Cooking For LifeThe Future of LPG Demand in Africa

Michael Kelly, Deputy Managing Director, WLPGAMaputo, July 2017

Agenda – Part Two

12.45 – 14.00 Lunch

Part Two – Cooking For Life

14.00 – 14.30 Introduction to WLPGA Cooking For Life programme

14.30 – 15.00 The Proposition for LPG

15.00- 15.30 Breaking down the entry barriers to LPG

15.30 – 15.45 Coffee break

15.45 – 16.15 Lessons from Other Countries

16.15 – 16.45 Panel Discussion on the Opportunities & Challenges forMozambique

16.45 – 17.00 Summary, Conclusions and Future Action

This session will build on the morning’s discussions toexplore what are the key policy challenges to growingthe LPG industry in Mozambique and how these canbest be addressed using examples from othercountries

Overview of Part Two – C4L workshop

• Underscore the benefits of switching to LPG from traditional fuels

• Inform stakeholders about Cooking For Life and some of the global initiatives that have been successful, and could conceivably be replicated, in Mozambique

• Secure common agreement with all key stakeholders to develop action plans and a timetable to implement a series of improvements

Objectives of Part Two – C4L workshop

Energy poverty is a reality for billions every day

Our cities are becoming unbearable due to outdoor pollution

Our homes are not much better

Optimism“hopefulness and confidence

about the future”

Agenda

• The WLPGA

• Cooking For Life

• LPG Industry Overview

• Future demand in Africa

• Conclusions

Who Are We?

Member companies Countries

ProductionShipping &

tradingStorage

Distribution and retail

Service

Serving the full LPG value chain

A Powerful Industry Association

Leveraging International Organizations

Women in LPG (WINLPG)

“Most LPG consumers are women. Many women make and manage the purchasing decision and it is largely women who

use the product. Within the industry itself there are few women, not only at executive level, but at all levels

Energia, WLPGA Industry Council, October 2014

National Industry Associations

national / regional associations

Spending annually

Many are facing the same issues...

What you get back

• Unique access to the network including the associations

• Access to member stakeholders e.g. OEM’s (vehicle and other)

• Access to privileged, member-only data

• Possibility to leverage WLPGA research in your studies

• Consistent communications e.g. Exceptional Energy

• Direct in-country support e.g. participation at Parliamentary briefings etc.

• Support to annual event

• Etc.

Agenda

• The WLPGA

• Cooking For Life

• LPG Industry Overview

• Future demand in Africa

• Conclusions

Cooking for Life: The Vision

COOKING FOR LIFE, a campaign of the WLPGA, aims to facilitate the transition of

people

from cooking with traditional fuels as well as other dirty and dangerous fuels to cleaner-burning LPG by 2030.

Cooking For Life: The Problem

19

Health Impacts

4.3 million people die prematurely every year from exposure to indoor air pollution

Indoor Air Pollution from cooking kills more than Malaria, HIV and TB combined

Cooking For Life: The Problem

20

Environmental Impacts:

• Cooking with LPG instead of wood combats Climate Change and deforestation

• Switching from harvested wood to LPG reduces net carbon emissions by 67%

• LPG produces virtually no black carbon (BC) or soot (particulate matter, PM)

• The introduction of LPG into a community almost always has a positive impact on the quality of life for women

Why LPG?

• Portable

• Bottles can be can be stored indefinitely

• Easily transported

• Minimal investment in infrastructure

• Used virtually anywhere -- from urban centres to remote regions

• Flexibility in applications

When and where costly, grid-based energy services are

unavailable

Cooking For Life: The Target

Source: http://www-wds.worldbank.org

20 countries

represent 2.3

billion people who

lack access to

modern fuels

Cooking for Life

will be active in

countries that

have populations

in need,

supporting

governments and

WLPGA members

India

Population 1.2 billion

GDP $ 2.6 Trillion

Economic growth 7% pa

Among the world top 5 LPG users

Consuming 20 million MT annually

Increase of 6% from 2014

Consumption grown from 15 million MT in 2012

Produces just over 10 MT

India

0 5 10 15 20 25 30

India

Indonesia

Peru

Bangladesh

South Africa

Myanmar

Colombia

Nigeria

Tanzania

Kenya

Mozambique

Uganda

Millions of metric tons of LPG

Residential / Commercial Demand for LPG

2030

2016

2013

India has the highest domestic LPG consumption among the countries in which WLPGA does advocacy , and second largest in the world

