With petrol subsidy removal, it is gas o’clock

In this piece, LAOLU AFOLABI and PAUL OMOROGBE look at the effect of petrol subsidy removal and the alternatives Nigerians have sought to meet their energy needs.

WITH the parlous state of the economy and its biting effect on the country, Nigerians, on May 29, had waited with bated breath the speech that would show the directions to take the country out of the doldrums. The incoming president had campaigned on ‘Renewed Hope.’ Unexpectedly and to the bewilderment of many, including those who had vetted the inaugural speech, the newly-installed president went off course and made a proclamation that shook the whole nation, “Subsidy is gone.”

The foundation of the country shook. Instantly, the heat was turned on not only Nigerians but even nationals of neighbouring countries. The hitherto buzzing border towns turned to ghost. There are no brisk businesses anymore. The attendant protests that greeted the announcement showed it was a hard decision for the incoming government to take, but subsidy is really gone. Immediately, pump price of petrol was adjusted. Until the moment, it was hovering between N185 and N200 in many fuel stations. It suddenly jerked up to N500. Not quite long after, Nigerians were greeted to another sudden increase, as petrol went as high as N617 per litre in Abuja and N580 per litre in the South.

The pump price of petrol will henceforth be determined by market forces, since the sector is now deregulated, said the Group Managing Director/CEO of Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari. He added that the government by the singular action has created more investment opportunities which it believes will allow companies to enter markets and compete, leading to lower prices. The attendant effects on the economy have, however, been brutal. Prices of goods and services have skyrocketed. Most businesses are now running at a loss, some have even folded up. Nigerians now pay through their noses for services rendered. Transportation fares have gone up astronomically. Those who have cars prefer to park them at home and board public transport. The salary is no longer taking workers home, with the organised labour clamouring for increase in minimum wage. Putting on power generating sets for many households is no longer a luxury, nightlife is now quiet in major towns in the country. Indeed, subsidy is gone! It all happened as earlier stated by the economist, Professor Adeola Adenikinju, in a discuss that fuel subsidy removal could cause inflation and reduce economic welfare.

 

The alternative choice

Trust Nigerians, the search for alternatives to petrol won’t take time. While some are still gnashing teeth over the removal of subsidy, a few others have moved on, charting alternatives for their energy supply. The trend is now towards gas. From power generating sets to vehicles, Nigerians are switching in droves to gas. Most households now use gas to power their generators. Some cars are being converted to use gas instead of petrol.  Even government is mooting the idea of buying Compressed Natural Gas (CNG)-powered vehicles for commercial purposes. Some states governments like Lagos and Ogun have commenced steps to ply routes in their major cities with CNG buses.  More states will soon join.

A question on the quantity of gas supply in the country,  is however necessary before deciding on the alternative source of energy lest Nigerians be forced to take another hard pill. According to a report by PwC in 2020, on ‘Evaluating Nigeria’s Gas Value Chain,’ Nigeria has the ninth largest gas reserves globally, with about 209.5 trillion cubic feet (tcf) of proven gas reserves and the third largest in Africa, after Algeria and Egypt. The NNPCL put the figure at 202 trillion cubic feet of untapped proven gas reserves. The estimated recoverable gas is estimated at 139.4tcf. The Nigerian Content Development and Monitoring Board (NCDMB) said the current proven gas reserve, which it put at 206tcf would last another 50 years, even if current seven billion cubic feet per day consumption was doubled.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) also advised Nigerians to switch to the use of CNG as an alternative to petrol. Its national president, Chinedu Okoronkwo, at a public hearing by the ad hoc committee of the House of Representatives on the recent hike in the pump price of petrol, in Abuja, said, “in spite of the excruciating pain of subsidy removal, there’s something that can act as a succor in the country if we must live and be happy. Energy everywhere is critical, it is in the security list of every nation and God has given us about the best in gas that can last for over 500 years!”

Nigeria also exports gas, especially to the Iberian Peninsula. The country is the main supplier of Portugal and the second largest to Spain. With conflict in Ukraine and sanctions on Russia, the demand for Nigerian gas has increased. In 2021, the natural gas exports reportedly amounted to over 38.4 billion standard cubic metres. Since natural gas is extracted from subsurface rock formations via drilling, advances in hydraulic fracturing techniques have enabled access to large volumes of natural gas from the shale.

