It is true that the African economy has undergone drastic development in the last two decades. These developments have led to a lot of social benefits, such as a rise in life expectancy, and political advantages. One of such political perks is obvious in the fact that in the 90s, only 5% of African countries were a democracy. Today, the figure is more than 90%. It is not only in politics that Africa has experienced development. There has been huge growth in energy adoption, more specifically, LPG consumption, especially in the last couple of years. For instance, the Petroleum Pricing Regulatory Agency recorded that Nigeria’s LPG consumption grew by 60.5 percent between 2018 and 2019.
Yet, there is still a lot of room for growth in LPG consumption within Africa. For instance, the consumption between Sub-saharan Africa and North Africa. While in North Africa, the average consumption of LPG per person is 53kg, in Sub-saharan Africa, the average LPG consumption is 2.5kg and less than 1kg in Nigeria. A 2021 study showed that only 15% of Nigerians rely on LPG.
The opportunities for LPG growth in the continent are facilitated by the population growth of the continent. In a 2019 report, the United Nation acknowledged that the world population will increase by 2billion in the next 30 years. Half of that figure will come from Africa. What will be the effect of this growth increase on a continent struggling to reduce energy poverty and what are the opportunities that will present?
A large portion of Africa, especially Sub-saharan Africa still depends on bioenergy. The Organization for Economic Co-operation and Development (OECD. 2015) estimates that in Central Africa, 85% of the population depends on bioenergy. The figure is a little lower in East Africa at 80%, In Southern Africa at 60% and in West Africa at 78%. This has raised serious concern for our environment as it accelerates the deforestation that the region is now experiencing. While many African countries have developed strategies to increase LPG consumption among Africans which include educating people on environmental and health benefits of using LPG instead of alternatives such as biomass or kerosene subsidies, awareness programmes, educating potential users of the efficiency, appliance programmes cleanliness, there is still space for improvement. Nigeria consumes 300,000 MT of LPG per annum while Senegal and Ivory Coast consume 250,000 MT each. These three countries make up to 80% of the total consumption in West Africa.
All these situations have combined in creating a high demand for LPG products across Africa. Here are some of the opportunities that are hidden in the African LPG sector for businesses and communities, and the associating risks.
Distribution of LPG Cooking Materials
LPG is a liquified propane/butane mixture under ambient temperature and pressure. It is a safe and clean-burning gas. It is used domestically for cooking in homes and businesses. It is also used industrially in the automotive industry, manufacturing plants and in generating electricity through thermal. Yet the most popular use of LPG in Africa is cooking with most of its consumers relying on the gas to prepare their meals. This means that there is a huge market for the distribution of LPG cooking products such as gas cylinders, burners and valves.
One of the things to consider when investing in LPG cooking products is to realize that most LPG consumers in Africa live in urban settlements, hence, your business has to be located in such a way that it will not be a herculean task reaching your target audience. Over 80% of urban dwellers rely on LPG to prepare their meals.
This opportunity only involves getting LPG cooking products wholesale and reselling to the end-users. Having this in mind, all you require to invest in this opportunity is:
Capital
This opportunity is not capital-intensive as all you require is at least one supplier who you can always depend on. The capital to invest in this opportunity depends on the size of your company.
Training.
Just like any business opportunity, one needs to learn the intricacies of dealing with such an opportunity before one plunge into it. It is no different with retailing lpg cooking products. For instance, if you decide to deal with cylinders, it is necessary that you know how to transfer LPG into the cylinders. You also need to know when and where to buy these products.
Good supplier
If you choose to invest in these products, then you will need to look for a consistent supplier. This is because to achieve success in this field, a simple goal is to always have products for your consumers. Hence, you need suppliers that you can trust.
2. LPG Bulk Terminal Storage
One of the problems facing the LPG industry in Africa is a lack of enough storage facilities. For instance, In Lagos where there is very high LPG consumption, Nigerian National Petroleum Commission (NNPC) has three jetties in Lagos. These jetties are:
Petroleum Wharf Apapa (PWA)
New Oil Jetty (NOJ)
Block Oil Plant (BOP)

These jetties are used to discharge petroleum products. However, these jetties are not enough, as it is only NOJ that has the facility to offload LPG. This leads to overwhelming situations in which vessels must wait for a long time to berth as there are no available jetties that can discharge LPG.
This situation is one of the leading causes of the unstable nature of LPG prices in Africa as when vessels are stranded, supply is limited. This increases demand which in turn increases supply. It is an understatement to say that there is a need for private-owned terminals and storage facilities that will not only stabilize the price of LPG but will add more organization to the LPG sector in Africa.
Setting up an LPG terminal is not a very simple process, and there are a lot of requirements that are necessary to be considered. However, before we discuss the processes involved, it is important that we realize the categories of owners of terminals and bulk storages.
Single owners - These are large global key players in the sector. For these sorts of companies, operating their own terminals and LPG farms is a feasible option, and it is from these farms that they distribute LPG to their other facilities.
Consortium - In many instances, a group of smaller companies come together to invest in owning a terminal, because of the capital-intensive nature of the project. Also, these companies get to share the responsibility of operational costs and technological contributions making the process of running a terminal a bearable one.
Private-owned - Many times, third-party individuals invest in owning LPG tanks. They hold LPG reserves for several companies at the same time and charge them for operational costs.
Here are some of the things to consider when attempting an LPG bulk storage facility:

Feasibility study to determine whether constructing a terminal is necessary in the first place. This study, which should be carried out by experts and professionals in the business, also looks to determine what model of terminal will be suitable and what sort of partnership would be necessary to begin erecting a terminal.

