The federal government has set a March 2022 deadline for cars to switch over from petrol to gas. This is part of its plan to eventually eliminate petrol subsidy. The government reasons that with abundant gas reserves of over 206.53 TCF, a population of about 200 million people and the enactment of the Petroleum Industry Act (PIA), “the continuous absorption of an under-recovery deficit would be eliminated when the alternative fuel comes on-stream”.
The Ministry of Petroleum Resources pledged to make available a centralised management portal to maintain standards, evaluate utilisation and impact of government equity and overall project as well as select competent retail networks to catalyse the CNG sector. “A priority for the FGN is the rapid and strategic introduction of Natural Gas Vehicles (NGVs) as an alternative fuel for transportation in Nigeria in line with the approved National Gas Policy. This will pave the pathway for full deregulation of the downstream petroleum sector in Nigeria, whilst reducing the effect of deregulation on transportation costs,” it stressed.
Speaking last Monday in Abuja when he met with stakeholders in the sector, the Minister of State for petroleum, Mr. Timipre Sylva, said that the government envisaged making about five million cars to run on gas at the end of the programme. A presentation made during the event showed that the government, working with original equipment manufacturers (OEM) and oil and gas marketers, planned to convert one million public transport vehicles and install 1,000 refuelling centres within 36 months.
According to the presentation, in 18 months, 500,000 conversions will take place and 580 refuelling centres will be supplied by five OEMs while in 18- 36 months another 500,000 conversions and 420 refuelling centres supplied by six OEMs would materialise. “The target is to reach 5,000,000 conversions by achieving a 20 per cent increment (from year 3) which could be accelerated as the market matures,” the government stated. To ensure rapid conversion of vehicles, it promised to provide 50 per cent equity participation as well as encourage credit scheme investments with partner nations and OEMS.
The changeover was actually launched in 2021 but failed to take off. The explanation the government offered was that it was not possible to move further without ensuring that the marketers were fully on board the agreement around auto gas. “If not, you will have a situation where converted vehicles do not have places to refuel,” Sylva said. “So, to do this, we all agreed as part of our engagement with labour to have at least 1 million cars converted in the first instance.”
He assured that very soon, the OEMs would be in Nigeria and they would need partnerships with local marketers to put their systems in place, especially the installation of the dispensing stations and conversion kits. According to him, N250 billion was recently made available in the Central Bank of Nigeria (CBN) for the marketers to access and a further incentive would be the downstream and midstream gas infrastructure development fund which would be deployed for the purpose.
Sylva, while making a case the conversion to auto gas, said “As desirable as the issue of deregulation is for the economy, you all will agree that these structures need to be put in place so that the impact it will have when ultimately subsidy is removed, maybe at some future time, will need to make sure that everything is in place for the suffering masses of Nigeria. This is so as not to have the full weight of whatever is going to come with full deregulation. So, a lot of discussions are going on, but I thought that I should invite you to discuss these details with you,” he said.
We welcome this planned move from vehicles running on petrol to gas. This will reduce gas flaring which is just economic waste but also harmful to the environment. For decades, the government has failed to have oil firms stop flaring of gas. If this new move will put our gas reserve to economically beneficial use, so be it.
However, the government will do well to address the concerns raised by private sector partners. These include what one of them described as “uncertainty” regarding the increase in Value Added Tax on gas and supply shortage. Their worry, in a nutshell, is that “where we are really is that the investment cases have been made across the board, but we need a few more definite things that feed the assumptions that will go into the financials, which is really what happens with investors.” A position well put, which deserves a reassuring response.
