Supply Chain Plant
Resume:
Residential Market for LPG:
A Review of Experience of 20 Developing Countries
Prepared by
William G. Matthews
and
Dr. Hilmar R. Zeissig
for the World Bank
December 2011
H OUSTON INTERNATIONAL BUSINESS CORP. Energy and Environmental Policy Consultants
151 Moss Point, Friendswood, Texas 77546, U.S.A. Tel.: 281-***-**** Fax: 281-***-****
E-mail: ****@**.******.*** www.energy-environment.com
The views expressed are those of the consultants
and should not be attributed to the World Bank or its Executive Directors.
2
Table of Contents
Acknowledgments 3
Abbreviations 4
Executive Summary 6
2. Aggregate and Comparative Data of the Study Countries 19
3. Ghana 46
4. Kenya 59
5. Senegal 66
6. South Africa 72
7. Fiji 77
8. Thailand 80
9. Vietnam 86
10. Albania 91
11. Moldova 95
12. Turkey 98
13. Brazil 114
14. Dominican Republic 123
15. Guatemala 129
16. Mexico 136
17. Peru 146
18. Canada/Ontario 157
19. Texas, United States 162
20. Jordan 168
21. Morocco 173
22. Afghanistan 178
23. Pakistan 181
24. Sri Lanka 189
3
Acknowledgments
We are grateful to the Norwegian Agency for Development Cooperation for funding this
study through its Petroleum Governance Initiative under the Oil for Development
program. We also wish to express our appreciation to Gazmend Daci in Albania, Ana
Taula Tu ionuku and Demetrios Papathanasiou in Fiji, Waqar Haider and Geraldine
Wilson in Ghana, Kyran O Sullivan in Kenya, Yesim Akcollu in Turkey, and Anh Nguyet
Pham for Vietnam, all World Bank staff in country offices; Victor Hugo Ventura of the UN
Economic Commission for Latin America and the Caribbean in Mexico City; and Peter
Nduru, Director-Petroleum, Energy Regulatory Commission in Kenya for providing
information or points of contact for information related to LPG in their respective
countries.
Lastly, we would like to thank the following organizations in Ghana and Turkey for their
kind assistance to William Matthews during his field trips to these countries:
Ghana:
Association of Oil Marketing Companies (AOMC) of Ghana
FUELTRADE Ltd. (Bulk Distribution Company)
Ghana National Fire Service (GNFS)
Ghana Oil Company Ltd (GOIL
Ministry of Energy, Ghana, Petroleum Downstream Department
National Petroleum Authority (NPA)
Tema Oil Refinery (TOR) Ltd.
Total Petroleum Ghana Limited
Turkey
AYGAZ
Energy Market Regulatory Authority (EPDK)
IPRAGAZ
Milangaz
T pras (Turkish Petroleum Refineries Corporation)
Turkish LPG Association
4
Abbreviations
ABNT Associa o Brasileira de Normas (Brazilian Association for Technical
Norms)
AFRED Alternative Fuels Research and Education Division (Texas, United States)
ANSA Afghanistan National Standardization Authority
ANSI American National Standards Institute
ANP Ag ncia Nacional do Petr leo, G s Natural e Biocombust veis (National
Agency for Petroleum, Natural Gas, and Biofuels, Brazil)
ANRE National Energy Regulatory Agency (Moldova)
API American Petroleum Institute
ARA Antwerp, Rotterdam and Amsterdam
ASME American Society of Mechanical Engineers
ASN Association S n galaise de Normalisation (Senegalese Association for
Standardization)
ASTM American Society for Testing and Materials
bpd barrels per day
o
C degrees Celsius
CFR Code of Federal Regulations (United States)
CIF cost, insurance, and freight
CNG compressed natural gas
CNH Comit Nationale des Hydrocarbures (National Committee for
Hydrocarbons, S n gal)
CSA Canadian Standards Association
DOT Department of Transport (United States)
DWT dead weight tonnes
Enerji Piyasas D zenleme Kurumu (Energy Market Regulatory Authority,
EPDK
Turkey)
EPPO Energy Policy and Planning Office (Thailand)
ERC Energy Regulatory Commission (Kenya)
GSB Ghana Standards Board
FLGE Fuel and Liquid Gas Enterprise (Afghanistan)
FOB free on board
HHI Herfindahl-Hirschmann index
HSE health, safety, and environmental
INDECOPI Instituto Nacional de Defensa de la Competencia y de la Protecci n de la
Propiedad Intelectual (National Institute for the Defense of Competition
and Intellectual Property, Peru)
ISO International Organization for Standardization
JPRC Jordan Petroleum Refining Company
