LP GAS The Obvious Alternative For Africa Michael Kelly, Director, Market Development,World LP Gas Association

11th UNCTAD African Oil and Gas, Trade and Finance Conference & Exhibition

Nairobi 23-25 May 2007

NOT AN OFFICIAL UNCTAD RECORDNOT AN OFFICIAL UNCTAD RECORD

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Agenda

1.The World LP Gas Association at a glance

2. Why LP Gas

3. Innovations

4. LP Gas as a Fuel for Rural Development

5. Conclusions

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Agenda

1.The World LP Gas Association at a glance

2. Why LP Gas

3. Innovations

4. LP Gas as a Fuel for Rural Development

5. Conclusions

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The WLPGA

WLPGA members>155 members headquartered in 50 countries > Representing the leading companies

Board ofDirectors

• Industry Leaders

WLPGA Staff

IndustryCouncil

• Top LP Gas Companies

As the authoritative, global voice for LP Gas, the WLPGA promotes the use of LP Gas worldwide to foster a cleaner, healthier and more

prosperous world.

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A powerful Industry Association

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The WLPGA

• We are a growing network of members representing the major LP Gas companies across the world

• We are influential – Partnerships with key global organisations such as the World Bank and the UNDP

• We are credible – Officially recognized within the UN Economic & Social Council

• We are informative – publishing essential information for the use of members

• We are the unique global organisation representing the interests of the full LP Gas value chain from producer to distributor

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The WLPGA – Facilitating market development

• Partnering with global institutions to prove new business models• Smart subsidies in South Africa• Microfinance in Morocco

• Lobbying governments for fair taxation: • Korean and German Autogas

• Sharing best practices• Publications on business and policy recommendations

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The WLPGA – Exchanging best practices and innovation

• Two active Member-driven networks:• Global Technology Network (GLOTEC)• Global Autogas Industry Network (GAIN)

• Revamped and informative web site: • Exclusive information in “Members-only” section

• Annual Forum • 20th World LP Gas Forum 24-26 2007 Cape Town• The unique global event in the industry which this year will feature the

“LP Gas for African Development Conference” on 24 October.

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Agenda

1.The World LP Gas Association at a glance

2. Why LP Gas

3. Innovations

4. LP Gas as a Fuel for Rural Development

5. Conclusions

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Fuel for Development – the context

• Energy is vital for socio-economic development

• 1.6 billion people in the world have no access to electricity and a further 2.4 billion people depend on traditional fuels for cooking and heating

• Access to modern energy strengthens the three pillars of sustainable development: Economy; Society; Environment

• LP Gas is an immediately available modern energy at low infrastructure cost

• LP Gas is a popular household fuel in many countries and most markets are growing– Brazil: over 90 % households use LP Gas– India: 66 millions households (90 % urban, 33 % rural areas covered)

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The landmark World Energy Council 2000 Statement “Energy for Tomorrow’s World” laid out 3 critical prescriptions for achieving a sustainable energy future

• Availability

• Acceptability

• Accessibility

Access to Modern Energy

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Supp

ly /

M

Tonn

es

Oceania

FSU / E Europe

Africa

West Europe

Asia

Latin America

Middle East

North America

Source: WLPGA Statistical Review of Global LP GasPurvin & Gertz

0

50

100

150

200

250

300

350

400

1995 2000 2002 2003 2004 2005 2010 2030

60% increase

LP Gas is an Available Energy source

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…because it’s a clean fuel

• It burns cleanly• No smoke or residual

particulate matter• And, relatively low pollutant

emissions

LP Gas is an Acceptable alternative

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Fuel Cycle CO2-Equivalent Emissions for Space Heating and Water Heating (g/Mbtu heat)

LP Gas has a low GHG footprint

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LP Gas and reduced indoor air pollution

Did you know that…

• … smoke from indoor cooking fires kills 1.6 million (mainly small children) every year

• … smoke in the home kills more people than malaria does, and almost as many as unsafe water and sanitation

• … smoke in the home is the fourth greatest cause of death and disease in the world’s poorest countries

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LP Gas and reduced indoor air pollution

According to the landmark 2006 WHO study “Fuel For Life, Household Energy and Health”

• WHO have highlighted LP Gas as the cost effective solution for reducing pollution from cooking fuel in the developing world

• “… investing US$ 13 billion per year to halve, by 2015, the number of people worldwide cooking with solid fuels by supplying them with LP Gas shows a payback of US$ 91 billion per year”

• “Government leadership in developing policies for successful market expansion of LP Gas is essential”

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Significant improvements can be brought by LP Gas

Graph shows relative pollutant emissions per meal

• Almost no emissions• Energy efficiency of 90%• 27mj/1kg LP Gas

0.1

1.0

10.0

100.0

CO Hydrocarbons PM

CO 0.1 1.0 3 19 22 60 64

Hydrocarbons 0.3 1.0 4.2 17 18 32 115

PM 2.5 1.0 1.3 26 30 124 63

Biogas LPG Kerosene Wood RootsCrop

ResiduesDung

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Because it’s portable:

