The Case for a Switch to
LPG Liquefied Petroleum Gas Presentation to Business Innovation Facility By. Oando Marketing Plc NOVEMBER, 2011
The Right to Win 2011 2
Content
• Executive Summary … the LPG story
• Energy Consumption Patterns
• LPG Utilization Roadmap
• Why LPG?
• Oando Marketing’s Initiative
• Winning Strategy
• Distribution Network
• Impact of Initiative
• Oando Marketing PLC
The Right to Win 2011 3
Executive Summary . . . the LPG Story
LPG Market Potential – 1,500,000MT
Current Market Size – 115,000MT
-
10
20
30
40
50
60
70
80
90
Senegal Gabon Angola Cote d'ivoire Ghana Cameroon Rep. Congo Nigeria
LPG C
onsumption (Kg/H
ousehold)*
6th Largest Producer of LPG in the World
2nd Producer of LPG in Africa
150 million TOTAL POPULATION
25 million Households
Av. 6* person per household
Research shows that more customers are willing and ready to switch to LPG*
Change 73%
No change 27%
Willingness to Change Cooking Fuel
Gas, 54%
Kerosene 12%
Others, 7%
. . . here lies a big opportunity
Source: NNPC Annual Statistical Bulletin 2009
**CIA FactBook 2010 (Estimates)
$23.3b*
$26.2b*
* COUNTRY GDP 2009
$377.9b**
* *COUNTRY GDP 2010
$II.06b* $I3.2b*
The Right to Win 2011 4
Energy Consumption Patterns
• Presently, the top tier of the pyramid use Kerosene, LPG & Electricity for their cooking and heating needs.
• The Bottom of the Pyramid, which makes up the lower / rural class segment, rely on firewood and coal for their cooking and heating needs.
• Why the Gap?
• Cost of the initial investment in cylinders
• Cheap cost of alternatives
• Awareness
• Traditional consumption patterns
2.5%
38.5%
59.0% of the population
> 1500USD/
Year
> 500USD/
Year
< 500USD/
Year
Household Income
Immense opportunities exist in the mid/ bottom
tier of the pyramid!
* Source: World Resource Institute, The next 4 billon
The Right to Win 2011 5
LPG Utilization Roadmap Must be Premised on Efficiency & Social Benefits
100,000 ANNUAL DEATHS FROM INDOOR POLLUTION
8.5% ESTIMATED LOSS OF DISABILITY ADJUSTED LIFE YEARS
55.7% PERCENTAGE OF PRIMARY FOREST LOST 2000 - 2005
• The hazardous effects of using unsustainable and unsafe cooking fuels
The Right to Win 2011 6
Why LPG?
50% Heating Efficiency
Unit Cost
N3,300.00
28 Liters
KEROSENE
35% Heating Efficiency
Unit Cost
N3,800.00
132 Kg
FIRE WOOD
85% Heating Efficiency
Unit Cost
N2,800.00
12.5 Kg
LIQUIFIED PETROLEUM GAS
Save 100,000 lives yearly
Create 42,000 direct and indirect
jobs
Generate revenue for Government
Reduce global emissions
Reduce deforestation
Reduces Indoor Air Pollution
The Right to Win 2011 7
Oando Marketing’s Initiative
Oando Marketing PLC has developed a new market stream by targeting a segment that has not previously been targeted directly, despite their huge numbers:
Patented & specially designed 3kg LPG cooking stove
Re-worked Distribution Approach
5 million households
SWITCHED
This channel will consist of a vast network of dedicated wholesalers (O-Gas Distributors) servicing a dedicated network of retailers.
The Right to Win 2011 8
…. A Winning Strategy
Distributor
- A smaller LPG cylinder size that is Portable Easily stored Can be refilled affordably
- Vast distribution network where cylinders can be gotten and refilled 10 minutes from the end user’s home
- Awareness campaign that highlights the advantages of LPG and how to use it safely
- Access to financing options to make initial purchase of cylinder more affordable for the end user
The Right to Win 2011 9
Distribution network
At the center of the dedicated distribution channel is the O-
Gas distributor.
The O-Gas distributor manages the O-Gas wholesale hub and the network of MFs attached
to each distributor
Start
OMP LPG Terminal
O-Gas Distributor
Micro-Franchisee
End User
Oando is responsible for logistics of cylinders between terminal and distributor as well as sales and marketing support for the distributors
Each distributor is expected to drive the distribution and sales to the micro-franchisee and also invest in logistics support
The Right to Win 2011 10
• Over the next 5 years, OMP seeks to reach 5mn households (representing 19.2% of total), thereby generating 612,617 Metric Tonnes (MT) of LPG sales
580,570
1,035,420
1,415,666 1,542,379
1,388,377
Year 1 Year 2 Year 3 Year 4 Year 5
Cylinder Injection
Now Year 1 Year 2 Year 3 Year 4 Year 5
MFs 0 1,566 11,784 32,215 32,215 32,215
SDPs 0 67 495 1,351 1,351 1,351
0
200
400
600
800
1000
1200
1400
1600
0
5000
10000
15000
20000
25000
30000
35000
No
of
Seco
nd
ary
Dis
trib
uti
on
Po
ints
No
of
Mic
ro-f
ran
chis
ee
s
No of SDPs & MFs
Impact of Initiative
The Right to Win 2011 11 11
Oando Marketing PLC
The Right to Win 2011 12
Oando Marketing PLC: An overview
• 8 Terminals – 159.5m Litres capacity
• 3 Aviation Depots–3,000MT Combined Capacity
• Access to 13 government depots across the country (shared with other Majors)
• 2 Lubes Blending Plants –100m Litres capacity
• 7 LPG Filling Plants - 945 MT combined capacity
• Over 1,980 trucks through partnerships with several transporters
• Over 500 Retail Outlets across Nigeria
• Over 500 Industrial Customers (i.e. Direct Sales, Vendor-Managed Inventory, Value Added Peddling
The Right to Win 2011 13
Oando’s Gas Supply Channels
Enugu
Benin
Warri
Jos
Kaduna
Sokoto
Lagos
By depending on multiple sources for the supply of the product, Oando enjoys a reliable supply of LPG at all times
Sourcing • International market • NLNG off-takers • Government owned refinery
OMP’s LPG bulk filling plant
Logistic support
The Right to Win 2011 14
Thank You www.oandomarketing.com