By Udeme Akpan & Sebastine Obasi

With its 202 trillion standard cubic feet of gas reserves, many global stakeholders had expected Nigeria to harness adequate gas for domestic use and export before 2020 for many reasons.

First, its gas reserves are in excess of oil, estimated at 37 billion barrels. Second, gas is a cleaner fuel than oil, meaning that Nigeria could become a more environmentally friendly nation through increased utilisation of its gas.

Sadly, that has not been the case. Consultant (Oil and Gas), Private Design Engineering, Dr Wisdom Patrick Enang, stated in his presentation – Natural Gas: Nigeria’s Next Big Thing – at the just concluded Nigeria International Petroleum Summit, NIPS, in Abuja, that Nigeria is currently losing $2.5 billion yearly because of severe gas flaring from 178 flare sites nationwide, a development expected to hit $9 trillion in the next 10 years.

According to him, the relatively high flaring has been attributed to many factors, including lack of infrastructure at many oil fields, limited re-injection, expensive nature of developing and installing of pipeline network and difficult terrain of the Niger Delta, which hinder the harnessing of the product for positive uses.

CNG

However, hope is not lost, as the Minister of State for Petroleum Resources, Timipre Sylva, has declared 2020 as a year of gas, stressing that Compressed Natural Gas, CNG, would be made to serve as the nation’s automotive fuel. According to him, the bold step would enable the government to safe huge funds, currently used to subsidise petrol for Nigerians.

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Nevertheless, this may not take place in a short or medium term as Vanguard investigation showed that it would take a much longer time to place CNG at the doorstep of Nigerians for commercial use because of many problems, including inadequate facilities, such as storage and filling stations to provide services to users.

LPG

Unlike CNG, LPG seems to be different, especially as many investors have already invested in facilities, including storage tanks, distribution trucks, and production of cylinders and accessories in virtually all parts of the nation.

In other words, Vanguard’s findings showed that LPG has already been brought nearer to the people, including the poor rural dwellers. Besides, there are many experts, including technicians that provide specialised services at all levels of the business, drive LPG. The business is also well structured and supported by professional associations in Nigeria and globally that provide capacity building and other services to their members, thus adding value to the sector and economy.

Price

In his presentation, Autogas, Is Nigeria Ready?, presented at the 2019 Annual NLPGA Conference and Exhibition in Lagos, President, Nigeria Liquefied Petroleum Gas Association, NLPGA, who doubles as Managing Director/CEO, Banner Energy Nigeria Limited, Mr. Nuhu Yakubu, said: “A total of N1,018,440.00 could be saved for a period of one year, when LPG is used instead of AGO to run a 37hp engine, and this amount increases to N6, 110,640.00 for a 6 year period. A total of N 63,288.00 is saved for a period of 1 year when LPG is used instead of PMS to run a 37hp engine, and this amount increases to N 379,728.00 for a six- year period.”

He said: “Percentage cost saved with 25kva generator running on LPG instead of diesel remains 16.56 per cent. For every one-hour runtime, a minimum of N117.32 is saved with a 25kva generator running on LPG instead of diesel. Without subsidy on petrol, percentage savings for a 37HP car engine running on autogas instead of petrol revs up is 32.04 per cent. For every 1 hour runtime, a minimum of N280.13 is saved with a 37HP car engine running on Autogas instead of Petrol.”

Yakubu stated: “I am sure most of us already know that autogas is the way to go, for all the sound reasons. Yes, Nigeria has for long been ready for autogas; except for government policies, which have continued to slow down the full emergence of this potentially huge industry.

Yet in spite of the depressing effect of government policies, especially the subsidies on competing fuels, this presentation makes it clear that LPG can still compete reasonably well. Development of autogas trading infrastructure must however begin to gain much more of our attention, and action. This is the only way we can easily harvest the much-awaited opportunity when it does come around.”

Problems

Investigation by Vanguard showed that LPG is still hampered by many problems, including the continued subsidy on petrol, prohibitive fees and duties currently being paid by investors and overlapping roles of agencies such as the Department of Petroleum Resources, DPR and Standard Organisation of Nigeria, SON and Lagos State Environment Protection Agency, LASEPA. Other issues such as limited awareness, pricing, infrastructure and relatively low margins also constitute additional problems.

Expectation

However, there are indications that the domestic LPG market would continue to grow in the coming years. In his presentation – Supply, Demand and Pricing Outlook – presented at the NLPGA conference in Lagos, managing director, NNPC Retail Limited, Sir Billy Okoye, said: “The size of the Nigerian domestic LPG market was 635,452.061MT by end of December 2018. It is expected to reach a milestone of 1,000,000 MT by December 2019 according to data from PPPRA. Inland storage capacity of about 42,500MT is available in LPG depots across Nigeria’s undulating and vast coastline.”

“There are over 555 operational gas plants with 95 per cent owned by independent marketers. In-country production is about 5,000,000 MTPA with over 90 per cent of that volume exported while 10 per cent is consumed locally. NLNG contributed about 350,000MTPA to domestic supply in 2018.

Other key contributors are the Port Harcourt and Warri refineries as well as other offshore/onshore producers like Exxon Mobil, Pan Ocean, Global Gas and Xenergi Oil & Gas. A significant portion of locally consumed LPG is also imported with numbers around 319,000 MTPA (55% of total consumption) for 2017. Major marketers like Oando, Forte Oil, Conoil, NIPCO and NNPC Retail Limited control only about 10% of the Nigerian LPG market while the independent marketers control around 90 per cent of the market.

“Global LPG Production expected to rise from 250 Million MT in 2010 to more than 380 Million MT by 2030. Key incremental production will be from the US, a result of further exploitation of shale Crude. Additional production is also forecast from the Middle East and Australia Limited incremental volumes are expected from refining sectors in emerging economies but developed nations likely to stagnate. LNG projects, shale, and conventional gas fields are the key reason for the growth in the availability of NGLs. Global LPG Supply has and will continue to grow in line with the development of natural gas production.”

He added: “It is estimated that 600,000 MT of LPG per year can be produced from the 178 flare sites the programme intends to commercialize. The NPDC Oredo facility should also increase supply, adding around 120,000 MTPA to in-country LPG production when it comes on stream.”

Action

From all indications, the major problems, including fuel subsidy, prohibitive fees and duties, overlapping roles of agencies, limited awareness, limited infrastructure, low margins and pricing would need to be tackled in order to encourage additional investment required to release commercial quantity of LPG for use in automotive and other sectors of Nigeria’s economy.

Vanguard News Nigeria.