Derefaka: Gas Will Provide Much-needed Alternative to Petrol, Firewood

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The Technical Adviser on Gas Business and Policy Implementation to the Minister of State for Petroleum Resources, Mr. Justice Derefaka, in this interview explains roles envisioned for gas in Nigeria’s deregulated downstream oil sector. Chineme Okafor brings the excerpts:

For a while now, the government has had a lot of buzz around gas, what’s the status of its intentions?

The National Gas Policy (NGP) was approved by the federal government in 2017, and it foresees Nigeria as an attractive gas-based industrial nation, centered on satisfying local gas demand requirements, and developing a significant presence in international markets. The policy seeks to define and set the framework necessary to move Nigeria from being a crude oil export-based economy to becoming an attractive oil and gas-based economy. Through the ministry of petroleum resources, the government is working on the policy goals, strategies and plan for establishing a framework that will drive the institutional and commercial reforms necessary for attracting investment into the gas sector and this is with a view to achieving what our abundant gas resources could offer as a strong option for Nigeria’s economy. As part of the strategy to reposition the oil and gas industry, the ministry commenced the implementation of carefully conceived initiatives to foster efficiency and attract investments along the gas value chain as embedded in the policy and these include rapid growth of the LPG/CNG/LNG market, development of supporting infrastructure, investment and domestic growth. The policy also seeks the promotion of natural gas usage in Nigeria thereby creating alternative fuel choices for Nigerians. It is expected that this will stimulate economic growth, further improve our energy mix, drive investments and provide jobs in Nigeria.

Can you tell me more about this; making gas an alternative for petrol?

The policy on Autogas includes AutoLPG, AutoCNG and AutoLNG, and it is encapsulated in the NGP. Nigeria currently holds circa 203 trillion cubic feet (TCF) in proven gas reserves, ranking among the top 10 in the world. Despite its huge reserves, current per capita consumption of gas in Nigeria is one of the lowest within the sub region, and until recently, significant sums were spent subsidising petroleum products. The current policy of government is to promote the utilisation of gas in Nigeria. It is expected that gas will provide the much-needed alternative to petrol and firewood. The Minister of State for Petroleum Resources, Chief Timipre Sylva is bent on ensuring this comes to fruition with the declaration of year 2020 as “The Year of Gas”. Building on that, he in January inaugurated the National Gas Expansion Programme (NGEP) as the mechanism to boost domestic utilisation of gas in the short and medium term. The NGEP will achieve the objectives, reinforce and expand gas supply as well as stimulate demand in the country through efficient mobilisation and utilisation of all available assets, resources and infrastructure. It will serve as a catalyst for adding value to the vast natural gas reserves Nigeria is endowed with.

Does this mean that gas has a role in the deregulated downstream oil sector?

It is good you’re aware of the government’s decision to deregulate the downstream petroleum industry; complete deregulation of the downstream sector is an enabler for private sector investment and government lost billions of naira every day to subsidy payment which could have been used in improving the wellbeing of ordinary Nigerians and rebuilding the economy to generate more employment. Gas as alternative fuel is regarded as a bridging fuel in the transition to a clean, affordable and sustainable transport system; Autogas vehicles can operate in dual-fuel mode with switches for alternating between fuels. There are various technologies available for the use of gas as engine fuel. It can be used as single fuel in mono fuel engines, as single fuel in bi-fuel engines that can switch between gasoline and LPG, or as a mix with diesel in dual fuel engines. In addition, it can be used in various forms of hybrid powertrain technologies. The choice depends on application, availability of technology for the specific application, as well as regulatory framework, costs and other regional factors. So, as you can see the overall economic multiplier implication is enormous. This ministry is also running a scheme by the NGEP in collaboration with NNPC and other stakeholders with their technical and financing partners, to introduce Autogas as an alternative fuel for automobiles and other prime movers in Nigeria. The scheme shall be self-financing and self-sustainable. It will generate over two million jobs per annum and reduce carbon emissions significantly.

