An Energy official last week said foreign oil companies shot down government’s proposal to use the Kingfisher block near Lake Albert to exclusively produce Liquefied Petroleum Gas (LPG).
Uganda has an estimated 70 billion cubic feet of the gas.
“The developers came to us and said, ‘there is no market for all this LPG in Uganda’,” Dozith Abeinomugisha, the principal geologist in the Petroleum Exploration and Production Department, at the ministry of Energy said.
This was at a breakfast meeting organised by the German Embassy to discuss Uganda’s readiness for climate change in the Albertine Graben oil–belt.
China National Offshore Oil Company Uganda, which operates Kingfisher, has since refuted the claim. LPG is the ordinary gas used in homes for cooking.
According to the Energy ministry, consumption of LPG in Uganda increased from about 1,000 cubic metres (cm3) in 1994 to 8,000 (cm3) in 2010, the most recent year for which such data is readily available.
The increase is attributed to urbanisation and more Ugandans transitioning into the middle–class. Uganda imports LPG from the Middle East, via Mombasa, Kenya.
Why is Uganda’s consumption of LPG low?
A 2008 study by the Energy ministry notes there are few bulk LPG storage facilities and filling plants in Uganda as well as few special trucks to transport LPG across the country.
This is partly because for long the few fuel dealers in Uganda treated LPG as a peripheral product, the study says, considering petroleum and diesel as more profitable.
Thus, in Uganda, there is no buffer to guarantee supply and it is not clear whether LPG is sometimes not readily available as a result of few companies in Uganda dealing in the commodity or if it is due to weather challenges on the high seas.
What is clear though is that since Uganda relies on imported LPG, the transportation costs make it expensive.
Consumption is also low partly because the price of cylinders and accessories is high.
Currently, an empty six–kilogramme cylinder costs between Shs70,000 (Mpishi Gas) and Shs100,000 (Vivo, Total).
Refilling it costs between Shs57,000 and Shs59,000 and could last for a month.
A bag of charcoal in some parts of Wakiso District costs Shs70,000 and could last for two weeks or a month.
However, an average household whose monthly income is about Shs200,000 is probably unlikely to set aside Shs100,000 to buy a 6kg cylinder and gas.
Twelve kilogramme cylinders cost upwards of Shs80,000.
The other reason the ministry’s study advanced was there are few companies dealing in LPG; and that they tend to be oligopolistic. Oligopolies usually collude to fix prices.
The ministry said some of the potential users of LPG perceive it to be dangerous because they might have seen pictures or heard of some people who was harmed by gas flames or related effects.
National Planning Authority’s chairman, Wilberforce Kisamba–Mugerwa, says low suppressed demand should not stop increased production or investment in LPG.
But how can consumption be increased?
Uganda has to invest in bulk storage facilities, which could mean putting up LPG storage facilities in regional towns.
It would also have to build filling plants outside Kampala so that those areas can get refills nearby.
According to Vision 2020, one of the government’s development plan for the next 25 years, is to encourage use of LPG though collaborating with neighbouring states to build a gas pipeline to and from gas fields in the region.
“You can introduce any innovation to create demand,” Kisamba–Mugerwa told this newspaper.
Vietnam and Peru increased consumption of LPG from 4 per cent to 50 per cent in 10 years by reducing value added tax and import duty on LPG.
In Indonesia, oil companies sell three kilogramme cylinders to consumers at half the price with government paying the balance.
Some people have suggested Uganda copies similar approaches, especially reducing of taxes on the commodity.
However, an April 2014 report titled Determinants of Household’s Choice of Cooking Energy in Uganda, says a reduction of tax on LPG is not enough.
“The high cost of LPG equipment – the canister, hose and the stove – might be more of a detriment on LPG use than just the price,” the report notes.
It says government and development agencies should provide affordable micro-credit to households to support purchase of required equipment.
State minister for Mineral Development, Peter Lokeris, says subsidising the cost of gas canisters, hoses and stoves, is a good idea, however, “somebody has to raise it with the ministries of Finance and Energy so that they could discuss the implications,” he said.
But to Abeinomugisha, there is need for increased awareness, which could include educating people about the use of LPG if the consumption is to increase.
Benefits of using LPG
Some environmentalists argue if Uganda increases consumption of LPG for cooking purposes, it would check felling of trees, which would mitigate global warming.
Tom Okurut, the executive director of the National Environmental Management Authority (Nema), says LPG “would help to reduce felling of trees for charcoal burning”.
According to Nema, Uganda loses 80,000 hectares, up from 50,000 hectares of forest annually.
With the depletion of forests, ‘entrepreneurs’ are invading even the unlike areas, like game reserves, for wood to produce charcoal.
Increased use of liquefied petroleum gas, according to experts is likely to reduce the impact of environment degradation that is mainly manifested through tree felling. Uganda, according to reports, loses more than 80,000 hectares of forests to charcoal burning annually.