The closure of the Nigeria Liquefied and Natural Gas (NLNG) processing plant, according to the Liquified Petroleum Gas Retailers (LPGAR), could result in an increase in the cost of cooking gas. The National Chairman of the LPGAR branch of the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG), Mr Umudu Michael, told the News Agency of Nigeria (NAN) in Lagos on Tuesday that the threat of shortage posed by NLNG’s declaration of force majeure on the LPG plant for Nigerians.
“There is a high tendency that the situation will lead to LPG scarcity in the country or a rise in the price owing to possible resort to importation. This means that LPG marketers will depend more on LPG importers having depots in Lagos”, he said.
According to NAN, the NLNG declared force majeure on its 22 million tonnes per year (mtpa) processing plant on October 17 in response to widespread flooding that cut off the company’s supply of gas. Mr Andy Odeh, the company’s general manager for external relations and sustainable development, made the announcement. A typical clause in contracts called “force majeure” essentially releases both parties from responsibility or obligation in the case of an extraordinary incident or scenario that is beyond their control.
These situations include those that prevent one or both parties from upholding their ends of the bargain, such as war, strike, riot, crime, disease, or rapid changes in the law. However, the company consoled people who had lost loved ones in the country’s devastating flooding as well as those whose means of subsistence had been impacted.
Michael noted that: “I also sympathise with millions of Nigerians who have been rendered homeless as a result of the flooding who are now living in refugee camps and those stranded in isolated areas. The flooding is a disaster and it is expected to affect LPG production, supply and distribution in Nigeria. It is very unfortunate because when natural disasters such as the ongoing flooding in the country lead to such force majeure by a major LPG production company, the impact can be enormous in the market”.
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He claims that the conclusion is that it is impossible to predict with confidence the level of damage brought on by the flood or when it will pass, putting the LPG market in a state of limbo. According to Michael, the damage is already being felt severely in the Northern region of the country due to the challenges associated with transporting goods via the inundated areas, particularly the impacted Lokoja-Abuja road.
His words: “This is really a bad time for Nigeria’s struggling LPG sector. Even within the Southern part of the country, the West-South road within the Niger Delta region is impassable, especially at the Bayelsa and Rivers States portions of the road. It is very challenging because natural disasters can hardly be controlled by humans, especially in this clime where intervention mechanism is very poor. Of course, there is a high tendency that the situation will lead to LPG scarcity in the country or a rise in the price owing to possible resort to importation”.
Michael added that a further price increase could be sparked by the lack of transparency in the pricing structure between NLNG and its off-takers. He recalled that the Federal Government had mediated NLNG’s involvement in the country’s LPG market roughly 15 years prior.
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He said: “Therefore, it is not patriotic for NLNG to be keeping the price secret. This is a big barrier to the affordability of LPG for Nigerians and of course, the benefiting off-takers are enjoying the secrecy.
“Another issue is selling the product in US dollars. I don’t know why what is produced in the country should be sold in foreign currency. It is not proper. If it is true that the Federal Government has about 49 per cent share in NLNG, then the government should equally have a duty to influence what happens in the company without undermining the interests of other investors.
“I think the naira remains our legal tender in this country and the government has the duty to enforce it. Again, it is obvious that NLNG, even at its 100 per cent of LPG production capacity cannot presently meet the domestic demand, hence importation by major companies such as NIPCO.
“It appears that the importers take advantage of this gap to peg prices based on the importation cost even when most of the product is supplied domestically by NLNG. I will advise NLNG, as a matter of national service, to try as much as possible to continue with its regular supply if it means adjusting its enabling facilities given the impact of the flooding”.
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