Petrol price and sustainable transportation – Part 2

Continued from yesterday

Introducing NGVs eventually eliminate fuel subsidies and facilitate a full deregulation of the downstream petroleum industry in Nigeria. Its impact on reducing demand for petrol and diesel is immediate and measurable. It will provide a cheaper and cleaner alternative fuel to motorists and remove them from the current ‘captive’ petrol/diesel market into which every motorist is locked-in. It will promote investment in natural gas production, CNG fuel stations, CNG production plants, CNG conversion centers, and CNG conversion kits thereby creating employment for millions of unemployed citizens.

It is an established fact that the price of petroleum products affects the prices of all consumer goods and services in the long run. Similarly, the introduction of a cheaper alternative fuel for public transportation and for transportation of consumer goods will lower prices of all goods and services in the long run. Also, alternative fuel transportation infrastructure can be established within a shorter time frame (9-12 months) compared to even the smallest refinery project.

The global NGV fleets as at 2013 was roughly 18 million vehicles, led by IRAN with 3.5 million, PAKISTAN (2.79 million), ARGENTINA (2.28 million), BRAZIL (1.75 million), CHINA (1.58 million), INDIA (1.50 million), ITALY (0.82 million), COLOMBIA (0.46 million), UZBEKISTAN (0.45 million), THAILAND (0.42 million), etc. Among the auto manufacturers of bi-fuel cars are Toyota, Honda, Peugeot, Volkswagen, General Motors, etc.

Iran has the world’s second largest natural gas reserves as at 2011, after Russia, and is now the world leader in NGVs. It is highly advisable that Nigeria, being one of the top natural gas reserve powers, with a huge population and high unemployment level should follow Iran’s lead in this respect. The same argument applies to all OPEC countries.
The cost of CNG fuel storage tanks and its placement in a vehicle are the major constraints to a wider and rapid adoption of CNG as a fuel. This accounts for why the early adopters were usually government ministries and departments, public transportation vehicles, private companies/corporation fleets, etc. The government bodies and companies can quickly amortise their investment in vehicle conversions. However, the experience of countries that have adopted NGVs is that the average cost of CNG storage tanks tends to reduce progressively as more vehicles are converted (i.e. economies of scale).

In all the countries that have developed the use of CNG as alternative fuel, government was the first adopter of the idea. Therefore, the Nigerian Government needs to develop an integrated policy document for CNG-driven vehicles, and also to simplify and accelerate the process for private investors in NGV fuel stations, natural gas gathering and compression centres, and vehicle conversion centres by providing incentives. The Ministry of Petroleum Resources (MPR) and Department of Petroleum Resources (DPR) have lead roles to play here. It is the responsibility of these government agencies to develop government policies, guidelines, and incentives on alternative fuels and fleet purchase. Subsequently, the MPR should rapidly escalate the policy document to the Federal Executive Council (FEC) for adoption and approval. This will deliver unequivocal message to the citizens of this country about government’s responsiveness to their needs. It will also stimulate private sector investment in alternative fuels for public transportation. This should generate huge positive public reaction and fiercely boost the ratings of this administration!

Government incentives would include mandatory purchase of NGVs by government ministries, agencies, and departments at national, state and local government levels. This should also include conversion of existing government vehicle fleets to CNG alternative. Government could design excise concessions or waivers on CNG conversion kits, CNG delivery trucks, and equipment for constructing CNG fuelling stations. Tax credits could be extended to gas gathering and compression companies.

On the basis of a clear government policy on NGVs and requisite incentives, the private sector can develop “Green Highways” driven by dual-fuel technology to interconnect public transportation between major cities. A Green Highway entails establishing alternative fuel refueling stations along specific public transport routes to boost adoption of alternative fuels. Green highways, funded by the private sector, can initially be established along four routes (as prescribed by Dr. Ene) namely, Route 1 (Lagos-Ore-Benin-Onitsha-Owerri-Aba); Route 2 (Warri-Mbiama-Port Harcourt-Uyo-Calabar); Route 3 (Enugu-Makurdi-Abuja); Route 4 (Abuja-Kaduna-Jos-Kano).

Subsequently, these routes can be expanded into other cities as the penetration of NGVs for public transportation gains traction.
This proposal is without prejudice to the role of government in encouraging other investments in the natural gas value chain, which includes expanding LNG exports and gas-fired power generation, contemplating building gas-to-liquid (GTLs) plants, conversion of natural gas to methanol, petrochemicals, fertilizers, and gas supplies to the usual industrial and domestic users.

• Concluded.

• Prof. Nwaozuzu, a Petroleum Policy Expert, is Deputy-Director, Emerald Energy Institute, University of Port Harcourt.
e-mail: cnwaozuzu@gmail.com.