There are prevalent and growing concerns capable of derailing the federal government’s effort
towards adoption of CNG as alternative fuel, that needs to be addressed, Valuechain reports
By Gideon Osaka
President Bola Ahmed Tinubu in May announced the removal of subsidy on petrol, instantly leading to exponential rise in the price of the product across the country, presenting an opportunity to look into other energy options, one of which is CNG. With proven gas reserves of 203 trillion cubic feet (tcf) and target to achieve 220tcf by 2030 validating Nigeria as a gas destination with oil reserves, Nigeria is well endowed with natural gas reserves, from which numerous economic values such as gas-to-power, petrochemicals/fertiliser industries and the transport sector using CNG is ordinarily derivable.
CNG is considered a suitable and cheaper alternative fuel for motorists with lower emission impact. It is also sourced cheaper and a more environmentally friendly energy source to supplement petrol consumption. Driving a CNG-powered vehicle is safe, easy and in many countries considerably cheaper than driving a petrol or diesel model. CNG’s acceptance and use have been growing in countries like Australia, Canada, China, France, Korea, India, Italy, Japan, Spain, Portugal, Thailand, Ukraine, Poland, Turkey and USA.
Price Waterhouse Cooper (PwC) in one of its recent reports titled: “Fuel subsidy in Nigeria- issues, challenges and the way forward” said the adoption of CNG as alternative 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.”
To herald the nation’s transition from the use of petrol to CNG, the Federal Government kick-started a number of initiatives designed to include conversion of fuel-powered cars and generators from petrol to CNG in line with the government’s plan to make gas the first-choice source for cheaper and cleaner energy.
On Monday, July 31, President Bola Ahmed Tinubu, during a national broadcast, announced the rollout of CNG buses to states and local governments, as a solution to ease the burdens created by the removal of fuel subsidies. He stated that the administration had made a provision to invest N100 billion between July 2023 and March to acquire 3000 units of 20-seater CNG-fueled buses.
Recently, the President also announced the establishment of a Presidential Compressed Natural Gas initiative, which targets over 11,500 new CNG-enabled vehicles. The initiative, according to Spokesman for the President Ajuri Ngelale, seeks to strengthen in-country manufacturing, local assembly and expansive job creation in line with the presidential directive.
This came even as the Nigerian National Petroleum Company Limited (NNPC) announced a strategic partnership with NIPCO Gas Limited to develop CNG stations as part of a broader plan to ramp up the first phase of the CNG penetration plan in Q1, 2024.
Briefing journalists in Abuja, the Group Chief Executive Officer of the national oil company, Mele Kyari, stated that the partnership, will see the rollout of 35 CNG stations across the country to cater for refuelling of around 200,000 vehicles in the first instance.
“This initiative is in addition to the phased deployment of 56 CNG stations planned by NNPC retail across the country.
“This landmark collaboration aims to expand our CNG infrastructure, improve access to CNG, and accelerate the adoption of cheaper and cleaner alternative fuel for buses, cars, including the widely adopted commercial tricycles, which will significantly reduce the cost of transportation and engender sustainable national economic growth,” Kyari, noted.
Under the NNPC-NIPCO strategic partnership, 35 state-of-the-art CNG stations will be constructed nationwide, including three mother stations that can service over 200,000 vehicles daily.
In the pursuit of sustainable energy solutions and reduced carbon emissions, CNG has emerged as a promising alternative fuel source. However, despite its potential benefits, the path to CNG penetration in Nigeria is riddled with challenges that require strategic solutions and collaborative efforts.
To be able to fully deploy CNG and other gas-based fuel as replacement for petrol, observers have noted that, the government must immediately rally stakeholders to address some sustainability concerns of the alternative fuel.
One major challenge identified is gas shortage. Nigeria is struggling with gas to support existing needs, as many of the country’s existing thermal power stations and industries are being hampered by gas supply challenges. For instance, the domestic gas market intermittently experiences gas shortage for power plants and household cooking and this often creates a major energy security challenge for the nation. Irregular supply of LPGs across retail outlets, which sometimes makes the gas prices unstable.
Gas supply to the domestic market through the NPDC/NNPC hovers around 2 billion cubic feet (BCF) compared to domestic demand of about 4.5 to 5 BCF.
According to findings available to Valuechain, Nigeria’s gas sector is export-oriented and with plans to expand the country’s export foot prints 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 gas that will be used for the CNG programme. Added to this is that majority of gas exploration and production activities is geared toward associated gas, even though Nigeria holds more reserves in non-associated gas. This is due to dearth of investment needed to pursue exploration of non-associated gas sites.
According to Felix Ekundayo, the President of the Nigeria Liquefied Petroleum Gas Association (NLPGA) in a recent media interview, one of the missing links in the administration’s plan for CNG is the supply side. The challenge is that, CNG is not available across the country, and starts to become more of a problem as you get to the North. Liquefied Natural Gas (LNG), according to him, would be better suited, but there is insufficient supply of that presently.
He said: “The NLPGA and the Nigerian Gas Association (NGA) position is that Nigerians should be offered a mix or selection of fuels from which to choose for transportation. In some areas, you may be able to access all these fuels (LNG, CNG, LPG); in other areas, you may only be able to access one or two. Nonetheless, the options should be there.”
According to the former President of the Nigerian Gas Association (NGA), Ed Ubong, the challenge of CNG adoption as an alternative source of energy nationally, is the acute shortage of gas. He said, “This poses a massive challenge to us in the gas sector as we need to accelerate the activation of initiatives that are in place to ensure that not only the domestic gas needs are met but also unlock the exportation of gas to other markets.” Among the implication of the huge gaps in gas infrastructure, according to him, is a shortfall in the domestic gas supply obligation. The implication of this is that new investments are required in gas distribution, infrastructure as many of the existing gas infrastructures are old and inefficient.
In addition to this challenge is the spike in the exchange rate of the naira to the dollar induced by the floating of the naira which 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 CNG 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.
The adoption of CNG in Nigeria presents challenges of cost, mainly the cost of initial investment required to retrofit existing vehicles with CNG engines. Documents cited by Valuechain indicate that the minimum investment required for a CNG station with 2 dispensers and 4 hoses co-located in an existing or inactive station capable of dispensing 250,000 standard cubic feet daily (scfd) or 500,000 scfd of natural gas equivalent to 7,480-15,000 liters of petrol a day is approximately N300 million. Also, a dedicated CNG station serving trucks with a daily dispensing capacity of 500,000 scfd to 1,000,000 scfd of natural gas equivalent to 14,280 to 28,000 liters of diesel a day requires an investment of approximately N1.4 billion.
A market survey by Valuechain shows that it costs between N350,000 and N450,000 to purchase the kit needed to convert a car from a petrol or diesel engine to a CNG engine, depending on the nature and condition of the car. Conversion of petrol vehicles of 1.6 litre engine could cost between N300,000 and N400,000 while tricycles with 4 Stroke Engine could cost between N100,000 to N200,000. Lorries and vans could cost as high as N1.8 million while 4 Stroke Petrol generator engines could cost about N90,000.
The foregoing calls for a holistic rethink in the efforts to exploit CNG especially as existing efforts have focused on export and domestic use for power and industry.
Experts have noted CNG utilisation can help Africa’s largest economy leverage its natural gas reserves, cut down excessive addiction for fuel demands and convert the country from an oil to a gas giant in the league of success stories like Australia or Qatar.