Review delays Brazil's LPG assistance program

Spanish Market: Biomass, LPG
11/11/24

Brazil's lower house has removed a proposed LPG assistance program from its urgent voting schedule, submitting it to further review and revisions.

The program announced in August is still under deliberation, but officials now expect further revisions before it moves forward and launches on 1 January.

The bill may add new controls to avoid fraud, the mines and energy ministry's petroleum, natural gas and biofuels secretary Pietro Mendes said last week during a debate in the lower house about LPG.

Congressman Hugo Leal, the bill's overseer, told Argus that he will propose creating LPG cylinders smaller than the typical household 13kg models to ease access for low-income families.

Low-income families spend 70pc of their resources on housing and groceries, according to Carlos Ragazzo, a researcher at the Getulio Vargas Foundation. That suggests that the current government financial support has likely been used for monthly expenses rather than substituting firewood usage for cooking with LPG.

Consumption of firewood for cooking fell from 2005-2015 (see chart), thanks to improved economic conditions throughout the country, according to energy research firm EPE. But the share of households that use firewood for cooking has hovered around 25pc since 2015, even after the launch of program to promote LPG cooking use in 2021 to help those families during the Covid-19 pandemic.

Leal met with lower house leader Arthur Lira on 5 November to discuss the program's proposals and voting agenda, but no details have emerged since.

Almost 1mn Brazilian households cook with biomass only. That represents 1.1pc of the 12.7mn households that use biomass for any energy need. Additionally, 56pc of the biomass-only households are low-income families.

A 13kg LPG cylinder in Brazil costs R106.63 ($18.49), on average. That represents 7pc of Brazil's minimum wage. Low-income families usually receive only half of the minimum wage, on average.

By Betina Moura

Brazil residential energy sources

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06/12/24

S Africa EML gets 2-yr contract at Sunrise LPG terminal

Cape Town, 6 December (Argus) — South African terminal operator Sunrise Energy has awarded local firm EML Energy a 24-month storage contract at its 210,000 t/yr LPG import facility at Saldanha Bay. Eight companies participated in Sunrise's bidding process, of which five opted to proceed to full evaluation. After "a comprehensive vetting process," EML emerged as the preferred bidder, Sunrise's chief executive Rajen Singh told Argus . The contract will begin on 1 January 2025. EML aims to use the opportunity "to enhance its supply chain efficiency, expand its reach and solidify relationships with wholesalers and end-users," it said. Sunrise's facility is the Western Cape's only LPG import terminal, and the province is almost entirely reliant on imports because local refineries are unable to meet demand. EML replaced Vitol's local unit Vita Gas as the Western Cape's sole importer in June 2023, since when it has imported to Saldanha Bay on a temporary basis. Sunrise launched an invitation-only bidding round to find a new long-term supplier after EML's agreement ended in December 2023. Wholesalers in the province served by Sunrise's terminal have said they have to pay significant premiums since EML took over. This has pushed regional prices above the government-regulated maximum refinery gate price (MRGP), prompting the department of mineral and resources energy (DMRE) to review the formula it uses to determine domestic LPG prices. It currently uses Saudi state-controlled Aramco's monthly contract prices (CP) and Argus ' Ras Tanura-Richards Bay freight assessment to generate an import parity price. EML sells at about $280-320/t above the Aramco CP, while the MRGP is only around $160/t above the CP, a local trader said. The firm also varies prices between buyers and has no transparent methodology, revealing prices after the MRGP is published each month, according to a wholesaler that paid a premium of more than R2/kg, or around 14pc above an MRGP of R14/kg, last month. "Nothing justifies such a high premium", the wholesaler said. The price could be "optimised" through long-term contracts and by using a supplier with a sizeable footprint in multiple locations. EML said the MRGP as calculated by the DMRE does not include factors and circumstances such as demurrage and freight costs specific to the LPG terminal in Saldanha Bay. "DMRE is aware of this problem and is better placed to comment on this issue," EML said. DMRE deputy director of minerals and petroleum regulation Tseliso Maqubelo told Argus Saldanha is costlier than Richards Bay — where the Petredec-Bidvest 22,600t LPG terminal is located — because the size of vessel it can accommodate is much smaller. However, some LPG operators in the region have questioned the motivation behind EML's appointment given it has no operational experience and is unable to secure long-term agreements, which forces it to buy more expensive spot supply. At least one wholesaler with an international trading arm, which said it could bring LPG into the Western Cape in full compliance with the MRGP, took part in Sunrise's bidding round but was rejected. Another withdrew its bid because it found the process was not transparent. A second LPG import terminal will add competition once state-owned Strategic Fuel Fund (SFF) completes a pipeline to LPG supplier Avedia Energy's 2,000t storage facility in Saldanha Bay. A tender process to appoint a construction company for the pipeline is underway and work is expected to start in the first quarter of 2025, said the SFF, which acquired a 60pc stake in Avedia last year. The pipeline is expected to be completed by around August 2025, said Avedia chief executive Atose Aguele. This will allow initial imports of about 5,000-6,000 t/month, he said. By Elaine Mills Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

EU affirms 12-month deforestation delay

03/12/24

EU affirms 12-month deforestation delay

Brussels, 3 December (Argus) — Negotiators for the European Parliament and EU member states have provisionally agreed on delaying the implementation of the EU's 2023 deforestation regulation by one year. Fast-track adoption can now take place with a plenary vote expected on 16-19 December and later approval by EU ministers. The EU's council of ministers noted that the provisional agreement does not affect the substance of the existing deforestation rules. The final text, provisionally agreed, does not retain a "no risk" category, put forward by parliament's largest centre-right EPP party. Parliament had narrowly accepted the EPP proposal for the "no risk" category. Backing down on the amendment now allows the EU to proceed to EUDR adoption and publication in the bloc's official journal before the end of the year. Due diligence obligations set by the EU's 2023 deforestation regulation require operators and traders to ensure listed commodities and derived products, sold in or exported to the EU are "deforestation-free". Products include those made from cattle, wood, cocoa, soy, palm oil, coffee and rubber. The European Commission said it aims to finalise the country benchmarking system "as soon as possible but no later than 30 June 2025". And an information system where firms register due diligence statements will enter into operation on 4 December. Parliament's lead negotiator for the deforestation law, Christine Schneider, also pointed to a commitment by the commission to an "impact assessment and further simplification" for low risk countries or regions. "From 2028, countries practising sustainable forest management and showing no deforestation will have the opportunity to be exempted from unnecessary red tape," said Schneider, a member of the German centre-right EPP. The Centre-left S&D group said the system of "no risk" countries would have created an "unfair double standard", dividing EU member states into different risk categories. Negotiators firmly rejected this approach, the group said. "It was clear all along that their half-baked amendment proposals had no chance of success with the council and the commission," said Delara Burkhardt, German S&D negotiator for the deforestation law. Citing reasons of legal certainty, EU states quickly came out in favour of just a one year delay , agreeing with the commission's original proposal. Speaking to parliament on 3 December, the EU's director general for trade Sabine Weyand said robust commitments to halt deforestation in South America, as of 2030, and to ensure adherence to the Paris climate Agreement, are also "essential" elements of the EU's free trade agreement (FTA) with Mercosur countries — Brazil, Argentina, Paraguay, Uruguay, and now Bolivia. By Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Brazil LPG association knocks price control plan

03/12/24

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

03/12/24

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

03/12/24

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.

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