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

The National Petroleum Authority (NPA) on Monday held the maiden Open Competitive Tender for LPG imports into the country.

The winning tenderer submitted the lowest premium of US$30.39/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 US$67/MT to US$98/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 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 to be recalled that the NPA proposed using Open Competitive Tenders for the importation of LPG in 2021 to, among other things, bring efficiency to LPG importation 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 implementing the Cylinder Recirculation Model (CRM), which has affordability as one of the key tenets for successfully implementing the policy.

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

There were several engagements with BIDECs throughout 2023. Those 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 implementing the policy.

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

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

 

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