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Brazil LPG association knocks price control plan
Brazil LPG association knocks price control plan
The scheme has received a call for the creation of a benchmark price ceiling for LPG distributors, writes Maria Frazatto Sao Paulo, 3 December (Argus) — Brazil's "Gas for All" scheme that aims to spread LPG use to more low-income homes should reconsider the creation of a price ceiling for LPG distributors, LPG association Sindigas' president, Sergio Bandeira de Mello, says. "The mechanism creates economic flaws that can lead to distributors withdrawing from the programme, especially in remote areas where most beneficiaries are located," he says. The bill, which underwent revisions in November, aims to extend LPG subsidies to nearly 21mn low-income households and prevent beneficiaries from using the financial benefit for other purposes. Instead, it might create a system to provide LPG cylinder vouchers to the families, with the government directly paying distributors. Sindigas supports creating a benchmark price from weekly price surveys made by oil regulator ANP. The LPG sector also agrees that prices should be different among states, as long as there is no price ceiling. ANP — which will be responsible for capping the price — assures that it will follow market price trends and consider each individual state situation such as transportation costs, according to the mines and energy ministry's oil and gas secretary, Pietro Mendes. The Gas for All scheme is meant to supersede the social assistance ministry's gas assistance programme, which gave the money equivalent to one 13kg cylinder directly to the beneficiaries. But the new programme can also facilitate reselling fraud. Brazil's low-income households spend about 70pc of their income on housing and groceries, according to think-tank Getulio Vargas Foundation researcher Carlos Ragazzo, meaning that the free LPG cylinder given to the families could be sold to supplement income. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
RLG production forecasts fraught with uncertainty
RLG production forecasts fraught with uncertainty
Government backing and co-operation between competitors are needed to align with the targets for RLG output, writes Matt Scotland London, 3 December (Argus) — The production of renewable LPG and dimethyl ether (DME) is projected to rise to 60mn-120mn t/yr by 2050 under a supportive policy scenario, consultants told attendees of this year's LPG Week conference in Cape Town, South Africa, over 18-22 November. But such forecasts continue to be laced with uncertainty given the enormous challenges involved in reaching commercial-scale output. Output of both fuels, often pooled together under the umbrella term renewable liquid gas (RLG), could grow to 4mn-9mn t/yr by 2030 and 8mn-27mn t/yr by 2040 under the same scenario, according to the findings from a soon-to-be-released report from consultancies NNFCC and Frazer-Nash. But under a situation where no policy support is forthcoming, volumes are about a quarter of these projections, NNFCC managing director Adrian Higson told the audience. RLG production could then exceed 100mn t/yr by 2050-55 and 200mn t/yr by 2060-65, Frazer-Nash consultant Jeremy Revell said, adding the caveat that greater uncertainty exists over a long timeframe. Biogas to LPG "offers the best potential route to renewable LPG beyond 2050", while gasification to DME does likewise for rDME. "One of the main surprises was just how much liquid gas we could produce by 2050, especially the role rDME could play from the gasification pathway," Revell said. "It has high potential yields and a lot of feedstock to support it." Speakers at the event were keen to emphasise the high level of uncertainty involved in RLG development, and just how much rests on the degree of government backing when it comes to projecting growth. And even assuming a supportive policy scenario does not necessarily equate to clear-cut support for RLG, bearing in mind it will be competing with other technologies, BioLPG LLC chairman Kimball Chen told delegates. "I don't know yet what supportive policies we want and for which solutions," he said. More co-operation between competitors in the LPG industry is needed to ease uncertainty, while allowing for competition between individual firms or partnerships, Chen said. "SHV and DCC [through their recently announced RLG collaboration] and my consortium [bioLPG LLC] with 12 European and American companies share the same technical challenges and will be competing for the same feedstocks, so the way we think about competition and increasing our chances for success as an industry and individually need to be further delineated," he said. Cost calculation Feedstock availability in many of the study's pathways is not a concern, with the possible exception of bioLPG from hydrotreated vegetable oil and hydroprocessed esters and fatty acids, something not unexpected, DCC's director of sustainable gas, Emmanuel Mannooretonil, said. The issue is having feedstock at the right price. "Now we see that technically it's possible and the feedstock exists, the next question is can we make a product good enough from an environmental and affordability standpoint for policy makers to support?" he said. The maturity of the technology is a challenge for the LPG industry, with "decisions of large financial magnitudes" required to get there, Chen added. "We have a race against time." Cost will remain a problem over the medium and long term because of the technological limits, Chen said. But perhaps the biggest challenge is the reluctance to build a first-of-a-kind plant, SHV Energy's head of sustainable fuels policy, Goher Ur Rehman Mir, said. SHV is testing a number of production routes for RLG, including converting ethanol to butane. But pilot plants and then demonstration facilities are required first, necessitating more investment and collaboration, he said. "We need to join forces, which is why we have signed [an initial agreement] with DCC Energy," he said. "But we are open to collaborating with other stakeholders to develop a consortium to progress this process fraught with difficulties." Production pathways Source Product Alcohol Renewable LPG Biogas Renewable LPG CO2 and H2 Renewable LPG and DME Gasififcation with Fischer-Tropsch Renewable LPG Gasification Renewable DME HVO and Hefa Renewable LPG Pyrolosis Renewable LPG — NNFCC, Frazer-Nash Renewable LPG, DME output forecast averages* Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Africa attempts to surmount clean cooking obstacles
