As Nigerians continue to grapple with the impact of the removal of petrol subsidy, the discussion as to the role of Compressed Natural Gas, CNG, as energy source in the automotive industry is taking the central stage. In this interview with Ediri Ejoh, a key player in the marketing of CNG in the country, the MD of 11 Plc, Mr Adetunji Oyebanji, argued that government has a lot to put in place before a full transition can take place.

CNG is new to many Nigerians. How can the citizenry take advantage of it as an alternative source of energy?

It’s a very positive development. Positive development in the sense that it will take time for it to yield the desired benefits. However, they say the journey of a thousand miles starts with one step. I think government has taken an excellent step in determining that the alternative energy source we want to emphasize is CNG.

The Presidential Initiative team is working very hard and putting many things in place. One of the first steps was to set up a partnership between government through the Nigerian National Petroleum Company Limited, NNPCL and the Presidential Compressed Natural Gas Initiative, P-CNGi, to partner with different people. 11plc and NIPCO are one of those entities with which they partnered.

As of today, we have developed four retail outlets in Lagos, which are part of that partnership. As we speak, those four retail outlets are in operation and this is in addition to what we have in Ibadan. We currently have two in Abuja and seven in Benin City.

This is a good initiative because CNG is a cleaner and cheaper fuel compared to PMS and what we need is to introduce it to the public and encourage them to convert their cars from being petrol only to at least a dual-purpose engine, where they can use either gasoline or CNG to power their vehicles.

That step has been taken. The initiative has been introduced to the public and certain investments have been made in that direction. In the last two weeks, Chairman of the Presidential CNG Initiative has been touring various states where they have been donating buses to various state governments so that they can provide CNG transportation, as some states have invested in CNG buses.

So, all these things are to activate consumer interest. And once it becomes widespread, many more cars are converted and the consumption starts going up, then the demand will start going up and more investment will be made. That means that for anybody who doesn’t want to run on PMS, which is becoming more and more expensive, there’s an alternative for that person. I think what is left is that, government should intensify its efforts. Additionally, initiatives, like these buses they are donating, are very important.

It’s good to see all of this initiative coming to fruition, but government has to do more. You have to invest if you want people to move from PMS to CNG. The first criterion is that you have to allow the price of PMS to find its market-level ground. When you suppress the price, CNG is not attractive because people don’t see the gain of the trans-fine. But when you allow PMS to be what it should be, the gap with CNG is so wide that it becomes a no-brainer for people who want to say, look, if I can convert my car to use both CNG and this, I will make significant savings. Government needs to also support the people who are going to develop stations so that once stations are plenty, then it becomes easier for people to find CNG when they want to buy it, and that makes things more attractive.

Do you think we have the right infrastructure in place?

We still need to do more because CNG is expensive to transport by truck. The reason is that it is condensed gas, so when it is condensed, it’s carrying a very big weight. Let’s imagine if something can fill this room, for instance, but you condense it into a suitcase. That suitcase will become very heavy. That means that for the trucks that convey CNG, the thickness of the tank that they use in carrying the thing has to be significantly thicker because it has been compressed under pressure.

Transporting it means that if you have to carry it a long distance, like Lagos to Kano, it becomes very expensive, but those trucks are much more expensive than the conventional trucks.

It suggests that there is a need for investment in pipeline infrastructures so that the distance to retail, dispensing points, and whatever from that pipeline is very limited. There will be no need to carry the product up and down with trucks. You can just tap into the pipeline, and you have it, and then you utilise it, so that investment is needed and required. You incentivize the private sector to make that investment. And in that regard, NIPCO has been a significant player as they built a pipeline. For instance, all those stations in Benin are connected by a pipeline. It’s not a case of seeing trucks go to the station. They’re all connected, the pipeline just goes in. The company made that investment without any government assistance. We believed that this is the future and took that step. NIPCO went further to make conversion easier by giving, whether taxi owners or private car owners, the opportunity to pay for that conversation kit over a period of time. There are a lot of facilities required and that’s why it’s very expensive. You may be able to build a petrol station for 250 million naira or 300 million naira, but a CNG station may cost you N800, N900 million. What we need in Nigeria is for government to play that helping role in acquiring conversion kits, infrastructure and pipeline investments, massive investments in buying CNG-powered, especially commercial buses and things like that.