CNG is received and stored in a vehicle’s tank in gaseous form. It is easier to refuel, very light such that even if there is leak, it will dissipate. It has an unlimited hold time, even if it goes unused, there is no fuel loss. It is naturally safer and cleaner. It can be used to power vehicles.

LPG, likewise, is used to power engines. Though flammable, it is common in many homes as the cooking fuel. It is a clean-burning and efficient cooking fuel.  The gas, in its different forms, is now an alternative to powering engines and vehicles. They are greener, with lead and sulphur-free and reduce harmful emission.

During a visit by the Nigerian Tribune to Ogunpa market in Ibadan, Oyo State, a range of sizes of carburetors of power generating sets which now uses dual fuel is on display. Depending on the size and power capacity of the generating sets, dual carburetors that make use of fuel and gas could be purchased to change the hitherto petrol carburetors. A customer may even choose to buy gas carburetor alone, discarding the old petrol carburetor.  A mechanic who preferred to be called Jude told the Nigerian Tribune that the sale has been on the high side for the carburetors. According to him, since the May 29 declaration by President Bola Tinubu, the demand for such carburetors has been on the high side.

When asked if such products were in the market before May 29, he answered in the affirmative, declaring that “yes, the carburetors have been here for a while, but no one asked for them. The sale was very low. But after May 29, the demand has been on the high side. Today alone, I have converted more than 10 generating sets to dual carburetors. I helped my customers to fix the regulators on their gas cylinders and connect it to the generators.”

When asked the effect on the lifespan of such engines, he said, “There is no effect. In fact, it prolongs the life of the engine. Though the power output of petrol engines will be higher than that of the gas, we have limited issues with plugs. The silencer will be smoke-less and there is no emission. With gas, the lead fouling of spark plugs is eliminated.”

A customer, Mr Afeez Oladele, said: “My experience of the gas-powered generator is fantastic. Instead of buying petrol at the rate of N600 per litre, I would rather fill my cylinder and use the gas to power the generator. From my observation, 1kg of LPG will use more than three hours to power the generator. One litre of petrol cannot sustain this generator for one hour. The commodities are almost at the same price, but with the LPG, I save more money and maximise my spending. I have been using the gas to power the generator for almost a month now. No complaint whatsoever. It has low emission and works perfectly well.”

According to a study, converting petrol car to run on CNG can be a good choice. It produces fewer emissions, less expensive to operate, though it can be expensive to make the initial conversion. The study reveals CNG vehicles emit 80 percent lesser carbon monoxide compared to fossil fuels such as petrol and diesel. CNG is also proven to produce around 45 percent lesser hydrocarbon than other fossil fuels. It concludes that CNG for diesel engines is costly, but for petrol engines, it is common and affordable and have seen tremendous growth over the years.

 

New business

For IPMAN, it is necessary is to build the market since the demand is now there. Its national president, Okoronkwo, said “Everyone is feeling the pinch, everyone has taken the bullet. Palliatives are just for some time, the permanent solution is what we have brought to the nation and we tag it good news because with little money, you can fill you tank and still do business.”

Governor Dapo Abiodun of Ogun State, while taking delivery of the CNG luxury buses, said the government will establish CNG fuel stations on the route of transport of the buses. So, it is a new business for some entrepreneurs.

Jude, speaking further with Nigerian Tribune, said some new power generating sets have flooded the market. They come with dual carburetor; some are gas-powered only. To him, it is a new business for manufacturers who can think outside the box. Many Nigerian vehicle manufacturers like Innoson, Nord and others are also rolling out CNG vehicles to the market, as many state governments and even Federal Government will partner with them to provide the vehicles to Nigerians.

