The principal impediment to Natural Gas Vehicles (NGV) market development in Nigeria is the uncoordinated implementation approach and that greater government involvement is required in setting strategic goals, developing the legal and regulatory frameworks, setting of clear standards for vehicles and refueling stations as well as assigning responsibilities to specific agencies.
Short-term low cost policy interventions identified by experts in the implementation include widening the existing NG and petrol price gap and offering limited support for refuelling and retrofitting facilities. Challenges and Opportunities in Nigeria’s Adoption of Compressed Natural Gas (CNG)
As Nigeria seeks to transition to compressed natural gas (CNG) as an alternative to premium motor spirit (PMS), also known as petrol, critical stakeholders have highlighted significant challenges that could impede this shift.
The urgency of this transition has grown as petrol prices have surged following the federal government’s removal of the subsidy regime.
The federal government had recently directed marketers to install CNG dispensing pumps to foster the growth of the CNG adoption program.
This initiative has been welcomed by indigenous gas stakeholders who view it as a promising step towards reshaping transportation, stimulating economic growth, and enhancing environmental sustainability. However, some have raised concerns about potential obstacles that need to be addressed.
Despite the government’s belief in the cost-effectiveness of CNG as a key component of Nigeria’s energy strategy, marketers promoting CNG have identified significant challenges. The primary concern is the high conversion cost for vehicles from petrol to CNG, which could hinder the government’s efforts to mitigate the rising cost of petrol.
An industry expert Oluwabukola Jimoh, in a recent analysis said that data indicates that converting petrol vehicles with 1.6-litre engines costs between N300,000 and N400,000. Tricycles with 4-stroke engines cost between N100,000 and N200,000 to convert.
Converting lorries and vans can cost up to N1.8 million, while 4-stroke petrol generator engines cost around N90,000.
Despite these high initial costs, the long-term economic benefits are substantial. A converted petrol vehicle consumes N40 per kilometre, saving the owner 40 percent on fuel costs. Tricycles consume N10 per kilometre, with savings of 50-75 percent compared to petrol, and converted trucks consume N360 per kilometre, resulting in significant savings.
While the government’s directive and the support from gas stakeholders signify a strong push towards CNG adoption, addressing the high conversion costs and other potential hurdles is crucial to the success of this transition and realising its economic and environmental benefits.
CNG vs. LPG Adoption
At LPG in Nigeria, Jimoh, in his analysis discussed the pros and cons of CNG and Liquefied Petroleum Gas (LPG).
As the Nigerian government promotes the adoption of CNG, experts also argued why discussions are not considered why LPG, which appears more sustainable and attainable, isn’t being given equal attention.
Comparing CNG With LPG Infrastructure
Encouraging the use of LPG in the transportation sector alongside CNG can provide a balanced approach to reducing carbon emissions and promoting sustainable energy practices.
Also, to reduce the cost burden of CNG infrastructure development, the Nigerian government has implemented tax incentives aimed at making CNG more attractive to investors and stakeholders.
These incentives are designed to expedite the expansion of CNG infrastructure by providing financial benefits that lower the average cost of building CNG Mother stations.
However, it’s essential to ensure these incentives are balanced and do not negatively impact other sectors or revenue sources.
Industry operators have also argued that building CNG Mother stations is a pivotal component of Nigeria’s plan to develop CNG infrastructure as a cleaner and more sustainable energy source.
Understanding the associated costs, comparing them with existing LPG infrastructure, and exploring the potential benefits of tax incentives for CNG are all critical steps in realising this vision. While the commitment to CNG infrastructure development is clear, a comprehensive and balanced approach that includes other clean energy alternatives like LPG is necessary.
This approach can help Nigeria reduce carbon emissions, promote sustainable energy practices, and create a diverse energy landscape that meets the needs of its growing population.
NNPCL And Partners Pushing Forward
The Nigerian National Petroleum Company Limited (NNPCL) has revealed strategic investment plans to expand stake in Compressed Natural Gas (CNG) with aim to provide affordable and sustainable alternative fuels to the motoring public.
The NNPCL sees the investment as more sustainable and efficient means of transiting into widely acceptable energy space.
The spokesperson of the Company, Olufemi Soneye, said the intention further informed the energy firm’s decision to reduce its stake in Dangote refinery.
Soneye revealed that the NNPCL capped its stake at 7.2 per cent instead of 20 per cent to build CNG stations across the nation.
He stated this while featuring on Berekete Family Radio, during which he cleared the air on allegations that the company was collaborating with the Nigerian Midstream and Downstream Regulatory Commission (NMDPRA) to sabotage the Dangote refinery.
