Ending fuel subsidy boosts investment in auto-gas

There are strong indications that the Federal Government’s policy of converting vehicles to run on natural gas may be further driven by the recent removal of subsidy on premium motor spirit (PMS) otherwise known as petrol, recent developments have shown.

President Bola Tinubu, had during his inaugural speech on May 29, 2023 ended an age-long debate on the controversial petrol subsidy when he announced that ‘subsidy is gone’.

This has seen a more than 200 percent spike in the pump price of PMS, triggering untold hardship among motorists, commuters and other consumers of the product, who now have to pay through their nose.

But this may turn out to be a blessing in disguise for the country’s dream of motorists using Compressed Natural Gas (CNG), a cheaper and cleaner alternative to the widespread consumption of PMS.

According to a recent report by The Punch, following the removal of petrol subsidy, about 800 tankers that formerly transported PMS to filling stations, were being converted by marketers to start moving gas to retail outlets. The marketers were also said to be collocating CNG dispensing pumps in selected filling stations that dispensed PMS.

The push for the conversion to gas usage in vehicles further gained traction recently when the Depot and Petroleum Products Marketers Association of Nigeria met with President Tinubu at the State House and promised to provide 100 units of CNG/diesel-powered 50-seater buses to ease mobility among the most vulnerable citizens.

The Managing Director, North-West Petroleum & Gas Company Limited, Winifred Akpani, who spoke for the group, had revealed at the meeting that the new locally-manufactured buses would cost N100m each and would run on gas.

Also, following the rising price of petrol, indigenous auto company, Innoson Vehicle Manufacturing, announced last week that it has mass-produced varieties of CNG buses.

The showcasing of the CNG vehicles, which took place at the company’s factory in Nnewi, Anambra State, revealed a range of trucks, mini-buses, ambulances, long buses, SUVs, among others.

In January last year, the Federal Government unveiled the 2022 framework for the deployment of CNG at a meeting with stakeholders in the downstream oil sector. It reeled out plans for the deployment of autogas in petrol filling stations and the conversion of 200,000 commercial vehicles to run on gas that year. This represents barely 3.0 percent of the 6.79 million commercial vehicles estimated to be in the country by the National Bureau of Statistics (NBS).

In the framework, the government explained that with abundant gas reserves of about 206.53 trillion cubic feet, a population of about 200 million people, and the enactment of the Petroleum Industry Act (PIA), which eliminated the continuous absorption of petrol subsidy, it was now vital to deploy autogas.

It stated that its priority was the rapid and strategic introduction of Natural Gas Vehicles (NGVs) as an alternative fuel for transportation in Nigeria in line with the approved National Gas Policy.

“This will pave the pathway to full deregulation of the downstream petroleum sector in Nigeria, while reducing the effect of deregulation on transportation costs,” the document read in part.

According to the framework, CNG was selected as the fuel of choice because it holds comparative advantages, namely, its ease of deployment, its comparatively lower capital requirements, the commodity’s supply stability, existing in-country values, and local market commercial structure, which relies predominantly on the naira.Large-scale adoption of CNG as a transportation fuel is expected to help to reduce greenhouse gas emissions in the country because it is cleaner than petrol and diesel.

The National Gas Policy 2017 says vehicles using CNG may be appropriate for some large Nigerian cities under a single regulatory authority, such as Lagos, Port Harcourt, Abuja, Kano, and Kaduna, or where there are large vehicle fleets, such as large corporate fleets or buses and/or taxis in large urban areas.

Stressing the need for a determined government push behind the initiative, the policy declares, “When there is a push which generates a demand, then the market starts to provide NGV filling stations. NGVs started to take off in London, for example, when the Mayor announced that taxis that were not converted to, at least, dual fuel would not have their licences renewed. NGVs also have a wide use in the West African region outside Nigeria, specifically in Ghana.”

Experts cannot understand why Nigeria still lags behind in the utilisation of its natural gas for economic development. The country is home to the largest proven natural gas reserves in Africa and ninth largest worldwide, with 206.53 trillion standard cubic feet as of January 1, 2021.

Available statistics show that natural gas powers more than 175,000 vehicles in the United States. By 2019, there were roughly 28 million Natural Gas Vehicles worldwide, according to the International Association for Natural Gas Vehicles. China leads with 5.0 million NGVs, followed by Iran with 4.0 million NGVs, and India with 3.04 NGVs.

A Public Relations consultant, Wole Olaoye, told Business Hallmark that the failure of successive Nigerian governments to maximise the country’s abundant gas resources has caused huge economic losses and environmental degradation, with continued flaring of gas by oil companies and the importation of dirty fuels remaining the norm.

He said, “Apart from solving a problem in the transportation sector, the use of autogas is also more environmentally friendly. Petrol can enter the environment both as liquid and as vapour, from leakage and handling during production, transport, and delivery even without being ignited. Petrol contains known carcinogens.

“One litre of petrol emits about 2.3 kilograms of carbon dioxide, a greenhouse gas, contributing to human-caused climate change.”

According to the National Oil Spill Detection and Response Agency (NOSDRA), in 2022, Nigeria flared 216.5 billion standard cubic feet of gas in about 11 months despite its commitment in November 2021 to reach net zero by 2060.

But it appears the narrative is about to change. Two weeks ago, the National President, Independent Petroleum Marketers Association of Nigeria (IPMAN), Chinedu Okonkwo, reportedly said, “Some of my members have started signing up to dispense gas at their stations, as well as the collocation of gas in their outlets. One of the major independent marketers has given over 500 of his trailers for conversion to transport gas to filling stations.”

Explaining further, he said, “There are some new tankers too, over 300 of them have also indicated interest to have CNG trucks. These trucks are to serve filling stations that would be dispensing gas to vehicles.

“What we will do is collocate the gas dispensing plants in a plug-and-play model with existing filling stations. That is the beauty of it and that is why IPMAN is very keen on this project because there is no Local Government or ward in Nigeria today that you won’t see my members.

“We control over 80 percent of the downstream oil sector. So it is an advantage for us. If you are to build new gas or CNG stations, it will take a huge cost. But this collocation model has helped to reduce the exposure in terms of building new stations.”

Massive potential

Speaking at the West Africa Automotive Show held in Lagos recently, Mateusz Koprianiuk, a business developer with Zamel, a Poland-based automobile firm, said Nigerians would be able to save up to 40% of their energy costs from the autogas conversion initiative.

He said, “For the last 30 years we have been converting PMS vehicles to run on CNG and LPG”. It’s actually a technology that is existing in Nigeria. It’s been introduced in smaller projects but it wasn’t done correctly and presented to the masses.

“Nigeria has massive potential. No part of Africa is very mature in terms of those systems. LPG and CNG conversions are very present in the Northern part of Africa, but Nigeria has the biggest potential. It has an abundance of gas to change the economy of the country.”

“Depending on the solution, either LPG or CNG, you can save up to 40% of your energy expense. Almost all types of engines can be converted. The original car is designed to run on gasoline. This technology cuts off the flow of the gasoline and replaces it with LPG or CNG”.

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