Butane Energy Boosts Local Content Policy with Expansion Programme

Kunle Aderinokun

Implementation of the local content policy of the federal government is expected to receive an extra boost as one of the indigenous players in the downstream end of the Nigerian oil and gas sector has kick-started expansion of its integrated liquefied petroleum gas (LPG) plant.The firm, Butane Energy Limited, which has Nigeria Content Development and Monitoring Board (NCDMB) as a major shareholder, commenced the second phase of its expansion programme, building on the state-of-the-art LPG plant in Katsina, which it inaugurated at the beginning of December 2021. The plant, with a storage tank capacity of 100 metric tonnes and cylinder processing capacity of 1,600 12.5kg cylinders per 8 hour shift day.

This phase of expansion entails the construction of a 180mt LPG Plant at Kaduna and another with storage capacity of 120mt in Bauchi. The plants are being built to exacting standards of aesthetics, safety and in full compliance with extant regulations.Established about 10 years ago, Butane Energy started out as an oil and gas products distributor, but recently expanded its business to include storage, trading and distribution of LPG and LPG accessories such as cylinders, regulators, hoses, and furnaces.The company continues to benefit from the experiences of its initial promoters and importantly the insights and best practices provided and promoted by NCDMB, a major shareholder. Collectively, the company is building a high performance organisation on the basis of best corporate governance practices and anchored on strict ethical values.Butane Energy has said its vision is to be the primary provider of LPG to Northern Nigeria, through its plants, franchised depots, and distributors.

The vision, the company revealed, is driven by concerns around very visible deforestation and desert encroachment associated with climate change, the need to preserve the little that remains of the vegetation in the north, whilst creating value for stakeholders and employment opportunities for the teeming youths in the region.According to the management of Butane Energy, the expansion programme is part of an increasing LPG consumption and business strategy that requires presence in nearly all LPG value chain elements for risk mitigation and performance, Specifically, the programme entails commencement in June, 2022 of the construction of 2 LPG storage and dispensing Plants of 180mt. in Kaduna and 120mt. in Bauchi, to exacting standards of aesthetics and safety and in full compliance with extant regulations.

The plants are expected to come on stream before the end of 2022.It also includes acquisition of distribution and delivery capabilities in the forms of trucks and bobtails, as well as development and domestication of internal competencies to take advantage of arbitrage opportunities in LPG trading,Besides, the company revealed, in this second phase, the programme would involve creation of branding and multiple income stream opportunities through acquisition and sale of branded, multi-size cylinders and LPG accessories such as hoses, regulators and furnaces at its plants and distributors’ locations, Expansion in the number of off-take sources and size of volumes, supported by adequate throughput capacity at various storage locations, is also included in the second phase of the expansion programmeButane Energy has also designed a third phase of the plants development programme, whose implementation is to begin in September 2022 with the commencement of plants construction in Kano and Abuja, of 180mt. each. By early 2023, the company is projected to have five plants and six distribution depots across 11 states of the North, with a combined tank and truck storage capacity of 915mt and 12.5kg cylinder filling rate of about 12,160 cylinders per 8-hour shift day.The company is delighted that, already, significant milestones have been achieved in the implementation of its business strategy to support the planned growth. An internal trading organisation has been established to create value for the company through ensuring stability in the supply of LPG to own Plants and the maximisation of returns from LPG arbitrage opportunities. All the equipment needed for the new plants including tanks, compressors, air dryers, alternative power sources and control systems, etc. have been acquired/imported.

The company's fleet of trucks and bobtails will be augmented by the arrival in August 2022 of additional 4No. 25mt. trailers and truck heads, currently under construction in China. Finally as part of market penetration plans, the company has taken delivery of over 5,000 branded cylinders of various sizes, manufactured by a company in Nigeria. The cylinders along with associated accessories including hoses, regulators, furnaces, lighters, etc. are sold at the company's plant and at franchised depots. Off-take sources from local producers and importers are being expanded to minimise supply and price risks. Off-take agreements are in place, with additional 3 in various stages of completion, complemented by 2 Throughput agreements already executed with terminal owners.

Speaking about the company's motivation for the project, the Chairman of Butane Energy, Alhaji Isa Mohammed Inuwa, noted: "The desire to preserve natural vegetation and discourage the use of wood to heat food, and also to create job opportunities for the teeming youths and grow business profitably".

Regarding the importance of the NCDMB's equity investment to the project's development, Inuwa said: "The plant in Katsina could eventually be expanded to 160 metric tonnes".He added: "Our aspiration under the first phase is to establish five plants in Kano, 180 tonnes; Bauchi, 120 tonnes; Abuja 180 tonnes and in Kaduna, 180 tonnes; and our expectation is that by September 2022, the firm would have five plants with total storage capacity of 820 metric tonnes".Stressing that, the company's aim was, "to make LPG easily accessible and readily available in the Northern part of Nigeria", Inuwa noted that, "all our plants have been strategically located in response to regions with supply and usage gaps." On the other hand, he pointed out that, in line with his mission, the aimed "to develop and control a robust downstream LPG distribution network made up of filling plants, depots and logistics through a combination of ownership and strategic partnerships to efficiently deliver good quality LPG to consumers at the lowest possible real cost."

Current estimated LPG demand in Nigeria is 1.3 million mt. per annum, projected to grow by 22 per cent annually over the next five years. Demand is fuelled amongst others, by various considerations such as improvements in LPG supply and infrastructure, sensitivity over climate change concerns, conscious, encouraging actions by government and the dearth of alternative sources of energy.The strategic actions taken by Butane Energy, analysts believe, has placed it on the cusp of being an active and important player in the LPG market in its chosen geographical niche. Looking positively into the future, the company is optimistic to achieve its business and other objectives for the benefit of all.