Compressed natural gas remains cost competitive versus gasoline
Government hopes to get 1 million vehicles converted to CNG by 2021
10,000 b/d of gasoline demand to be displaced in short-term: Platts Analytics
Nigeria has started the roll out of compressed natural gas (CNG) as a key transport fuel as part of the government’s strategy to gradually wean the nation off the high-sulfur gasoline it normally runs its cars with.
The government launched its National Gas Expansion Programme (NGEP) on Dec. 1, focusing on the distribution of autogas (CNG) and liquefied petroleum gas (LPG) across gas stations operated by state energy company Nigerian National Petroleum Corporation (NNPC).
“The [Muhammadu] Buhari administration is focused on developing the country’s natural gas resources, as part of the government bid to key into the global shift from crude oil to gas,” the country’s oil minister said in a statement. “The plan to develop CNG into alternative automobile fuel will also afford Nigerians cheaper, cleaner and additional fuel.”
The government hopes to get up to 1 million vehicles converted from gasoline to CNG by the end of 2021.
Nigeria is keen to grow its domestic gas supply to take advantage of its abundant resources.
“The rollout is the culmination of [the government] deepening domestic usage of natural gas in its various forms. It is also in line with the government’s plan to make gas the first choice of cheaper and cleaner energy for Nigerian’s personal and industrial endeavors,” the oil ministry said in a separate statement.
This move is much needed for Africa’s largest oil producer, which still lags behind many of its continental peers in implementing lower sulfur fuel requirements either for imports or from its domestic refineries.
“The need to switch from petrol [gasoline] to gas was necessitated by the deregulation of petrol by the government, which has led to increment in the domestic pump prices in recent times,” Mohammed Ibrahim, head of the government committee in charge of the NGEP, said.
S&P Global Platts Analytics expects this program to displace only 10,000 b/d of gasoline in the near-term, “with the full impact of the conversion scheme to be felt more on a longer time horizon.”
Gasoline or premium moto spirit (PMS), as it is known in Nigeria, accounts for a large chunk of Nigeria’s transportation demand.
Nigeria is one of the leading consumers of road fuels in Africa, typically using around 1 million-1.25 million mt of gasoline per month.
Platts Analytics said the success of this program will depend on the low cost of installation of conversion units, the cost competitiveness of autogas/CNG fuel against gasoline and easy accessibility of refueling stations.
“Since autogas and CNG are price-competitive versus gasoline, this could provide a sufficient incentive to kickstart conversion efforts,” it added.
This program is also part of the government’s policy to drive LPG demand and reduce demand for kerosene and wood as a cooking fuel.
Nigeria depends on imports for almost all its oil products to meet its oil demand of around 450,000 b/d.
Nigeria has four refineries with a combined nameplate capacity of 445,000 b/d but years of neglect have meant they are all offline and set to undergo major repairs.
Push for cleaner fuels
Nigeria has struggled to effect gasoline fuel specification change, which would see the sulfur content of up to 1,000 ppm dropped to 150 ppm, even though it previously fixed July 1, 2017, as the implementation date.
Africa’s biggest oil producer, however, believes it could use its huge gas resources to achieve its goal of cleaner fuel supply while aiming to complete a full gasoline fuel specification change by 2021.
NNPC estimates domestic demand for natural gas rising from current levels pf 1.5 Bcf/d to 7.4 Bcf/d by 2027.
Nigeria is currently ranked as having the 9th largest global gas reserves with over 200 Tcf, according to government estimates.