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Lp Gas’ Commercial Advantage Over Gasoil

By James Rudman, business development director, Flogas UK Ltd

The lpg industry currently has an exciting opportunity to grow the commercial lpg gas market in off mains areas through the substitution of gasoil with propane.

In recent years, the average cost difference between oil grades and lp gas has been gradually changing in lpg’s favour, with the largest cost saving to be had between gasoil and propane. Gasoil is predominantly used in commercial applications and, given that the UK oil market is over 20 times the size of the lpg gas market, this represents a tremendous growth opportunity.

The average saving in the buying price of lpg compared to gasoil has increased from 1.1 pence per kWh in 2006/7, to 1.6 pence per kWh for 2008/9. Forward projections over the next decade are for this differential to continue to increase as gasoil supply tightens and more lpg comes on stream.

Obviously, in order to substitute gasoil for lp gas, the customer’s boiler will need to be replaced. Boiler efficiencies have increased significantly over time. Boilers over 15 years old are typically rated between 65 per cent and 80 per cent efficient, whereas a new condensing lpg boiler can be 95 per cent efficient.

This reduces energy consumption between 15 and 25 per cent through swapping the boiler alone, without including fuel costs savings. Further efficiency savings are usually possible through the installation of various control systems.

Lpg gas also offers clear environmental benefits as it emits 29 per cent less CO2 than gasoil. In addition to the emissions savings, lpg produces negligible amounts of particulates, NOx and sulphur when compared to gasoil. Lp gas boilers also run much quieter and are odour free in comparison.

Aside from the cost and environmental advantages of lpg over gasoil, lp gas provides a number of additional benefits. Oil boiler servicing tends to be around twice as expensive as lpg gas boiler servicing, and it is recommended that oil boilers are serviced twice a year in commercial applications.

This results in servicing costs being four times higher. If oil boilers are not serviced regularly, their efficiency will deteriorate quicker than lpg boilers, leading to increased operating costs. New lp gas boilers are significantly cheaper than oil boiler installations. Flues for oil boilers have to be manufactured from stainless steel, resulting in increased installation costs. Oil storage tanks remain the responsibility of the customer, along with their ongoing maintenance costs. Oil customers are responsible for annual tank maintenance inspections and the appropriate insurance.

Oil tanks are required to be bunded, and typically need replacing every 15 years, which can be expensive. In contrast, lpg gas tanks remain the property of the lp gas company, which is fully responsible for their maintenance and safe operation.

Strict environmental legislation is in place for oil storage, with the tank owner being responsible for leakage, however it is caused. The costs associated with an oil spillage can be significant.

In summary, there now exists a clear opportunity to grow the UK lpg market through the substitution of gasoil, which should lead to an increased marketplace for lp gas to compete within.

Contact Flogas UK Ltd on 0116 264 9000 www.flogas.co.uk

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