How Nigeria can tackle gas utilisation challenges, by Runsewe
NIGERIA is said to be a gas nation, rather than oil, what do you think are the factors that have impeded optimal utilisation of the nation’s gas resources?
Indeed, Nigeria is among the world’s top five exporters of Liquefied Natural Gas (LNG). In terms of natural gas ranking as per proven reserves, it’s about the 9th.
I believe there aren’t enough infrastructures in place to off-take or should I say monetize the processing of our gas resources especially for domestic use.
Historically, there has been an over reliance on crude oil exports and I hope that recent events in the oil market will address that especially now there is a growing demand for Liquefied Petroleum Gas (LPG) to fuel power plants as well as Compressed Natural Gas (CNG), so i believe that things will surely take a positive turn over next years.
Secondly, the wholesale and retail pricing of gas especially for power generation isn’t compelling enough to attract international investors who are ever ready to invest in the Nigerian gas value chain.
Pipeline vandalism is a menace to gas distribution and has affected the nation’s power generation capacity, what do you think the incoming government can do to arrest the situation?
I believe the incoming administration could address the situation by initially carrying out an impact assessment of the entire pipeline network and develop a disaster recovery plan to implement corrective actions when vandalism does takes place.
Secondly, they would need to carry out a gap analysis on what has been done and indeed what needs to be done in terms of preventative actions. A good example of this compelling proposition will be to develop communities rather than “community leaders” and I guess link specific development initiatives to the continuous security of the pipelines. Community development to the relevant locations is not just about giving money to the leaders but to the actual communities and ensuring real punishment is carried out onculprits.
Level of corruption in the oil and gas sector has attracted nationwide concerns, do you think the new administration could curtail the wave of corruption in the sector?
Yes, I believe the incoming administration can curtail corruption. It is about creating the right environment in terms of leadership, anything other than the right leadership will be like putting “Dracula in charge of blood bank”. That is creating the right message which I believe the incoming president has hampered on as part of the campaign propaganda.
Another element that has been much overlooked is the strategy. The process management within the sector in terms of the policies, procedures and business processes need to be documented, optimised and made public. Corruption is not just about people, it is also about the processes that guide the operations.“Corrupt processes, corrupt people and corrupt people, corrupt processes”, it’s like 6 and two 3’s.
Delay in passage of PIB is a major factor to the industry’s assessed stagnancy. What do you think the incoming legislators should do to overcome the unseen forces against PIB?
As my dad would say, “what is bad is bad!” The negatives of the bill need to be addressed for what they are and most importantly is to ensure that the bill shouldn’t just be about delivering “outputs” like signing the bill alone, rather the “outcomes” in terms of ensuring the respective elements of the bill achieve the objectives that precipitated the need for the bill in the first place.
The bill has dragged for too long. What should the new legislators do to set the ball rolling?
We all know that the PIB is important for the entire oil and gas sector. The expectation is that once the new legislatures assume office, this bill should be given a fair and thorough review in order for the House to begin the process of passing the bill into law.
How would you rate the regulation of the gas sector?
The different units of the sub-sector value chain have specific checks and controls however there is inadequate synergy between the various bodies and I know the regulators have been doing more to address the issue. However, it would be best for all the parties to have a united stance on regulations that affects the sector. I believe there should also be greater involvement of the stakeholders not just at implementation stage but essentially at development stage.
Standard Organisation of Nigeria (SON), Department of Petroleum Resources (DPR) and Nigerian Content Development and Monitoring Board (NCDMB) are the major regulators guiding the; cylinder production standards, Liquefied Petroleum Gas, and the terminationof cylinder importation into Nigeria respectively.
SON had recently introduced a policy on cylinder re-certification. This policy is laudable in its ambition to safeguard the lives and property of Nigerians, however, it is virtually impossible to enforce at the moment because of the lack of local manufacturing facilities with good re-certification facilities.
Once our manufacturing plant is completed, it will boast of a state-of-the-art re-certification and testing facility which will ensure that our customers will have their cylinders re-certified every five years. This service will also be available for our current buyers because every cylinder we procured from our European partner contains a re-certification date which allows the end-user to know when to bring their cylinders in for routine maintenance.
Besides, if SON should enforce their policy on imposing a marketer-owned model for cylinder distribution, which effectively means that all cylinders will be owned by marketers (Oil Majors, Gas Plants and Wholesalers) and end-users effectively just lease the cylinders but only buy the gas. This model is currently running in other African countries and it makes the enforcement of cylinder recertification easier for the authorities to handle.
How would you assess the Nigeria’s LPG sub-sector now?
Attempting to develop sustainable structures within the sub sector can sometimes be lonely but you know what, it’s not all doom and gloom. I am fully conversant with the developments in the sector and I know a lot is going on especially in terms of infrastructural development.
Thanks to NLNG, the gas is there so the next value chain focus is retail and distribution of LP gas to address the issue of accessibility, There are about 440 gas plants in place nationwide and a rising number of LP dispensing skid tank deployment which, partly thanks to the Lagos State Government under the Ministry of Energy and Mineral Resources initiativewill continue to increase the awareness and accessibility of LP gas. I see further growth in skid tank deployment especially into rural communities and strategic locations to enhance the retailing and distribution of gas over the next two years.
There is the need for more bulk tank storage and in terms of cylinder manufacturing; there are two serious contenders I am aware off with the structures in place to kick off within seven months as long as the right policies are implemented.