Source IHS

India

Four million cylinders are delivered daily

50% + total demand imported

Demand estimated to increase to

38.8MMT by 2021

Year Demand Projections (MMT)

2016-17 21.2

2017-18 23.9

2018-19 26

2019-20 28

2020-21 30

2021-22 31.8

2022-23 32.8

2023-24 33.6

2024-25 34.5

2025-26 35.3

2026-27 36.2

2027-28 37.1

2028-29 38

2029-30 38.8

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2007 2008 2009 2010 2011 2012 2013 2014 2015

11,00011,778

12,526

14,04115,069 15,369

16,366

18,01919,132

Co

nsu

mp

tio

n 0

00

t

Year

Indian LPG consumption

India – What Worked

What worked:

• Strong support from the highest levels of government

• Three innovative programmes

– PaHal cash transfer programme.

– Pradhan Mantri Ujjwala Yojana (PMUY)

– Give It Up! Campaign launched in April 2015

• Coordinated execution by national PSUs

India - PaHal

Direct Benefit Transfer for LPG (DBTL)

Consumers get cylinders at market price and receive subsidy directly into their bank accounts

Launched November 2014

176 million joined the programme

Over 420 INR (6.5 billion USD) transferred directly to consumers

Commercial sales increased by 39.3% April 2015 – March 2016

India - Ujjwala.

Launched May 2016

Goal to provide 50 million LPG connections to BPL families over three years

Against initial target of 15 million connections, already achieved 16 million in nine months

Increased coverage to 72% may reach 85% by 2019

Women of BPL families are given a free connection then purchase the stove and refill

•

Indonesia

• Population 250 million

• Kerosene to LPG substitution programme

• Converted 50 million households across 396 cities

• Saving government $14.6 billion in subsidies

12451500 1583

42634422

5080 4979

60666400

2007 2008 2009 2010 2011 2012 2013 2014 2015

Co

nu

mp

tio

n 0

00

t

Year

Indonesian LPG Consumption

Indonesia

What Worked:

• Strong support for programme from senior government officials

• Large amounts of investment in infrastructure

• Innovative programmes:

– Small 3kg cylinders

– Kits of cylinders, stoves and regulators given away

– Very strong end user training programmes

LPG is the energy of choice for 95% of Brazilian

homes

33 million cylinders are delivered per month,

door to door

Government subsidized LPG in initial stages as

a “social fuel”

Industry largely deregulated and dynamic

Brazil

Ghana Population 25.9 million

2015 consumption 280,000 MT (16% increase on 2014)

Per capita consumption 9.45, kg

Potential LPG household cooking market size could double within 5 years as a result of national initiatives, and could continue to grow by about 20% every 5 years thereafter.

The projected increase would mean that about 16 million Ghanaian people (approximately 40% of all households) could be using LPG by 2030.

LPG market growth will require major improvements to the existing LPG supply chain, including storage capacity, filling, distribution and retailing, and the number of safe cylinders in circulation.

Source GLPGP

Nigeria

Population of 173 million

Consumption 400,000 MT in 2015 (33% increase on 2014)

Over 40% of domestic consumption in 2015 was imported

Very low Per capita consumption of less than 2.5kg

Production been steadily increasing - 2,405,000 MT but largely exported

Expects that with Government intervention with regards to policies which would aid investment and current initiatives, Nigeria should be consuming about 5 million MT by 2026 (10 year forecast) with LPG as the major fuel for cooking

Do not expect that the Government intervention would come very fast but gradually with regards to policies that would aid investment despite the ongoing huge investments by sector Stakeholders

Committee on the Expansion of Domestic LPG in Nigeria headed by the Vice President plans to convert 4 million households within 2 years, 10 million households over 5 years, 21 million households over 15 years

Bangladesh

Population of 168 million, 34 million households

Consumption grown from 50,000 MT in 2005 to 140,000 MT in 2015

A 37% increase 2014-2015 figures

Production 17,000 MT in 2015

Domestic is 67%

Predicting 1 million MT by 2020 domestic and transport

Constraints: Lack of infrastructure and limited draft for vessels

WLPGA event drew over 2,000 in March

Bangladesh

Source Laugfs

Agenda

• The WLPGA

• Cooking For Life

• LPG Industry Overview

• Future demand in Africa

• Conclusions

Iranian export potential bringing more Arabian Gulf LPG to Asia…

Panama Canal expansion brings US Gulf LPG to Asia…

The LPG industry continues to be characterised by three enduring and

strengthening trends – strong production, matched by solid demand and sustained lower

international prices.

