As Nigeria anticipates the eventual removal of petroleum subsidy in July 2022, the Association of Local Distributors of Gas invited experts to discuss a path forward with natural gas as an alternative to the use of petroleum and diesel in Nigeria’s transport sector.
The event was the third edition of the ALDG Webinar series, a forum that brings together industry stakeholders to discuss important conversations in the gas sector.
Opening the webinar, the Executive Secretary, Association of Local Distributors of Gas, Oga Adejo-Ogiri set the background for the webinar noting that In October 2021, the Petroleum Products Marketing Company reported that petroleum subsidy is expected to rise to 3 trillion naira yearly if current market realities persist.
The unsustainability of this financial commitment has triggered a search for an alternative. This has brought the prospect of using natural gas in its various forms, Compressed Natural Gas (CNG), Liquified Natural Gas ( LNG) and Liquified Petroleum Gas (LPG) to power vehicles instead of petroleum and diesel to the fore. The argument for the use of natural gas has been driven by the environmental friendliness of gas evidenced by lower CO2 emissions, comparative cost advantage and domestic availability.
Establishing the prospects of natural gas
In his opening address, keynote speaker and Program Executive at Axxela, Myke Oseh analysed the key factors that make a switch to natural gas a great decision.
According to him, natural gas diversifies the fuel sources for Nigeria’s transport sector, frees funds for development projects, saves foreign exchange currently spent on petroleum importation, creates jobs from new infrastructure and services and provides a cost-efficient solution for mass and goods transit operations.
Myke Oseh also shared Axxela’s commitment to making natural gas adoption a reality through an ongoing pilot project in Lagos. The pilot project focuses on Compressed Natural Gas (CNG) and has seen a proof of concept bus powered by CNG ply a popular mass transit route. This trial phase will precede the deployment of CNG refilling stations in strategic locations across Lagos.
Driving the penetration of Gas in the Nigerian Market
Hadiza Garbati, gas strategy executive at integrated energy company Gascomarine Limited cited price competitiveness, effective taxation and conversion programs as three essential elements necessary to grow the penetration of natural gas in Nigeria.
Analyzing price competitiveness, Hadiza explained that gas must be competitive in comparison to petroleum and diesel. This means that it must offer significant cost savings and value compared to other options. To actualise this, the government needs to incentivise vehicle owners to make the switch to gas by providing funding to cover the cost of converting vehicles to run on gas or the purchase of natural gas-powered vehicles and the costs of fuelling for a significant period.
For utilizing taxation as a tool to drive gas adoption, Hadiza called for low to zero taxation on gas itself and the attendant machinery or infrastructure needed to support its growth. This will provide a climate where gas companies and manufacturers can import parts needed to set up conversion centres or build refuelling infrastructure without the added cost of taxes.
Hadiza noted that there is a rising cost in conversion programs globally due to the advancement in the technology for the conversion of vehicles to either run on both gas and another fuel type or solely on gas. She advocated for the provision of grants by the government to make it an attractive business for interested players.
Answering the safety question
Safety concerns over the conversion of cars to run on gas or even the use of gas in cars remains a challenge to driving the adoption of natural gas. According to Oluwasegun Olajuwan, Chief Executive Officer of the THLD Group, affordability and a lack of awareness about the long term gains of gas trumps the safety question. People who control large fleets of trucks or are major players in the mass transit business are reluctant to transition from using diesel or petrol because of the upfront costs of conversion rather than over safety concerns.
Olajuwan noted that the return on investment upon converting to gas can be seen under 15 months from the time of conversion validating the switch to gas. He further restated the safety of gas as a fuel for automobiles noting that the conversion process does not come with an increased risk or volatility.
In driving up conversion numbers, Olajuwan advocated for the automotive industry led by mechanics to be at the forefront of awareness so they can leverage their relationship with vehicle owners to convince them to make the switch.
What is the Government doing?
Speaking on the role of policy and government action, Hadiza Garbati highlighted current government actions that are positive in the push for the adoption of gas in Nigeria’s transport sector.
She noted the passing of the Petroleum Industry Act that recognizes gas as a standalone business, the Central Bank of Nigeria’s 250 billion funds for the gas sector, the partnership between NNPC and Innosson motors with the automobile brand providing CNG powered vehicles and the inauguration of a Presidential taskforce on Autogas
What can the Government do better?
Citing Pakistan as an example of a proactive country driving gas adoption in Nigeria’s transport sector, Myke Oseh offered key policy recommendations for Nigeria to make a future where gas is widely used to power vehicles a reality.
He advocated for a clear policy direction to achieve a 25% CNG mix as a transport fuel by 2025 with certain states focused on for a first phase, the provision of intervention funds (at single-digit loan rates) from the Central Bank of Nigeria to gas stakeholders, the sale of gas at Gas based industrial (GBI) price, zero duties on natural gas vehicles and other machinery and creating demand for natural gas by mandating the conversion of government fleets and urban mass transit schemes.
Thanking the participants and speakers, the Executive Secretary of the Association of the Local Distributors of Gas, Oga Adejo-Ogiri noted that countries like Colombia and Pakistan used as case studies for driving the adoption of gas are developing economies like Nigeria with similar challenges and possibilities. He concluded that with active government support Nigeria can undoubtedly replicate the success experienced in these countries.