Africa attempts to surmount clean cooking obstacles
Financial backing and carbon credits could be vital for making LPG more affordable as a clean cooking fuel, writes Elaine Mills Cape Town, 3 December (Argus) — Sub-Saharan Africa still has many of the same intractable challenges to overcome if it is to come close to achieving universal clean cooking access, delegates heard at LPG Week in Cape Town, South Africa. But government support, public-private collaboration, grassroots movements and carbon credits could pry open markets. The IEA is spearheading momentum behind the drive to clean cooking adoption in sub-Saharan Africa, expecting 45pc of the transition to be to LPG. A global transition would result in a net reduction of 1.5bn t of CO2 equivalent by 2030, of which sub-Saharan Africa alone would account for 900mn t, it says. "We can't imagine a more important global initiative in terms of our objectives of development, poverty alleviation, health and prosperity," the IEA's head of sustainable transitions, Daniel Wetzel, said during the World Liquid Gas Association event. Sub-Saharan Africa consumes less than 4kg/capita of LPG per year, according to South Africa's Department of Mineral and Petroleum Resources. This compares with north Africa's 35kg/yr, including Morocco, which has the highest in the world at 73kg/yr, Argus Consulting data show. The IEA estimates Africa requires investment of $4bn/yr to facilitate clean cooking. The continuing challenge for LPG penetration in southern Africa is "affordability, availability and acceptability", the International Finance Corporation's (IFC's) regional industry manager for manufacturing, Bambo Kunle-Salami, said. An average household needs to spend about $300-400/yr on LPG, while GDP per capita is just over $1,000/yr, he said. Government backing is essential, as "no LPG has grown on its own organically or reached desired levels [without] government intervention", the UN-backed Global LPG Partnership's East Africa director, Elizabeth Muchiri, said. Subsidies can solve cost barriers but many African governments cannot afford them, Kunle-Salami said. It might also encourage cross-border smuggling, so if used they must be targeted to low-income homes with a clear end goal, he said. Some countries have struggled to scale back their LPG subsidies, Wetzel said. But the IEA expects LPG prices to drop sharply later this decade as global demand peaks, allowing markets to reduce subsidies and emerging markets to expand. Kenya has distributed subsidised cylinders to low-income homes, scrapped LPG taxes and introduced mandates on new homes to include LPG infrastructure, Muchiri said. Some banks and retailers have offered microfinancing and pay-as-you-go smart meters on cylinders, she said. Ghana has also provided free cylinders and stoves to those most in need, its National Petroleum Authority director Akua Kwakye said. A cylinder recirculation model was introduced so consumers do not own the cylinders, which improves safety and reduces costs, she said. Logistics and their cost impact are a significant problem in Africa, Kunle-Salami said. "In a healthy market [logistics costs] should be 10-20pc, but in many African countries it is as high as 40-50pc," he said. A lack of storage infrastructure to protect from supply shocks is another issue. This requires significant investment that needs private-public collaboration, Wetzel said. But centralised solutions can only go so far — only grassroots initiatives create trust and acceptance, he added. Credits where they're due The IEA thinks carbon credits have huge potential in making LPG more affordable as a clean cooking fuel owing to the emissions savings and certainty of the verification. Such schemes might yield higher-quality credits than many other carbon-offsetting projects, Wetzel said. Many of the firms IFC finances struggle to understand, let alone access, the carbon market, Kunle-Salami said. But agreements on Article 6 at the UN's Cop 29 climate summit on establishing a global carbon market, and inclusion of clean cooking at the G7 and G20 summits, provide more hope such credits can become important, delegates heard. Nigeria LPG residential demand. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Q&A: Clean cooking the focus after Cop 29 hitch
Q&A: Clean cooking the focus after Cop 29 hitch
London, 3 December (Argus) — The dust has started to settle following the UN's Cop 29 climate summit in Baku, Azerbaijan, last month, and the general sentiment is again of missed opportunities. This is despite an agreement to mobilise $300bn/yr in climate finance for developing c ountries. Clean cooking in sub-Saharan Africa and other developing regions also appears to have slipped down the agenda at the summit. Yet this did not stop the World Liquid Gas Association (WLGA) LPG Week conference in Cape Town, South Africa, dedicating much of its energy to the issue over 18-22 November. Argus spoke with WLGA chief advocacy officer Michael Kelly about Cop 29 and LPG Week. What were your overall impressions of Cop 29? The venue impacted the negotiations. Cop 29 was well organised. Baku is charming. It was well managed, it was safe and the number of protests was limited. It was also surprisingly big — nearly 50,000 people, which makes it one of the biggest Cops in history. But the outcomes don't seem to be that significant. The final negotiations stretched into Sunday [24 November] and some late text modifications happened that disappointed those with more ambition. And the entirety of the negotiations had a glum mood because of the US election, given [US president-elect Donald] Trump pulled the US out