Enhancing Traceability of Total Energies LPG cylinders
Introduction
Development of tamper-proof, safe and durable tracking system for LPG cylinders from the filling plant to end user and back.
Description of the Challenge
The Liquefied Petroleum Gas
(LPG) energy sector is marred with a myriad of challenges ranging from
unscrupulous dealers illegally refilling and trading in branded LPG cylinders. The
illegal re-fillers tamper with the cylinders compromising their safety features,
under fill and use gas from untraceable and sometimes adulterated. Furthermore,
some of the illegal re-fillers use gas siphoned from LPG bulk tankers on
transit. The cylinders in illegal circulation are not inspected and serviced as
required. These illegal re-fillers operate in unsafe conditions hence posing a
big risk to life. As a result frequent catastrophic failures of the refilling
systems and the non-serviced cylinders are reported. These malpractices
undermine the business of the company whose cylinders are so used, exposes such
companies to uncalled for litigation and further erodes customers’ satisfaction
& confidence in the company’s products. Additionally, the practice denies the
company value for its investments while the customers do not get value for the gas
product purchased.
The LPG Cylinder safety standards require that a cylinder is inspected every 8 years for a maximum of three times during its 24years lifetime to confirm its suitability for use, and allow for servicing as necessary. In Kenya, the law, Legal Notice No. 100, Petroleum Act. No. 2 of 2019 among other requirements, obligates LPG companies to track their cylinders, monitor the retail point of sale, and ensure that only authorized distributors’ trade with their branded cylinders.
The current system lacks adequate traceability measures and hence a fertile ground for malpractices among competitors as well as illegal traders. The system allows for theft and rebranding of competitor’s cylinders; hoarding of competitor’s cylinders hence curtailing the penetration and availability of the company-branded cylinders to the public and further creates a rich ground for illegal re-filling of the cylinders with substandard gas which could also be below the required quantities. The undesirable consequences range from low rotation of branded cylinders; provision of substandard gas to the customers and in worst case scenarios explosions occasioned by un-serviced cylinders which could also be tampered with. Furthermore, the system limits the company’s ability to track the cylinders and develop that crucial customer data for data analytics to enhance decision making.
The
cylinders in circulation amount to a significant investment of company’s
resources as they are based on the company’s target market size. Further, the
supporting gas distribution system is designed to match the number of cylinders
in circulation. The loss of cylinders to competitors and the illegal dealers
causes considerable distortions of the target market, making it difficult to
make sound business decisions. The loss therefore becomes a major impediment to
enhanced investment in the sector and consequently inhibits the widespread
adoption of LPG as an alternative to biomass source of energy. The LPG domestic
uses include cooking, heating, lighting and barbecue.
Challenge Owner's Business Model
The
authorized LPG companies manufacture and brand their own cylinders. They have
refilling stations at strategic locations in the country and distribute the refilled
cylinders through petrol stations and a
network of authorized retail outlets.
Often, retail outlets are micro, small and medium enterprises (MSMEs) who
are engaged in other businesses alongside that of trading in the gas. Outlets
receive empty cylinders from customers as a condition for purchase and exchange
with a filled one. It is notable that households use 3 kg, 6 kg and 13 kg size
cylinders. It is cylinders in this size range that are mostly traded in the
illegal market.
Impact
The
UN Sustainable Development Goal (SDG) 7 is to ensure access to affordable,
reliable, sustainable and modern energy for all. Natural gas is considered a
better alternative to biomass and serves to increase access to energy. In Kenya, for example, consumption of LPG is
approximately 400,000 metric tons per annum and this is used by only an approximate
20% of the households (NCI, 2021). Approximately, 75 % of households rely on firewood
and charcoal as their primary source of cooking energy. These sources are risky
as they significantly expose the users to various health risks through indoor
air pollution, reduced forests and tree cover. In Eastern Africa region,
natural gas serves to increase access to clean energy to the region’s
population. Consumption for LPG is estimated as 950,000 Metric tons in the
region. The solution to the LPG gas
traceability problem will contribute towards shifting millions of households
from using firewood and charcoal to LPG as the primary cooking source of energy
in the region and ensure safety in the use of LPG. Further, the solution, will contribute towards
attainment of SDG7 among others.
Solution Required
One
of the ways of solving this problem is by creating a system of tracing the
cylinders. A leading oil marketing company would like to develop a system of
tracing the 3, 6, and 13 kg gas cylinders, so as to establish when and where the
illegal filling takes place. In addition, the solution will enable the company
to capture crucial customer data for decision making including and not limited
to production capacities, prospective new future market segments, customer
response and attitude to their products as compared to the competitor etc. The
solution should therefore meet the following minimum requirements.
à
Investment cost per
cylinder during its life time should not
exceed US$7, or the equivalent in local
currencies;
à
The solution should not
be obvious to the customers and the public;
à
In the event that the
proposed solution is electronic, it should comply with “Atmospheres Explosive”
(ATEX) certifications; and
à
Take into account the LPG
cylinder safety standards requirement which requires a cylinder to be inspected
every 8 years, for a maximum of three times during its life time to confirm its
suitability for use and allow for servicing as necessary.
All legal entities individual entrepreneurs and innovators, firms, institutions and public entities in Africa.
- A cover letter of your entity
- An ethical compliance letter
One must be registered as a problem solver.
Eligibility criteria for a problem solver.
- One must be registered as a problem solver.
- One can be a startup company or a research institute.