On Thursday, according to a statement by the Chief Corporate Communications Officer, Garba Deen Muhammad, the NNPCL formed a strategic partnership with NIPCO Gas Ltd to deploy CNG stations across the country. Under the partnership, 35 state-of-the-art CNG stations will be constructed nationwide, including three mother stations. Once fully operational, the stations can service over 200,000 vehicles daily, thereby significantly reducing the cost of automobile fuel for Nigerians and the cost of transportation. The first phase of the project, comprising 21 CNG stations, will support intra-city transportation and be ready by first quarter of 2024 while the second phase, comprising 35 CNG stations, will support inter-city transportation and be ready by late 2024. NIPCO Gas Limited is currently operating 14 CNG stations across Nigeria and has converted over 7,000 vehicles to run on CNG.

 

Not yet uhuru for eco-friendly target

For some experts, however, though Nigerian is tilting towards gas, it is still not the suitable option. To them, the best option is electric-powered engine. They are of the opinion that with gas, there are still extractive activities of the petroleum, causing environmental hazard and ripple effects on climate change.

Philip Jakpor, the Director of Programmes at Corporate Accountability for Public Participation Africa (CAPPA), an environment-focused non-governmental organisation (NGO), said “There is unanimity that fuel subsidy has to go. There’s no doubt about it. But the approach the government has taken is where the problem is. There were no palliatives in place and there was no stakeholder consultation before the decision was taken. This has left Nigerians in a state of confusion and there is crisis.”

Moving on from that, he said, “CNG is cleaner but it doesn’t mean you don’t also have emissions. CNG also emits some amount of methane. Even in the process of the manufacture of CNG, there are emissions. So while it is said to be cleaner and proven to be so, there are still levels of emissions and those emissions are greenhouse gases that contribute to the climate crisis. There will be, of course, some level of reduction in emissions by about 30 percent or so, compared to carbon monoxide and carbondioxide released into the atmosphere from other dirty fuels.”

He added that “Government has counted CNG as a transition fuel. But what this also means is that extraction will still continue. That is where the climate crisis starts from. Inasmuch as we believe that CNG is cleaner, it doesn’t take away the fact that extraction will go on. And it will actually negate the so-called net zero plan by government.”

Jakpor said the adoption of CNG requires the creation of “another round of infrastructure which is not the solution. It is only a stopgap. Now that cars are being converted to CNG, we are creating another round of infrastructure that runs away from the real solution. The real solution is to keep oil in the soil – keeping extraction at its barest minimum.”

Tolulope Olukokun, founder and director of ThinkElectric Africa, an organisation with the aim of accelerating Africa’s transition to renewable energy and green transportation, told the Nigerian Tribune that “We’ve always known that gas will be a bridge between where we want to be and where we are. It’s just that the emissions are lesser and not zero. The goal is net zero.

“When you look at the cost implications, most people will think that going the way of gas is cost-friendly. The reason is that this is an initiative of the Federal Government. I think it first started a year or two ago, for people to start using gas for their vehicles and other uses. It wasn’t because they were talking about subsidy removal then. It was because a lot of gas was being flared. Gas flaring was causing a lot of environmental hazards in the areas where it was occurring. The fact that it is also less expensive – a kilogramme of gas costs less than the equivalent amount of petrol – everyone will look for what pays them.”

Olukokun, however, noted that the cost of conversion of a car to use CNG from petrol can be costly. He said, “It costs N500,000 to N1.5 million, depending on the size of the engine. The goal is ultimately electric vehicles. If we can ride our way through gas to get there, it is allowed. This (fuel subsidy removal) has opened up a number of alternatives. A lot of people are thinking electric, a lot of people are thinking LPG or CNG; that’s totally fine. The conclusion is that if it is about emissions, emissions are getting lower, especially in transportation.”

Professor Emmanuel Ofoezie, a former Director of the Institute of Ecology and Environmental Studies at the Obafemi Awolowo University (OAU), noted that “Many variables that we do not currently know will determine the overall impact of the shift on the environment.

“For example, we don’t know how the price at a new gas station affects vehicle volume and total vehicle travel time. We also don’t know the current ratio of petrol cars and natural gas vehicles on the road. You said that people are switching to CNG. If that’s true, we should know if they prefer to buy new cars with natural gas or convert gasoline vehicles to natural gas.

“In any case, the trend will lead to more and more CNG vehicles at the expense of gasoline-powered vehicles. If this trend continues, there will be less carbon pollution in our environment. The overall result is a cleaner and less polluted environment.”