Why Tinubu’s promised CNG powered vehicle project is stalling — Verheijen

…says govt not paying subsidy but intervenes to reduce cost of energy

The federal government has said that over 70 percent of the nation’s gas reserve has remained underdeveloped, stalling the Compressed Natural Gas powered vehicles project.

Olu Verheijen, the Special Adviser (SA) to the President on Energy disclosed this during the ministerial press briefing in Abuja on Friday.

According to her, there was a need to address the fundamental issues, in Nigeria’s oil and gas sector. Top among these issues for her is the insufficient gas supply.

She however explained that there is an existing fund, created and ready to make investments in gas infrastructure.

She said, “There are lots of investors who are very interested in making investments in infrastructure, but it’s like building a road without having a car to drive on it. You cannot invest in infrastructure to compress gas if there is no gas.

Read also: How FG can fast-track CNG adoption as rollout slows

“We need to address the fundamental issues in sectors so that we can attract capital to the infrastructure and there is no one who is going to invest in midstream infrastructure if they don’t have assurance or line of sight to the attractiveness of gas supply.

“So if the gas suppliers are not making investments because the fiscal terms or the business environment is a very difficult one in which to invest in, then it will be very difficult to continue to mature midstream projects and downstream projects because you have to deal with the Abinitio problem which is gas supply.”

She however explained that to address the bottlenecks in the Nigerian oil and gas sector, president Tinubu recently issued some policy directives, including the introduction of fiscal incentives to deepen compressed natural gas, and liquefied petroleum petrol penetration.

Others are: streamlining of contracting processes, procedures and timelines and local content practice reform.

These incentives, according to her were designed to ease the impact of fuel subsidies on transport and enable the displacement of PMS and diesel. She said that it also aims to stabilise the price of cooking gas in the market and support the transition to clean cooking.

“That is exactly what President Bola Ahmed Tinubu has done with fast-tracking this policy directive to ensure that we have sufficient gas supply whether we’re trying to export to a get Trans Sahara gas pipeline, whether we’re trying to compress natural gas or liquefied for domestic use, whether we’re trying to have floating LNG as alternative ways of getting gas into the market. All of those things are enabled by these policies that unlock supply,” she said.

Verheijen speaking further, maintained that the government had stopped the payment of subsidy following the pronouncement of President Tinubu on May 29, 2023.

She however said that the government has the prerogative to maintain price stability and prevent social unrest. “So if prices are moving, they reserve the right to intervene. It was done in the US during COVID-19, there were a lot of interventionist moves that are also subsidies.

“All governments reserve that right and so if for whatever reason the Tinubu-led administration has reviewed that it is not the right time to have prices continue to fluctuate, given the level of hardship in the country, given inflation, the government has the right to intervene intermittently, all governments do so but it does not negate the fact that the subsidy was removed.”

Speaking further, the SA to the president said that the cost of renewable energy sources was twice the cost of gas, adding that, given the level of energy poverty in the country, gas remains the short to medium-term plan of the government to deliver power to Nigerians

She explained that the government was not yet ready to diversify the energy mix on the grid for electricity, due to some underlying structural issues that need to be addressed.

Noting the challenges in the generation, transmission and distribution sections of the nation’s power sector, she said, “Until we address those fundamental issues ensuring that the Disco’s for example, make sure that all customers are metered and we have a level of assurance and revenue in the electricity value chain. Then we will not be able to attract capital into distribution, not be able to attract capital into transmission and definitely not be able to pay the current gas suppliers or potential solar or hydro suppliers of generation capacity.

“So the fundamental issue that we’re addressing at the moment is to focus on financial liquidity with technology interventions through the presidential metering initiative. For example, reviewing policies and structural issues that allow capital to flow into that value chain, and then allow us to diversify beyond gas on the grid.”