NPA revises mode of LPG importation to reduce cost and improve efficiency

The National Petroleum Authority (NPA) on Monday, 29th January 2024 successfully held the maiden Open Competitive Tender for LPG imports into the country. The winning tenderer submitted the lowest premium of USD30.39/MT for the four (4) Lots that were tendered for the period March to June 2024. This is a significant drop from the current premiums which range between USD67/MTto USD98/MT. Each lot is about 20,000 metric tonnes.

The NPA says the decision to use open competitive tenders for the importation of LPG is to reduce cost and ensure efficiency.

It said the proposal for the open competitive tenders was approved after consultation with Bulk Import, Distribution and Export Companies (BIDECs) with a majority of them supporting it.

The Authority indicated that the quantity being tendered per month represents about 70 percent of Ghana’s monthly LPG consumption with the Ghana National Gas Company (GNGC) supplying the remainder.

It is recalled that the NPA proposed the use of Open Competitive Tenders for the importation of LPG in 2021 to, among other things, bring efficiency to the importation of LPG into Ghana and ultimately reduce the cost of LPG through competition.

This was one of the measures proposed to help reduce the cost of LPG to aid in the implementation of the Cylinder Recirculation Model (CRM), which has affordability as one of the key tenets to successfully implementing the policy.

The proposal was thoroughly discussed in-house to assess its feasibility, and after it was concluded that it would help reduce the cost of importing LPG, approval was granted to engage with the BIDECs to get their buy-in before its implementation.

There were several engagements with BIDECs throughout 2023. These engagements resulted in the majority of BIDECs supporting the proposal, despite some reservations from a few of them.

The Authority considered the concerns raised by those with reservations and concluded that they were not strong enough to prevent the implementation of the policy.

Data available to the Authority on LPG imports by BIDECs over the years shows a huge disparity in the premiums paid to the International Oil Trading Companies (IOTCs). This can be attributed to the smaller parcels of LPG imported by the BIDECs.

The Authority is of the view that importing the LPG in bulk through the tender process will help to reduce the premiums due to economies of scale and further bring efficiency to the importation of LPG.