Gas Explosions: IMANI's proposition on the gas cylinder exchange programme

Rampant gas explosions in Ghana, including the fatal one that occurred two nights ago, has brought to the fore discussions about options the country must explore to deal with the problem.

One such option on the table is the gas cylinder exchange model. Two months ago, IMANI published a paper on the model and suggested among others what must be done.

As Ghana’s Cabinet meets on Thursday to consider the policy, IMANI pleads that the suggested steps below be considered to ensure incident-free roll out of the Gas cylinder exchange programme.

What we should do:

One of the main hindrances to the adoption of the Cylinder Exchange Model especially by rural folk is the initial financing cost of signing onto the program; that is, paying the deposit. It will be prudent on the part on the regulators to, in conjunction with private sector, develop feasible financing models that would ease adoption.

1. It will be expedient to fast track the recapitalization of the Ghana Cylinder Manufacturing company to facilitate production of smaller size cylinders (3kg and 6kg) or engage the private sector to provide them. This will facilitate rural access to LPG given the relatively cheaper cost of the smaller size cylinders.

2. Position the country to eliminate malpractices (such as unauthorized cylinder filling, unlicensed distribution, under or over filling and cylinder theft by standing ready to enforce regulations through innovative means). For example; the Indian Ministry of Petroleum and Natural Resources in 2012 created an online portal that provided real time information on the supply chain distribution system including distributor ratings. This reduced diversion of LPG commercial sales and facilitated overall transparency in the distribution business[17]

3. There is the need to correctly identify and separate market segments, that is, domestic, commercial and industrial in order to adequately serve each consumer segment.

4. The regulator must stand ready to enforce fool proof safety measures that will curb gas explosion at bottling/filling sites. There is also the need to undertake rigorous public education and sensitization on LPG and handling practices especially in view of the potential for increased access to rural areas.

5. The Cylinder Exchange implementation plan should have a long term view and should be scalable for example through the establishment of more bottling plants which are appropriately distributed geographically per year so that future demand growth is well catered for.

6. Gas Tanker businesses as well as gas refill stations should be worked with and supported to redefine their business models in order to take advantage of the potential business opportunities that are expected to emanate from the implementation of the Cylinder Exchange Policy. This will also help to prevent a situation where existing gas refill stations rush to dispel/sell off stored gas to avoid perceived losses caused by an outright ban and by so doing create an artificial shortage of LPG. Tanker operators may merge and form partnerships with bottling companies so that their services may be employed in transporting LPG from production points to bottling plants.

7. Explore and acquire highly efficient distribution management software that would facilitate the running of the cylinder exchange model in order to prevent situations where consumers are not able to access services. For instance; Supergasbras, one of the largest LPG retailers in Brazil which supplies 1.5 million tonnes of LPG per year to over 10 million households via the cylinder exchange model employs the SAP Secondary Distribution Management software which provides efficient administration and automation of the entire process chain from order entry to transport planning and invoicing[18].

8. Employ transparent methods in selecting distributors such as competitive bidding with terms of selection covering such issues as ability to increase penetration, service and maintenance costs among others.