of the Paris Agreement [during his first term]. None of his allies followed him then, but this time they might, because you have other populist regimes around the world. For example, the Argentinian delegation pulled out. This may be a hinge point. Did it meet expectations in terms of raising the clean cooking in Africa agenda? Clean cooking didn't figure as prominently in Cop 29 as it did in Cop 28. There may have been more focus on clean cooking, but the US election scrambled the message, plus a lot of governments had other priorities going into Cop 29. There were also a lot of calls from developing countries to change the way future summits are structured so fossil fuel lobbyists like me have their influence reduced. So, it seems like the clean cooking in Africa agenda was not really pushed, and the only silver lining may be the adoption of articles 6.4 and 6.2. Article 6.4 of the Paris Agreement concerns the creation of a global carbon market overseen by the UN, while 6.2 enables carbon credit trading between countries. Does this mean LPG could be included in a global credit scheme? Our industry has yet to seize the opportunity offered by carbon credits. Some of our members are working on this and it has been a topic of discussion with a lot of interest, but nobody has been able to crack the code yet. There are new algorithms in place by [carbon credit registries] Verra and Gold Standard — the Gold Standard one is under consultation — that we've contributed to, and WLGA member Envirofit helped design the Gold Standard consultation. Verra and Gold Standard had already included biomass-to-LPG for clean cooking in their credit schemes, but they were very limited in what they would accept. This is theoretically what they are changing, to expand the scope for carbon credits, including LPG projects. You flew from Cop 29 to LPG Week in Cape Town. Was the event a success? The feedback has been very positive. We didn't think we would have as many local participants as we did. We had South Africa's mineral and petroleum resources minister Gwede Mantashe, who gave a fairly full-throated endorsement of LPG. The market in South Africa is growing pretty strongly, largely because of [LPG trading firm] Petredec's [Richards Bay import terminal]. It's a few years old now but [the company is] establishing a rail connection to Gauteng, which is the most populous province in South Africa, and it looks like the market is really poised to grow. A core theme at LPG Week was cost. Are targeted subsidies a necessity in sub-Saharan Africa in areas where households cannot afford to cook with LPG? We recognise that subsidies can be effective in expanding access to LPG, and the main example of this is in India. But subsidies aren't a realistic option for many governments in sub-Saharan Africa because they simply can't afford them. The other challenge with subsidies is that they're hard to remove. There are other tools in the toolbox that governments can use to encourage growth. Saying that, with all the risks acknowledged and taking advantage of technology the way India has through biometrics and direct benefit transfers, they can be very effective in targeting a particular population and minimising seepage. Can carbon credits play a key role in the region? Some of our significant members think they will in offsetting the costs for those making investments, not only in sub-Saharan Africa but in other developing countries. It seems like they're moving in the right direction. The recent moves by Verra and Gold Standard and the approval of articles 6.2 and 6.4 at Baku demonstrate this. But the proof will be in the pudding — it's going to take one of our members to get a few projects up and running and receiving credits to prove the concept. One thing that came out of a study that [US-based clean cooking non-profit organisation] Envirofit did for us last year is that in order for carbon credits to be effective for a company, they can't just be a bolt-on. They almost have to establish a new business unit or department focused on carbon credits to make them worthwhile. So there's a cost associated with getting the credits, and a learning curve, which means it will take time. Cylinder ownership is a significant challenge in sub-Saharan Africa. Is the cylinder recirculation model the best approach? Our official position is that the only model that works is the cylinder recirculation model. Even when you're using pay-as-you-go [PAYG] systems that allow people to buy small amounts of LPG, it's still a cylinder recirculation model. Because the marketer puts a sensor on the cylinder and owns the cylinder, and the consumer buys small amounts, controlled by a locking mechanism. Once the cylinder is empty, it gets replaced by the marketer. What is holding back the adoption of PAYG technologies in the region? There are two challenges PAYG systems face. One is the penetration of cell phones, which is a problem in rural populations in sub-Saharan Africa. And the biggest issue is the cost of the technology. You hope that as these technologies evolve, the costs will come down. But it's taking longer than anticipated when these things first rolled out about 10 years ago. Everyone thought they would be the iPhone for our industry. But it's yet to really take off the way we had hoped. A soon-to-be-released report suggests 60mn-120mn t/yr of renewable liquid gases (RLG) can be produced by 2050. Do you think these levels are feasible? Achieving these kinds of numbers is dependent heavily upon strong, supportive policy frameworks and access to feedstocks. But there is a significant risk that RLG production may only reach less than a quarter of this potential capacity. Furthermore, without the supportive policy frameworks, there's a risk that feedstock and product competition will restrict the market available to the LPG sector. What is going to happen with renewable fuels, not just RLG, is very hard to predict. Does a Trump second term threaten the status of US RLG projects? In a word, yes. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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