How realistic and cost-efficient will gas as an alternative to fuel be in Nigeria?

So, here is why the NGEP Autogas scheme is seen as an alternative fuel; shifting from PMS to Autogas gas provides increased flexibility for an oil-dependent transportation system, economic development, highly economical to run and saves running cost by up to 40 to 45 per cent than that of petrol.

The total cost of the conversion can be recovered easily between five and seven months maximum, there is no spilling when filling the tank and no possibility of theft or pilfering, complete adulteration free fuel as compared to petrol or diesel, lower engine noise assures smooth and environment friendly drive and unlike other fuels, no additives are required to guarantee high quality.

This also ensures that we reduce dependence on foreign exports and create a more stable energy market less susceptible to supply and price volatility. Additionally, the Autogas scheme allows drivers and fleet managers to reduce PMS use, minimise emissions, decrease greenhouse gas (GHG) emissions and reduced fuel costs in the long run.

On the implications to the overall economy, it helps with the diversification of the nation’s fuel portfolio, and greater use of domestically produced energy resources strengthens national security.

How will this happen in an economy steeped in PMS usage?

Reforming and implementing the promotion of a market structure in a manner that will ensure the utilisation of gas infrastructure, assets and facilities on a common carrier and co-sharing basis. The NGEP will formulate strategies that will promote cost effective distribution of the various gas streams by marine, rail and road for achieving a most affordable, available, acceptable and accessible gas to Nigerians.

It will contribute towards Mr. President’s promise to take 100 million Nigerians out of poverty within the current decade. The NGEP has the capacity to reduce poverty by making locally available, produced, affordable and accessible fuel to mostly under-served communities in the country. Autogas in Nigeria is a wealth of untapped potential.

What kind of incentives would Nigeria need to open up its gas market?

In terms of the right kind of incentives, note that the NGEP also seeks to achieve gas-based industrialisation via low-cost gas resources that have been identified and dedicated to the Nigerian domestic market. We used the portfolio management methodologies for prioritisation of the development of low-cost gas with the proportion of that dedicated to domestic markets.

The policy also seeks to liberalise and incentivise entry into the midstream to enable private sector investors develop gas infrastructure. In that regard, the government has made available a finance scheme of N250 billion for gas penetration in the form of stimulus and intervention facility. The objective of the facility include improved assess to finance for private sector investments in the domestic gas value chain, stimulation of investments in the development of infrastructure to optimise the domestic gas resources for economic development, fast-tracking the adoption of Autogas as the fuel of choice for transportation and power generation, as well as LPG as the fuel of choice for domestic cooking, transportation, and captive power.

Is that all that there is in the N250 billion CBN facility?

There is also the incentive to fast-track the development of gas-based industries particularly petrochemicals – fertilizer and methanol, to support large industries such as agriculture, textile, and related industries. And provision for additional private sector investments in the domestic gas market.

The activities that are eligible under the N250 billion intervention range from establishment of gas processing plants and small scale petrochemical plants to establishment of gas cylinder manufacturing plants, L-CNG regasification modular systems, Autogas conversion kits or components manufacturing plants, CNG primary and secondary compression stations and manufacturing of LPG retail skid tanks and refilling equipment, amongst others.

All these will obviously steer the ship towards making Nigeria a gas hub just as using natural gas is already helping to reduce carbon dioxide and improve air quality where it replaces coal or diesel.

Aren’t these going to be impeded without the PIB?

The NGEP is geared towards harnessing Nigeria’s vast gas resources by removing the barriers affecting investment and development in the gas sector and driving the institutional reforms and regulatory changes necessary to evolve into a gas-based industrialised nation.

Above all, there is light at the end of the tunnel; the Petroleum Industry Bill (PIB) presently at the National Assembly according to the minister, would ensure that the nation’s abundant natural gas resources are used to promote national development and that it will unlock several midstream gas opportunities to further enhance domestic gas utilisation. The proposed PIB will also provide a wide variety of features to ensure that natural gas makes the optimal contribution to sustainable industry and national development in the medium to long term.