1. LP GAS The Obvious Alternative For Africa Michael Kelly, Director, Market Development, World LP Gas Association
11th UNCTAD African Oil and Gas, Trade and Finance Conference & Exhibition
Nairobi May 2007
NOT AN OFFICIAL UNCTAD RECORD

2. Agenda
The World LP Gas Association at a glance 2. Why LP Gas 3. Innovations 4. LP Gas as a Fuel for Rural Development 5. Conclusions
Let me now turn to trends in the International LPG business looking at supply and demand.

3. Agenda
The World LP Gas Association at a glance 2. Why LP Gas 3. Innovations 4. LP Gas as a Fuel for Rural Development 5. Conclusions
Let me now turn to trends in the International LPG business looking at supply and demand.

4. The WLPGA WLPGA members Board of Industry Directors Council
As the authoritative, global voice for LP Gas, the WLPGA promotes the use of LP Gas worldwide to foster a cleaner, healthier and more prosperous world.
WLPGA members
>155 members headquartered in 50 countries
> Representing the leading companies
Board of
Directors
Industry Leaders
WLPGA Staff
Industry
Council
Top LP Gas Companies
So, What is the World LP Gas Association ?
We bring together the industry at a global level
As you can see, we have approx. 150 members in 50 countries with just over half from Europe & Asia
This include regional and national associations, global markets and producers, distributors, importers, original equipment manufacturers …
Our Industry Council is made up mostly of large marketers and producers
The Board of Directors is composed of the industry leaders
Our staff is located in Paris, France and our activities support the association’s mission

5. A powerful Industry Association
Many of the worlds best know brands are represented on our Industry Council – giving us credibility and influence
We also count SG Trans and JSC PA Specialised Rail Tank Cars from Russia as members

6. The WLPGA
We are a growing network of members representing the major LP Gas companies across the world
We are influential – Partnerships with key global organisations such as the World Bank and the UNDP
We are credible – Officially recognized within the UN Economic & Social Council
We are informative – publishing essential information for the use of members
We are the unique global organisation representing the interests of the full LP Gas value chain from producer to distributor
Our organization is very active.
This year we have nearly 30 projects spread over 6 programme areas including:
Outreach and lobbying where we participate in international events
Communications
New Market Development, which includes our partnership with the United Nations to increase rural access to LP Gas
Our global autogas industry network, which meets 3 times a year to coordinate global autogas issues
Our global technology network, which monitors and shares technology developments
And, good industry practices …

7. The WLPGA – Facilitating market development
Partnering with global institutions to prove new business models
Smart subsidies in South Africa
Microfinance in Morocco
Lobbying governments for fair taxation:
Korean and German Autogas
Sharing best practices
Publications on business and policy recommendations
Focusing on some of our activities in a little more detail:
A key role is facilitating market development

8. The WLPGA – Exchanging best practices and innovation
Two active Member-driven networks:
Global Technology Network (GLOTEC)
Global Autogas Industry Network (GAIN)
Revamped and informative web site:
Exclusive information in “Members-only” section
Annual Forum
20th World LP Gas Forum Cape Town
The unique global event in the industry which this year will feature the “LP Gas for African Development Conference” on 24 October.
Assisting member companies through exchanging innovation and new ideas

9. Agenda
The World LP Gas Association at a glance 2. Why LP Gas 3. Innovations 4. LP Gas as a Fuel for Rural Development 5. Conclusions
Let me now turn to trends in the International LPG business looking at supply and demand.

10. Fuel for Development – the context
Energy is vital for socio-economic development
1.6 billion people in the world have no access to electricity and a further 2.4 billion people depend on traditional fuels for cooking and heating
Access to modern energy strengthens the three pillars of sustainable development: Economy; Society; Environment
LP Gas is an immediately available modern energy at low infrastructure cost
LP Gas is a popular household fuel in many countries and most markets are growing
Brazil: over 90 % households use LP Gas
India: 66 millions households (90 % urban, 33 % rural areas covered)

11. Availability Acceptability Accessibility Access to Modern Energy
The landmark World Energy Council 2000 Statement “Energy for Tomorrow’s World” laid out 3 critical prescriptions for achieving a sustainable energy future
Availability
Acceptability
Accessibility
This presentation demonstrates how LP Gas delivers on each of these three criteria – with a focus on Rapid Access to Modern Energy

