LPGLPG: THE FORGOTTEN ENERGY: THE FORGOTTEN ENERGY

Mr. Vaughan GIBSONManaging Director, Oryx Oil Company Ltd, Tanzania

9th Africa Oil & Gas, Trade & Finance ConferenceMaputo, 2nd June 2005

NOT AN OFFICIAL UNCTAD RECORD

PART IPART I

AOG AN EXAMPLE OF LOCAL AOG AN EXAMPLE OF LOCAL

INTEGRATIONINTEGRATION

OUR PROFILE (1)

An integrated mining and petroleum company inrapid growth

Turnover: > USD 5 billions

3 brand names: ORYX, ASCOT and ADDAX

> 1000 persons and more than 30 nationalities

4 strategic divisions

A solid African presence: > 15 countries

OUR PROFILE (2)

DOWNSTREAM FOCUS (1)

A growing infrastructure for ORYX OIL & GAS

Sierra Leone: 1 terminal

Ivory Coast: 1 export/bunkering jetty2 LPG storage and filling plants

Senegal: 1 terminal

Benin: 1 terminal1 storage and filling plant

Tanzania: 2 terminals3 inland depots1 Lube blending plant3 LPG storage and filling plants

Service stations Mauritania, Senegal, Ivory Coast,network in: Nigeria and Tanzania

DOWNSTREAM FOCUS (2)

DOWNSTREAM FOCUS (3)

A unique approach

Betting on African500 employees: only 2 non African

expatriates

Betting on Africawe move in when others move out

Local integration – Local partners

Moving down the value chain – Full service envelope

LPG: strategic emphasis / growth potential

PART IIPART II

LPGLPG: THE ENERGY FOR AFRICA: THE ENERGY FOR AFRICA

THE BENEFIT OF LPG (1)

A mixture of gaseous hydrocarbons, very rich in energy content, easy to store in liquid form at low pressure (contrary to natural gas)

What is LPG ?

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

World Energy Consumption

LPG2.70%

Oil37.40%

Natural gas24.30%

THE BENEFIT OF LPG (2)

Table 2: Africa versus rest of the world

60.1

26.6

37.8

15.4

7.4

67.3

0

10

20

30

40

50

60

70

Million MT

North A

meric

a

Centra

l & S

outh A

meric

a

Europe &

FSU

Mid

dle E

ast

Africa

Asia

THE BENEFIT OF LPG (3)

environment friendly

Main benefits

portable and powerful

versatile

THE BENEFIT OF LPG (4)

Desertification

“Tailored” for Africa

Lack of infrastructure

Rural

Employment and growth

PART IIIPART III

CONDITIONS FOR SUCCESSCONDITIONS FOR SUCCESS

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)

BARRIERS TO DEVELOPMENT (2)

Limited access to poorer classes- cost of cylinder and appliances

Inappropriate taxation

- cost of gas itself

- import taxes

- indirect subsidies to “traditional fuels”

Lack of awareness- from government authorities

- from the public in general

LIFTING THE BARRIERS (1)

Supply and infrastructure role of private sector

Regulations

support from international institutions

developing adequate framework using experience from well established and structured market

opting for a cylinder deposit system banning cross-filling establishing a licensing system

LIFTING THE BARRIERS (2)

Access to poorer classes and implication of taxes developing an efficient network

Awareness

financing solutions such as micro-credit

education campaigns (schools, associations, role of village heads)- safety- applications

advertising campaigns by marketers

eliminate taxation of LPG and cylinders (import duties and VAT)

harmonizing the tax system (in case partial taxation is maintained)

government focus

PART IVPART IV

ORYX’S APPROACH: MAKING IT WORKORYX’S APPROACH: MAKING IT WORK

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

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

CONCLUSION

Access to modern energy is a pre-requisite to economic and social development.

L.P.G. = Long-term Progress Generator

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.