Location study is an important aspect as this would determine the area that would observe high profit and low operational costs. Also, one needs to consider the proximity to other facilities.

The truth is that there is a huge need for more terminals and LPG farms in Africa that would service the growing need of LPG among African consumers. Yet, it is important that one pays attention to the complexities and intricacies of beginning such complex processes.


3. LPG PLANTS
Another area that is overwhelmed by demand in the African LPG sector is the need for more bottling plants. In Nigeria, for instance, there are not more than 500 bottling plants. However, to reach the overwhelming demand of LPG consumption, we need 2000 plants. The effect of the lack of enough bottling plants means that retailers must travel long distances to get the gas from the plants. This process not only makes the business a rigorous chore for the retailers, it also leads to more logistics problems.
The opportunity involved in investing in an LPG filling plant is enormous, one of which is the optimal utilization of resources involved. This is guaranteed especially because of the flaring away of gas that occurs during the refinement of petroleum.
If you are considering investing in owning an LPG plant, you may have to consider the following:
• Location. It is not a good idea that your LPG filling plant be in a residential area.
• Gas filling equipment will need to be procured and installed.
• LPG tanks attached to trucks will need to be procured as this will be needed for purchase of LPG from refineries.
• Also, investors need to invest in getting the necessary approvals from Petroleum departments across Africa.
Due to the huge profit from opportunities such as this, investors can seek sourcing out funds from banks or other platforms. However, this route requires that they invest in a thorough feasibility study.

4. LPG as Marine Fuel
This opportunity is one of the latest in the African LPG sectors. It was not until October 2020, that the world’s first LPG-fueled vessel set sail successfully. Since then, LPG has found its place in the shipping industry as marine fuel. This is on par with IMO’s 2050 regulation, as the World LPG Association (WLPGA) announced a reduction in greenhouse gas emission to about 50% by 2050. LPG as marine fuel promises to lower emissions, not just in terms of green emissions but also regarding other pollutants.
Although this calls for a rethink in the design of many ships as they have been designed to rely on LNG. The adoption of LPG as marine fuels means that experts would begin to consider regulations, safeguards, safe practices, operational processes, and training to accommodate this new adoption of LPG as marine fuel.
Global LPG production is increasing 2-3% every year. Also globally, LPG prices have been dropping since 2011. This indicates that there is the availability of LPG especially for its use as marine fuel.
Here are some of the benefits of LPG as marine fuel:
• Clean handling and low emissions
• LPG is not harmful to the environment, especially when there is spillage.
• Meets Global emission standards.
• Installation costs is lower than LNG
• It has a lower-life cycle cost.
• Saves time for large LPG tankers that can use the cargo (LPG) as fuel.
• Saves cost.
Some marine infrastructures for LPG use have already been marked into their planning stage, and with more expected to be designed as the time goes, one can be certain that this opportunity is going to be around for a while. The industry is ripe for LGP as marine fuel as studies have made it aware of terminals where there are technical, operational and commercial limitations, introducing LPG as fuel could resolve these tensions.
There are two main factors that would facilitate African countries to take advantage of this opportunity:
Regulatory situations: African governments must realize the potential of LPG as marine fuel and regulate government policies in the favor of investing time and resources. This situation should be engineered promptly, as global industries have initiated discussions in this direction, and this would create an avenue where Africa can contribute, alongside, other developed countries, in LPG’s use as marine fuel.
Operational drivers: This refers to the technology necessary to \facilitate LPG for marine use, and eventually, foster cost-savings. This technological push is needed in the designing and installation of specialized engines in ships so that they can begin to be fueled by LPG. This will lead to cost-effective business running as many experts now complain of the high price of LNG. More and more large LPG industries have shown interest in having ships that can run on LPG. However, due to the novelty of the opportunity, an accepted LPG price for marine ships has not been decided yet. This means that until a uniform price has been deliberated on, no commercial LPG-fueled ships will trade in spot markets where the same ship owner will have to pay their bunker cost because of the unstable nature of the price.

These are some of the opportunities available in the African LPG sector. These opportunities, provided for by the high demand of LPG in Africa, do not come without risks. Chief among these risks is the unstable price of LPG in African regions. This lack of maintenance of LPG pricing is because of logistics. Some of the variables include the cost of the product from NLNG, terminal fees, cost of transportation from bulk storages to bottling plants and costs from bottling plants to retailer outlets.
The unsteadiness of the price of LPG and other factors such as world bench-mark pricing, exchange rates and the shortage in terminals, storage and distribution facilities means that one who is considering investing in this terrain must gather as many resources as they can get before entering the field.
Kiakia gas is a leading integrated marketer of LPG products in Africa. Our experience in the industry makes us an ideal partner as we are open to help you with planning for your businesses with details such as:
Business Overview
Marketing Plan
Production Plan
Organizational and Management Plan
Financial Plan
Risk Analysis and SWOT analysis
Quarterly business intelligent update
Kiakia gas helps stakeholders make data-driven decisions in the clean energy space via real-time quantitative research and feasibility studies. Mail hello@kiakiagas.com to learn more.