12. LP Gas is an Available Energy source
400
350
Oceania
60% increase
300
FSU / E Europe
Africa
250
Supply /M Tonnes
West Europe
200
Asia
150
Latin America
100
Middle East
First, LP Gas is plentiful and available worldwide.
LP Gas production has historically grown at a rate of 5% per year.
Annual production is currently more than 210 million metric tonnes per year -- and supplies are projected to increase 4-5% annually.
This is equals about 10% of annual global natural gas consumption or around 6% of global oil consumption
ALSO, with LP Gas there is nothing exotic to invent or improve -- the transportation system is in place, the tanks to store it are available, the appliances and equipment that provide heat and power are simple, reliable and proven in hundreds of millions of applications worldwide. 50
North America
1995
2000
2002
2003
2004
2005
2010
2030
Source: WLPGA Statistical Review of Global LP Gas
Purvin & Gertz

13. LP Gas is an Acceptable alternative
…because it’s a clean fuel
It burns cleanly
No smoke or residual particulate matter
And, relatively low pollutant emissions
LP Gas is an acceptable alternative…because it’s clean.
LP Gas burns cleanly without smoke or residual particulate matter and with relatively low pollutant emissions.
These inherently ‘clean’ characteristics are especially important for reducing indoor air pollution associated with traditional fuels -- which can cause serious health problems.
[optional] Indoor pollution from fuel use is thought to account for as much as 4-5% of global disease, with women and children generally suffering the most. Because LP Gas has negligible emissions of the toxic gases that can cause serious health problems, the health benefits of switching to LP Gas can be considerable.

14. LP Gas has a low GHG footprint
And with respect to climate change, while LP Gas may not be a zero-greenhouse gas fuel -- it can make immediate contributions to delivering real GHG reductions.
For example, space and water heating are particularly important energy needs in developing countries – and this chart shows that LP Gas emits lower CO2 emissions than electricity and heating oil, as well as for most traditional fuels.
[optional] In commercial and industrial boilers, petroleum fuels emit 32% more GHG emissions compared to LP Gas; coal 43% more, and wood 78% more.
Additionally, it is believed that a significant number of households are harvesting biomass fuels non-renewably or taking them from more productive applications, such as soil maintenance. These practices contribute to deforestation, reducing the capacity of forests to sequester CO2 and threatening bio-diversity.
Fuel Cycle CO2-Equivalent Emissions for Space Heating and Water Heating (g/Mbtu heat)

15. LP Gas and reduced indoor air pollution
Did you know that…
… smoke from indoor cooking fires kills 1.6 million (mainly small children) every year
… smoke in the home kills more people than malaria does, and almost as many as unsafe water and sanitation
… smoke in the home is the fourth greatest cause of death and disease in the world’s poorest countries
Another very important area is that of indoor air pollution.
1.6 million deaths per year in the world is 4,300 per day or 180 per hour or 3 per minute…every minute 24/7

16. LP Gas and reduced indoor air pollution
According to the landmark 2006 WHO study “Fuel For Life, Household Energy and Health”
WHO have highlighted LP Gas as the cost effective solution for reducing pollution from cooking fuel in the developing world
“… investing US$ 13 billion per year to halve, by 2015, the number of people worldwide cooking with solid fuels by supplying them with LP Gas shows a payback of US$ 91 billion per year”
“Government leadership in developing policies for successful market expansion of LP Gas is essential”

17. Significant improvements can be brought by LP Gas
Graph shows relative pollutant emissions per meal
100.0
10.0
1.0
0.1
Crop
Biogas
LPG
Kerosene
Wood
Roots
Dung
Residues CO
0.1
1.0 3 19 22 60 64
Hydrocarbons
Studies and measurements have shown that compared to most traditional fuels, LPG has a far lower burden on health. Even biogas which shows low Carbon monoxide and Hydrocarbon emissions, shows higher levels of the harmful particulate matter.
0.3
1.0
4.2 17 18 32
115 PM
2.5
1.0
1.3 26 30
124 63
Almost no emissions
Energy efficiency of 90%
27mj/1kg LP Gas CO
Hydrocarbons PM

18. LP Gas delivers Rapid Accessibility
Because it’s portable:
Bottles can be can be stored indefinitely
Easily transported
Used virtually anywhere -- from urban centres to remote regions
When and where costly, grid-based energy services are unavailable
LP Gas delivers rapid accessibility…firstly because it’s portable.
LP Gas can be stored, easily transported and used virtually anywhere from downtown urban areas to remote regions of the globe.
This important comparative advantage, in particular, means that it can deliver immediate contributions across the social, environmental and economic priorities of sustainable development.