Subsidy

I am very skeptical about subsidies. What can be done is such that, for instance, if you say you waive the duty on any CNG truck or CNG equipment or anything that has to do with CNG, you make it easier to acquire. You give grants for people to help them make conversion of their vehicles to CNG. All those things, when you add them together, they help.

You may not see the result for five years, but for me, by removing the subsidy on PMS, some of the money saved should be used to invest in this new energy source. This is to ensure that over time you build up demand and a lot of those people who were on PMS will now move to CNG. With that, you will find that the cost of transportation will stabilize.

Private sector’s involvement

Take the NIPCO, 11 Plc initiative. Everything is profit-driven. There’s always a profit motive, but if you have confidence in the economy long-term and you take into account the size of the population and the size of the economy, you may want to start looking at investing for the future. Investing and believing that with time, that market is going to grow, and by the time it starts growing, you would have already invested in having retail CNG outlets all over the place. I think that opportunity exists for the private sector, and some are taking advantage of it. Others are saying it’s currently not profitable for me, so I would not make that investment.

You have a huge retail outlet network across the country, in terms of petroleum products and marketing. How are you coping with the current situation of absence of products, yet overhead remains large and almost unstressed?

This is a big problem, not only for us but for our business partners. Many of the stations are run by dealers and agents. Just as it is affecting us in that we have overheads to take care of, they also have to pay the salaries of their staff. They have to pay for the electricity bill and whatever.

When they are not getting products, things are quite tough for them. In some cases, you find some staff laid off because if a man who sells ten trucks a month suddenly is not getting more than two or three a month, it becomes a challenge. We’ve been trying to cope in different ways.

As we said earlier, we’ve invested in CNG as an alternative. We’ve also invested a lot in LPG. From five years ago when we had zero LPG outlets, today we have a huge LPG storage of 8,000 metric tons.

We have LPG retail outlets in about 30 of our stations now. So you go there, fill your gas cylinder and come out.

These are some of the ways we’ve been trying to cope with the CNG investment in LPG, and then other areas where we are diversifying. Our company also owns Lagos Continental Hotel. So, we’ve diversified away from being solely downstream to going into the hospitality sector.

So what do you think can be done differently by government to remedy the challenges posed by energy?

Government should get its hands out of everything and just be the regulator, setting the guidelines as far as quality standards are concerned. Through the Federal Competition and Consumer Protection Agency as well as making sure nobody is cheated in terms of overpricing. Government should leave the business of running refineries and distribution to the private sector because the private sector can do it much better and more efficiently than they can do it. To me, the number one source of our problem is too much government involvement.

All you end up doing is creating gatekeeping opportunities, bottlenecks, where you have to go and meet somebody to get a location or whatever. All those things are a recipe for disaster. The best thing that could solve all these problems is for government to hand it off directly, then it can be the referee in the middle blowing the whistle if anybody comes and infringes.

That’s a good answer. NIPCO, your sister company, seems to be staying very strong in gas markets. Is 11 Plc thinking of doing the same?

I would say we are more or less doing it side by side. We actually have an entity now called Nipko Gas. So this is different from NIPCO Plc, which is the retail outlet owner, and Double One PLC. So Nipko Gas basically coordinates all our gas activities, whether it’s the stations in Benin, or all of these new developments recently entered into partnership with the Nigerian Gas Marketing Company Limited, which is a subsidiary of NNPCL.

What is the prospect of the gas market in Nigeria?

For me, I think that is the future. We, actually, are a gas country, rather than an oil country that has some gas. We have a lot of gas and some oil. It’s just that over the years, oil has been more exploited.

I think with the realization that we have much larger gas reserves, government is now focusing more attention on that. By extension, it becomes very understandable that government has now decided that gas is now a transition fuel. Every effort is being made by government to expand the exploration and the application as well as use the sale of gas in our local market.