He denied the allegations that the NNPCL would sabotage a company in which it had a 7.2 per cent stake.
He mentioned that the NNPCL realised that CNG was more affordable as a better energy alternative for Nigerians, especially during the period of energy transition.
He added that Nigerians could fuel their vehicles with N10,000 when using CNG, compared to petrol.
“The reason for reducing our stake in Dangote refinery is because we wanted to invest in CNG. We observed that CNG is very cheap and all over the world, people are investing in clean and cheaper alternative energy.
“That is why the NNPC is building different CNG stations everywhere. We understand that with N10,000, Nigerians can fill their cars and use it for two weeks. We realised that gas is cheaper in Nigeria, why don’t we invest in it?” the NNPC official stated.
On the allegation of sabotage, Soneye posited, “We want all Nigerians to know that the NNPCL does not have any issue with the Dangote Refinery. We are part of the owners of the Dangote refinery and we don’t want it to collapse.
“We invested billions of naira into the Dangote refinery. As of today, we have a 7.2 per cent stake in the refinery. So, why would we want to sabotage such a company?”
He maintained that the Nigerian Midstream and Downstream Petroleum Regulatory Authority’s Chief Executive, Farouk Ahmed, was speaking in his capacity as a regulator in charge of all operators in the midstream and downstream, including the NNPC.
“Mr Farouk Ahmed is the head of Nigeria’s mainstream and downstream petroleum regulatory authorities. They have power over all refineries. Anything that has to do with the distribution of petrol, they are in charge. In fact, they are superior to the NNPC in that sector. We don’t have anything to do with them,” Soneye posited.
In 2021, the NNPCL acquired a 7.25 per cent stake in the refinery for $1.0bn, with an option to purchase the remaining 12.75 per cent stake by June 2024. But the national oil firm has since reneged on its decision.
The President of the Dangote Group, Alhaji Aliko Dangote, disclosed in July that the NNPC had only a 7.2 per cent stake in the refinery and not 20 per cent.
“The agreement was actually 20 per cent which we had with NNPCL, and they did not pay the balance of the money up until last year; then we gave them another extension up until June (2024), and they said that they would remain where they had already paid, which is 7.2 per cent. So NNPC owns only 7.2 per cent, not 20 per cent.” Dangote stated.
To buttress Soneye’s position, the NIPCO Plc has reiterated that the strategic partnership between its wholly owned subsidiary ,NIPCO Gas Limited with the Nigerian National Petroleum Company Limited (NNPCL) to address the infrastructural deficit in the effective utilisation of natural gas as auto fuel will be a game changer in the sector .
The partnership which seeks to establish 35 premium Compressed Natural Gas (CNG) stations and three(3) flagship mother stations nationwide , aiming to serve over 200,000 vehicles daily in 2024 .
Managing director/CEO of NIPCO Gas,Suresh Kumar, said this during the company’s 2023 Annual General Meeting (AGM) in Abuja .
According to him, plans to operationalise these 35 CNG stations by late 2024 as part of the project’s secondary phase, enhancing inter-city transportation is receiving good attention.
He affirmed that the primary goal of the partnership is to expand the existing CNG infrastructure, ensuring greater accessibility and promoting the adoption of this cost-effective and environmentally friendly fuel for buses, cars, and Keke Napeps.
The partnership is expected to facilitate the setup of 21 CNG stations for intra-city transportation, set to be operational in Q1 2024 while the balance of the 35 CNG stations envisaged will be completed by late 2024 as part of the project’s secondary phase.
Speaking about the company’s performance over the last few years, Kumar stated that NIPCO Gas has continued to demonstrate resilience and sustain growth potential despite challenges such as foreign exchange volatility, rising inflation, and fluctuating petroleum prices in the international market.
“The company is focused on quality service delivery across all our business lines to consistently deliver good profits and value for our shareholders,” he said.
In the LPG sector , NIPCO is playing a crucial role in harnessing Nigeria’s abundant gas resources. Kumar highlighted the company’s significant progress since diversifying into the natural gas distribution subsector following the inauguration of its LPG plant in 2009.
“We have expanded our LPG sector reach to several states through massive skid deployment and other infrastructure, enhancing access to the product at market-friendly rates. Our LPG penetration grew to over 70 outlets in 2023, with prospects of reaching 100 in 2024,” Kumar noted.
Additionally, Seplat Energy Plc, is currently considering putting funds down to expand the country’s Compressed Natural gas (CNG) projects drive which the Federal Government is spearheading.
The Nigerian independent energy company, says it is rising to the challenge of energy deficit in Nigeria through its new critical projects, which are capable of taking the company’s gas processing capacity to 850 Million standard cubic feet per day (MMscfd) consolidating the company’s position as a leading gas supplier to the Nigerian market.