KEBS Kenya Bureau of Standards
5
lb pounds (0.454 kilograms)
kg kilograms (2.2 pounds)
LNG liquefied natural gas
LPG, LP Gas liquefied petroleum gas
LPGSASA Liquefied Petroleum Gas Safety Association of Southern Africa
MOCI Ministry of Commerce and Industry (Afghanistan)
MOLDST Department of Standardization and Metrology (Moldova)
NACE National Association of Corrosion Engineers
NFPA National Fire Protection Association (United States)
NOM Norma Oficial Mexicana (official Mexican norm)
NPA National Petroleum Authority (Ghana)
OGRA Oil and Gas Regulatory Authority (Pakistan)
p.a. per annum
Pemex Petr leos Mexicanos
PGPB Pemex Gas y Petroqu mica B sica (Mexico)
PPP purchasing power parity
PUCSL Public Utilities Commission of Sri Lanka
RRC (Texas) Railroad Commission
SABS South African Bureau of Standards
SAR Soci t Africaine de Raffinage (African Refining Company, S n gal)
STAMEQ Directorate for Standards and Quality (Vietnam)
TIS Thai Industrial Standards
TLPGA Turkish LPG Association
TNRC Texas National Resource Code
TSE T rk Standardlari Enstit s (Turkish Standards Institute)
TSSA Technical Standards and Safety Authority (Ontario)
UNDP United Nations Development Programme
VAT value-added tax
VPM ventas de primera mano (first-hand sales)
WLPGA World LPG Association
6
Executive Summary
This study was undertaken as part of a larger study examining how liquefied petroleum
gas (LPG) can contribute to reducing household energy poverty in developing countries.
Energy poverty remains prevalent in the developing world, where an estimated 1.4
billion people lack access to electricity and three billion continue to rely on traditional
solid fuels for cooking and heating. The study takes 20 developing countries from
around the world and assesses the legal framework, industry and market structures and
practices, supply arrangements and infrastructure, and pricing policies. The information
from developing countries is supplemented by case studies of Ontario, Canada and
Texas, United States to illustrate how markets with a strong legal framework and market
governance operate.
Consumption and price levels
The developing countries examined varied in kilograms (kg) of LPG consumed by
households both per person and per dollar of gross domestic product (GDP) valued at
purchasing power parity (PPP). Figure E.1 shows the statistics for 2008, the last year
for which the data are available for most countries. Household use of LPG tends to rise
with income, except where natural gas is increasingly supplied to (urban) residential
consumers, as in Moldova, Pakistan and Turkey, or where electricity is widely used for
cooking and heating, as in South Africa.
Figure E.1: Household consumption of LPG in 2008
60 12
kg per US$million GDP at PPP
50 10
kg of LPG per person
40 8
30 6
20 4
10 2
0 0
Kenya
Brazil
Moldova
Senegal
Turkey
Ghana
South
Albania
Mexico
Peru
Jordan
Morocco
Fiji
Thailand
Afghanistan
Pakistan
Sri Lanka
Africa
Vietnam
Dominican
Guatemala
Rep.
per capita Per $million GDP at PPP
Sources: See country chapters in the report.
Note: Household consumption of LPG in Afghanistan in 2008 was not available.
The retail prices charged in December 2010 varied by a factor of eight, ranging from
US$0.40 per kg in Morocco to $3.26 per kg in Turkey (Figure E.2). Two markets from
North America, Ontario and Texas, are included for comparison. The international bulk
supply prices in November and December of 2010 were about US$0.66 0.68/kg in the
7
U.S. Gulf Coast (benchmark for North America and Latin America), US$0.85 1.00/kg in
Europe (benchmark for Eastern Europe, Turkey, and some parts of Africa), and
US$0.82 0.91/kg in the Arab Gulf (benchmark for east Africa and Asia). To these bulk
supply prices must be added transport and distribution costs, company profits, and
taxes. It is clear that the pricing policies in Ghana, Thailand, Mexico, Jordan, and
Morocco involved some elements of price subsidy. The top five countries as measured
by kg of LPG consumed per person in Figure E.1 Mexico, the Dominican Republic,
Morocco, Jordan, and Thailand were all low-price markets in December 2010.