• Bottles can be can be stored indefinitely

• Easily transported

• Used virtually anywhere -- from urban centres to remote regions

• When and where costly, grid-based energy services are unavailable

LP Gas delivers Rapid Accessibility

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Traditional fuels

Coal/kerosene

Household energy use

Time, economic development

Natural gas

Electricity

LP Gas

• Traditional fuels (e.g. wood, charcoal) still dominate household energy use

• Transition to modern fuels central to sustainable development

• Economic development doesn’t drive energy usage rather, it may be stimulated by energy provision (UNDP)

The Transition to Modern Energy

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LP Gas allows for incremental development

Stage 1: LP Gas cylinder inside feeding stove

Stage 2: LP Gas cylinder outside, piped in to fuel stove, refrigerator and light

Stage 3: LP Gas bulk tank, fuelling stove, refrigerator, water boiler and generator

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2 000 – 5 000Home Heating

1 500Electric Kettle

1 500Electric Stove

95Sewing Machine

50V.C.R.

90Refrigerator

100Television

6Radio

400Additional Lighting

150Minimal Lighting

ENERGY CONSUMPTION / WattsAPPLIANCE

TYPICAL APPLIANCE ENERGY USAGE

Many domestic, thermal energy needs can not be met by off-grid electrical power

Meeting Energy Needs

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Agenda

1.The World LP Gas Association at a glance

2. Why LP Gas

3. Innovations

4. LP Gas as a Fuel for Rural Development

5. Conclusions

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LP Gas partnering with renewable energy

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• Commercial services

• Manufacturing, metal-works and crafts

• Community sanitation

• Commercial food preparation

• Agriculture

LP Gas supports a wide range of services

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Morocco Microfinance project• Partners are Shell, Afriquia Gaz, Total, Zakoura Foundation• Pilot phase US $150,000 rolled out successfully

– Zakoura staff trained on LP Gas applications– Promotional material provided– Active promotion of applications around country– Quarterly status reports provided on status of loans

• To qualify for loans, recipients must not have access to traditional sources of financing, must have a project generating income using LPG

• Ultimate goal: create successful project template to be replicated in other markets

Innovative programmes

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Demand Side Management (DSM): Works!

• Cost effective - low cost method of peak electricity load avoidance• The LP Gas element of the overall programme saved 48.3 MW of peak

electricity usage out of a total target of 200 MW• 7000 electric appliances replaced by gas in middle and upper income

households• 100,000 low income households switched to gas for cooking• Practical lessons learned• Industry has to guarantee:

– Availability of supply– Stability of price

DSM programmes can be replicated

Innovative programmes contd/

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Agenda

1.The World LP Gas Association at a glance

2. Why LP Gas

3. Innovations

4. LP Gas as a Fuel for Rural Development

5. Conclusions

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What is the LP Gas Rural Energy Challenge?

• A Public – Private Partnership (UNDP/WLPGA)

• Address lack of access to clean energy through the use of LP Gas

• Improve living standards

• Contribute to achieving the Millennium Development Goals

• Create viable and commercially sustainable LP Gas markets in rural / suburban areas of developing countries

– for domestic consumption

– for industrial productive uses

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The rural distribution paradox

• Low relative incomes in Rural Areas

• Long distances / difficult terrain

• Highest cost supply to those who can least afford it

What are the barriers to rural distribution and how can they be addressed?

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Barriers

• Low density of LP Gas target population

• Weakness of LP Gas distribution networks in remote rural areas

• Low cash purchasing power

• Need for local credit facilities

• Inappropriate cylinder size

• Lack of safety culture and poor enforcement of regulations

• Widespread use of less healthy, or unsafe, fuels

•Inadequate State policy to support fair LP Gas market development (some times keeping major players away), including: sub-optimal tax policies and emphasis on other fuels for various policy reasons

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WLPGA report based on in-depth survey of members and feedback from the WLPGA / UNDP Rural Energy Challenge

The Report:

• Summarises key barriers

• Explores key success factors for developing rural markets

• Showcases 10 case studies of innovative rural models

Developing Rural Markets

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Agenda

1.The World LP Gas Association at a glance

2. Why LP Gas

3. Innovations

4. LP Gas as a Fuel for Rural Development

5. Conclusions

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Conclusions

• Strong endorsement of LP Gas has been received from key global authorities

• Barriers to rural development exist but some can be addressed through private and public sector action

• Good practices are the responsibility of both the industry and government

• Good practices are essential for the safe and sustainable delivery of excellent services

• LP Gas is an ideal fuel for development being available, acceptable and accessible

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And Finally…

Mark it in your agenda now!Mark it in your agenda now!

Our 20Our 20thth anniversary event anniversary event&&

The LP Gas for African The LP Gas for African Development ConferenceDevelopment Conference

24th – 26th October 200724th – 26th October 2007Cape Town, South AfricaCape Town, South Africa

www.wlpgasforum2007.comwww.wlpgasforum2007.com

Thank you