NLNG exposes cooking gas scandal: Offtakers bought at N900, sold for N2,400

Nigeria LNG Limited has disclosed that some major LPG offtakers bought cooking gas for between N800 and N900 per kilogramme and sold it for as much as N2,400 per kilogramme during the recent scarcity. NLNG Managing Director and Chief Executive Officer, Adeleye Falade, revealed this at the company's Facts & Figures Presentation in Lagos.

Hoarding at terminals caused artificial scarcity

Falade said investigations showed that some customers were storing LPG at their terminals instead of releasing it promptly into the market. This contributed to the supply squeeze consumers experienced.

“What we found out is that a number of people who take products will put them in their terminal, and they are part of those that have created the artificial scarcity that has led to the price increase,” Falade said.

While cooking gas was selling for about N2,400/kg in the market during the scarcity, some of the affected offtakers were obtaining the product from NLNG for between N800 and N900/kg. That created a significant disparity between the purchase price and what consumers ultimately paid.

Regulators working on downstream distortions

The Nigerian Midstream and Downstream Petroleum Regulatory Authority had previously indicated that LPG retail prices, after accounting for transportation costs, should generally remain within the range of N1,000 to N1,200 per kilogramme.

Falade said the wide difference between the recommended retail range and the prices paid by consumers reflected distortions within the downstream LPG market.

“So there’s also some distortion that happened on the sales side, which I know the regulators are working on right now to get control of it,” Falade added.

Train 7 to boost LPG supply

NLNG distributes LPG domestically through its dedicated vessel, Alfred Temile. More than 15 terminal operators currently take the product from the company and supply bulk quantities to gas plant operators and independent petroleum marketers.

An assessment carried out for NLNG by one of the Big Four consulting firms reportedly found that retaining LPG at terminal level slowed the movement of the product to retailers. The resulting supply constraints pushed up prices at the retail end, even when adequate volumes were available earlier in the distribution chain.

Falade also disclosed that the Train 7 project will increase LNG capacity by 35% and LPG production by 50%, helping to boost supply as Nigeria's LPG consumption rises.

What it means for consumers

Consumers paid the price for terminal hoarding while offtakers pocketed huge margins. If Train 7 delivers the promised LPG boost, supply could ease and prices could moderate. But until regulators rein in the distortions, Nigerians are likely to keep facing inflated cooking gas costs.