LP Gas as a fuel for economic development: What is needed?

1. LP Gas as a fuel for economic development: What is needed? Michael Kelly Director, Market Development World LP Gas Association IAEE Workshop on Clean Cooking Fuels Istanbul, 16 – 17 June 2008

2. Agenda • The World LP Gas Association – Who are we? • Why LP Gas? • What is needed? • Innovations • Conclusions

3. The Unique Global Association representing the LP Gas Industry for over 20 years • More than 170 members operating in 90 countries in the world • Representing the interests of the full LP Gas value chain from producer to distributor • Partnering with key global organisations such as the World Bank, the UN, Regional Development Banks, NGOs As the authoritative, global voice for LP Gas, the WLPGA promotes the use of LP Gas worldwide to foster a cleaner, healthier and more prosperous world

4. A powerful industry association

5. The WLPGA – Our Mission • Demonstrate the benefits of LP Gas and position it as clean energy • Create the environment to develop and sustain LP Gas markets • Identify and stimulate innovation • Promote compliance with good practices • Facilitate and drive information exchange among all stakeholders To add value to the sector by driving premium demand for the product

6. Agenda • The World LP Gas Association – Who are we? • Why LP Gas? • What is needed? • Innovations • Conclusions

7. What is LP Gas? (also known as LPG) LP Gas is propane or butane or a mixture of the two. It is always present as a product of oil refining and also is always present naturally in natural gas (methane) fields and crude oil fields. It can be distributed in relatively cheap, small containers and used for cooking, heating, lighting and commercial/industrial activities LP Gas has significant health, safety and environmental benefits compared to traditional solid fuels, such as wood/biomass and coal 1

8. LP Gas delivers Rapid Accessibility • Because it’s portable: • Bottles can be can be stored indefinitely • Easily transported • Used virtually anywhere -- from urban centres to remote regions When and where costly, grid-based energy services are unavailable

9. LP Gas is an AvailableEnergy source 400 Oceania 350 60% increase FSU / E Europe 300 Africa 250 West Europe Supply /M Tonnes 200 Asia 150 Latin America 100 Middle East 50 North America 0 1995 2000 2002 2003 2004 2005 2010 2030 Source: WLPGA Statistical Review of Global LP Gas Purvin & Gertz

10. LP Gas is an Acceptablealternative • …Because it’s a clean fuel: • It burns cleanly • No smoke or residual particulate matter • Relatively low pollutant emissions • Low Green House Gas (GHG’s) emissions • Helps fight deforestation by substituting “traditional fuels” • Frees women and girls from drudgeryof searching for firewood

11. LP Gas has a low GHG footprint LP Gas is NOT a zero – GHG fuel: However in most cases it can make major and immediate contributions to real emission reductions Coal Electricity : 3.5 LP Gas: 1

12. LP Gas and reduced indoor air pollution • According to the landmark 2006 WHO study “Fuel For Life, Household Energy and Health” • … smoke from indoor cooking fires kills 1.6 million every year, more more people than malaria, and almost as many as unsafe water and sanitation • … smoke in the home is the fourth greatest cause of death and disease in the world’s poorest countries • WHO have highlighted LP Gas as the cost effective solution for reducing pollution from cooking fuel

13. LP Gas allows for incremental development Stage 3: LP Gas bulk tank, fuelling stove, refrigerator, water boiler and generator Stage 2: LP Gas cylinder outside, piped in to fuel stove, refrigerator and light Stage 1: LP Gas cylinder inside feeding stove

14. Agenda • The World LP Gas Association – Who are we? • Why LP Gas? • What is needed? • Innovations • Conclusions

15. Potential market • WHO: “… investing US$ 13 billion per year to halve, by 2015, the number of people worldwide cooking with solid fuels by supplying them with LP Gas shows a payback of US$ 91 billion per year” • Characteristics of LP Gas make it an ideal form of modern, clean energy for developing and least developed markets • The potential markets size for LP Gas is enormous and growing • As an industry how to tap these nascent markets in a sustainable manner?