19. The Transition to Modern Energy
Household
energy
use
Traditional fuels (e.g. wood, charcoal) still dominate household energy use
Transition to modern fuels central to sustainable development
Economic development doesn’t drive energy usage rather, it may be stimulated by energy provision (UNDP)
Electricity
Natural gas
Coal/kerosene
LP Gas
Traditional fuels
Most importantly, the portable nature of LP Gas enables rural communities (in both developed and developing countries) to have access to modern conveniences when and where costly, grid-based energy services are unavailable.
It is also important to remember that a transition to modern fuels cannot occur overnight…
LP Gas represents a phase in this transition -- and since it does not require large infrastructure investments, this phase in the transition can occur rapidly.
Simply put, LP Gas is an easier step up the energy ladder, providing communities with rapid access to modern energy services.
[background] Even after the construction of a natural gas grid, LP Gas often remains the main fuel for residential/commercial heating and cooking in remote areas.
[background] In most developing countries, the distribution of natural gas to residential customers is unlikely to become widespread for many years, if ever, especially in regions that do not foresee a need for domestic central heating.
Time, economic development

20. LP Gas allows for incremental development
Stage 3: LP Gas bulk tank, fuelling stove, refrigerator, water boiler and generator
Stage 2: LP Gas cylinder outside, piped in to fuel stove, refrigerator and light
Once in place, LP Gas use can grow to meet more and more energy needs.
This chart shows the growth of services which can be achieved within the household.
The first stage would entail using cylinder gas directly attached to an appliance…then to power a stove, refrigerator and light…then for feeding a water boiler and a power generator to meet further electrical needs.
In this way, LP Gas is also a natural precursor fuel, enabling communities to build up the use of modern energy appliances in advance of future natural gas or electricity grids.
[optional] This incremental development approach has already occurred in many countries. The provision of gas to South Korea followed a very similar development to that described above.
Stage 1: LP Gas cylinder inside feeding stove

21. ENERGY CONSUMPTION / Watts TYPICAL APPLIANCE ENERGY USAGE
Meeting Energy Needs
2 000 – 5 000
Home Heating
1 500
Electric Kettle
Electric Stove 95
Sewing Machine 50
V.C.R. 90
Refrigerator
100
Television 6
Radio
400
Additional Lighting
150
Minimal Lighting
ENERGY CONSUMPTION / Watts
APPLIANCE
TYPICAL APPLIANCE ENERGY USAGE
In addition to getting clean fuel delivered to consumers, the fuel must perform.
Many domestic, thermal energy needs cannot be easily or fully met with off-grid electrical power solutions, such as solar, wind, solid fuel, and traditional fuels.
For example, while low-power applications such as lighting, radio and even television could be powered by solar and / or wind energy, critical cooking and heating needs require a higher energy intensity.
Many domestic, thermal energy needs can not be met by off-grid electrical power

22. Agenda
The World LP Gas Association at a glance 2. Why LP Gas 3. Innovations 4. LP Gas as a Fuel for Rural Development 5. Conclusions
Let me now turn to trends in the International LPG business looking at supply and demand.

23. LP Gas partnering with renewable energy
[optional] In looking forward, it’s worth noting that LP Gas can play an important -- if not essential -- role in commercialising renewable energy in rural locations.
As a strategic partner with renewable energy sources, LP Gas can:
-- diminish the impact of prohibitive costs of renewable energy technologies.
-- provide reliable back-up supply to compensate for the intermittent nature of renewable energy supply.
[optional] LP Gas’ comparative advantages over most other fuels mean that it can make energy development more sustainable until such time as affordable and environmentally acceptable renewable energy technologies become available.
[Background]
In this example,
LP Gas is used directly in the cooker and water heater - and it fuels the fuels the electricity generator. Electricity produced by the CHP unit and PV module array is not used directly but stored in the battery unit while heat recovered from the CHP unit is stored in the water tank.
The PV elements of the system are sized to supply the summer electrical load. In winter the PV contribution is negligible and electricity is produced solely by the CHP generator while its heat contributes to the space heating demand.

24. LP Gas supports a wide range of services
Commercial services
Manufacturing, metal-works and crafts
Community sanitation
Commercial food preparation
Agriculture
Beyond the household, LP Gas is a multi-value resource capable of generating multiple productive services in the wider community and cultivating commercial and industrial growth in the local economy.
[optional] Extending this proven, high-value service to rural communities in the developing world elevates household living conditions and productivity and delivers an immediate opportunity for women and girls to more actively engage in the social and economic fabric of the community outside the household.

25. Innovative programmes
Morocco Microfinance project
Partners are Shell, Afriquia Gaz, Total, Zakoura Foundation
Pilot phase US $150,000 rolled out successfully
Zakoura staff trained on LP Gas applications
Promotional material provided
Active promotion of applications around country
Quarterly status reports provided on status of loans
To qualify for loans, recipients must not have access to traditional sources of financing, must have a project generating income using LPG
Ultimate goal: create successful project template to be replicated in other markets

26. Innovative programmes contd/
Demand Side Management (DSM): Works!
Cost effective - low cost method of peak electricity load avoidance
The LP Gas element of the overall programme saved 48.3 MW of peak electricity usage out of a total target of 200 MW
7000 electric appliances replaced by gas in middle and upper income households
100,000 low income households switched to gas for cooking
Practical lessons learned
Industry has to guarantee:
Availability of supply
Stability of price
DSM programmes can be replicated

27. Agenda
The World LP Gas Association at a glance 2. Why LP Gas 3. Innovations 4. LP Gas as a Fuel for Rural Development 5. Conclusions
Let me now turn to trends in the International LPG business looking at supply and demand.

