Friday, June 14, 2024

COMPRESSED NATURAL GAS…Conversion Cost, Infrastructure Deficit Threaten CNG Initiative

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Critical stakeholders have highlighted two key factors capable of impinging on the country’s drive towards the adoption of compressed natural gas (CNG) as an alternative to premium motor spirit (PMS), also called petrol, whose cost has risen arbitrarily after the federal government exited the subsidy regime.
Just recently, the federal government directed marketers to install CNG dispensing pumps to achieve a spiral growth pattern for the programme.

Although this directive is endorsed by indigenous gas stakeholders and seen as promising to reshape transportation, stimulate economic growth, and enhance environmental sustainability, others have taken a critical assessment where they have identified drawback tendencies along the path.

Much as the government sees this transformation as a central component in Nigeria’s energy strategy given its cost-effectiveness, the marketers responsible for promoting it have shared experiences that could hinder progress.

Following growing concerns over Nigerians’ efforts to adopt alternative automotive fuel, LEADERSHIP findings show that the current conversion statistics for various categories of vehicles from petrol to CNG have been described as outrageous and likely to complicate the government’s efforts in addressing the rising cost of petrol.

Data obtained by our correspondent shows that converting petrol vehicles with 1.6-litre engines could cost between N300,000 and N400,000, while tricycles with 4-stroke engines will cost between N100,000 and N200,000.

Also, lorries and vans may cost as much as N1.8 million while 4-stroke petrol generator engines will cost about N90,000. But on the economic scale, a converted petrol vehicle can only consume N40 per kilometre which saves the owner 40 percent, while a tricycle consumes N10 per kilometre with savings of between 50-75 percent against petrol, while a converted truck consumes N360 per kilometre.

The document suggests a palliative package of N200 billion to support the conversion of one million vehicles, N200 billion to convert two million tricycles, and about N250 billion for five million power-generating sets.

The data from the Nigeria LPG Association (NLPGA) provides cost differentials between a gas engine truck and a diesel engine truck and conversion costs for other categories of petrol engines.

However, experts have warned of the consequences of patronising quacks in the conversion process.
In 2020, the federal government initiated programmes aimed at utilising the country’s huge gas reserves, including the National Gas Expansion Programme and the National Autogas Roll-out Initiative.

The government sees the availability of autogas as an alternative fuel that will afford Nigerians a cheaper, cleaner, and eco-friendly option with less impact on vehicles. It was projected that about one million cars would be converted before the end of 2021.

PwC Nigeria also estimates that economic activities stimulated by the domestic utilisation of Nigeria’s recoverable proven gas reserves have the potential to generate a Gross Value Addition (GVA) of $18.3 billion yearly to the domestic economy and $10.5 billion through direct economic value addition, with Liquefied Natural Gas (LNG) contributing $1.3 billion. Its excess allied components, Propane and Butane, contribute a further $2 billion, which compares to generating an annual export value of $7 billion.

Also, PwC projected that harnessing the country’s proven reserves for domestic utilisation can support 6.5 million full-time equivalent jobs annually.

However, to drive the programme, the NLPGA has released a joint document with the Nigerian Gas Association (NGA), the Association of Local Distributors of Gas, and the Lagos Chamber of Commerce and Industry (LCCI).

The LPG group further explained what engines can use autogas, the various types of autogas, the commercial benefits of autogas, and proposed palliatives that the government can embrace and offer to the public.

The NLPGA said it is already investing in research and training and has already unveiled a training and resource centre project that, upon completion, will provide over 30 areas of study in a curriculum based on gas operations, usage, and safety, among other topics.

The managing director of Asiko Energy, Felix Ekundayo, has also raised concerns about the infrastructure gap and conversion costs, which may drive people to engage the services of unqualified persons.

However, aside from the presidential directive, NIPCOGAS is sustaining the promotion of CNG and has completed four CNG stations in Lagos.

The facilities were billed to be opened for commercial operations by the end of May to become the first of its kind in the state, now with long queues at filling stations.
Nagendra Verma, the managing director of NIPCO Gas Ltd, said the firm had been involved in AutoCNG development and expansion since 2009.

Verma assured of the sustainability of supply after the commissioning and said that, presently, for cars, taxis and tricycles, AutoCNG is being sold at N200/standard cubic feet scm against the petrol price of N610 per litre in Lagos and N230/scm against the PMS price of N670/litre in Abuja.

The managing director further stated that similarly, for heavy commercial vehicles, AutoCNG is being sold at N260/scm against the diesel (AGO) price of N1250/litre in Lagos and N290/scm against the AGO price of N1300/litre in Abuja.

“NIPCO Gas is sure that with the continuous focus and push by the current government, AutoCNG will become the fuel of choice for Nigeria, which has the potential to reduce the pressure on importation as well as on forex,” he added.

According to him, AutoCNG is a project for the masses and of national cause and importance.

“We are sure that once expanded across Nigeria, it will surely relieve the masses and motorists from high fuel costs. We continuously seek the blessing and support of the government and media to make AutoCNG a cheaper, cleaner and greener fuel of Nigeria.”

LEADERSHIP learnt that NIPCO Gas presently operates 15 AutoCNG stations across Nigeria, and CNG vehicles from Lagos can travel up to Abuja and Kaduna by taking CNG from the in-between NIPCO Gas AutoCNG stations.

