Nigeria’s move from subsidising fossil fuel has created opportunities for cleaner energy, especially gas that is touted as the transition fuel. But addressing issues bordering on market structure, right policy and implementation, infrastructure and safety are necessary conditions for achieving a gas-powered economy, KINGSLEY JEREMIAH writes.
Currently, Nigeria holds the largest natural gas reserves in Africa with proven reserves estimated at 209 trillion standard cubic feet. The country also ranks sixth globally among exporters of liquefied natural gas (LNG) as of 2021.
But despite the rich endowment, domestic utilisation of gas has been dismal as Nigeria consumes only 25 per cent of its commercialised supply while the remaining 75 per cent is exported.
Amidst the battle to monetise gas resources and also to stop flaring, in 2021, former President Muhammadu Buhari declared ‘the Decade of Gas’, which among others, sought to stimulate the development and utilization of gas resources for increased domestic use and export towards generating more revenue for the nation. The National Gas Expansion Program (NGEP) also complements such initiatives.
Gas-power economy, according to most stakeholders, is necessary to aid energy diversification as Nigeria currently relies mostly on oil. By embracing gas, the country can diversify its energy mix, reduce its dependence on a single commodity and enhance energy security. Through that, the economy would reduce its carbon footprint and contribute to global efforts in combating climate change.
Similarly, embracing gas helps improve air quality, reduce pollution-related health issues and protect the environment. It also plays a vital role in power generation. Nigeria has been grappling with significant challenges in its electricity sector, including inadequate power supply and frequent blackouts. Gas-fired power plants offer a reliable and efficient source of electricity generation. Expanding gas infrastructure and promoting gas-powered plants can help address our power deficit and contribute to economic growth.
Similarly, it has numerous industrial applications including manufacturing, petrochemicals, fertilizers, and transportation. By embracing gas, Nigeria can stimulate industrial growth and attract investments, which will in turn create employment opportunities, enhance local manufacturing capabilities and contribute to economic development.
It also serves as a reliable and affordable energy source for domestic use. It can be used for cooking, heating, and powering appliances in homes. Promoting the use of gas for residential purposes can reduce reliance on traditional biomass fuels such as firewood, charcoal, or kerosene, which contribute to deforestation, indoor air pollution, and health hazards.
Apart from these, on the backdrop of the removal of subsidy on Premium Motor Spirit, Nigeria came up with the auto-gas policy to encourage motorists to embrace Liquefied Natural Gas (LNG), Liquefied Petroleum Gas (LPG), and Compressed Natural Gas (CNG) as a key transportation fuel by converting their vehicles to run on gas.
Over time, Nigeria has battled with subsidies on fossil fuel as the scheme which was reportedly designed to lessen the burden on the masses became a tool that was also only benefiting a few. Between 2022 and the first five months of 2023, Nigeria budgeted about N10.5 trillion on subsidising PMS alone.
Last month, President Bola Ahmed Tinubu removed fuel subsidies causing the price to rise from N195 per litre to about N550 a litre. This development is already forcing some people to find leeway in the direction of gas.
Recently, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) held stakeholders’ engagements on gas utilisation in Nigeria across the six geopolitical zones of Lagos (South-West), Enugu (South-East), Rivers (South-South), Bauchi (North-East), Kano (North-West) and Abuja (North-Central).
Data obtained from NMDPRA shows the historical and future consumption (2015 to 2030) of Automotive Gas Oil (AGO) also known as Diesel and LPG. It indicated that while AGO consumption increased from 2015 and peaked in 2020, the trend showed a decline in consumption and this is predicted to continue until 2030. Specifically, its consumption is predicted to decrease by more than 50 percent in 2030 compared to 2015.
On the other hand, the data revealed a wider use of LPG in vehicles, households, power generation and industrial applications in Nigeria as its consumption is predicted to increase by over 500 per cent within the same period. The demand for LPG is predicted to surpass that of Diesel around 2025.
In the same vein, the data showed that while the number of gas depots in the country rose from 12 to 27 between 2017 and 2022, LNG facilities increased from five to 42 even as CNG facilities grew from 97 to 102 within the same period. Also, LPG filling plants increased from 675 to 1,338, representing a 98 percent increase.
For most stakeholders, the prevailing situation in Nigeria creates a good outlook for the gas business, especially at a time when the price of other energy sources can now compete with the price of gas. They also see a need to leverage gas to address the environmental concerns posed by fossil fuels.
Some stakeholders had however seen investment in the sector as being too risky as market, bankability, consistency in government policies, product plans and other elusive factors make the domestic gas sector a challenge.
