LPG Market Challenges and Opportunities in Jordan
Kholoud Mahasneh Beirut, Lebanon 26th April, 2018
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Jordan National Energy Strategy’s first goal is promoting competition in the sector and ensuring the supply of petroleum products
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Ensuring sustainable supply of petroleum products, and promote competition in the sector
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Achieving security of electricity power supply
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Achieving security of natural gas supply and diversifying import sources
4 5 6 7
Utilizing of renewable energy sources to generate electricity
Exploiting of oil shale to generate electricity and the production of shale oil
Introducing of nuclear power in electricity generation
Raising the efficiency of energy consumption
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Market demand at 433K MT in 2016, of which 81% is met by imports and 92% distributed through cylinders LPG as % of Petroleum Products Consumption
Market Size (000 MT) Imports
Kerosene 2% Asphalt 5%
LPG 9%
Diesel 35%
Gasoline 30%
AAGR 3.66%
Total Consumption (000 MT)
Fuel Oil 12%
Production
450
416
400
377
369
371
275
291
280
102
78
2012
2013
433
350
300 250 200
336
352
91
80
81
2014 Year
2015
2016
150 100 50 0
Jet Fuel 7%
0.30%
Market Segments (%)
8%
91.50% Bulk
Cylinders 50 Kg
Cylinders 12.5 Kg
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The LPG supply and distribution chain is currently dominated by Jordan Petroleum Refinery, which its production has declined
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Like any country, Jordan’s LPG supply chain has it own challenges Bulk Importation
Primary Storage
Secondary Storage & Distribution
• Monopoly over imports: currently one company is allowed to import LPG • Limited storage facility in Aqaba, currently at 3,000 MT • Lack of “Open Access” practice • (3) manual bottling plants with limited automation • Inefficient/unsafe operations & handling • Strict cylinder specifications to fit with handling process • Old truck fleet
Pricing
Substitution
• Regulated market, high capital investments, volatility of the international LPG prices
• The industrial sector may switch towards LNG
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Main Changes/ Updates occurred in the LPG industry
Oil Sector Restructuring
Regulatory Framework
Establishing the Logistics Company
New Storage Capacities
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Opening up the market for the entry of new companies
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Promoting fair competition among licensed companies through removing barriers to market entry and setting regulations
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Launching the petroleum product law
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Establishing a regulatory body, the Energy & Minerals Regulatory Commission
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New HSE and technical regulations, standards and specifications to be developed
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To build logistic facilities and serve all operator on an open-access basis
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To build required storage capacities for the kingdom strategic stock of petroleum products
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16,000 MT (8 spheres) at Amman Strategic Terminal
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6,000 MT (3 spheres) at Aqaba Terminal
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JOTC is currently building 22,000 MT of LPG storage in two locations, and will promote competition through adopting the “Open Access� principles
1 Amman 16,000 MT (8 spheres) at Amman Strategic Terminal
2 Aqaba 6,000 MT (3 spheres) at Aqaba Terminal 7
Theses changes are expected to create new opportunities in the LPG market
Bulk Importation
• Licensed companies will be allowed to import freely, and benefit from the new storage capacities
Bulk Distribution
• Possibility for building gas networks for larger complex
Bottling
• To be able to extend their business, and to be more efficient as a result of importing their requirements from LPG, and more capacities available • The market will be open for building new bottling plant(s) • Availability of LPG apparatuses business
Cylinder Distribution
• Building consolidated retail brands • Utilizing the cylinders pallets
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Recommendations to Policymakers…. The provision of energy services should be competitive. Competition allows consumers to choose among fuels and among suppliers. Healthy competition in the presence of monitoring and enforcement of regulations and standards promotes service quality and drives down costs.
The market should set prices. All controls over pricing should be removed once competition is established. Given the benefits of LPG over traditional fuels and kerosene, taxes on LPG should be kept to a minimum so as not to harm its competitiveness and discourage its use. Subsidies should be targeted, transparent, practical and temporary. The Regulator should remove all barriers to market entry and establish the required regulations that protect the rights of all parties. Barriers to switching to modern fuels should be addressed. Support could be provided to LPG company credit programs and to lower the cost of cylinder, appurtenances and cooker. Awareness about comparative fuel costs and attributes should be promoted. Government should disseminate information and raise awareness among households about the costs and practical benefits of modern fuels compared with traditional fuels.
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Thank You!