Figure E.2: Retail prices of LPG in December 2010
3.26
3.50
3.00
2.57 2.54
2.50
2.05
US$ per kg
1.73
2.00
1.47 1.36
1.37 1.30
1.23
1.50 1.18
1.17 1.17 1.15
1.03 1.06
0.97
0.82 0.73
1.00
0.60
0.56
0.40
0.50
0.00
Kenya
Brazil
Moldova
Senegal
Turkey
Albania
Mexico
Peru
Ghana
Canada/Ontario
Jordan
Morocco
Fiji
South Africa
Thailand
Afghanistan
Pakistan
Sri Lanka
USA/Texas
Vietnam
Dominican
Guatemala
Republic
Sources: See country chapters in the report.
Note: All prices are for LPG sold in cylinders except Moldova, where the price is the pump price for
automotive LPG sold at filling stations.
Regulatory framework for LPG
The downstream petroleum laws and general regulations in many of the developing
countries reviewed are incomplete and often antiquated. Only about half of the countries
have promulgated special regulations for LPG, but most have issued at least some
national standards and/or formally adopted international or regional standards for quality
control and protection of occupational health, safety and the environment (HSE).
LPG has well defined specifications in the international markets. The appliances for use
in households as well as the facilities and equipment for transport, storage and
distribution are relatively simple and similar around the world. As such, it is not
necessary for developing countries to re-create their own HSE standards and technical
specifications for LPG and the chain of supply.
The standardization laws in many jurisdictions specifically allow the formal adoption of
foreign norms as an alternative to the writing of national standards. Nicaragua,
Madagascar, Tanzania and Uganda have recently promulgated modern laws for the
downstream petroleum sector that mandate the formal adoption of international
8
standards as the preferred method to regulate HSE. Although not mandated by law to
do so, Albania, Ghana, Guatemala, Moldova, Morocco, Pakistan, Sri Lanka and Turkey
as well as Ontario/Canada and the U.S. state of Texas have formally adopted the
principal standards for the LPG chain of supply from Europe or the United States, from
the International Organization for Standardization (ISO) or from regional standardization
bodies. Mexico and Peru, on the other hand, issue detailed standards or technical
regulations, most of which are based on or referring to international standards without
formally adopting them. Most other countries have adopted at least some foreign
standards or include references in their national standards.
In countries where the legislation and/or standardization are incomplete, as in
Afghanistan, the Dominican Republic, Fiji, Senegal, Thailand and Vietnam, international
standards are often applied by the regulators and the industry as a matter of fact.
Whether those rules are applied and enforced in practice depends more on the
institutional structures and capacities of the government than on the completeness and
sophistication of the regulatory framework. The subsidiaries of major international oil
companies and well organized local operators, privately or state-owned, tend to apply
the basic standards regardless of the mandates and efficiency of the applicable
legislation.
The use of international standards without official adoption or any other legal basis
obviously creates uncertainty for the operators, who have to choose between various
standards, leaves broad discretion to the enforcement agencies and opens
opportunities for abuse and corruption.
Certification of private installers
Given the lack of inspection capability in the government agencies of many countries,
probably the single most effective measure to promote a greater degree of safety for
LPG use would be to establish a system of registered private installers and inspectors
to be supervised and controlled by regulatory agency personnel. Such a system can be
made self-financing through fees charged to operators for set tasks as it has been done
in several of the countries reviewed.
Industry structure
Eight out of 20 developing countries studied had no state ownership in both the bulk
supply and distribution segments. The bulk supply area had more state involvement
with full or partial ownership in 12 countries. In the distribution segment there were only
five countries with partial state ownership.
The LPG supply business is extremely capital-intensive with high indivisible front-end
costs. The presence of a large bulk supplier that is not engaged as a competitor in the
downstream business, whether state-owned or private, can result that any new cylinder
filling/distribution operator has no need to invest in his own marine terminal in order to
ensure supply at a reasonable cost, thereby lowering the barrier to entry. An example is
Peru, where a state-owned enterprise with a major storage terminal serves as the bulk
supplier to more than 50 distributors.
9
Supply arrangements and infrastructure
Several of the countries that are dependent on imported supply have limited storage but
are planning to expand in order to improve the economies of scale in both marine
transport and receiving/storage terminal operations.
