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The Cylinder Recirculation Model-All you need to know

BY: Mabel Aku Baneseh
Mr Alhassan Tampuli (arrowed), the Chief Executive Officer (CEO) of the National Petroleum Authority (NPA), inspecting a filled cylinder during a recent visit to Bogota, Colombia, with some officials of the NPA
Mr Alhassan Tampuli (arrowed), the Chief Executive Officer (CEO) of the National Petroleum Authority (NPA), inspecting a filled cylinder during a recent visit to Bogota, Colombia, with some officials of the NPA

More than 250 Ghanaians have died from gas explosions in the past decade. A little over 50 per cent of the figure was recorded between 2015 and 2017.

Ghanaians have blamed the explosions on the failure of authorities to beef up the safety of gas refill plants across the country. Authorities have further been accused of failing to clamp down on the haphazard siting of gas and other fuel stations in residential areas.

Following these events, the government has developed a new Liquefied Petroleum Gas (LPG) policy aimed at curbing explosions, ensuring stringent monitoring mechanisms, as well as creating more job opportunities in the LPG retail market. The Ministry of Energy has introduced a new policy directive for marketing and distribution of LPG in Ghana, using the Cylinder Re-circulation Model (CRM). The aim of the policy is to ensure that 50 per cent of Ghanaians have access to safe, clean and environmentally friendly LPG for increased domestic, commercial and industrial usage by 2030.

Mandate

In a letter dated October 30, 2017, the Ministry of Energy mandated the National Petroleum Authority (NPA) to constitute an implementation committee to plan, oversee and ensure the smooth and successful implementation of the National LPG Promotion Policy. The committee commenced its work on November 17, 2017 and as part of its terms of reference, it embarked on working visits to some countries operating the CRM in order to understand the supply chain dynamics, regulatory framework and challenges associated with the implementation of the CRM so as to develop the best implementation strategy for the model. Three groups undertook working visits to Morocco and Senegal; India and Cote d’Ivoire and Colombia and Peru.

How the policy works

In order to ensure smooth implementation, LPG refilling plants would be classified into low risk and high risk based on their deficiency in meeting safety standards in a Risk Assessment of all plants by the NPA. The high risk refilling station would be immediately converted into filled cylinder retail and distribution outlets, whereas low risk refilling stations would be dedicated to the supply of Autogas only, with improved safety standards, the Chief Executive Officer (CEO) of the National Petroleum Authority (NPA), Mr Alhassan Tampuli has stated.

“The proposed new LPG distribution model will begin with the LPG Bulk Distribution Company (LBDC), whose responsibility will be to either import or buy the LPG from local refinery or/and gas processing plant, such as Tema Oil Refinery and Ghana National Gas Company, and store the LPG in their Bulk Storage facility.

He said “the LBDC will then sell the LPG in bulk to either the Bottling Plant for the sole purpose of filling the empty cylinders or to the LPG Marketing Companies (LMCs) for bulk sale to industrial end-users - factories, restaurant, and mini-power plants- and also to auto gas users. The LPG Bottling Plant Company will be responsible for filling the empty cylinders for onward distribution to LMCs.”

The LMCs will be responsible for procuring, branding, and maintaining the cylinders.

Specialised trucks will be used to transport the filled cylinders from the bottling plants to the retail stations or exchange points, where consumers will exchange their empty cylinders for filled ones.

The country will be zoned for the siting of these bottling plants. However, the distribution of their filled cylinders will not be limited to any particular zone, Mr Tampuli explained.

Employment

One of the main concerns raised over the new policy was the belief that it would lead to job losses but the NPA has provided figures to dispute the claims.

Mr Tampuli explained that the population of Ghana and Peru were almost the same. Peru, he noted, had successfully implemented the CRM, leading to the creation of many jobs. A value chain springing from the Bulk Oil Distribution Companies (BDCs), storage tanks, bottling plants, LPG Marketing Companies, Cylinder Exchange point, autogas retail outlets, Bulk Road Vehicles (BRVs), cylinder delivery vehicles (door to door), cylinder retail points (supermarkets and corner shops) and shops will averagely lead to the creation of more jobs.

Direct job creation is estimated to be 9,468 in relation to new jobs under the LMCs, LBPs, LCTs and door-to-door delivery. This does not affect current jobs of LPG Bulk Transporters, LPG Bulk Distribution Companies, and LPG Bulk Storage companies as well as the retail outlets that would transition into distribution centres, which is estimated to be around 3,355.

In addition to the above jobs created,the NPA will recruit a little over 200 safety auditors throughout the country, as well as resource its newly established Health Safety Security and Environment department. There will also be a number of indirect jobs created for installations, maintenance, fabrication and other services.

It is important to note that the new policy will be implemented together with the existing market structure until the old market structure is gradually phased out. Mr Tampuli gave the assurance that all stakeholders would be continuously engaged to ensure smooth implementation of the policy.

Safety measures

Under the new policy, it would be the responsibility of the LPG Marketing Companies (LMC) to ensure that the cylinders are in good condition before they are handed over to the end user. It is also mandatory for all the bottling plants to have a minimum maintenance facility to check for dents, leakages and replacement of valve etc. This maintenance would be done with  the full knowledge of the LPG marketing company.

There will be different sizes of cylinders to meet the needs of all income earners. The LMCs are expected to have different sizes of filled cylinder such as 3kg and 6kg to cater for those who would want to purchase smaller quantities.

The needs of users of fibre glass will also be catered for under the new policy.

Under the policy, consumers are expected to pay for the initial cost of the cylinder and the gas. Subsequently, the consumers will pay for only the gas.

With regard to cylinders currently being used, Mr Tampuli said a plan was being developed to come up with strategies to address that. “It is likely that we may adopt the refrigeration rebate scheme implemented by Energy Commission to address this issue,” he stated.

Assurance

The new policy has clearly tackled issues of safety, job creation and protection of the environment. Mr Tampuli said “the Cylinder Recirculation Model of LPG distribution will help Ghana achieve a market driven structure that ensures safety in the LPG value chain,  and increases access and adoption of LPG as a clean fuel by consumers.”

“It is the responsibility of the NPA to ensure that local jobs in the LPG value chain are protected under this new policy.

“The LPG value chain has been expanded to include additional actors. It has also been structured to improve upon safety and commercial practices which will guarantee good returns to investors,” Mr Tampuli noted, adding that “it is time to upgrade the mode of LPG distribution in this country and take it to the next level. I have no doubt in my mind that the Cylinder Re-circulation Model (CRM) is the way to go."

Support project

Ghana has unfortunately had its share of activities that continue to deplete the environment. The number of explosions recorded at LPG refill plants should be of concern to all well meaning Ghanaians. This brings to the fore the importance of the CRM which will not only create jobs but guarantee the safety of consumers, marketers and all stakeholders in the value chain. It is, therefore, a policy that must be embraced by all.

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