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LPG : THE FORGOTTEN ENERGY

LPG : THE FORGOTTEN ENERGY. NOT AN OFFICIAL UNCTAD RECORD. Mr. Vaughan GIBSON Managing Director, Oryx Oil Company Ltd, Tanzania 9 th Africa Oil & Gas, Trade & Finance Conference Maputo, 2 nd June 2005. PART I . AOG AN EXAMPLE OF LOCAL INTEGRATION. OUR PROFILE (1).

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LPG : THE FORGOTTEN ENERGY

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  1. LPG: THE FORGOTTEN ENERGY NOT AN OFFICIAL UNCTAD RECORD Mr. Vaughan GIBSON Managing Director, Oryx Oil Company Ltd, Tanzania 9th Africa Oil & Gas, Trade & Finance Conference Maputo, 2nd June 2005

  2. PART I AOG AN EXAMPLE OF LOCAL INTEGRATION

  3. OUR PROFILE (1) An integrated mining and petroleum company in rapid growth • A solid African presence: > 15 countries • > 1000 persons and more than 30 nationalities • 3 brand names: ORYX, ASCOT and ADDAX • Turnover: > USD 5 billions • 4 strategic divisions

  4. OUR PROFILE (2)

  5. DOWNSTREAM FOCUS (1) A growing infrastructure for ORYX OIL & GAS • Senegal: 1 terminal • Ivory Coast: 1 export/bunkering jetty 2 LPG storage and filling plants • Sierra Leone: 1 terminal • Benin: 1 terminal 1 storage and filling plant • Tanzania: 2 terminals 3 inland depots 1 Lube blending plant 3 LPG storage and filling plants • Service stations Mauritania, Senegal, Ivory Coast, network in: Nigeria and Tanzania

  6. DOWNSTREAM FOCUS (2)

  7. DOWNSTREAM FOCUS (3) A unique approach • Betting on Africa we move in when others move out • Betting on African 500 employees: only 2 non African expatriates • Local integration – Local partners • Moving down the value chain – Full service envelope • LPG: strategic emphasis / growth potential

  8. PART II LPG: THE ENERGY FOR AFRICA

  9. THE BENEFIT OF LPG (1) • What is LPG ? • A mixture of gaseous hydrocarbons, very rich in energy content, easy to store in liquid form at low pressure (contrary to natural gas) • It originates from the refining process of crude oil or comes as associated gas in natural gas or crude oil wells • Why is it so little known ? Table 1: the weight of LPG in world energy consumption

  10. THE BENEFIT OF LPG (2) Table 2: Africa versus rest of the world

  11. THE BENEFIT OF LPG (3) • Main benefits • environment friendly • portable and powerful • versatile

  12. THE BENEFIT OF LPG (4) “Tailored” for Africa • Desertification • Lack of infrastructure • Rural • Employment and growth

  13. PART III CONDITIONS FOR SUCCESS

  14. BARRIERS TO DEVELOPMENT (1) The structural barriers: • Lack of supply and/or infrastructure • terminals and plants • Inadequate regulations • Cylinder property right • Cylinder exchanges and cross-filling practices • Lack of standards (cylinders, appliances and filling plants)

  15. BARRIERS TO DEVELOPMENT (2) • Limited access to poorer classes - cost of cylinder and appliances - cost of gas itself • Inappropriate taxation - import taxes - indirect subsidies to “traditional fuels” • Lack of awareness - from government authorities - from the public in general

  16. LIFTING THE BARRIERS (1) • Supply and infrastructure • role of private sector • support from international institutions • Regulations • developing adequate framework using experience from well established and structured market • opting for a cylinder deposit system • banning cross-filling • establishing a licensing system

  17. LIFTING THE BARRIERS (2) • Access to poorer classes and implication of taxes • developing an efficient network • financing solutions such as micro-credit • eliminate taxation of LPG and cylinders (import duties and VAT) • harmonizing the tax system (in case partial taxation is maintained) • Awareness • education campaigns (schools, associations, role of village heads) - safety - applications • advertising campaigns by marketers • government focus

  18. PART IV ORYX’S APPROACH: MAKING IT WORK

  19. MAKING IT WORK (1) The case of ORYX BENIN: • 3’200 m3 terminal and filling plant in 2001  Regional role ( Burkina, Niger, Mali ) • Creation of 700 sales point network • Lobbying for subsidies to put LPG prices in line with wood, charcoal and kerosene • Market grew from 1,000 mT to 9,000 mT in 2005 • Giving access to low and middle classes • “minigaz” campaign • Credit sales through companies

  20. MAKING IT WORK (2) The case of ORYX TANZANIA: • 2’200 m3 import terminal • 3 filling plants (Dar Es Salaam, Moshi and Mwanza) • lobbying campaign for new standards and elimination of taxes • “blending” into the culture: TV advertising

  21. CONCLUSION Access to modern energy is a pre-requisite to economic and social development. Africa with its increasing production of LPG and weak infrastructure has a solution within easy reach. It is only by combining the efforts of all stakeholders (private sector, government bodies, international institutions and public in general) that we will be able to grasp this historic opportunity. L.P.G. = Long-term Progress Generator

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