I think government just needs to continue on this, emphasising gas, and encouraging investment, not only on the downstream side of gas, which is all the CNG stations that you have seen about, but even on the exploration and application side, because the more gas that is discovered, explored and produced, the better for us, first from an earnings standpoint and capability.

It’s good for us in that respect, but it’s also good in that a lot of gas-based industries, petrochemical industries, feed on gas. For instance, all these Indorama, the Dangote petrochemical plant, all of them are going to use gas as their feedstock.

The more gas that is available, the more we can set up integrated industries that depend on this gas as feedstock, particularly in the petrochemical area. I think it’s a step in the right direction, and I hope to see more of it from government.

What would be your advice to the President on how to resolve this energy crisis in Nigeria?

Well, I would say we’re doing the right things. I think, first and foremost, you need to make the arrangements.

Let me start with the law. We did not have well-defined legislation to guide the energy industry in Nigeria before, and it took us 20 years to craft the PIA, which is now in place. You have a law that looks after certain aspects of the industry, and provides the necessary structure and governance to encourage investment in that area. So, once you’ve got the law and potential governance issues in check, then the next thing is you start implementing it.

For instance, you start resolving with IOC some of these ongoing issues that have prevented investment in the upstream activities, which is manifested by the relatively low level of production that you see. You keep on hearing Nigeria is producing 1.2mbd, 1.3mbd, then Nigeria should be producing like 4 million barrels a day. So they need to get all that right so that production can grow and come to higher levels. So that’s one of the areas they need to do.

Then, another one is the gas initiative. They should intensify efforts, and deliberate in areas to grow the gas aspect of the oil and gas industry.

The more of that they can do, the better their revenue profile, and new industries that are gas-based will spring up and become more available for people in the country.

Then, security. The issues of vandalism of pipelines, oil theft, and all that, is something that also needs to be introduced so that the investment that has been made by IOCs and NNPCLs doesn’t go to waste because all the oil has been stolen.

Another thing that government can do is to hand off day-to-day involvement in the industry. If an NNPC is to be fully commercial, let it be. Then, divest of it, let it be put on the stock exchange, even if government wants to take control of the interest, but let there be a substantial private sector commercial, so that it can run efficiently like a company is supposed to run.

So I think all these things combined, if we can actively implement them, then I think our energy future will be more secure and will be a brighter future.

Colour of Dangote petrol

There’s been some conversation around the colour. Colouring has differences. There are various colours you can put in PMS and they are for different reasons. For instance, sometimes you can dye gasoline to differentiate the grades. If you have a 95 run, in terms of octane rating of a BMS, you can put a certain colour to differentiate that particular grade, so that if I put it in the bottle, I can say which has a higher octane.

This is deep red, this is light red, and so on and so forth. So, sometimes it’s just colouring. Sometimes it is the result of putting an additive to aid the petrol to perform better, to clean engines better, to burn faster, to be more combustible, so that during the combustion process, ash is created, which can be a problem for engines.

So, the cleaner the petrol, the better for that thing not to produce soot in the engine, which will create particles that can spoil or wear your engine down. And then, another reason sometimes is when you mix gasoline, PMS, with ethanol, ethanol is like a pure, but it’s made from corn or cassava or whatever. So, sometimes it’s mixed to be able to enrich the petroleum product.

The only problem, and that is what I am not clear about, as far as Dangote refinery is concerned, if there’s ethanol in it, it cannot be more than a particular percentage, because if the ethanol content is very high, then it can cause a problem. I don’t know whether you remember some product that was imported into Nigeria that created a lot of problems or whatever. A lot of those PMS were ethanol blends. In fact, if you can remember those instances, they will tell you that the petrol was very clear.

There was a time we had issues with petrol which was very bad. Those instances will tell you that the petrol was very clear. If ethanol is in it, when you mix it with water, it creates a slug that doesn’t like water. It absorbs water easily. What I don’t know is the ethanol content.