How FG can quickly displace petrol with gas-powered vehicles

A phased implementation of fossil fuel replacement with Compressed Natural Gas (CNG) powered vehicles beginning with government commercial fleet, removal of duties on conversion kits, and a long-term repayment plan for the cost of conversion, are ways to quickly displace petrol with cheaper CNG cars, experts say.

While Nigeria is awash with gas, it spends billions of dollars yearly to import Premium Motor Spirit – petrol, whose sulphur content pollutes the atmosphere. The government seeks to change this situation by displacing petrol with gas-powered vehicles.

Experts say the government should start with its own commercial fleet. “I think what would be useful is to focus on mass transportation. In states like Lagos where some buses have been acquired, they should be converted to run on CNG, starting off in a closed ecosystem wherein the buses can fill up at their terminals and along important routes,” Clement Isong, chairman, Major Oil Marketers Association of Nigeria (MOMAN), says.

The next phase should be to see commercial vehicles including minibuses and gradually scale up, but government needs to consult with private sector operators for it to succeed, Isong states.

The Nigerian government first proposed CNG for automotive fuel in the 1990s as part of efforts to harness natural gas resources. The move has gained some traction in Benin City, the Edo State capital.

In January 2010, the management of NIPCO plc, a downstream energy company, commissioned its first CNG plant and filing station in Benin City. Ten years later, there are over 6,000 natural gas vehicles (NGVs) in the state used for both public transport and private use.

Other corporates including Dangote Group is seeking to power all its trucks with gas, Sahara Energy and some other companies also have vehicles in their fleet powered by gas. This shows the potential for growth if backed by forward-looking policies.

Nimi Amachree of Ener-Gas International Investments and Excalibur Power and Gas Limited, whose company designed and built a CNG-Mother station in Lagos, for Oando Gas and Power (now Axxela), says the Federal Government needs to waive duties for CNG conversion kits for automobiles.

“Currently, gas equipment intended for gas-to-power projects are duty exempt but this policy should be extended to the auto sector too,” Amachree says.

Experts say the cost of conversion kit ranges from €1,000 to €1,500, depending on the vehicle and the techniques employed. An additional duty and VAT charges will significantly raise the cost.

Experts say that unlike petrol subsidy, which is recurring, a duty waiver for a limited period can be a capital cost that can be re-paid over the lifetime of the asset.

BusinessDay spoke with some drivers who use CNG vehicles in Benin City about their experience. Osamwonyi Orobosa, taxi driver, notes: “I have been using CNG vehicle since the past 10 years. When I converted my car 2014, I deposited N10,000 and started paying little by little. To convert is N200,000. As you are buying (gas) they will be deducting the balance.”

Another taxi driver, Godstime Osagie, says: “I started using gas four months ago. When I was using fuel, I do buy N4,000 fuel daily but since I started using gas I do not use half of that amount. If I want to fill, N1,250 will take me for more than four hours, as I make about N7,000.”

This model adopted in Benin City, where taxi drivers pay a limited fee over a long time for the cost of conversion when they refuel, can be replicated elsewhere.

According to the 2017 National Gas Policy, the Federal Government is seeking to replace petrol with cleaner-burning gas-powered vehicles as a measure to reduce the country’s carbon emission and exit a costly fuel subsidy programme haemorrhaging over N1 trillion yearly.

The benefits of switching to gas are enormous. Olufola Wusu, commercial lawyer, oil & gas/intellectual property consultant, states, “The use of natural gas as a fuel for transportation can help reduce greenhouse gas emissions by 20 – 30 percent when compared to petrol and diesel.

“There are also additional benefits to the economy including that it is cheaper, leads to job creation ranging from CNG technicians to CNG safety experts.”

On safety, Amachree says the cylinders installed in vehicles are seamless and almost like core solid metal and are designed to withstand extremely high impact.

Sarki Auwalu, director, Department of Petroleum Resources (DPR), last year told BusinessDay that the agency was ready to drive a transition from PMS to CNG, and called for free conversion and the cost recovered as a token on the cost of CNG.

According to taxi drivers interviewed, this is what currently obtains in Benin City.

“I started paying little by little. In the finance package, the amount is N120 per kg while they will deduct about N25 in each kg till you are able to finish payment,” notes Innocent Imoisili, a commercial bus driver.

With over 202 Trillion Cubic Feet (TCF) of gas reserves, Nigeria has in abundance the critical feedstock required to drive gas-powered vehicles. Analysts say good policies will drive private sector investment into conversion and building filling stations.