Alhaji Isa Mohammed Inuwa is the Executive Chairman, Butane Energy Limited, an indigenous firm that is deepening the domestic gas market. In this interview, Inuwa, whose firm established a mega Liquefied Petroleum Gas (LPG) plant in Katsina late last year, speaks about gas penetration and how it is contributing to actions against climate change.
By Simon Echewofun Sunday & Linda Ifeachor
Tell us more about your background in the gas industry.
I was a banker until I found myself in oil and gas, particularly in NNPC; I joined as a senior person having worked in the banking industry. So I was selected through a competitive interview process as a senior person and I have worked in various areas. I have done accounting and compliance, controllership, audit, head of audit for the core group, have done financial work for NAPIMS where most of the investments are made, before going to NLNG on secondment as Deputy Managing Director, and I spent some years there. I came back to NNPC and I was promoted to group executive director and when I turned the age of retirement, I left. But here we are working on the first phase of this project, five plants, capacity to transport, capacity to trade, and that’s what we have been working on over the last one and half years. We have one plant and we have just started building two more. We are hoping before the end of this year, we’ll start building two others because we plan five plants in the first phase in Kano, Bauchi, Kaduna and Abuja.
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For any of the plants that we build, they are entirely different from others; we bring in aesthetics, the best equipment and we’re compliant with all the regulations. Our plants are state-of-the-art and are compliant in terms of safety and so on, but those international standards are very practical.
Your firm got funding from the Nigerian Content Development Monitoring Board, (NCDMB), what is the impact so far?
NCDMB has a mandate that allows them to take equity in the company, stay there for five years, and then collect dividends during those five years and sell off the equity.
And this was, I’m sure, informed by the difficulty in raising funding, particularly for small and medium enterprises. So, we took advantage of that equity investment programme and applied to the NCDMB. The clear purpose of the investment was to use it to acquire fixed assets for the plants that we have established. This was of course, in addition to the equity that was raised by the promoters.
We have used the money as part of the investments. So, we have acquired all the assets that we needed to set up the additional four plants that we have planned for the first phase. These equipment include tanks, trucks, both for interstate and intrastate movement of gas, flatbeds, compressors, fire water pumps, air dryers etc. Part of that money is also being used for civil structures, offices, acquisition of plots of land etc for the establishment of the plants.
How do you market your gas across the plants?
We sell our gas in three ways, we can buy gas from the producer or a terminal and sell that entire truck to someone who also has a plant somewhere. We are also a bottling plant; we bring in bulk gas and put it in cylinders and sell them. We also do bulk-tail which means we bring a full truck and supply in tons to our customers like hospitality establishments that use LPG primarily for cooking and there are some industries that use LPG generators.
With the commissioning of Butane’s Katsina plant, what is the impact so far?
We bottle LPG and we sell retail as well. Our ability to impact on prices is fairly limited but we have been competitive. For us, we have to be efficient in importing and efficient in transportation, so that our landing cost is such that we could compete and undercut the price of gas.
When you have supplies, two things happen, either alone or concurrently. One is, you see an increase in demand. So, what we have seen in Katsina is that we are offering a choice for consumers to buy from plant A or come to our plant to buy. We have offered availability and stability of supply. So, what we have brought to Katsina is the ability to supply, I mean and then choice; we have never been out of stock since we started. So, the second level is that because of the price competition between the plants and also because of the stability of supply that we offer, there is an increasing demand only down by the price issue.
Do you have challenges in the market so far?
We have challenges, and the biggest challenge that we have is competition from the less quality that is imported from Niger. They have gas from their refinery that is import, they are able to sell at a lower price for two reasons or three reasons one, the fiscal taxes the fees and charges that gas faces is much lower than what we have; therefore, they are able to sell at cheaper rate but the quality of the gas, of course, it is in the heat value. The heat value for our LPG is much higher than what the alternative gas offers. So, see, in simple terms, you buy a 12.5kg cylinder, cook with it, it may last you for like two weeks, you buy the other gas at a cheaper rate and it does not last for a week.
That is why people should be very careful, make sure you buy gas from where you should. At this point, of course, I want to advise that always buy from reliable sources, as well as better to buy from branded distributors. When you see a Butane distributor anywhere, go and buy from them because you can be rest assured that we monitor what they do.
So, how can the government intervene on these challenges?
When you’re trying to grow a market, from an economic perspective, you can do several things as a government. You can improve competition, by producing in-country, and put barriers or you can do an outright ban on import. Second, you can look at the taxes, fees, charges, etc and reduce them such that they are reflected in the cost of the end product and then the market grows. The third thing that the government can do is also to look at other areas, let’s say funding, provide cheap funding that is easily available. For example, the NCDMB funding.
The third area is infrastructure: I’ve just told you about roads, how long it takes for a truck to get from point A to point B, and all these distractions in between; the toll gates, the local government toll collectors, and all others, if these are addressed, honestly, things will be better.
What is the current capacity of Butane Energy and expansion plan?
In Katsina, we have capacity for 100 metric ton storage and bottling and our plant is configured to be able to fill 1,600 12.5kg cylinders on an eight-hour shift and if there’s sufficient demand. By the time we open the other four plants, we are looking at nearly 850mt of storage capacity, more LPG trucks across the five outlets.
In terms of employment, for direct employment, we have an average of 10 persons per plant, and we outsource some aspects like the cleaners and security. We also have the franchising which is, we have a plant in Katsina, we have someone who has a depot in Funtua and gets the gas and retails there taking about 500 to 1000 cylinders. We have two of such – Funtua and Gusau (Zamfara) and each may have five persons as staff. We also have distributors and retailers and all of them have staff.
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