Gas Pro adds storage capacity to exploit propane market

Published: Wednesday | April 3, 2013 Comments 0
Peter Graham, chief executive officer of Gas Products Limited in Jamaica. File
Peter Graham, chief executive officer of Gas Products Limited in Jamaica. File

Avia Collinder, Business Writer

Gas Products Limited has expanded its storage capacity in Freeport, Montego Bay by 50 per cent to satisfy growing demand for propane in the western end of Jamaica.

The US$2.3 million (J$225m) investment was prompted by the evolving market among businesses trying to escape the high cost of grid-supplied electricity and are utilising Liquid Petroleum Gas (LPG) for applications other than cooking, according to Gas Pro Jamaica CEO, Peter Graham.

The market for LPG overall was relatively flat in 2012, Graham said Monday. But while butane followed that pattern, propane sales rose nine per cent, said the gas executive.

The facility in Montego Bay - whose capacity has risen from 12,000 barrels to 18,000 barrels - is an independent sea-fed storage capacity, which allows Gas Pro to purchase some supplies directly from overseas sources, instead of relying solely on the Petrojam refinery.

The facility in Montego Bay is an independent sea-fed storage capacity, which allows Gas Pro to purchase some supplies directly from overseas sources, instead of relying solely on the Petrojam refinery.

Gas Pro is therefore not fully dependent on supplies from Petrojam, said Graham.

The expansion project spanned six months and created 25 construction jobs over the period.

FINANCING THE PROJECT

The project was financed by debt, said Graham, who declined to discuss projected returns, nor how the expenditure will affect profits this year.

The company, whose core business is the marketing, sale and distribution of LPG is a subsidiary of the Neal & Massy Holdings, a Trinidad-based conglomerate whose holdings span the region.

Graham, while noting that the LPG market was far from robust last year, said Gas Pro grew market share by taking business away from its competitors.

"The turnover is driven primarily by the prevailing price of fuel, which can have large fluctuations," he said.

"Volume is the primary indicator. The increase in volume sold by Gas Pro in the last financial year was twice the estimated change in total market," he said.

At yearend September 30, 2011, Gas Pro made sales of just over J$4 billion. Last year, Graham said LPG prices fell but that total revenue rose to J$4.5 billion. Petrojam's ex-refinery price for propane fell by an average of 25 per cent in 2012, he said, from around J$46 per litre to J$35 per litre.

Dealers typically add their margins to the Petrojam prices.

In 2013, demand is expected to be driven by the search for cheaper sources of energy to replace electricity generated from oil.

Even Jamaica Public Service Company, the monopoly distributor of electricity through the national grid, is considering developing a combined cycle plant that can be fired by LPG. JPS said last week that it is awaiting sign-off by the Office of Utilities Regulation on the LPG proposal, among others.

Gas Pro, however, has its eye on businesses that are seeking alternatives to the high-cost power supplied by JPS.

"At least two large companies have stated their intention to construct co-generation plants to produce their own electricity. Both are considering LPG as the primary fuel," said Graham.

Gas Pro markets both butane, which is typically used to fill cylinders for domestic/household use; and propane, which is used by commercial customers.

"The growth in propane demand is driven primarily by a larger number of commercial entities utilising LPG for applications other than cooking. Propane is used in lieu of electricity, diesel and other forms of fuel to generate steam and produce hot water, among other applications," said Graham.

"Given the price of propane relative to electricity and diesel, it is more economical to use LPG," Graham explains.

Gas Pro's MoBay terminal will ensure "product security" to large customers and the hotel in sector in particular, and it will serve to minimise "the safety risk" of transporting LPG by road from Petrojam's facility in Kingston, he said.

business@gleanerjm.com

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