28. What is the LP Gas Rural Energy Challenge?
A Public – Private Partnership (UNDP/WLPGA)
Address lack of access to clean energy through the use of LP Gas
Improve living standards
Contribute to achieving the Millennium Development Goals
Create viable and commercially sustainable LP Gas markets in rural / suburban areas of developing countries
for domestic consumption
for industrial productive uses

29. The rural distribution paradox
Low relative incomes in Rural Areas
Long distances / difficult terrain
Highest cost supply to those who can least afford it
What are the barriers to rural distribution and how can they be addressed?

30. Barriers Low density of LP Gas target population
Weakness of LP Gas distribution networks in remote rural areas
Low cash purchasing power
Need for local credit facilities
Inappropriate cylinder size
Lack of safety culture and poor enforcement of regulations
Widespread use of less healthy, or unsafe, fuels
Inadequate State policy to support fair LP Gas market development (some times keeping major players away), including: sub-optimal tax policies and emphasis on other fuels for various policy reasons 5

31. Developing Rural Markets
WLPGA report based on in-depth survey of members and feedback from the WLPGA / UNDP Rural Energy Challenge
The Report:
Summarises key barriers
Explores key success factors for developing rural markets
Showcases 10 case studies of innovative rural models
Unfortunately, there are number of commercial, regulatory and institutional reasons why investment may be insufficient or may not occur.
However, Governments can strongly influence LP Gas market development.
There is a good case for government support to the LP Gas sector in developing countries based on the positive contribution the fuel can make to more sustainable energy use.
Active government support can catalyse LP Gas market take-off and establish a virtuous circle of growing market potential, increased investment and expanded availability.
[Background -- don’t read these unless you want to or have time]
The provision of energy services should be competitive: Competition allows consumers to choose between fuels and between suppliers. It promotes service quality and drives down costs.
Prices should be set by the market: All controls over pricing should be removed once competition is established. For as long as the state retains control over pricing, it should adopt import-parity pricing.
Taxes should not undermine consumption nor distort the market inadvertently: Any differentials in tax rates between different household fuels should be justified by legitimate social or environmental arguments. Given the benefits of LP Gas over traditional fuels and kerosene, taxes on LP Gas 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: Where justified, subsidies should be aimed at rural households and the urban poor who would otherwise not use modern fuels. Subsidy programmes should not be unduly costly, taking account of the resources required to administer them and to monitor, prevent and deal with abuse. The financial costs and the channels through which cash payments are made must be fully transparent. On-budget costs should be properly accounted for and the results made available to the public. Subsidies should normally be regarded as a temporary measure to support switching from traditional fuels and should not be kept in place indefinitely.
Barriers to market entry should be removed: Laws and regulations that impede trade and investment, including restrictions on repatriation of profits, should be removed. State-owned enterprises should compete on an equal footing with private companies. Privatisation or private-public partnerships should be considered as a way of attracting private capital.
Barriers to switching to modern fuels should be addressed: Emphasis should be given to subsidising the initial cost of service, where this is a barrier to fuel switching. Subsidies can be used to lower the cost of the cylinder deposit and stove. Support should also be given to micro-credit organisations that help consumers overcome such barriers. At a minimum, financing and banking laws should not erect unnecessary barriers to the development of micro-credit financing arrangements targeted at the poor.
Awareness about comparative fuel costs and attributes should be promoted: Governments should disseminate information and raise awareness among households about the costs and practical benefits of modern fuels compared with traditional fuels.

32. Agenda
The World LP Gas Association at a glance 2. Why LP Gas 3. Innovations 4. LP Gas as a Fuel for Rural Development 5. Conclusions
Let me now turn to trends in the International LPG business looking at supply and demand.

33. Conclusions
LP Gas is an ideal fuel for development being available, acceptable and accessible
Strong endorsement of LP Gas has been received from key global authorities
Barriers to rural development exist but some can be addressed through private and public sector action
Good practices are the responsibility of both the industry and government
Good practices are essential for the safe and sustainable delivery of excellent services

34. Mark it in your agenda now! Our 20th anniversary event &
And Finally…
Mark it in your agenda now!
Our 20th anniversary event
&
The LP Gas for African Development Conference
24th – 26th October 2007
Cape Town, South Africa

35. Thank you
Spa see va