2.3 million cylinders is what we need right now, based on the current gas supply from NLNG and with the market utilisation potential of 1 million metric tonne (MT) per annum, 16million cylinders will eventually be required before 2020. This figure is nothing for a growing population of 170 million people.
There are 100 million cylinders in use in Brazil with a population of 196 million. There are 8 million cylinders in use in Portugal with a population of 10 million, Turkey with a population of 75 million have 100 million cylinders in use and the list goes on.
What are the challenges facing the operators as regards cylinder manufacturing and certification?
Inadequate funding, policies and non-streamlined industry processes. There is a major lack of understanding by most Nigerian banks that erroneously categorise LP gas infrastructure development under oil and gas finance instead of infrastructure finance.
Investors don’t understand the dynamics of the business and in terms of certification, there needs to be clearly defined policies linked to effective change management structures which ensures that market participants are given enough time to prepare for new policy kick off rather than the current approach of new rule introduced today, implement tomorrow.
Another major problem is the shortage of cylinders in the system. Nigeria has a population size estimated at 172 million, but there are only about 1.8 million cylinders in circulation.
One way of addressing this issue is to encourage local manufacturing of good quality LPG cylinders, this will ensure adequate supply and availability of cylinders for the populace and it also significantly reduces the price for end-users making LPG more accessible to low income earning households.
What is Rungas doing to help the nation in gas utilization particularly in the area of LPG?
Firstly, we have exclusively pioneered in Africa the introduction of the content level gauge valve cylinders which allows end users to know when they are running out of gas.
Our composite cylinders are advanced in technology with a 30 year life span, non-rust features, 40 per cent lighter than steel cylinders and the most significant feature is that of safety, such that the cylinders don’t explode in fire.
They are extremely safe cylinders, which give the end-users greater confidence in using gas as their cooking fuel of choice.
“Now the next step is expanding LPG accessibility through retailing and distribution of both gas and cylinders. In recent months we have gradually increased our involvement in LPG dispensing skid tank deployment and installation especially under the EKO Gas scheme as well as with other major clients.
This initiative ensures that the common man, both urban and rural based, enjoy the convenience of the proximity of LPG (cooking gas) refill or exchange points.”
It’s been very challenging and sometimes frustrating but I believe “change is a step towards movement” and by God’s grace, despite all our challenges for sure we are moving forward daily.
You know what, I turned 38 years old on the 29th of April and I resolved within myself to focus more on developing human and spiritual immortality, as Prof Pat Utomi once advised me to do things that will impact people positively long after I am gone, so our vision for Rungas is not just about growing the LP gas market, saving lives through the use of clean fuel but also about creating wealth, job creation and skills development in local production of all our LPG equipment’s and support services which will surely spring out of our business model for the sector.
What is the present state of your proposed multi-billion naira gas cylinder manufacturing plant?
We have made great strides and are currently working with our European partners to develop a capacity building framework that will ensure that phase 1 of the manufacturing project will provide the estimated 1,000 workforce directly and indirectly linked to the project with the appropriate skills and competencies to excel within their respective roles.
Against all odds, our key motivating factors: Job creation, and skill development, economic growth, sub sector optimisation and reduction in the per-unit cost of cylinders.
How could the Federal Government liberate the masses from the gas utilization challenge?
There are a lot ofvery good policies on domestic LPG framework policy development already in place such as: the National LPG policy launched in 2012, with emphasis on a cylinder injection programme to leapfrog the conversion from kerosene to LPG for cooking and auto use; the Joint initiative by SON and DPR to transfer the ownership and maintenance of cylinders to marketers; the recent National Awareness Creation for LPG development championed by PPMC.
Besides, the LPG demand growth initiative currently being packaged by the Ministry of National Planning with significant input from the Nigeria LPG Association; Nigeria Content Development Monitoring Board on local manufacture and supply of cylinders, in line with the local content law which aims to ensure the prompt commencement of local cylinder production, and the NNPC also injected 150,000 cylinders into the market two years ago.
Notwithstanding all these, the NLNG also set up a committee to look into increasing the accessibility of LPG to non-urban areas especially in terms of retail and distribution of gas as well as a cylinder injection plan under the right conditions.
Now you can see a lot is going on behind the scenes but the challenge is that the good policies need to be enforced especially those policies that will lead to a marked and massive shift to LPG.
Policies such as the cylinder injection scheme for example, If N10 billion naira is taken from the budgeted kerosene subsidy and used to fund a cylinder procurementof say 1 million cylinders(locally produced) and freely distributed to low income earners and maybe verified taxpayers, by the time the balance of the kerosene subsidy is exhausted there should be clear and significant achievement towards the spread of LPG as a cleaner cooking fuel of choice as well as the economic benefits that will accrue to the government in terms of revenue generation from the growth of entire value chain on LPG utilisation. Lagos State government has already pioneered the initiative and the results are remarkable so this is not new news.
I dare say, NLNG will be forced to increase, if not double the supply of LPG to say 500,000 MT PA. The domino effect economically will be unbelievable. Again if you continue to grow the agricultural sector, what fuel are you going to
use to cook the food? Do you know that LP Gas can be used to fuel power plants?
The bottom line is kerosene subsidy or no subsidy the per litre price of kerosene will remain higher than the per litre price of LPG…do the maths!