Pakistan has private sector terminal operators engaged in receiving, storing and onward
shipping product for third parties for set fees. The regulatory authority in Pakistan,
supported by an association of LPG distributors, encourages hospitality arrangements
among land-based LPG storage facilities whereby operators would trade off storage
capacity in one area in return for access to the other company s storage in another
region. These hospitality agreements are registered with the regulatory authority. Both
of these measures minimize duplication of infrastructure, improve efficiency and
enhance potential for lowering costs.
Cylinder management
In the group of countries investigated, by far the most prevalent system of cylinder
distribution and ownership is centralized filling of cylinders, return of empty cylinders to
filling plants through the same network and ownership in the hands of the marketing
companies with or without an explicit deposit.
Only Ghana in the study group of 20 developing countries is confirmed to have a bulk
distribution, mini-filling plant system, similar to the United States and Canada, with
consumers being the owners of cylinders, which they bring to nearby plants for re-filling
or, in some cases in North America, exchanging for filled cylinders. This is by far the
most efficient system for delivering LPG to final consumers since it brings the product in
bulk as close as possible to the consumer and minimizes the transport and handling of
metal in the form of full and empty cylinders. Its greatest drawback is the lack of control
over the cylinder itself and monitoring of its safe condition. For such a system to be safe
the mini-filling plant operators must have the expertise and authority to be able to
reject/confiscate a cylinder of a potential client for filling based on its poor condition or
recertification date. There are mechanisms by which the cost of replacing a damaged
cylinder can be pre-built into the product price and the consumer is kept whole. A larger
and more critical question, however, is whether the quality of the filling plant operator is
such that he has the expertise to make the judgment call.
The most common cylinder size worldwide in household applications is 10 to 12 kg of
contained LPG payload. This size range seems to be a compromise among the cylinder
and refill cost, the ease of handling, and consumer preference parameters affected by
cylinder and payload size. In an attempt to overcome the barrier to LPG uptake imposed
by high refill costs of large cylinders, some markets have introduced smaller cylinder
sizes and related appliances for household usage. Several countries, particularly in
Africa, have 3 6 kg cylinders in circulation. LPG sold in small cylinders may be
subsidized or cross-subsidized because of their higher unit costs. Handling many more
cylinders poses logistical challenges, including cylinder inspection, and the need to refill
more frequently could also be problematic in areas where LPG delivery is not regular.
Where small cylinders are subsidized, this has led to growing unsustainable subsidies in
recent years.
10
Information and education of small distributors and consumers
An important part of the supply chain of LPG for household use is handled by very small
operators who deliver the cylinders to the homes and by the consumers who pick them
up at local filling stations or retail outlets. In most developing countries, rural retailers
are small grocery shops. Regional sub-dealers use small trucks to deliver cylinders to
larger villages almost daily. From there LPG is often carried by animals and people to
smaller villages only once or twice a week.
Eventually, the cylinders, valves and regulators remain under the sole control of the
consumers for extended periods in their homes, where many accidents occur. Laws,
regulations, standards and enforcement efforts rarely reach into this tail end of the
supply chain. What really matters is the knowledge of the individual consumer and his
or her realization that they are handling a potentially hazardous product. It is, therefore,
critically important that the regulators and the suppliers educate the general public, the
small distributors and each consumer by appropriate means.
Most details of the complicated technical standards are directed towards the
manufacturers and the operators of repair and maintenance facilities, storage and filling
plants. Therefore, in all industrialized countries, the regulators and the industry produce,
distribute and publish simplified manuals, guidelines and leaflets at various levels of the
supply chain and for the consumers. Cylinder labels, marketing letters, point-of-sale
notices are other tools for raising consumer safety awareness. In well developed
regulatory systems, the laws and licenses include requirements for consumer education
as well as training and certification of management and personnel of the operators that
are designed to assure that everybody knows and understands the specific rules for his
activity. A review of the countries studied shows a serious lack of efforts in this respect.
The downstream petroleum laws and regulations and other general legislation typically
contain detailed provisions for enforcement and sanctions, but rarely do they require
training of the operators and information dissemination to the public.
Comparing, for instance, the Web sites of the principal regulatory agencies and of the
national standards bodies of the countries under review, it does not appear that the
government authorities and their advisors appreciate the growing importance of the
internet for communication with their sector operators and the public in general. All
regulatory agencies for the downstream petroleum sector as well as the national
standardization bodies in the countries reviewed have their own Web sites, but very
often they are not fully functional yet nor are they updated regularly. Only a few of the
major LPG distributors of the private sector have Web sites with safety tips and
consumer information.
