Will autogas surpass petrol to become the new fuel in Nigeria?
Nigeria began producing oil and gas in 1958 when the country’s first oil discovery well was dug at Oloibiri (present-day Bayelsa State, Niger Delta Region). Gas output began to expand significantly in the early 1970s, eventually exceeding 2.7 billion cubic feet per day (bscf/d) in 1979.
Nigeria has the 9th largest gas reserve size in the world which holds 206 trillion cubic feet of gas as of 2021 and is also the largest in Africa. Nigeria also contributes about 3% of natural gas to the global reserve and 36% to Africa’s reserve. Nigeria currently exports 929,844 million cubic Ft of gas annually.
The enactment of the Petroleum Industry Act to remove subsidy on PMS (Premium Motor Spirit) and also the recent approval of the National Gas Policy made it imperative for the Government to find a sustainable alternative to PMS. To minimise the impact of fuel subsidy removal on the masses, the Federal Government unveiled the 2022 framework for the deployment of CNG (Compressed Natural Gas), popularly called autogas in Nigeria.
CNG was selected to be the fuel of choice amongst others such as LPG and LNG due to its comparative advantage regarding ease of deployment, comparatively lower capital requirements commodity’s supply stability, and local market commercial structure which predominantly relies on the Naira.
To support the introduction of autogas into the Nigerian market/filling stations, the government provided incentives to gas utilisation companies who manufacture, market and distribute natural gas for commercial purposes. This includes:
- Initial tax-free period of 3years
- Additional tax-free period of 2years (renewable based on satisfactory performance)
- Tax-free dividends, during the tax-free timelines
- 0% VAT for investments in plants, machinery, and equipment
The Federal Government also introduced a ₦250Billion intervention fund provided by the Central Bank of Nigeria to actualise the conversion process of vehicles and petrol stations from petrol to autogas. This loan will be used by oil marketers to convert over 7,000 retail outlets/filling stations to autogas stations to encourage the use of gas in vehicles.
“The government will also provide 50% of the conversion kits to fast-track the process and also meet their target of converting 200,000 commercial vehicles to run on gas this year.”
The Lagos State Government is also collaborating with the Federal Government to develop autogas filling stations in the State through the inauguration of the Ibile Oil & Gas Corporation Gas Plant in Ikorodu, Lagos.
How will the use of autogas affect businesses in Nigeria?
Gas-based industries, especially petrochemicals such as fertilizer and methanol would also develop rapidly to support large industries like agriculture. This will help foster investment from the private sector; which will then be encouraged to invest in the domestic gas market. Which should in turn foster more employment opportunities.
This will also be economical for the government as a result of the abundance of gas. When local industries and vehicles are converted to autogas, there will be less demand for petrol, so the government can export more oil and import less refined petroleum products.
The utilisation of gas will enable oil companies to stop gas flaring. As a result, they will no longer pay gas flaring penalties/fines to the government thereby reducing their cost of production. Also, oil and gas industries such as Nigerian Liquified Natural Gas (NLNG) will experience expansion in operation leading to an increase in revenue and employment opportunities.
While the government must provide certain incentives and investments to increase gas utilisation in Nigeria, the government still needs to invest in new pipelines and other gas processing and storage infrastructures.