Under current government directives, NIPCO Gas has partnered with the Nigerian National Petroleum Company Limited (NNPCL) to expand AutoCNG stations across various states of Nigeria.

Disclosing that 35 AutoCNG stations are to be constructed in a phased manner under the current partnership, Verma also revealed that the locations for 19 CNG stations had been identified, and the firm had received stage-wise approval from NMDPRA and other statutory authorities.

“For making this AutoCNG expansion project a reality, we are getting due support and guidance from all, including but not limited to PCNGI, NMDPRA, SON, NNPC, other Ministries and Departments, and the Media, too, who are also keen to see this become a reality in the near future,” he said.

Verma said gas distribution and AutoCNG projects are highly capital-intensive and require huge investments and the highest level of commitment and perseverance. He expressed hope that with support from all and with a continuous push from the Presidency, the firm will surely deliver.

He went on to state that NIPCO Gas, in addition to AutoCNG, is also expanding its gas transportation pipeline towards Ibadan and gas distribution network in the Lekki Free Zone.

“All these projects require huge investment and a high gestation period. Once the above projects are commissioned, they will help deepen the utilisation of indigenous gas, which remains underutilised, and reduce dependency on importation of other fossil fuels, thereby reducing the pressure on forex,” he added.

In addition to NIPCO GAS’ efforts, the Independent Petroleum Marketers Association of Nigeria (IPMAN) is embarking on massive Investments in CNG infrastructure across the country.

The projected mass rollout of CNG refilling outlets across all states of Nigeria is becoming a reality, with seven banks ready to manage the revolving fund facility from the African Development Bank, AfDB.
According to Elder Chinedu Okoronkwo, treasurer of the IPMAM Board of Trustees, IPMAN had already sealed the deal with the bank.

The association, he said, took this approach after conducting a market survey on the cost of converting existing petrol stations to CNG outlets, adding that it had already commenced identifying members interested in co-locating CNG dispensers and infrastructure on their existing petrol retail outlets.

The exercise aims to identify qualified potential candidates for loans to support its target of establishing 10 to 20 CNG stations in each federating state during the first phase of its planned nationwide rollout.
For instance, the minimum investment required for a CNG station with two dispensers and four hoses located in an existing or inactive station capable of dispensing 250,000 standard cubic feet daily (SCFD) or 500,000 SCFD of natural gas, equivalent to 7,480-15,000 litres of petrol a day, is approximately N300 million.
Also, a dedicated CNG station serving trucks with a daily dispensing capacity of 500,000 SCFD to 1,000,000 SCFD of natural gas, equivalent to 14,280 to 28,000 litres of diesel, requires an investment of approximately N1.4 billion.
Retrofitting a typical auto workshop, which is found in a filling station, requires an investment of approximately N8 million while building a new CNG station with 4-10 dispensers requires an investment of about N500 million.

With an anticipated price range that is 40 per cent—60 per cent cheaper than PMS or AGO, CNG offers a compelling alternative to traditional petrol, providing consumers with a more financially viable option. Experts presume that this stable pricing mechanism not only insulates consumers from the volatility of global oil markets but also fosters economic predictability and resilience.

Moreover, CNG’s environmental benefits are significant, and as Nigeria strives to mitigate its carbon footprint and address environmental concerns, the adoption of CNG presents a tangible solution.
Its combustion emits significantly fewer greenhouse gases than petrol’s, contributing to a cleaner and more sustainable energy landscape.

Given that Nigeria is actually a gas province blessed with oil, leveraging its abundant natural gas reserves is crucial. Gas serves as a domestically sourced energy solution, bolstering energy security and reducing dependence on imported petroleum products. This strategic utilisation of domestic resources enhances national sovereignty and stimulates economic development by capitalising on local assets and reducing the pressure on Forex.

Despite the initial gaps and difficulties in bringing the objective to reality, CNG stands out for its safety and stability.

Unlike traditional fuels, CNG has limited flammability, reducing the likelihood of accidental combustion and minimising associated risks.
Moreover, CNG cylinders are engineered with stringent safety measures, ensuring their durability and resilience even in challenging conditions.

The impact of CNG extends beyond economic and environmental spheres, permeating society at large and through vehicle conversion initiatives, CNG facilitates a seamless transition for existing vehicles, minimising the need for an extensive infrastructure overhaul. This inclusive approach ensures that individuals from all socio-economic backgrounds can access the benefits of this transformative energy source.

However, the government’s unwavering commitment is central to the success of Nigeria’s CNG initiative. Through a series of proactive measures, including financial incentives, tax breaks, and subsidies, the government is creating an enabling environment for industry players to thrive.
The government aims to see one million CNG vehicles on Nigerian roads by 2027. This goal involves establishing 1,000 conversion and refuelling stations nationwide, a move poised to generate over 50,000 jobs. Such efforts underscore the government’s commitment to robust infrastructure development, paving the way for the widespread adoption of CNG technology.

Stakeholders also commend the government’s pragmatic approach to advancing the CNG agenda, although proactive measures will not only facilitate industry growth but also nurture an enabling environment for indigenous gas players.

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