Another aspect requiring attention is the formation of national LPG associations that
include oil marketing companies, consumer organizations, cylinder manufacturers and
maintenance companies, and government representatives. Governments of all
industrialized countries and some developing countries accept that such organizations
can play important roles as advisors in the regulatory policy formulation, promotion of
fair competition, adoption of international safety standards, and promotion of consumer
information and education. International organizations, such as the World LP Gas
Association, and major donors are promoting and supporting the formation of those
national associations.
11
1. Introduction
Of all the modern fuels available today, liquefied
Box 1: Confusing acronyms for two
petroleum gas (LPG) is particularly well suited to
other gaseous products
domestic cooking and heating uses because of
LNG and CNG
its clean-burning attributes and practical
LNG stands for liquefied natural gas and is
advantages over traditional biomass fuels as well
simply natural gas (predominantly methane,
as kerosene. LPG is more convenient in use and
CH4) in its liquid state. Natural gas is converted
acquisition (e.g., no lengthy gathering or onerous to LNG by cooling it to 162 C ( 260 F), at
bulk purchasing operations as with biomass), which point it becomes a liquid. This process
safer and cleaner. It has a high calorific value by reduces its volume by a factor of more than
600. This allows natural gas to be converted to
volume and mass and uses high-efficiency end-
a compact liquid at a distant natural gas field
use cooking apparatus. Households recognize
source and transported efficiently by sea in
these advantages and are usually prepared to highly insulated, refrigerated (cryogenic)
pay a premium for LPG over other fuels if their tankers to a consuming location where it is
incomes are high enough and LPG is available. 1 regasified and fed into the existing natural gas
piped network. Although its main application
Switching from traditional biomass fuels and coal has been seaborne transport, it is also being
to LPG can bring considerable health and used as an automotive fuel, particularly in
environmental; benefits at the local, regional and heavy trucks. It is also used in peak-shaving
storage for natural gas piped systems.
global levels. Indoor air pollution, which affects
mainly women and children, is greatly reduced. CNG stands for compressed natural gas and
is made by compressing natural gas to less
By reducing exposure to smoke from combusting
than 1% of the volume it occupies at standard
woodfuels and coal. Switching to LPG can also
atmospheric pressure. It is stored and
reduce deforestation and free up supplies of distributed in thick-walled steel containers at a
dung for use as fertilizer and soil improver, pressure of 200 248 bar (2900 3600 pounds
enhancing agricultural productivity. The savings per square inch). Although technology has been
developed to transport CNG by ocean tanker,
in time consumed gathering or acquiring bulk
its main application has been as a replacement
supplies of biomass fuels may allow
for gasoline in automotive internal combustion
householders to dedicate this time to pursue engines.
more productive activities, thus alleviating
poverty.
The following provides brief descriptions of the nature and characterization of LPG as
well as a typical, generic supply and distribution chain for the product.
The Product
LPG is a mixture of propane (C3H8) and butane (C4H10), which can be stored or
transported separately or as a mixture. Propane and butane exist as gases at normal
room temperature and atmospheric pressure, but when subjected to moderate
pressures at ambient temperature, or sub-zero temperatures at ambient pressure, they
become liquids.
1
There are other forms of modern energy that are even cleaner, natural gas and electricity. However,
natural gas is available generally only in urban areas and only in certain developing countries, while
electricity for cooking is rare in a large number of countries and many prefer a gaseous fuel to electricity
for cooking even in high-income countries. Among the three gaseous fuels LPG, natural gas, and
biogas LPG is the most widely available fuel.
12
Propane and butane are recovered from two principal sources:
Gases produced in oil refining operations
Natural gas production, either as off-gas associated with crude oil production or
non-associated gas in wet 2 natural gas fields. The processing facilities that are used
to recover LPG are known as natural gas processing plants.
Globally, about 41% of LPG supply is a by-product of crude oil refining. Around 24% of
LPG supply is recovered from natural gas that is associated with crude oil production.
Nearly 35% of global LPG supply is produced from natura gas that is not associated
with oil production (Purvin & Gertz 2011).
Propane and butane boil at different temperatures. Propane is more volatile, boiling at
42 degrees Celsius (oC), while butane boils at 0oC, the freezing point of water (normal
butane boils at 0.5, but isobutene at 11.7]. LPG in its liquid state occupies about
1/260th of the space of the gaseous state This makes the liquid form of LPG an
attractive, compact form of energy for transport and logistics compared with gaseous
state fuels.
