Challenges and Opportunities for LP Gas Promotion at Global & Regional Levels

1. Challenges and Opportunities for LP Gas Promotion at Global & Regional Levels Emmanuel Chantelot Managing Director World LP Gas Association 17th AIGLP Congress Isla Margarita, Venezuela, 18-20 September 2002

2. Outline1. Challenges and Opportunities for LP Gas2. The Role of LP Gas in Meeting the Goals of Sustainable Development3. The LP Gas Industry’s Collective Response4. The Autogas Market and GAIN’s Actions5. Conclusions

3. Challenges and Opportunities for LP Gas

4. LP Gas Industry • Is getting mature in some markets • Is still evolving in some markets • Integrates many players along the product distribution chain • Is adapting to market globalisation • Is looking at new challenges and opportunities

5. Challenges • Competition with other modern energies (electricity, natural gas) • Price fluctuations • Safety management • Image • Globalisation • Deregulation • Affordability • Level playing field • Good industry practices

6. Opportunities • Substitution of traditional fuels (e.g. wood, charcoal) • Reduce deforestation • Reduce indoor air pollution • Reduce urban air pollution (autogas) • Deregulation • Partner with other energies (e.g. solar PV) • Partner with new technologies & distributed power generation • Leverage external funding for industry programmes • Become partner in sustainable development

7. The Role of LP Gas in Meeting the Goals of Sustainable Development

8. Global LP Gas Production • Global LP Gas Production (2001) : 204 million tonnes • LP Gas supplies from crude oil refining are at 38 % globally; LP Gas supplies from gas processing (associated gas + NGLs) are dominant at 62 %, with marked regional variations • Largest LP Gas producing countries (over 5 million tonnes) : USA, Saudi Arabia, Canada, Algeria, China, Mexico, UK, UAE, India, Russian Federation, Venezuela

9. Global LP Gas Consumption from WLPGA Statistical Review of Global LP Gas, 2001 Note: Domestic includes Residential & Commercial

10. Facts about LP Gas Worldwide • 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) China: 115 millions customers, double-digit growth etc. • Markets are highly fragmented in most developing countries, and at global level, LP Gas distribution is shared between : Independent marketers 50 % State-owned companies 30 % International oil/gas majors 20 %

11. Market Barriers Typical barriers to regional and national LP Gas market development include : • High taxes, making LP Gas unaffordable to the poor • Subsidies to alternatives like kerosene • Inconsistent policy, driving major players away • Lack of enforcement / regulations for good business practices • Corruption, piracy • High import duties on equipment needed for market development • Difficult permit procedures for import/storage/bottle filling facilities

12. World Bank / WLPGA Study onThe Role of LP Gas in Meeting the Goals of Sustainable Development Joint study of the World Bank and the World LP Gas Association published in February 2002 Objectives and scope of study : • LP Gas in the global energy mix and its contribution to the 3 pillars of sustainable development • Main drivers of LP Gas supply / demand • Prospects for expanding supply to households in developing countries • Economic and policy barriers to market growth

13. Household energy use Electricity Natural gas Coal/kerosene LP Gas Traditional fuels Time, economic development LP Gas on the “Energy Ladder” • Traditional fuels (e.g. wood, charcoal) still dominate household energy use • Transition to modern fuels central to sustainable development • Contribution of LP Gas: • more convenient & efficient • cleaner and healthier • safer

14. Drivers of Household LP Gas Use • Affordability • income levels • absolute prices • Competitiveness • access to local supplies • oil prices and pricing policies • taxation and incentive policies

15. Policies to Overcome Market Barriers and Promote LP Gas Use (1) Improve the business & regulatory environment • Make energy services competitive • Tackle barriers to market entry (e.g. product import/storage facilities, equipment import duties) • Encourage investment in distribution • Regulate and enforce good business practices

16. Policies to Overcome Market Barriers and Promote LP Gas Use (2) • Target subsidies carefully for household use / target subsidies at the poor : - lower initial cost of service (bottle & stove), helping with bottle deposit / first purchase - avoid excessive & hidden fuel subsidies • Avoid subsidies to competing energies • Raise awareness of comparative benefits

17. Policies to Overcome Market Barriers and Promote LP Gas Use (3) • Micro-credit financing • Innovative forms of public-private partnerships for LP Gas retailing, especially in rural areas • Innovative forms of incentives to direct new LP Gas supplies from use of flared gas to markets with SD / poverty reduction goals

18. Conclusions of World Bank / WLPGA Study • LP Gas can play an increasingly important role in sustainable energy development • Global LP Gas supply is set to grow steadily • This will create an opportunity for expanded household use and increased Autogas use • Demand growth in each country will depend on government policies to encourage investment in distribution and make LP Gas affordable and competitive

19. The LP Gas Industry’s Collective Response

20. The World LP Gas Association - is the authoritative global voice for LP Gas- brings together the top executives from major producers, marketers, transporters, associations & equipment manufacturers - has currently 140 member organisations headquartered in 45 countries around the world- has entered a third phase of development to foster the growth of the LP Gas industry worldwide

21. Promotion of LP Gas Use • Our new Vision : “WLPGA promotes the use of LP Gas worldwide to foster a cleaner, healthier and more prosperous world” • Industry leaders have joined forces at global level and we want to support growth at the regional and national levels.

