-By Fred Ojiegbe
As the quest for debate for total deregulation of the downstream sector rages in Nigeria, the Federal Government has now diverted its attention towards an affordable alternative for energy with the launch of the Natural Gas Expansion Programme in December 2020.
The NGE programme has the sole aim to popularise autogas as an alternative to petrol. If fully implemented, it means that cars and generators will no longer be powered by petrol, deepening domestic usage of natural gas in its various forms.
Already, with a reserve of about 203 trillion cubic feet (TCF), and an additional upside of 600tcf, Nigeria ranks 9th across the globe in terms of natural gas resources.
Autogas is notably the third most popular automotive fuel in the world, with approximately 16 million of 600 million passenger cars powered by fuel. There is no doubt that, if integrated into the country’s economy and lifestyle, it will lower Nigeria’s dependence on petrol. For starters, autogas is 40 per cent cheaper than petrol. It also reduces carbon dioxide exhaust emission by 15 per cent, when compared to petrol. Also, despite having a lower density, it is highly efficient.
With the abundance of natural gas resources in Nigeria, the Federal Government is confident that this will not only soften the effects of the deregulation, but also create new markets and job opportunities for Nigerians.
Most importantly, it is 100 per cent possible and achievable to have a vehicle converted to an LPG-powered vehicle, and still have its petrol tank. This way, the driver can easily alternate.
In the virtual meeting, Nigeria’s President Muhammadu Buhari stated that the autogas initiative will enrich the trajectory of the national economic growth and development.
“I, therefore, encourage everyone to embrace the gas in the form of LPG (Liquefied Petroleum Gas), CNG (Compressed Natural Gas), and LNG (Liquefied Natural Gas) as an alternative fuel for autos and other prime movers,” he added.
Presently, the government is set to make the first choice source of cheaper and cleaner energy.
Taking the first step, the Minister of State for Petroleum, Chief Timipre Sylva, handed over CNG-powered mass transport buses to Nigeria Labour Congress (NLC), while the Federal Government autogas programme is expected to deliver 1 million vehicle conversions by the end of 2021.
Prospects, challenges of gas expansion scheme
With Nigeria said to be consuming about 56 million litres of petrol per day, according to Nigerian National Petroleum Corporation (NNPC), the country is beginning to sort ways of easing the burden of petroleum products importation which is now compounded by the inability of refineries to function in full capacity. This is why the country rolled out the gas expansion scheme to complement its efforts in gradually eradicating the monopoly of petroleum motor spirit.
Subsequently, the Federal Government, through the CBN (Central Bank of Nigeria), has set aside N250 billion for the gas expansion programme to support players in the industry to produce and distribute more gas.
The framework for the implementation of the intervention facility was predicated on the proven gas reserves of 188tcf of gas, and with proven deposits standing at over 203 trillion standard cubic feet (TSCF).
To this end, the National Gas Expansion Programme (NGEP) is set to make CNG the fuel of choice for transportation, and LPG, the fuel of choice for domestic cooking, captive power and small industrial complexes.
In addition, the CBN noted that equally, gas-based industries, most especially the petrochemical (fertilizer, methanol, etc) are to be enabled to support large industries, such as agriculture, industrial applications, textile and so on.
“Therefore, as part of its efforts at stimulating finance to critical sectors of the economy, the Central Bank of Nigeria (CBN) introduces the N250 billion intervention facility to help stimulate investment in the gas value chain.
“Large-scale projects, under the intervention, will be financed under the Power and Airlines Intervention Fund (PAIF), in line with existing guidelines regulating the PAIF, while small-scale operators and retail distributors will be financed by the NIRSAL Microfinance Bank (NMFB) and/or any other Participating Financial Institution (PFI) under the Agribusiness/Small and Medium and Medium Enterprises Investment Scheme (AgSMEIS).
“The initiative is to be implemented in collaboration with the Ministry of Petroleum Resources (MPR). This framework outlines the operational modalities for the intervention,” the apex bank said, while throwing light on the intervention fund.
As such, if fully implemented, gas will serve as a veritable alternative to petrol for usage by Nigerians, ease the burden of importing petroleum products into the country, and also target a total of 2 million jobs annually.
Some of the challenges highlighted are how to ensure that gas cylinders are produced with a lengthy life span in order to avoid rust and probable gas explosions.
In Nigeria, about 1.8 million steel cylinders have exceeded their lifespan, but they are still being used daily. This has led to explosion incidents, loss of lives and properties.
Another task before the Federal Government is how to ensure safer and more economical solutions for households, as well as meet local consumption needs in gas usage.
Provisions of the law
The Nigerian Oil and Gas Industry Content Development Act 2010 (NOGICD 2010) defines local content as “the quantum of composite value added to or created in Nigeria through utilisation of Nigerian resources and services in the petroleum industry, resulting in the development of indigenous capability without compromising quality, health, safety and environmental standards”.
It is developed within the context of growth of Nigerian entrepreneurship and the domestication of assets to fully realise Nigeria’s strategic developmental goals. The scheme, which has the potential to create over 30,000 jobs in the next five years, is geared towards increasing the domestic share of the $18 billion annual spending on oil and gas, from 45 per cent to 70 per cent, in addition to enhancing the multiplier effects on the economy, through refining and petrochemicals.
The local content policy action started in 1971 through the establishment of the Nigerian National Oil Corporation (NOC). NOC was established as a vehicle for the promotion of Nigeria’s indigenisation policy in the petroleum sector. It later became known as the NNPC in 1977 through NOC’s merger with the Ministry of Petroleum Resources.
NNPC flagged off the actual local content initiative through the acquisition of interests in the operations of the IOCs (International Oil Companies). These interests grew to about 70 per cent, with the responsibility of controlling all acreages and other activities. Although conscious efforts were made in the past through Regulation 26 of the 1969 Petroleum Act, enforcement of local content policy, the springboard for sustainable economic transformation of Nigeria, was mere paperwork. For an industry that contributes 80 per cent of the Nigerian government’s revenues and 95 per cent of its foreign exchange, this is entirely unacceptable to the Nigerian government – hence, the clamor for change.
On his own part, Sylva has said that Nigeria will increase local content in the oil and gas sector to 70 per cent by 2027.
The Minister stated this recently at the African Local Content Roundtable (ALCR), while adding that Nigeria has achieved a significant 35 per cent local content compliance in 2021 from a dismal five per cent in 2010.
According to him, through the implementation of local content, Nigeria has been able to achieve significant progress in value addition.
He added that the country plans to achieve 70 per cent local content compliance in the next six years.
“We have achieved significant growth in local value addition from less than five per cent in 2010 to 35 per cent in 2021, and we have set an ambitious target to achieve 70 per cent local content in the oil and gas sector by 2027.
“While over 15 African nations are producing and exporting crude oil, the sad reality is that our people have not benefited maximally from this natural resource, either because we have not managed the proceeds optimally or we failed to domesticate the core operations of the industry,” Sylva said.