By Gideon Osaka
An immediate and forceful shift to gas as alternative fuel for automobiles and other uses could become the needed buffer to cushion the impact of the removal of subsidy on petrol by the Federal Government, Valuechain findings have shown.
President Bola Tinubu recently announced the removal of subsidy on petrol and this decision has led to exponential rise in the price of pet- rol across the country. The removal of subsidy on Premium Motor Spirit (PMS) also known as petrol comes at a time Nigerians are grappling with harsh economic realities amid an electricity tariff increment scheduled for July and potential increase in school fees in tertiary institutions, in addition to the rise in the cost of foodstuff, transportation and other raw materials.
Although subsidy removal may address key economic situations in the country, especially conservation of foreign exchange, increase in exter- nal reserves, boost for local refineries and related industries, as well as job creation, the concern for many is the alternative plan by the government after subsidy removal.
The removal of subsidy and consequent hike in the price of petrol presents an opportunity to look into other energy options, one of which is the reviving of the autogas scheme.
Autogas is the common name for Compressed Natural Gas (CNG) and Liquefied Natural Gas (LPG) when used as a fuel in internal combustion en- gines in vehicles as well as in station- ary applications such as generators.
Autogas is the most accessible alternative fuel. Driving an LPG or CNG vehicle is safe, easy and in many countries considerably cheaper than driving a petrol or diesel model. Auto- gas is the most widely used to con- ventional automotive fuel. Its accep- tance and use have been growing in countries like Australia, Canada, Chi- na, France, Korea, India, Italy, Japan, Spain, Portugal, Thailand, Ukraine , Poland, Turkey and US.
The Price Waterhouse Coopers (PwC) in its latest report titled: “Fuel subsidy in Nigeria- issues, challenges and the way forward” recently released, said the adoption of CNG as alternatives will bring lower cost, reduced emissions, and improve fuel efficiency.
It said: “One of the most significant benefits of CNG is that it is considerably cheaper than petrol, which could result in substantial savings for vehicle owners. Additionally, the cost of CNG is more stable than the volatile price fluctuations experienced by petrol.
“Also, the use of CNG could reduce vehicle maintenance cost due to its cleaner burning properties, which produce fewer engine deposits that clog up the engine over time.”
Where is Nigeria’s Autogas scheme
The autogas programme in Nigeria was launched under the National Gas Expansion Program (NGEP) to herald the nation’s transition from the use of petrol to gas as well as the delivery of cheap transportation fuel. In December 2020, the Federal Government kick-started the initiative designed to include conversion of fuel-powered cars and generators from petrol to gas in line with the government’s plan to make gas the first choice source for cheaper and cleaner energy.
Then Minister of State for Petroleum Resources, Timipre Sylva had during the unveiling of the initiative noted that the autogas programme was an alternative that would afford Nigerians a cheaper and cleaner option to fuel consumption as the government’s target was to convert one million vehicles from petrol to gas usage by 2021 at no cost.
In January 2022, NNPCL met with oil marketers in the downstream sector to perfect plans for the full deployment of autogas in filling stations and the conversion of 200,000 commercial vehicles to run on gas. At the meeting, which was convened by the former Minister, the government unveiled the 2022 Framework for the deployment of Compressed Natural
Gas (CNG) disclosing that the government was out to ensure that it made available the alternatives required before the removal of subsidy.
According to him, CNG was selected as the fuel of choice because it holds a comparative advantage, due to its ease of deployment, its comparatively lower capital requirements, commodity supply stability, existing in-country volumes, and local market commercial structure which relies predominantly on the naira.
In the framework, one of the three implementation options targeted the conversion of one million public transport vehicles and installation of 1,000 refueling centres within 36 months. For the first 18 months it targets to achieve 500,000 conversions and 580 refueling centres supplied by five Original Equipment Manufacturers, among other targets.
In the plan, the government targeted converting 200,000 commercial vehicles in 2022, including tricycles, cars, mini-buses and large buses.
The cities captured in Phase 1 of the project included Abuja, Kaduna, Kano, Kogi, Kwara, Lagos, Ondo, Oyo, Edo, Delta, Bayelsa, Niger, and Rivers. Cities under Phase 2 were listed as Sokoto, Katsina, Jigawa, Borno, Bauchi, Gombe, Yobe, Osun, Ekiti, Enugu, Anambra, Imo, Cross River, Abia, Akwa Ibom and Plateau. For Phase 3 cities, they were listed as Kebbi, Zamfara, Yobe, Gombe, Taraba, Adamawa, Benue and Ebonyi.
However, the initiative seemed to be another fairytale by the government, as the programme is yet to fully take off.