Most of the marketers, including the independent players, had at some point seen the business as too risky to venture into, as prevailing realities show no viability.
With the Petroleum Industry Act (PIA), Nigeria, through the NMDPRA has gazetted 12 regulations; Midstream and Downstream Petroleum Operations, Natural Gas Pipeline Tariffs, Gas Pricing Domestic Demand and Delivery, Petroleum Measurement; Petroleum (Transportation and Shipment), Assignment and Transfer of Licence and Permit, Gas Distribution System, Gas Trading and Settlement Regulations, National Strategic Stocks, Midstream and Downstream Penalties and Enforcement Mechanisms, Midstream Gas Flare Regulations as well as Midstream and Downstream Petroleum Alternative Dispute Resolution.
Some stakeholders believe that if the policies are properly enforced to provide regulatory confidence for investors, Nigeria would be able to drive gas business and create jobs while fostering industrial development through gas resources.
The Chief Executive of NMDPRA believes that autogas facilities could increase from about 100 currently to more than 12,000 in the short and long terms.
The corresponding increase in autogas conversion and cylinder manufacturing centres would boost the needed conversion of more than five million vehicle targets, and encourage massive infrastructural and economic development. In the same way, it would further reduce the percentage of carbon emissions from the transportation sector, thereby enhancing the chances of meeting the net zero targets by 2050/2060.
As critical as the transition to a gas-based economy is, the safety concerns in handling gas have been a challenge in Nigeria with the repeated cases of gas explosions due to a lack of professionalism in the value chain.
It is on this, that Farouk’s warning on the need for operators to urgently obtain the requisite petroleum storage licence and to engender the transition from white products to gas, becomes a priority.
Farouk had noted that no unlicensed petroleum product dealer would be allowed to load products from August 1, 2023, as it vowed to shut down such businesses beginning from that day.
Farouk said: “It is in this regard that the Federal Government has put in place various initiatives and policy frameworks including the National Gas Expansion Programme (NGEP) and the Decade of Gas Programme (DOGP). The Petroleum Industry Act (2021) has also established the Midstream and Downstream Gas Infrastructure Fund to catalyze gas investments.
“These efforts are yielding significant results, yet more collaboration and interventions are needed to improve domestic gas utilization. The Authority empowered by the Petroleum Industry Act (2021) is poised to enable the growth of the industry. The twelve (12) regulations recently gazetted unlock the golden opportunities and signpost the pathway to energy security.”
While the Central Bank of Nigeria had announced a funding of N250 billion to expand domestic utilisation of gas, finance remained a critical challenge to most stakeholders even as marketers had noted that accessing funds remained a major barrier to improving gas infrastructure in the country.
Chief Executive Officer of Auto Lady Engineering Technology, Joyce Daser-Adams had said one of the major challenges in converting a vehicle from fossil fuel to LPG or CNG is the non-availability of parts.
According to her, the parts are not in Nigeria, though she noted that when converted, it was very safe and the risk of an explosion in the event of a collision was very minimal.
Energy expert at PwC, Habeeb Jaiyeola, equally noted that a full analysis of the programmes remained sacrosanct to determine the comprehensive benefits and risks, adding that identifying the comprehensive benefits and risks will enable the government to determine if the benefits outweigh the risks and if measures could be put in place to mitigate the risks.
A professor of economics at the University of Ibadan, Prof. Adeola Adenikinju, said incentives to convert to gas-powered vehicles were not there under the subsidy regime.
“Once the subsidy goes, economic agents, including vehicle owners, would assess the relative costs of both options and choose the more feasible one. The higher fuel prices would trigger incentives for the use of alternative fuel like electric vehicles and gas-powered vehicles,” he said.
Just recently, Innoson Vehicle Manufacturing (IVM) announced the mass production of CNG buses, likewise NIPCO -an indigenous downstream petroleum and gas operator – leading in the conversion of petrol-powered vehicles to autogas.
More cheering is the recent disclosure by oil marketers that about 800 tankers that formerly transported petrol to filling stations were being converted to start moving gas to retail outlets, in addition to the existing 4,000 trucks of Dangote’s companies running on gas. The icing on the cake is the government’s identification of over 10,000 stations across the country that would dispense autogas to the public.
Embracing gas as an energy source is crucial for our sustainable development. By leveraging its abundant gas reserves, industry experts say the country can address environmental concerns, diversify its energy mix, improve power generation, stimulate industrial growth, meet domestic energy needs and unlock significant economic opportunities. Ultimately, it is a win-win for the government, the governed and our environment.