In order to detect if LPG in gaseous form is present and prevent an explosion from a
buildup of LPG gases, an odorant (almost always ethyl mercaptan) is added to liquid
LPG prior to delivery to bulk storage plants. Ethyl mercaptan has a distinctive odor and
has a high odor impact.
The LPG Supply/Distribution Chain
Figure 1 provides a schematic of the supply/distribution chain.
The commercial participants in the LPG supply chain include the following actors:
Producers sell LPG at the petroleum refinery or natural gas processing plant gate.
Traders and marketers buy LPG in bulk from producers, or from overseas
markets, and store in large primary terminals and sell to other marketers,
distributors, retailers and/or final consumers.
Transporters and distributors truck, rail or pipe bulk LPG to their regional depots,
where it is stored in large pressure vessels, to be supplied to bulk customers by
small road tanker and to refill LPG cylinders, which are distributed to bottled gas
retailers or consumers. The transporters and distributors may be integrated with a
marketer, or may operate on contract to a marketer, or may be independent. Sub-
contractors may carry out any of the specific functions of distributors such as bulk
haulage, depot operation, and/or cylinder filling and distribution.
Retailers sell directly to customers, including the activities of sales and billing, and
sometimes appliance retailing. These may be retail branches of a marketer,
commission agents of a marketer, or else independent resellers who purchase and
resell LPG in marketer-owned and branded cylinders.
2
A wet gas field refers to one, usually associated with liquid condensate, where the gaseous state
contains upwards of 10% hydrocarbons that are heavier than methane, such as ethane, propane, butane,
pentane and small quantities of even heavier components.
13
Operators of local, piped networks are shown as Town Gas in the schematic.
Automotive filling stations serve automotive users of LPG.
The final consumers include:
Large bulk clients such as industry which use LPG as fuel, petrochemical plants
which use LPG as feedstock
Smaller bulk clients such as commercial, agricultural and larger residential
consumers
Households using LPG cylinders for cooking and other energy uses such as water
and space heating.
Equipment and service industries supporting the supply chain include:
Cylinder manufacturing, testing, rehabilitation and requalification and recertification
where applicable 3
LPG appliances and equipment such as valves, hoses, regulators, stoves
Automotive conversion equipment and installation
Bulk tank manufacturing and installation services
Number of Cylinders per Residential Consumer
In a centralized cylinder filling and distribution system with return of empty cylinders to
filling plants through the same network that delivers the filled ones, the total cylinder
stock in a country includes a large number of cylinders outside of those that are actually
in the client s residence. The extra cylinders outside the house are accounted for by:
1. empty cylinders in transit and storage heading back to the filling plant
2. storage of empty and filled at the filling plant
3. filled cylinders in transit and storage heading for the consumers
An empirical estimate 4 of the number of cylinders required to support one residential
LPG client results in a coefficient of 0.8 to 1.0 cylinders outside the residence besides
the cylinders in operation or stored in the house. That is, if all clients were to keep one
cylinder in the house, there would be 1.8 to 2.0 cylinders per client in the entire system.
The level of this coefficient of number of cylinders required to support a client on
average depends on the geographic extension of the clientele from each filling plant as
well as the efficiency of the particular company in minimizing average cylinder inventory
3
The two terms requalification and recertification are often used interchangeably and synonymously in
many international and local country codes and standards. Our interpretation is that requalification
means that the cylinders comply with whatever applicable norms are in place, while recertification
means that there is a formal process in the country requiring or allowing an inspection and certification of
such compliance.
4
Based on experience of both the consultants and LPG marketing companies.
14
in his system. An efficient coefficient for extra cylinders for a highly concentrated
population area could be as low as about 0.5 where the weighted average distance of
clients from filling plants, for example, is very low. This coefficient would also vary with
the configuration of the cylinder distribution system. A horizontal configuration with few
levels should normally require a lower coefficient than a vertical, complex one with
many levels.
15
Figure 1: Schematic of LPG supply/distribution chain
Natural Gas Processing Plants
Source:
www.worldlpgas.com/page_attachments/0000/0043/The_20LP_20Gas_20Distribution_20Chain_20_Poster_.pdf
16
Report Objectives and Organization
This report was prepared as a background paper for a larger study entitled The Role of
LPG in Reducing Energy Poverty and discusses the findings of a desk study and field
work in two developing countries to investigate the conditions of supply, markets and
utilization in a number of developing countries. The World Bank has requested
consultants William G. Matthews and Dr. Hilmar Zeissig of Houston International
Business Corp. (HIBC) to undertake the study.
