilling plants and then supplying the filled cylinders to consumers at specialised retail outlets called exchange points. The consumer exchanges his/her empty cylinder for a filled one at the exchange point.
This model means that LPG bottling plants will be sited away from congested commercial and highly populated areas; and will procure, brand, maintain and fill empty cylinders for distribution to consumers and households through retail outlets. This policy is to provide direction and a framework for safety legislation and operational standards in the industry.
Given the importance of LPG to the national economy, government has committed itself to ensure reliable supply of LPG as well as increase current access to LPG from 25% to 50% nationwide by the year 2030. The consumption of LPG has been rising steadily, from 45,000 tonnes in 2000 to 178,400 tonnes in 2010 and to 332,370 tonnes as at the end of 2020.
CRM policy goal
To ensure at least 50% of Ghanaians have access to safe, clean and environmentally friendly LPG for increased domestic, commercial and industrial usage by 2030.
- Develop a market-driven structure to ensure safety, increased access and adoption of LPG.
- Enhance the capacity of existing regulatory institutions in order to meet the regulatory requirements of the new market structure.
- Ensure the existence of robust and standard health, safety and environmental practices in the production, marketing and consumption of LPG.
- Ensure the sustainability of supply under the new market structure
- Ensure local content and participation in the LPG sub-sector in compliance to the Downstream Local Content Policy.
Current LPG market structure
Government’s efforts at promoting the use of LPG have significantly increased demand for the commodity in the domestic, commercial and industrial sectors of Ghana’s economy.
In response to the increased demand, LPG marketers and refilling stations have increased appreciably; such that there are currently over 1,000 mini-refilling plants across the country.
The inadequate capacity and skills of these mini-refilling plants led to challenges in the current model’s regulatory system. Indeed, safety standards were compromised – resulting in over 10 LPG-related accidents in the 5 years from 2015.
The current LPG distribution model consists of Bulk Distribution Companies (BDCs) importing LPG into their storage facility; and LPG Marketing Companies (LPGMCs) buying the product in bulk and transporting same to their refilling plants to be discharged for onward retailing.
Customers with their own LPG cylinders go to LPG refilling plants to fill same when empty. Both commercial and private vehicles also go to these refilling plants to buy LPG as auto-fuel for their vehicles.
This structure poses clear dangers and raises serious safety issues at the refilling point, and even during transportation to homes. It is in this regard that government is establishing new CRM.
The new Cylinder Recirculation Model (CRM)
This model involves filling LPG cylinders at designated refilling plants before onward distribution to customers at retail outlets called exchange points. Each LPG bottling plant will have a capacity of 2,000MT for storage and a safe distribution of filled cylinders to various outlets in the country.
LPG will be coming to the plant via pipes and road through Bulk Road Vehicles (BRVs). This will be stored in ‘bullets’ and then filled in various cylinders within the plant for onward distribution to customers. Aside from construction of the plant, the main business will only involve storing and bottling the LPG.
The facility will be managed in line with international best practices, and all aspects of its operations will be guided by requisite standards, operations and procedures. In the filling plant, the empty cylinders of various capacities (3kg, 6kg and14.5kg) will be fed through the automated chain conveyor system.
The cylinders will be branded with the names of various Liquefied Petroleum Gas Marketing Companies (LPGMCs).
The National Petroleum Authority (NPA) will licence operators – LPGMCs, to set up exchange points for consumers to exchange their empty cylinders for filled ones. These operators could also send their filled cylinders to consumers at the household level as a good marketing strategy.
Currently, NPA has piloted the CRM in the Eastern, Ashanti, Northern, and Western Regions in both phase 1 and 2 of its implementation, with a similar pilot study ongoing in the Volta Region.
The NPA in collaboration with the Ghana Cylinder Manufacturing Company in both pilot phases has distributed over 46,470 branded LPG cylinders of different sizes to LPG marketing firms for distribution to households.
About 11,140 cylinders have been made available for the Volta Region pilot project. Again, the NPA has given licence to 10 bottling companies to increase the capacity of bottling to meet demand once the CRM is implemented fully.
Table 1: Details of Cylinder Distribution so far
Source: National Petroleum Authority, 2021
The way forward and focus of NPA
First of all, the NPA should implement the LPG behavioural change strategy and public awareness campaign as part of the GESTIP project. As part of the strategy, communities and households must be educated on the new government policy of CRM and its impact on the LPG industry, and safe use of cylinders at the household-level.
Secondly, in collaboration with the Ghana National Fire Service (GNFS) at the local level, provide households with practical demonstrations and education on the storage, maintenance and disposal of LPG cylinders at the household level to ensure safety and quality of gas. This will reduce accidents and guarantee safety.
More importantly, set up regional and district educational campaign models as a strategy to achieve policy objectives of the CRM. These will be drivers of the policy at local level.
Also, reduce bureaucracies in the acquisition of LPGMC licences so as to make the provision and distribution of LPG to households more effective when the CRM policy is rolled out fully.
Finally, the NPA should as a matter of urgency evaluate pilot projects in the Eastern, Ashanti, Northern and Western Regions and fully implement the CRM to ensure efficiency in household energy consumption and sustainability.
The writer is an economic research consultant. He can be contacted on: [email protected]