16. Barriers • Price of LP Gas compared to other fuels • Government energy policy, including tax policies • Communication and contact with lower income markets, rural and remote communities • Availability and cost of equipment • Size and cost of cylinders • Lack of general information available to the public

17. Industrywish list • Fair pricing – subsidies issue must be addressed • Infrastructure • Stability – economic political • Incentives • Regulatory framework • Good Governance • Participatory, Consensus oriented, Accountable, Transparent, Responsive, Effective and Efficient, Effective and efficient , Equitable and inclusive, Follows the rule of law.

18. What industry can do… • Establish strong industry wide good business and safety practices, codes of conduct, industry associations • Establish uniform norms for cylinder use and filling • Introduce smaller, lighter cylinders • Sale of LP Gas to order in small amounts • Educational campaigns – environment, health, safety, productivity • Promotional campaigns to educate government and end users on the benefits of LP Gas. • Pilot projects and INNOVATION!

19. Agenda • The World LP Gas Association – Who are we? • Why LP Gas? • What is needed? • Innovation • Conclusions

20. Public Private Partnerships Public Private Partnerships (PPPs): Government service or private business venture which is funded and operated through a partnership of government and one or more private sector organizations. Sometimes referred to as PPP or P3 LP Gas Rural Energy Challenge: • UNDP Strengths: expertise on financing mechanisms, capacity building to support governments in policy development, collaboration with local organisations to stimulate investment, employment generation • LP Gas Industry Strengths: expanding storage capability for imported LP Gas to capture shipping economies of scale, addressing recurring user costs through investment in the production of smaller, more affordable bottles

21. Public Private Partnerships Public Private Partnerships (PPPs): Pros & Cons • Pros: • Complementary competencies and resources • Global reach • Experience with partnerships • Access to the worlds major private sector companies • Comparative advantages as partners • Different entry points (profit vs. non-profit)  same goal (improved standard of living) • Cons: • Steep learning curve • Different organizational drivers, motivators, urgencies and concerns

22. Microfinance • Morocco Microfinance project • Partners are Shell, Afriquia Gaz, Total, Zakoura Foundation • Pilot phase US $150,000 rolled out successfully • Zakoura staff trained on LP Gas applications • Promotional material provided • Active promotion of applications around country • Quarterly status reports provided on status of loans • To qualify for loans, recipients must not have access to traditional sources of financing, must have a project generating income using LP Gas

23. Microfinance Morocco Microfinance project • 101 micro loans for an average of 900 USD have been granted • 72 hotel projects • 26 restaurant projects • 3 hand craft projects • New MOU signed and loan repayments are being rolled into new loans. • Project extended until December 2009 • Linking LP Gas with entrepreneurial micro-loans can generate social and economic benefits and create new, viable markets Ultimate goal: create successful project template to be replicated in other markets where similar challenges exist

24. Partnering with other energy sources • Portability and storability makes LP Gas a perfect complement to distributed renewable energy sources such as solar, wind and wave energy (and soon the fuel cell) • Reduces reliance on centrally produced electricity • LP Gas used in combination with renewable sources also can improve energy reliability while reducing the overall life-cycle costs • An LP Gas powered generator, with a small storage tank, provides an ideal back up

25. Agenda • The World LP Gas Association – Who are we? • Why LP Gas? • What is needed? • Innovation • Conclusions

26. Conclusions • LP Gas supply is increasing in supply • LP Gas is an ideal fuel for a changing world as it is clean, acceptable and accessible • Strong endorsement of LP Gas has been received from key global authorities • Innovative applications for LP Gas can be found in both the developed and developing world • The World LP Gas Association is ready to assist

27. And finally… Mark it in your agenda now: Our 21st World Forum Incorporating a Global Technology Conference 24th – 26th September 2008 Seoul, Korea

28. Thank you