22. Audiences NGOs International Organisations Parliaments Customers and Consumers National Governments WLPGA Member Associations and Companies Business Associations/ Alliances Media & Press Corps Local Governments Think Tanks

23. Drivers • Education of policy-makers • Building relationships among industry participants • Building partnerships with non-industry partners • Efficient communication tools • Exchange of ideas and cross-fertilisation

24. Strategic Cooperation • The LP Gas industry should speak with a united voice through the global, regional and national LP Gas associations. • WLPGA is developing sustainable cooperation with LP Gas Associations worldwide • WLPGA can provide strategic support to the AIGLP and industry members throughout Latin America Let’s build a strategic alliance

25. Autogas • Global Autogas Industry Network (GAIN) • Guide for Policymakers on How to Develop a Sustainable Autogas Market (April 2001) • “Clearing the Air”, a Technical Report on Autogas (May 2002) Emissions - Test Methods - Standards – Technology • Relationships with Car Manufacturers

26. LP Gas Technology • Global Technology Network (GLOTEC) • Guidelines for LP Gas Use in Rural Energisation (March 2002) -incl. synergies between LP Gas & Renewable Energies (e.g. Solar) • Fuel Cell Technology • Micro-turbines • International Project on Fuel Composition

27. LP Gas Industry Practices Implementation of • Guidelines for Good Safety Practice in the LP Gas Industry (1998, WLPGA – UN Environment Programme) • Guidelines for Good Business Practices in the LP Gas Industry (WLPGA, June 2001)

28. Other Major Projects • Annual World LP Gas Forums 15th Forum: Bangkok, Thailand, 24-26October2002 Don’t Miss It ! 16th Forum: Santiago, Chile, 15-17 October 2003 With the support of AIGLP • Annual Statistical Review of Global LP Gas • Web site and online Members-only database • Special projects and services for members

29. The Autogas Market and GAIN’s Actions to Promote Autogas

30. Global Autogas Growth(1) Global Consumption In Million Tonnes

31. Global Autogas Growth(2) Number of Vehicles Worldwide ‘000 vehicles

32. Global Autogas Growth(3) Number of Dispensing Sites Worldwide In thousands

33. Global Autogas Industry Network GAIN, the Global Autogas Industry Network is leading actions aimed at promoting autogas and creating a sustainable market at global level.

34. GAIN Actions • Identify market opportunities and help develop existing autogas markets • Collect and disseminate benefits of autogas • Support policy and advocacy positions • Develop partnerships with OEMs • Discuss and resolve technical issues • Contribute to automotive technology development • Sponsor and participate in autogas conferences

35. Selected GAIN Products(1) Developing A Sustainable Autogas Market - A Guide for Policymakers • Major tool produced in 2001 • Rationale for fiscal incentives and other measures • Range of policies available • Case studies : UK, France, Italy, etc… • Implementation • working with regional and national associations to distribute • communicating directly with international governmental organisations

36. Selected GAIN Products(2) Clearing the Air, A Technical Guide on Autogas - Emissions, Test Methods, Standards & Technology • Major publication published in May 2002 • Delineates range of environmental standards • Provides current emissions data • Highlights autogas advantages • Identifies regional & country standards • Target audience - policymakers, regulators, industry • TNO drafted study (independent, recognised & respected)

37. Participation in GAIN GAIN, a proactive Global Network is supporting the development of autogas use and of the autogas industry. However, the success of GAIN is also incumbent on member involvement. AIGLP should become the Latin American pillar of GAIN to promote Autogas in Latin America.

38. 5. Conclusions

39. The Way Forward (1) • In 2002, the WLPGA has been developing a range of new projects and partnerships worldwide to foster LP Gas’ contribution to Sustainable Development. • The WLPGA and the World Bank are promoting together the importance and role of LP Gas. • At the Bangkok Forum, the WLPGA will be launching a new partnership initiative with the United Nations Development Programme (UNDP), called “The LP Gas Rural Energy Challenge”.

40. The Way Forward (2) • The WLPGA and AIGLP should forge a strategic alliance for the promotion of LP Gas use in Latin America. • The WLPGA will accompany the growth of the Autogas market in numerous countries worldwide. • Let’s work together to create and develop a sustainable autogas market in several Latin American countries. • In October 2003, the global LP Gas industry will meet in Santiago de Chile for the 16th World LP Gas Forum.

41. Thank you for your attention www.worldlpgas.com