Three trends

• Global production reached over 292mt/yr in 2015, a 4% rise from 2014

• Global consumption grew by 3.7 % to over 284 mt/yr

• Prices remain historically low but this could change…

What grows demand?

1. Clear government policyInitiatives driven by the senior leadershipInvestment in needed infrastructure

2. Tangible benefits to end usersSaved money and time Improved health & increased status

3. Strong and effective industry implementationProvide safe, dependable energy sourceFollow industry best practices

4. Population growth & increased incomeAsia and Africa are critical

The critical role of government

“Appropriate laws and regulations, adequately enforced, are the single most critical factor in whether widespread access to, and use of, LPG by a country’s households and businesses can be achieved in the near and medium term and sustained for the long term.”

WLPGA Guidelines for the Development of Sustainable LPG Markets

Where will future demand come from?

Agenda

• The WLPGA

• Cooking For Life

• LPG Industry Overview

• Future demand in Africa

• Conclusions

Where is future demand?

• African GDP growing by c. 5% since

economic crisis

• Up by a factor of 6 by 2050

• Population to exceed that of China by 2025

and greater than China EU and USA by

2050

• GDP per capita expected to double by 2050

• Grid-based energy will not keep up

• Ingredients for LPG growth

Africa

LPG consumption in Africa

• 4.2% growth per year since 2003

• 11kg per capita per year average

consumption in Africa

• The demand is concentrated on the

Northern border of the Mediterranean sea

(55kg/cap/y) compared with Sub-Saharan

(2.3kg/cap/y)

• But growth is not even by country or by

end-use

5465

60 51

47

Average 2.3 kg/cap/yr

Average 55 kg/cap/yr

Copyright © WLPGA 2015. All rights reserved

Africa is dominated by domestic demand

87.6%

1.4%

5.8%4.3%

0.6%0.2%

Domestic Agricultural

Industrial Transport

Refining Chemical

African LPG consumption by sector 2014

45.5% 1.6%

11.4%

9.7%

6.7%

25.1%

Domestic Agricultural

Industrial Transport

Refining Chemical

Global LPG consumption by sector 2014

Copyright © WLPGA 2015. All rights reserved

And penetration is uneven

Nigeria and South Africa stand outWhere is Mozambique?

Copyright © WLPGA 2015. All rights reserved

African Demand ProjectionActual 2007 … Actual 2010 … Actual 2013 … Actual 2016 … Projection 2020 … … Projection 2030

Kenya 74,017 63,779 59,626 197,649 288,780 402,936

Tanzania 8,019 21,484 33,250 52,737 99,735 321,852

Uganda 7,273 7,838 10,345 13,836 32,376 104,481

Zambia 2,071 1,139 2,736 4,112 9,622 42,385

Rwanda 1,500 2,850 4,300 9,660 40,777

Côte d’Ivoire 101,862 129,127 170,941 268,903 342,418 468,454

Senegal 120,656 114,419 103,207 122,450 132,544 161,570

Benin 9,428 11,785 14,350 15,565 19,820 63,962

Burkina Faso 20,168 28,865 51,269 74,537 130,366 189,104

Togo 2,879 4,164 10,132 14,352 21,103 37,565

Source Oryx Energies

+570%

+860%

+900%

+1,400%

+1,300%

+174%

+56%

+345%

+268%

+270%

What is the potential for Mozambique?

How can we help Mozambique?

• Industry is growing strongly but still

concentrated in Maputo

• Most consumption is domestic,

primarily for cooking

• Poised for strong growth in the coming

years

• Business model needs to be refined

There is plenty of opportunity for

growth – WLPGA can help!

Case Study - HopetounHopetoun is a fast-developing country in South East Asia with a population of around 100m.

Most of the population of Hopetoun has relied on traditional fuels, such as wood and charcoal, astheir primary cooking fuel but the government wants to introduce LPG into the sector.

They have an ambitious plan to transition half the population away from traditional fuels over asix-year period to combat the issue of deforestation in the country.

Recent market research confirms that the disposable income of their target audience for thiscampaign is limited and the government is concerned that they will not be able to afford LPGwithout some form of subsidy programme.

The government do not have a budget for supporting this programme and have called a meetingwith the LPG Association to discuss a way forward.____________________________________________________________________________

Discuss how LPG might be introduced into Hopetoun to meet the governments objectives

Want to know more about LPG opportunities?

Join us from October 3rd - 5th

in Marrakech