The total deregulation of the downstream oil sector has attracted mixed reactions from the populace because of the place of petrol in the movement of goods and services across the country. The Federal Government has however promised to reduce the impact of uncontrolled fuel price by encouraging the use of compressed natural gas (CNG), LUCAS AJANAKU writes of the prospects of the new line of thinking.
FOR long, successive administrations could not summon the courage to completely deregulate the downstream oil sector. Nigeria, the sixth largest oil producer in the Organisation of Petroleum Exporting Countries (OPEC), depends almost entirely on imported petrol to run the engine of its economy. Fuel importation of course comes with its price in form of subsidy which became a cesspit of corruption and rent-seeking.
The Petroleum Products Pricing Regulatory Agency (PPPRA), an agency created to monitor the downstream oil sector, especially petrol, said the Federal Government spent N8.94 trillion on oil subsidy between 2006 and 2015.
According to a document it released on subsidy payment in Abuja, the subsidy was paid to oil marketers and the Nigerian National Petroleum Corporation (NNPC) during the period under review.
A break down of the money indicated that in 2006 N257.36 billion was paid; in 2007, N271.51 billion while in 2008, N630.57 billion was paid to marketers.
“Also, oil marketers in 2009 were paid N409.31 billion and N667.08 billion in 2010 respectively as subsidy claims,” it said.
The document further revealed that in the year 2011, the Federal Government paid a N2,105.92 trillion an increase of N1,437.84 trillion from 2010 payment. The PPPRA in the document noted that in 2012, N1.35 trillion was paid as subsidy, the highest in the period under review.
“A total of N 1,316.63 trillion in 2013, N1,217.35 trillion in 2014 and N653.51 billion in 2015 was paid as subsidy claims,” it added.
The NNPC, since 2016 had been the sole importer of the product to the country and promised to release cash paid on subsidy before the deregulation of the downstream oil sector.
The administration of former President Olusegun Obasanjo deregulated the markets of automotive gas oil (AGO) or diesel and dual purpose kerosene (DPK) but could not deregulate that of petrol. Former Group Managing Director of the NNPC Funsho Kupolokun, and Finance Minister Ngozi Okonjo-Iweala said oil majors would be mandated to refine 50 per cent of their crude oil in-country to stop the foreign exchange (forex) haemorrhage but could not implement the policy.
This year, the pump price of petrol has been tinkered with about four times. It was N125 per litre in March, N123.50per litre in April, N121.50 per litre in June and between N140.80 and N143.80 in July before it was deregulated.
Already, the organised labour has given the Federal Government notice to go on strike should it fail to rescind its decision of petrol pump price and electricity tariff hike.
The Federal Government said it was going to encourage the use of Compressed Natural Gas (CNG) in the country because it is cost-effective.
Minister of State for Petroleum Resources Timipre Sylva, who dropped the hint in Abuja, said: “To give it (deregulation) a human face, we are introducing an alternative fuel. We are giving autogas. Gas will now become fuel for our cars. This programme will be rolled out within the next month. So, if you go to a filling station and you convert your car to dual capability or dual fuel, then you drive into a typical filling station, you will find gas LPG (Liquified Petroleum Gas), you find CNG and LNG (Liquified Natural Gas) being sold.
“So, if you look at the price of PMS versus the price of gas and you think that gas is cheaper which, of course, it is going to be. Gas will even be cheaper than PMS as it is today. So you see that we are also giving an alternative to ordinary Nigerians.’’
To realise this, it was gathered that the Department of Petroleum Resources (DPR) had ordered about 9,000 filling stations across the country to start the installation of facilities for gas products. The move is expected to improve the utilisation of LPG, CNG, LNG, and Autogas as an alternative fuel for Nigerians.
According to online knowledge bank, Wikipedia, CNG (methane stored at high pressure) is a fuel that can be used in place of gasoline, diesel fuel and liquefied petroleum gas (LPG).
“CNG combustion produces fewer undesirable gases than the aforementioned fuels. In comparison to other fuels, natural gas poses less of a threat in the event of a spill, because it is lighter than air and disperses quickly when released. Biomethane — refined biogas from anaerobic digestion or landfills — can be used.
“CNG is made by compressing natural gas, which is mainly composed of methane (CH4), to less than one per cent of the volume it occupies at standard atmospheric pressure. It is stored and distributed in hard containers at a pressure of 20–25 MPa (2,900–3,600 psi), usually in cylindrical or spherical shapes.
“CNG is used in traditional gasoline/internal combustion engine automobiles that have been modified or in vehicles specifically manufactured for CNG use, either alone (dedicated), with a segregated gasoline system to extend range (dual fuel) or in conjunction with another fuel such as diesel (bi-fuel),” it explained.
Natural gas vehicles are increasingly being used in Iran, Pakistan, the Asia-Pacific region, Indian capital of Delhi, and other large cities such as Ahmedabad, Mumbai, Pune, Kolkata—as well as cities such as Lucknow, Kanpur, Varanasi, and others. Its use is also increasing in South America, Europe and North America because of rising gasoline prices.
In response to high fuel prices and environmental concerns, CNG is starting to be used also in tuk-tuk, pick-up trucks, transit and school buses, and trains.
Experts say the use of alternative to fossil fuel guarantees increased energy security. According to fueleconomy.gov, natural gas is a domestically-available fuel; enhances public health and environment protection as it has between 60 per cent and 90 per cent less smog-producing pollutants and between 30 per cent and 40 per cent less greenhouse gas emissions.
A study by Washington Metropolitan Area Transit Authority titled: Compressed Natural Gas Transit Bus Evaluation, the use of natural gas to power automotives faces challenges such as vehicle prices. Natural gas vehicles cost more because of onboard fuel storage and engine modifications.
Another challenge is fuel availability. Refueling is certainly going to be less readily available outside major cities such as Lagos, Port Harcourt, Abuja and others.
There is also limited availability of original equipment manufacturer (OEM0 engines and vehicles. But by far, the greatest challenge that Nigeria may yet face is the cost of conversion. Wikipedia said the cost and placement of fuel storage containers is the major barrier to wider/quicker adoption of CNG as a fuel. It is also why municipal government, public transportation vehicles were the most visible early adopters of it, as they can more quickly amortise the money invested in the new (and usually cheaper) fuel. In spite of these circumstances, the number of vehicles in the world using CNG has grown steadily (30 per cent per year). Now, as a result of the industry’s steady growth, the cost of such fuel storage cylinders has been brought down to a much more acceptable level. Especially for the CNG Type 1 and Type 2 cylinders, many countries are able to make reliable and cost effective cylinders for conversion need.