Oryx Energies is one of the largest and longest-established LPG and oil product distributors in sub-Saharan Africa, present in over 20 countries in the region. The company, owned by investment group AOG, will be keeping a keen eye on the IEA's upcoming Clean Cooking Summit in Paris this month, which is bringing heads of state from the region — including Tanzanian president Samia Suluhu Hassan — together to help mobilise political backing and financing for schemes to transition to clean cooking fuels such as LPG. Argus' Oliver Binks spoke to Oryx subsidiary Oryx Gas Tanzania's managing director Benoit Araman to discuss the summit and the company's expansion plans in Tanzania and regionally:
What are your hopes and expectations for the IEA Clean Cooking Summit later this month?
Oryx Gas Tanzania is pioneering the implementation of the Clean Cooking Programme in Tanzania. This is creating dynamic growth that benefits the domestic market — the business environment [has improved] thanks to this initiative. If, in May, the key stakeholders are able to make commitments on policies, financing and partnerships during the Clean Cooking Summit — beyond mere good intentions — this should boost LPG growth across the whole of Africa for the next 10 years, which is a unique opportunity for existing and future investors.
What are the main challenges you have faced in helping to develop Tanzania's LPG market over the past 10 years?
Firstly, supply and infrastructure. The country had very little, if any, infrastructure such as LPG terminals, bulk storage facilities and filling plants. So the first thing that has been addressed in the past 10 years has been to build some infrastructure, which can today store around 16,000t of LPG. This is not enough — more terminals and storage space are needed. Further to that, supply is constrained by Dar es Salaam port congestion, while other ports including Tanga in the north and Mtwara in the south are not yet equipped to receive large LPG vessels.
Red tape is also a challenge. Tanzania has come a long way even if today the situation is not ideal, but it is still much better than it was 10 years ago. Another issue is individualism versus industry thinking. Culturally, concepts like pooling assets were very alien. It remains the case but at least the industry has started talking with one voice on some matters. In other words, instead of looking at the midstream of the industry — terminal, storage, filling — as an opportunity to joint venture, share the capex and therefore decrease operational costs by pooling big assets among high standards players, the mentality is more individualistic. Thanks to the synergies created by the newly born Tanzania LPG Association, this mindset starts to slowly evolve in a more communal direction.
Oryx has previously cited a national target of moving 80pc of Tanzania's 65mn people to LPG for cooking by 2032. Given current demand puts LPG's reach at less than 10pc, can this be achieved? And how does Oryx plan to help meet this goal?
The 80pc target came from a pledge made by [Tanzania's first female president] Samia Suluhu Hassan, who is championing the implementation of clean cooking programmes in Tanzania and the African continent. It will be supported by all current and future participants in the market, including Oryx, Taifa, Manjis, Lake, Oil Com, Puma and soon TotalGas. The market grew annually by double-digit percentages until 2022 when there was a lull, mainly owing to growing inflation. Since 2022, the market has grown by a CAGR [compound annual growth rate] of 11pc.
Currently, the market stands at 2kg/capita, which is minimal but has doubled against 2018. The market should double again in the next five years and is expected to then double again. So by 2034, we should be operating a domestic market of around 500,000 t/yr, without any volumes from potential autogas sale.
What the country critically needs now is infrastructure development. This includes a big sea terminal with a minimum of 20,000t of storage in the north of the country to mitigate Dar es Salaam port congestion and saturation, connected to a SBM [single buoy mooring], which will help the offloading of VLGCs. Also, increased capacity at existing terminals in Dar es Salaam and upgrading the current jetty to enable larger vessels to discharge — currently vessels of a maximum size of 5,800t can berth. As well as a new terminal project in Tanga and a 1,500t phase-one project that is undergoing commissioning in Zanzibar, another 5,000t project has been proposed at Mtwara. Finally, additional inland storages such as break-bulk depots and increased storage capacity at existing filling plants.
Other than the price of the LPG, another significant barrier is the cost of the equipment for households. What can be done to bring these down?
In Tanzania, an LPG starting kit consisting of one 6kg cylinder, one burner and one trivet costs about $33. On promotion, it is sold for half the price, the other half subsidised by the LPG market participants. Such an entry cost is still a barrier, yet it is not impossible to overcome. A two-burner stove meanwhile costs around $30. So yes, there is a disconnect between what the appliances cost and the willingness to pay or the purchasing power of households. But LPG players are self-subsidising part of this cost, you have institutional funds such as the Clean Cooking Fund that are becoming gradually available for distributors, and lobbying is alleviating levies such as VAT on LPG appliances and accessories. Some form of announcement on this will be made for the government's 2024-25 budget, due to be ratified in June 2024.
A large proportion of Tanzania's imports are sourced from the US despite the country's proximity to the Mideast Gulf. As Tanzania consumes more LPG, will it look to other more regional suppliers?
As per current market dynamics and according to Tanzania's main LPG supplier, Geogas, it seems that US-origin product is the best priced and the main source. This does not discard other supply sources, such as the Mideast Gulf, South America, Australia and other world reputable sources.
Oryx operates in many other east African countries, as well as in west Africa. Where are you focusing on LPG market expansion in the short to medium term, what is driving growth in these areas, and what are the main challenges?
I see huge opportunities developing in eastern and southern Africa in the likes of Tanzania, Uganda, Ethiopia, Kenya, Malawi and Zimbabwe. In west Africa, Senegal and Nigeria are showing big untapped potential. The challenges are all the same in respect of the need for political stability, ease of doing business, red tape, tax regimes and above all, how secure the judiciary is and the fairness of justice.
In terms of LPG, product access through sustainable and affordable supply remains key. Once this is overcome, the rest is easy to tackle. Southern and eastern African regions, together with Senegal, are the markets that seem to offer the biggest potential in terms of market growth. This is owing to the appetite of their growing populations to secure access to LPG. Last but not least, the narrative about energy poverty has to change, in that a significant part of the African population has some money to spend to benefit from cleaner energy sources rather than polluting and harmful charcoal, paraffin and wood open fires.