The Chief Executive Officer (CEO ) of Seplat Energy, Mr. Roger Brown, said this while delivering a keynote at the Society of Petroleum Engineers (SPE) Nigerian Council’s 47th Nigeria Annual International Conference & Exhibition (NAICE) in Lagos.
Brown, who was represented by the Director New Energy, Seplat Energy, Mr. Okechukwu Mba, spoke on the Conference theme: “Petroleum Industry Value Chain Optimization: The Inevitability of Midstream and Downstream Development”.
He said the company’ new $700m ANOH gas project in Imo State, with a capacity of 300MMscfd of gas in addition to Liquefied Petroleum Ga (LPG) will greatly boost domestic gas supply.
“Also completing a new 85MMscfd gas plant in Sapele Delta state expected to come on stream by Q4 this year. These new projects bring Seplat Energy’s gas processing capacity to 850MMscfd consolidating our position as a leading gas supplier to the domestic market,” Brown noted.
He said Seplat energy is also looking to invest in Compressed Natural gas (CNG) projects in support of the government’s CNG initiative, adding that: “When we receive approval for the MPNU transaction, we intend to promptly develop the significant gas resources in the asset to further enhance Nigeria’s energy security.”
Currently, the country is experiencing insufficient supply of electricity from the national grid (about 4GW daily); very low electricity usage per-capita (with some Nigerians with no access to energy); insufficient supply of gas to some power plants; and with a bulk of electricity used in Nigeria generated off-grid at two or three times the cost of generation using gas turbines.
Brown said: “We need to develop our abundant gas resources and deliver sufficient gas to the power sector for energy security. Gas is an affordable and reliable source of energy. Incentives provided in the recent Executive Orders as well as recent review of Domestic Gas Delivery Obligation (DGDO) gas prices are commendable.
“Current reforms in the power sector need to be sustained like tariff increase, bilateral power trading between power generation company (GenCos) and power distribution companies (DisCos). Key gas infrastructure like the Obiafu-Obrikom-Oben (OB3), The Ajaokuta-Kaduna-Kano (AKK) gas pipelines, and so on, should be delivered.”
SPE Seeks Implementable Policy
The Society of Petroleum Engineers (SPE) Nigeria has expressed confidence that the country’s midstream and downstream oil sector stands greater chance to advance beyond current level if recommendations by key industry operators and Government authorities during its 2024 conference are adopted and implemented.
The Engineers therefore advised the Federal Government, and oil and gas industry stakeholders to implement the recommendations from Nigeria Annual International Conference and Exhibition (NAICE) 2024.
The Chairman of SPE Nigerian Council, Mr Salahudeen Tahir, made the call during a media interaction to draw to a close the conference in Lagos.
Tahir said that the gathering was able to identify the gaps and proffer solutions to energy security in Nigeria, especially as regards the midstream and downstream petroleum sector.
He called on all industry players to adopt innovations and technologies that would guarantee cleaner, cheaper and more efficient energy supply to Nigerians.
Tahir said a communiqué would be issued soon alongside five others that have been presented from the conferences in the last five years.
He said the theme of the conference: “Petroleum Industry Value Chain Optimisation: The Inevitability of Midstream and Downstream Development”, was chosen because of the importance of the sector to the Nigerian economy.
“To ensure sustainability, optimisation of the petroleum industry value chain is necessary, and the development of the midstream and downstream sectors plays a significant role in achieving this optimisation.
“The midstream sector involves the transportation, storage, and wholesale marketing of crude oil and natural gas, while the downstream sector focuses on refining crude oil into various petroleum products and distributing them to end consumers.
“Without an effective, efficient, and vibrant midstream and downstream sector, investments in the upstream become meaningless.
“Our God-given natural resources will forever remain in its raw state,” he stated.
Tahir also emphasised that the optimisation of the midstream and downstream sectors of the petroleum industry value chain was essential for attracting investments to the upstream.
According to him, it will also help to achieve operational efficiency across the value chain, and meeting the demands of the market in a cost-effective manner.
“It allows for the smooth flow of resources, maximises the value of hydrocarbons, and ensures a reliable supply of petroleum products to consumers,” he said.
Applauding the President of SPE International, Mr Terry Palisch, for his physical presence at the conference, Tahir said that SPE remained the foremost professional association for petroleum industry practitioners worldwide, with over 127,000 members across 145 countries.
In Nigeria, he said that SPE’s paid membership was over 15,000 including student members, spread across five sections; Lagos, Port Harcourt, Warri, Benin, and Abuja and 47 vibrant student chapters?