The first step in the study work was to select a group of countries which would be
representative of all six developing world regions as designated by the World Bank. The
number of countries suggested was a total of about 20 with no fewer than two in any
single region. It was also agreed with the World Bank that two additional markets in
high-income countries would be selected for comparative purposes in the study. The
LPG markets in Texas, United States and in the Canadian Province of Ontario are used
as a reference, because each has one of the most efficient systems globally.
The following countries are covered in this report, listed in alphabetical order of the
region designation:
Sub-Saharan Africa (AFR)
o Ghana
o Kenya
o Senegal
o South Africa
East Asia and the Pacific (EAP)
o Fiji
o Thailand
o Vietnam
Europe and Central Asia (ECA)
o Albania
o Moldova
o Turkey
Latin America and the Caribbean (LAC)
o Brazil
o Dominican Republic
o Guatemala
o Mexico
o Peru
Middle East and North Africa (MNA)
o Jordan
o Morocco
North America (NAm)
o Canada/Ontario
17
o United States/Texas
South Asia (SAR)
o Afghanistan
o Pakistan
o Sri Lanka
The following maps place the different countries within each region:
Senegal
Ghana
Kenya
South
Africa
Sub-Saharan Africa (AFR)
Mexico Dominican
Republic
Guatemala
Brazil
Peru
Latin America & Caribbean (LAC)
Jordan
Morocco
Afghanistan
Pakistan
Sri
Lanka
Middle East & North Africa (MNA) South Asia Region (SAR)
18
This report comprises 23 chapters in addition to this introduction. Chapter 2 presents an
overview that aggregates and compares individual country information. Chapters 3
through 24 cover the LPG sector in each country in the order of the regions as listed
above. The overview and individual country chapters are organized under the following
sub-headers:
1. Legal, regulatory and institutional framework
2. Industry structure
3. Supply, procurement arrangements and infrastructure
4. Markets
5. Filling, distribution and management of cylinders
6. Pricing, taxation, subsidies
7. Market promotion measures (this subject is covered in the overview and in only a
few of the individual country chapters where programs have actually been put in
place and information on them was available).
8. Safety and industry malpractice issues in the case of the two developing
countries visited: Ghana and Turkey.
The report draws from a variety of sources:
Documentation and references provided by the World Bank, including information
obtained directly from the country office in Albania, Fiji, and Kenya
Extensive Web searches by the consultants
The consultants own working files from previous assignments
Consultants direct information-gathering in the field in the case of Afghanistan,
Canada/Ontario, Ghana, Turkey and USA/Texas.
19
2. Aggregate and Comparative Data of the Study Countries
This chapter is designed as a summary and discussion of aggregate and comparative
data on the LPG sectors of all 22 countries. The information on each sub-category of
the LPG sectors is presented in the same order as in the individual country reports.
2.1 Legal, Regulatory and Institutional Framework
Summary
The downstream petroleum laws and general regulations in many of the countries
reviewed are incomplete and often antiquated, as shown in Table 1. . They typically do
not contain specific provisions for LPG. Very few countries have promulgated special
regulations for LPG, but many have issued at least some national standards and/or
formally adopted international or regional standards for quality control and protection of
occupational health, safety and environmental (HSE). In countries where the legislation
and/or standardization are incomplete, international standards are often applied by the
regulators and the industry as a matter of fact, but without having a formal legal basis.
As a consequence, in almost all countries the main quality, safety and environmental
issues of the LPG chain of supply are subject to similar, basic rules according to
international norms and practices they have been either formally adopted and
incorporated into national legislation or are used as a matter of fact by regulators and
operators. Whether those rules are really applied and enforced depends more on the
institutional structures and capacities of the government than on the completeness and
sophistication of the regulatory framework, and also on the characteristics of the
suppliers and distributors in each country. The subsidiaries of major international oil
companies and well organized local operators, privately or state-owned, tend to apply
the basic standards regardless of the mandates and efficiency of the applicable
legislation.
