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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

Opening up the market for the entry of new companies

Promoting fair competition among licensed companies through removing barriers to market entry and setting regulations

Launching the petroleum product law

Establishing a regulatory body, the Energy & Minerals Regulatory Commission

New HSE and technical regulations, standards and specifications to be developed

To build logistic facilities and serve all operator on an open-access basis

To build required storage capacities for the kingdom strategic stock of petroleum products

16,000 MT (8 spheres) at Amman Strategic Terminal

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!

Profile for Ahmad Zein

Lpg market challenges and opportunities in jordan by kholoud mahasneh  

Lpg market challenges and opportunities in jordan by kholoud mahasneh  

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