Hope, Fear as FG Rolls-out Gas for Cars Programme

…Gas shortage, pricing & infrastructure
may mar scheme -Expert

-By Gideon Osaka

Barring any last-minute setback, selected filling stations across the 36 states and the Federal Capital Territory would soon begin dispensing gas into cars, Valuechain can report.

The commencement of the sale of gas as fuel for cars could signal eventual success of the federal government’s agenda to promote gas as a replacement for petrol and diesel for transportation vehicles. Since 2019, the Federal Government has been pushing for the usage of autogas in automobiles.

Autogas which include Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG) and Liquefied Natural Gas (LNG) will be dispensed into automobiles and other prime movers depending on the type of vehicle.

Valuechain reports that the plan, which is to collocate autogas dispensing facilities at the retail outlets had reached advanced stage as NNPC and mega retail outlets owners and equipment providers are fully on board in the initiative while measures are in place to achieve a roll out of this programme which will be done using selected NNPC owned outlets as pilot.

Valuechain learnt that efforts are in top gear to ready the options with an official launch of pilot collocation and conversion centres across the country for CNG. Over one million vehicle conversion kits are planned to be established in the six geopolitical zones of the country for easy access to autogas.

To give fillip to the policy, the Federal Government has ordered the chief executive officers and their lieutenants in agencies under the Federal ministry of petroleum resources to convert all their official vehicles to run on autogas.

The Minister of State for Petroleum Resources, Chief Timipre Sylva, who gave the directive has already submitted all his vehicles to be converted to run on gas, as opposed to petrol.

The minister had said the conversion of vehicles in his ministry and agencies to run on autogas was to demonstrate to Nigerians that the government was serious with its declaration of 2020 as “the year of gas”.
Sylva said, “To give it (deregulation) a human face, we are introducing an alternative fuel. We are giving autogas. Gas will now become fuel for our cars. This programme will be rolled out within the next month. So, if you go to a filling station and you convert your car to dual capability or dual fuel, then you drive into a typical filling station, you will find gas-LPG, you find CNG and NLG being sold. So, if you look at the price of PMS versus the price of gas and you think that gas is cheaper which of course, it is going to be cheaper, you can make your choice.’

Valuechain, reports that preparatory to this, the Department of Petroleum Resources (DPR), has ordered about 9,000 filling stations across the country, to start the installation of facilities for gas products.
Also, preparatory to the roll-out of this programme and following the declaration of 2020 as “the year of gas”, the government had at the beginning of the year inaugurated a Committee called the National Gas Expansion Programme (NGEP) to drive the adoption of autogas and natural gas vehicles in the country.

As part of the federal government’s strategy to re-position the country’s gas sub-sector, the ministry commenced the implementation of critically conceived initiatives. Nine priority projects to harness the country’s gas resources were mapped out for execution by the NGEP. They included, rapid growth of the LPG/CNG/LNG market, development of support-infrastructure for the gas sector, investment and domestic growth of the sector, as well as the promotion of natural gas usage in Nigeria as an alternative fuel choice.

According to Justice Derefaka, who is the Technical Adviser (TA) on Gas Business and Policy Implementation to the Minister of State for Petroleum Resources, the NGEP will issue an Expression of Interest (EoI) form to bonafide parties to participate in an open and competitive auction with the intent to invest in autogas and Natural Gas Vehicles (NGVs) re-fuelling stations.

“The auction will present a significant opportunity for domestic developers and their technology providers and/or original equipment manufacturers (OEMS) alike to participate in a unique initiative geared towards deepening natural gas usage in Nigeria.

“Successful bidders will be granted a Permit to Situate Station (PtSS) underpinned by a lease agreement with the FGN acting through Nigerian National Petroleum Corporation (NNPC) Retail (NNPC Retail),” he said.

