ENERGY Infrastructure Financing News & Reports

$138.9m gas infrastructure plant will boost LPG usage in Nigeria

The federal government late last year announced plans to achieve a 40 per cent energy switch from the consumption of Premium Motor Spirit (petrol), Dual Purpose Kerosene (kerosene) and Automotive Gas Oil (diesel), to the use of LPG, but the switch will cost not less than 138.9 million US dollars or 50 billion Naira. This amount is required to start local cylinder manufacturing to suit all-purpose uses.

Gas cylinder manufacturing plant

According to the government, efforts are currently being intensified to promote the wider use of LPG in households, power generation, auto-gas and industrial applications. Providing explanation on its LPG penetration programme, the Ministry of Petroleum stated that government initiated the LPG Expansion Programme in order to effectively drive the switch to LPG consumption across the country.

The LPG Penetration Framework is designed to reduce the national energy consumption of PMS, DPK, AGO by achieving a 40 per cent fuel switch to LPG in 10 years. President of the Nigerian Association of Liquefied Petroleum Gas Marketers, NALPGM, Mr. Nosa Ogieva-Okunbo, commended fresh steps being taken by government to deepen the use of Liquefied Petroleum Gas (LPG), also called cooking gas, saying the initiative is well articulated but observed that a major obstacle to its actualisation is dearth of support infrastructure especially in the area of cylinder production. According to him, the country does not have enough cylinder production capacity to offer the necessary access to LPG especially to households.

138.9 million US dollars in investment would be needed to close the cylinder gap in the country. Ogieva-Okunbo said the target is achievable if concerted effort is made towards supplying the infrastructure support. He said currently, Nigeria is consuming 700,000 metric tons of LPG and if the tempo is sustained yearly, the nation will achieve five million metric tons consumption. The president also identified Value Added Tax, VAT which is placed on locally sourced gas as an impediment. He recalled that though there was announcement that the VAT has been expunged but from all indications it has not been gazetted and as such buyers still pay tax on gas as at the end of 2018. According to the roadmap, the programme will also promote the wider use of LPG in households, power generation, auto-gas and industrial applications towards the attainment of five million metric tonnes domestic utilisation and creation of an estimated 500,000 job opportunities nationwide in five years. This also targets overall improvements in the standard and quality of living in rural communities.

The LPG Penetration Programme along with the Nigeria Gas Flare Commercialisation Programme, NGFCP, were components of Nigeria’s intended nationally designed contributions under the Paris agreement for reducing annual greenhouse gas emissions by the year 2020. The NGFCP is a key component of the Nigerian Gas Policy which has the aim of reducing the environmental and social impact caused by flaring of natural gas, protect the environment, prevent waste of natural resources, and create social and economic benefits from gas flare capture. The design of the key programme transaction, commercial framework and documentation have been completed and when fully implemented, it will improve gas supply for power generation, industrial use and LPG penetration in the economy.

The government has also set target revenue of $1billion annually and a total of 300,000 direct and indirect jobs from the commercialisation of flared gas and the flared gas would be harnessed to stimulate economic growth, drive investments and provide jobs in oil producing communities and indeed for Nigerians through the utilisation of widely available innovative technologies. Government also stated that the recently gazetted Flare Gas (Prevention of Waste and Pollution) Regulations 2018 was the legal basis for the implementation of the NGFCP and the payment regime (penalties) for gas flaring and the regulation adopted the polluter pays principle, similar to a carbon tax.

Also, results of work done to trigger up to 85 projects that will utilise flared gas, generate approximately 300,000 direct and indirect jobs and annual revenue generation/Gross Domestic Product impact estimated at $1 billion/annum are also highlighted in the document. The NGFCP is developed by the ministry, Nigerian National Petroleum Corporation (NNPC), Department of Petroleum Resources, DPR and the implementation team of the NGFCP comprises of adviser teams from the World Bank and USAID under the leadership of a ministerial steering committee that reports to the Minister of State for Petroleum Resources.

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