20
Table 1: Regulatory framework for LPG
Downstream Special International Regulatory agency
National Coverage
petroleum LPG law / regional Type Capabilities/
law and/or or standards standards of LPG efficiency
Country/city Region regulations regulation issued adopted Issues
Ghana AFR good good none good good Autonomous good
Kenya AFR good good good fair good Autonomous fair
Senegal AFR good none fair none poor Ministry poor
S. Africa AFR good good good none good Autonomous good
Fiji EAP none none none none none Ministry poor
Thailand EAP fair none good none fair Ministry fair
Vietnam EAP none none good fair fair Ministry poor
Albania ECA poor none none good good Ministry fair
Moldova ECA good none none good good Autonomous fair
Turkey ECA good good good good good Autonomous good
Brazil LAC fair good fair fair fair Autonomous fair
Dom Rep LAC fair fair none poor good Ministry poor
Guatemala LAC good fair poor fair fair Ministry poor
Mexico LAC good good good few good Ministry fair
Peru LAC good good fair fair good Autonomous good
Jordan MNA none none fair good fair Ministry poor
Morocco MNA fair good none good good Ministry fair
Canada/Ontario NAm fair good fair good good Autonomous good
USA/Texas NAm good good none good good Autonomous good
Afghanistan SAR none none none none poor Ministry poor
Pakistan SAR fair good none good good Autonomous fair
Sri Lanka SAR fair none none good fair Autonomous fair
Source: Authors assessment.
Application of international health, safety and environmental standards
There are hundreds of technical standards, norms and codes of practice for protection
of occupational health, industrial safety and the environment, issued by national,
international and regional standardization organizations for installations, equipment,
process technology, products and operations in the LPG chain of supply. In addition to
those specific standards, many of the general codes for design, construction,
maintenance and fire protection of buildings, electrical and other installations, for
construction materials and the respective quality testing methods, for transport
equipment, and for other machinery and equipment are also applicable to many
components and activities within the LPG supply chain. They have been developed
worldwide over a long time and are constantly being updated by numerous specialized
national and international industry organizations and governmental entities. Many
regional standardization organizations have established policies and special procedures
for the adoption and adaptation of their intellectual products by governments (ISO and
IEC 2007) and offer them for sale to the industry and consumers.
Some regional standardization organizations distinguish between different types of
21
standards (OGP 2010), such as recommended practices, specifications, standards,
bulletins, publicly available specifications, and workshop agreements, with different
standing in their catalogues. This also causes some discussion in the industry. The
American Petroleum Institute (API) provides the following definitions for their various
categories:
(1) Specifications facilitate communications between purchasers and manufacturers.
(2) Recommended practices communicate proven industry practices.
(3) Standards combine elements of both specifications and recommended practices.
(4) Codes are intended for adoption by regulatory agencies or authorities having
jurisdiction.
(5) Bulletins and technical reports convey technical information on a specific subject
or topic.
The majority of documents of the International Standards Organization (ISO) are
standards, and ISO provides the following definition: Document, established by
consensus and approved by a recognized body that provides for common and repeated
use, rules, guidelines or characteristics for activities or their results, aimed at the
achievement of the optimum degree of order in a given context. When referenced by a
regulator, however, the subtle differences between the different types of standards are
usually not taken very seriously.
Legislators and regulatory agencies in the countries reviewed use different methods to
incorporate at least some international standards into their regulatory framework, which
can be summarized as follows:
Mexico has created a comprehensive set of lengthy Normas Mexicanas, many of
which are partial translations of international norms but are rarely mentioned as
references. South Africa developed its own norms based on international practice
including ISO. Its LPG standards are broadly similar to NFPA 58 (code 58 of the
U.S. National Fire Protection Association dealing with LPG), but have not
formally been adopted. The problem of this system is that it takes a lot of effort
and time to draft the texts, which soon become outdated, because most
international standards are periodically updated according to technical and
regulatory developments.
In contrast, Albania has, within a few years, formally adopted the most important
European standards by reference without writing any of their own. Ghana and
Morocco have adopted all key ISO standards for their LPG supply systems, and
Pakistan adopted NFPA and British standards for LPG installations and cylinders
in 2001. In these cases, the national standards are automatically updated along
with the international codes, which are referenced.
Of all countries reviewed, Peru has the most detailed and comprehensive
regulatory framework for downstream petroleum in general and for LPG in
particular, but it is also very complicated in its application in the chain of supply
by the participants and in the enforcement by the authorities, mainly because
there is no clear distinction between administrative and technical regulations.
Frequent references to international standards are combined with a local
22
standards or specific technical details defined by the regulation itself.
In contrast, Turkey has create
Contact this candidate