Speaking further, he said, “Approximately 46 of NNPC Retail owned and operated refuelling stations spread across the 36 states of the federation are available on an ‘as is, where is’ basis through the auction. The purpose of inviting this EoI is to encourage the applicant to co-locate and set up Autogas/NGVs refuelling stations and enable scaling up of the gas utilisation potential in the transport sector by replacing costly and environmentally unfriendly diesel and petrol which are almost 100 per cent imported.”

To give financial firepower to the autogas programme as well as stimulate investment in the gas value chain and deepen growth in the sector, the Central Bank of Nigeria (CBN) realising that weak investment in the sector had resulted in minimal production and utilisation of CNG and LPG as clean alternative sources of domestic energy, recently introduced a N250bn intervention facility to help stimulate investment in the gas value chain.

It listed the objectives of the intervention facility to include improved access to finance for private sector investment and also to enhance investments in the development of infrastructure to optimise the domestic gas resources for economic development.

The apex bank also said it plans to fast-track the adoption of CNG as the fuel of choice for transportation and power generation, as well as push LPG as the fuel of choice for transportation, captive power and cooking.
Some of the eligible activities under the intervention include the establishment of gas processing plants and small-scale petrochemical plants; gas cylinder manufacturing plants; CNG regasification modular systems; auto gas conversion kits or components manufacturing plants CNG primary and secondary compression stations.

Others are establishment and manufacturing of LPG retail skid tanks and refilling equipment; development/enhancement of auto gas transportation systems, conversion and distribution infrastructure, and enhancement of domestic cylinder production and distribution by cylinder manufacturing plants and LPG wholesale outlets.

Stakeholders have commended the federal government effort to drive gas penetration through the Autogas scheme saying that the move to deepen gas penetration was a step in the right direction.

However, Valuechain has identified gas shortage, pricing and downstream infrastructure deficit as major issues that may undermine or mar the government’s plan to roll out the autogas programme.
For instance, the domestic gas market is currently experiencing severe shortages for power plants and household cooking, which is forecast to last a few more years into the future. This creates a major energy security challenge for the nation. Gas supply to the domestic market through the NNPC currently stands at about 1.5 billion cubic feet (BCF) compared to domestic demand of about 4.5 to 5 BCF.

According to Valuechain findings, the country’s gas sector is export-oriented and with plans to expand the country’s export foot prints following the execution of the Final Investment Decision (FID) for the expansion of the NLNG trains to Train 7, exports of the country’s gas is set to witness an upsurge. While the export market thrives, there is a domestic market that currently suffers huge energy crisis and shortages. The question about the source of the gas that will be used for the autogas programme, then arises.

Added to this challenge is the fact that the recent spike in the exchange rate of the naira to the dollar induced by the corona virus pandemic is triggering concerns of increase in domestic prices of natural gas.
This is coupled with the fact that there is an existing disparity in the export and domestic prices of natural gas. Domestic users of gas (power sector, fertiliser and other gas-based industries) pay significantly more for gas than international customers (export). A lot factors including the absence of a market-reflective tariff, have disincentivised gas producers from allocating greater volumes of gas to the domestic market, which is dominated by the electricity industry and now, possibly the autogas market. Therefore, the widening gap between domestic and export gas parity prices may have inevitable impact by the time the autogas roll-out is fully commenced.

Commenting on the issue in a series of Whatsapp posts, Professor of Petroleum Economics and the Ghana National Petroleum Corporation Chair in Oil and Gas Studies at the University of Cape Coast’s Oil and Gas Institute, Ghana, Prof. Wumi Iledare said that the fact that Nigeria has 200 trillion cubic feet (TCF) of proved gas reserves does not imply daily production capacity without further investment.
He asked, “Where is the incentive in place to incite gas infrastructure development. This administration has less than 3 years to go, so what is on the ground? Where are the CNG plants! Where is the road infrastructure to build VGC or do you want to be using CNG to drive cars on the current road infrastructures that we have? Perhaps the target is Abuja. If we are dreaming, let us have a plan in place in case our dreams come to past.

With the abundance of oil, no functional refineries in 3 decades? Yes, natural gas as a suitable alternative fuel, is good to dream, but when the dream materialises then what!”