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Experts caution FG on drive for cheaper fuel

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Timipre Sylva

• Move Will Address Subsidy, Climate Change, Local Content Challenges, Experts Say
• Stakeholders Cautiously Optimistic Over Oil Block Licensing

Nigeria may conserve over N3t currently being spent on the importation of petrol if the Federal Government is sincere in its drive for cheaper fuel through Compressed Natural Gas (CNG) alternative, stakeholders have said.

With over 20 million vehicles already running on CNG across the world, and a meagre 10, 000 vehicle doing so in the country, Minister of State for Petroleum Resources, Timipre Sylva recently disclosed that the Federal Government would soon make available CNG that would cost between N95 to N97 per kilogram.

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Sylva, who also disclosed plans for a new licensing round and passage of the Petroleum Industry Bill (PIB) before May 29, 2020 had said: “What we have decided is that we should try and give the masses an alternative. This will move the masses to CNG. CNG costs less than the subsidised PMS. The subsidised rate of the PMS is N145 per litre. CNG will cost about N95 to N97 per litre.”

If properly planned, some practitioners in the industry told The Guardian that the move could offer a sustainable leeway to reduce subsidy payment on petrol, address climate change challenges, provide employment opportunities while improving local content.

With the fragile state of the economy and drain on the nation’s foreign exchange, Nigeria last year spent a whopping N3t importing about 18 billion litres of petrol, the Petroleum Products Pricing Regulatory Agency (PPPRA) had said.

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1n 2010, the Federal initiated plans to promote CNG through a private investor- Green Gas, which is currently operating a pilot project in partnership with NIPCO, and Nigerian Gas Company Limited (NGC).

Over 10, 000 cars are currently using CNG as some workshops have been empowered to convert cars and a few CNG stations are already in existence dispensing the alternative fuel.

An energy expert, who was a consulting member on the initiative, Michael Faniran told The Guardian, that the move was a displacement strategy as it would reduce the pressure that petrol puts on government and enable it to deregulate the downstream sector without any impact on the masses.

Describing it as a good move, Faniran expressed the hope that the development would reduce the nation’s environmental challenges, cost for the consumer and create investment opportunities.

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He added: “The only issue now is that the infrastructure is still not yet available. This is not new, but our problem in Nigeria is the effective implementation of new initiatives. However, I am sure that the current minister will do a lot regarding the implementation. The government does not need to develop any new study. All it needs to do is to look at what has been done and implement it. Government should come up with its policy on this and get people to invest in it, especially in conversion workshops and CNG stations.”

He stressed the need for government to create an enabling environment, put in place favourable policies and regulations, as well as waivers, tax holidays, in order to encourage investment in CNG stations, vehicle conversion facilities, distribution infrastructure, among others.

The chairman, International Energy Services (IES) Ltd., Dr. Diran Fawibe, who sees the initiative as a way of optimising the nation’s energy resources, stressed that the country needs to adopt an energy mix.

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Fawibe, who expressed his preference for gas over petrol, said that if effectively done, Nigeria would soon embrace gas-powered vehicles over petrol or diesel.

Asked whether the country was ready for such a bold move, especially in the absence of adequate infrastructure, he said: “Necessity is the mother of invention. If we go all out for gas utilisation, you will see that in a couple of years, gas vehicles would be everywhere.”

Fawibe, however, called for sustained efforts to ensure that the plan becomes a reality, considering that similar initiatives have remained on the drawing board for years.

While Sylva had described 2020 as the year of gas, he noted that Nigeria’s gas reserves have remained significant, standing at about 202TCF, with potential to up to 600TCF.

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He equally said that with the undiscovered potential, Nigeria could be in the same league as Iran, Qatar, Saudi Arabia, and Russia, stressing the need for the Federal Government to vigorously harness these resources to meet the needs of the nation.

An economist and former Chairman of Council, Chartered Institute of Bankers of Nigeria, Segun Ajibola, wants the government to expedite action towards moving to solutions that align with global practices, knowing fully well that she is a signatory to most treaties that are aimed at reducing environmental challenges.

While noting that resorting to CNG would reduce air and noise pollution, as well as attendant negative consequences, he was quick to point out the need for the country to work with car manufacturers and importers with a view to getting them to design cars with CNG options for the country.

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Additionally, the CNG initiative should also see the country beginning to think in the direction of evolving home made automobiles.

Partner and Head of Odujinrin & Adefulu’s Energy Practice, Real Estate, and Mining Teams, Dr. Adeoye Adefulu, is of the view that the conversion to CNG would take time, and also cost a lot of money.

He said: “It is sensible that the government focuses on mass transportation, which will lower the costs of transportation for the masses, and for the movement of essential commodities. We still expect the government to come up with clear plans indicating costs and timelines.”

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Adefulu, who also lamented that the last time the government conducted a bid round was in 2007, said with depleting reserves, it was important that the country focuses on fully exploring its reserves.

“The proposed bid round is an important step in this regard. In organising the bid round, I would enjoin the government to learn from the recently organised international bid rounds in Brazil, which failed to attract the level of interest it did in the past.”

Faniran, on his part, described licensing as the weakest link for value realisation in the country’s petroleum industry, stressing that past upstream licensing processes fell short of best practices, even as they failed to secure maximum value for the country’s assets.

“Discretionary decision-making and lack of openness drove down the competition and returns to Nigeria, including over $2b in unpaid signature bonuses. This led to public controversy, including lawsuits, indictments, sackings, cancelled or revoked awards, and legislative probes,” he said.

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Before any other oil block award, Faniran urged the Federal Government to write licensing best practices into the PIB, set goals for bid rounds based on long-term planning and strengthen the National Data Repository.

During the bidding, he tasked government to publish and abide by clear, transparent asset information and bid criteria so as to eliminate confusion and ensure due process, provide detailed guidance on process and fees in the bid guidelines, make pre-qualification criteria strict enough to privileged, serious bidders, minimum size of signature bonuses should be tied to the characteristics of the asset, government should develop balanced and depoliticised criteria for supporting local content while abiding by published bid guidelines for all awards.

“There should be no award of blocks after bidding has closed and the government should clean up the signature bonus payment process,” Faniran added.

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