Valuechain reports that with the removal of subsidy, reviving the gas for fuel scheme will not only cushion the effect or impact of subsidy removal but also create new markets and enormous job opportunities for Nigerians.
Substituting traditional white products with gas could help the country leverage its huge gas assets, cut down excessive demand for fuel and foreign exchange.
The global focus towards the climate-change-net-zero-emission debate has further necessitated the need to optimise the use of Nigeria’s abundant gas resources domestically as a transition or alternative fuel to move the country from the conventional dependence on white products for autos and prime movers of industrial applications, to cleaner, more available, accessible and affordable energy source.
This move is much needed for Nigeria which has over 600 trillion cubic feet of gas reserves and is Africa’s 2nd largest gas producer, but still lags behind many of its continental peers in domestic gas utilisation. Nigeria’s abundant gas reserves could become less useful as the global campaign against fossil fuel/hydrocarbons intensifies and the transition to cleaner energy increasingly becomes a reality.
Anticipated challenges & solutions
To be able to fully deploy CNG and other gas-based fuel as replacement for petrol, the government must immediately address some sustainability concerns of the alternative fuel. Concerns such as inadequate micro-distribution centres to provide liquefied petroleum gas to retailers, lack of necessary kits needed for the smooth running of the programme, and the exorbitant cost of converting vehicles from fuel usage to gas.
Other major issues are gas shortage, pricing and downstream infrastructure deficit. For instance, the domestic gas market intermittently experiences gas shortages for power plants and household cooking and this often creates a major energy security challenge for the nation. Gas supply to the domestic market through the NPDC/NNPC hovers around 1.5 billion cubic feet (BCF) compared to domestic demand of about 4.5 to 5 BCF.
According to Valuechain findings, Nigeria’s gas sector is export-oriented and with plans to expand the country’s export footprints through NLNG Train 7, exports of the country’s gas is set to witness an upsurge. While the export market thrives, there is a domestic market that currently suffers huge energy crisis and shortages. This then raises the questions about the sources of the gas that will be used for the Autogas programme.
Added to this challenge is the fact that the spike in the exchange rate of the naira to the dollar induced by the floating of the naira, has triggered increase in domestic prices of gas. This is coupled with the existing disparity in the export and domestic prices of natural gas. Domestic users of gas (power sector, fertiliser and other gas-based industries) pay significantly more for gas than international customers (export). A lot of factors including the absence of a market-reflective tariff, have disincentivized gas producers from allocating greater molecules to the domestic market, which is dominated by the electricity industry and now, possibly the Autogas market. Therefore, the widening gap between domestic and export gas parity prices may have inevitable impact by the time more car owners opt for gas instead of PMS.
To address these concerns, stakeholders have advised the government to compel the use of CNG in official vehicles in the public service as well as consider the pricing of the product in a way that will make it very attractive to motorists aside from other benefits derivable from using the product. Government could also make it a policy that staff buses in MDAs be converted to use gas, especially in states where there are gas stations.
They also advised the government to step up investment in crucial infrastructure that could scale up switch to gas as auto fuel and boosts the pipeline network with the promote availability of CNG by motorists.
In the realm of the cost of conversion kits, stakeholders implored the government to put in place fiscal
measures to encourage private sector players to go into kits manufacturing locally and for those imported some form of waivers could be put in place to reduce the cost of importation.
Stakeholders also implored key players in the sector to put in place credit facilities that may encourage motorists to convert vehicles and be paying the cost of conversion bits by bits
Already, one company that is bracing the odds in terms of investment to shift the attention of Nigerians to gas, is NIPCO. In 2007, the company received the licence to operate CNG business in the country, setting up refilling facilities in partnership with the Nigeria Gas Company for the deployment of CNG in the country, which resulted in the establishment of Green Gas Limited.
Today, NIPCO Gas Limited, the CNG pioneer in Nigeria, is leading the private sector in Nigeria to beam more light on the necessity for the use and adoption of CNG, in the country.
Presently, NIPCO Gas operates 12 CNG stations in Edo, Kogi, Delta, Ogun state, and Abuja. Four CNG stations are under various stages of construction and approval in Oyo, Lagos, Akwa Ibom state, and Abuja FCT. These CNG stations cater to Auto Gas requirement of vehicles, providing a cleaner, safer, economical, proven, and indigenous fuel. NIPCO Gas presently fuels 7000 vehicles with AutoCNG. Nipco Gas has 4 AutoCNG conversion workshops in Ogun state and Abuja FCT to convert PMS vehicles on AutoCNG. More and more fleets operate converting their fleet on AutoCNG due to safety, availability, and economic reasons.”
