Energy can be referred to as a pillar of human activities. Energy has different sources, with different uses; the simplest source being food, while more complex sources being vibrations. Technological discoveries on harnessing and using energy, e.g. the harnessing of heat energy from fire 400,000 years ago have improved mankind’s quality of life. This discovery improved the quality of human life, as did further discoveries of how to harness other sources of energy, or how to harness existing sources more efficiently.

The discovery of several sources of energy has revolutionised the world and ushered in a new wave of industrial productivity. The second to fourth industrial revolutions occurred as the technology to harness electrical energy developed. Similarly, harnessing energy from crude oil transformed the transportation sector. Jato Dynamics reported that 91% of the passenger cars sold in the first half of 2019 were Internal Combustion Engine (ICE) vehicles i.e. vehicles that use petrol, which is derived from crude oil. Ten years ago, almost every car sold used an ICE. The global economy is currently dependent on electrical energy, and the energy harnessed from petrol; the system a country has in place to provide adequate electricity and affordable petrol plays a role in national prosperity, making them basic amenities in every nation.

Despite the well known importance of energy to development, many households in Nigerians still lack access to energy. According to World Bank data from 2018, only 56.5% of Nigerians have access to electricity. The World Poverty Clock data indicated that 46% (89 million people) of Nigerians live in extreme poverty (less than $2/day). This seems to partially buttress the fact that the availability of electricity influences national prosperity. Due to the erratic supply of electricity, most households have their private electricity generators, which mostly run on petrol. Petrol in Nigeria is used mostly for transportation, and the electricity generation, and while it is accessible everywhere in the country, it has gotten less affordable over the years. This is because 91% of the petrol used in Nigeria is imported, making Nigeria dependent on the international price of petrol, which is pegged against United States Dollars. The continuous devaluation of the naira kept reducing Nigeria’s purchasing power, thereby increasing the cost of petrol (although it was subsidised, the prices needed to be increased to lessen the fiscal burden on the Nigerian government).

The challenges Nigeria faces are multi-faceted but a viable technical solution will be the incorporation of a gas based economy. This means, the country will intensify efforts in using natural gas to provide electricity, as well as shift focus to using natural gas to fuel vehicles for transportation. Nigeria has natural gas reserves of 5 trillion cubic metres, the 8th largest in the world as at 2018, but produces only 40 billion cubic metres of natural gas annually. This means Nigeria has the potential to meet the expected demand of natural gas if it is used as a major fuel for electricity and transportation with local supply.


Figure 1. Access to Electricity in Nigeria

Gas for Electricity
Thermal sources of energy have proved a more cost effective source of energy compared to other sources. Natural gas-fired (advanced combined cycle and the conventional combined cycle) are the second and third cheapest means of generating electricity. It will be beneficial to focus on generating electricity through thermal means (specifically, gas-fired) as opposed to hydroelectric power supply, as the cost of producing 1 Megawatt hour from natural gas is generally cheaper than generating the same amount of electricity from an hydroelectric plant.

Currently, Nigeria generates electricity through two methods:

1. Thermal ( 10,142 MW installed capacity)
2. Hydroelectric ( 2,380 MW installed capacity)

According to the Census and Economic Information Centre (CEIC), Nigeria has a total installed capacity of about 8,000 MW in 2019. About 81% of the total electricity generated in Nigeria was from natural gas, showing that Nigeria depends relatively more on gas for electricity than other sources of power.

Figure 2. Electricity Generation in Nigeria

Figure 3. Percentage of electricity produced from Natural Gas in Nigeria

Although more electricity is being produced from natural gas in Nigeria, the total electricity generated in the country has not increased considerably. For this reason, the number of citizens with access to electricity has not considerably increased. To tame this trend, one possible solution would be to increase the number of gas-fired plants in the country in strategic locations. To this end, the Nigerian Electricity Regulatory Commission (NERC) discussed the opportunities in the generation sector such as:
• Embedded generation
• Independent power plants
• Rural off-grid (Independent Embedded Distribution Network).


Investment in projects to increase the capacity of Nigeria to generate more electricity will require an understanding of factors that make up the costs of production. Levelized cost of electricity (LCOE) is a way to measure holistically the costs that go into the production of a kilowatt-hour, taking cognisance of the timeline of the expenditures, and the lifetime of the plant. LCOE is a useful metric for knowing the cost of electricity, by incorporating the time value of money as well as variable profit and costs during the lifetime of a plant. This metric can be used as a measure to estimate the cost of producing electricity through different methods in Nigeria. Some factors used to calculate the LCOE include:
i. Levelized capital cost.
ii. Fixed operation and maintenance.
iii. Variable operation and maintenance (e.g. fuel costs)
iv. Transmission investment.


Gas for Transport
In Nigeria, petrol can be referred to as a household fuel. It is used in vehicles for transportation and used in generators to produce electricity for households (most firms use diesel generators). Nigeria imported about 21 billion litres of petrol in 2019, compared to the 19 billion litres of petrol consumed in 2015. Each litre of petrol imported into Nigeria was subsidized by the Federal Government, as Nigeria had been subsidizing petrol since 1984. The rise in global oil prices caused an increase in subsidy payments made by the Nigerian government. Nigeria spent 10 billion naira on subsidizing petrol from 2006 to 2018, posing a huge fiscal burden on the Federal Government. This challenge has a simple solution: increasing local production in order to meet demand.

Local refining of crude oil into petrol will make petrol more affordable to the general public, but petrol remains a major source of pollution. Gas, on the other hand, is a cleaner fuel. Therefore, using gas as a transportation fuel will favour the environment.

Focusing on Automotive LPG - Autogas, (which is Liquefied Petroleum Gas used for vehicle engines), the Nigeria Liquefied Petroleum Gas Association (NLPGA) analysed the differences between LPG, diesel and petrol showing the difference in consumption and cost of each fuel for the same operating conditions.

Figure 4. Cost - Benefit/Comparative Analysis for LPG vs. Diesel & Petrol Under a Fully Deregulated Regime

Based on the table above, Autogas is a more efficient option compared to Petrol and Diesel (based on a 25KVA generator set producing 37HP). It should be noted that in a deregulated system, the cost of Petrol is likely to rise above the current 141 naira per litre, meaning the price difference between LPG and petrol will increase. For each litre of Autogas used instead of petrol, 27 naira is saved. If Nigeria was running fully on Autogas in 2019, the country would have saved 567 billion naira, consuming 21 billion litres of petrol.

Nigeria seem to be missing out on this global trend in fuel consumption. The global demand for Autogas has experienced increase in recent years, reaching 27 million tonnes in 2017, although it is not a major road fuel. Figure 6 below shows the share of fuel types used globally in 2019.

Figure 5. World Energy Consumption in the Road Sector

In 2019, there were 27 million vehicles running on Autogas, aided by supportive government policies, as well as its cost advantages over petrol. Autogas provides lower harmful emissions without impeding vehicle performance. Switching from a petrol engine to an Autogas engine requires a modest sum on converting the existing vehicle and refuelling infrastructure.

Government policies are necessary to ensure that LPG vehicles become main stream. While the use of retrofitted vehicles may grow even in unregulated markets (75% taxis in Tema, Ghana use retrofitted vehicles run on LPG without government approval) this is to be discourages as it may lead to unsafe practices. The rise in the number of retrofitted vehicles in Ghana shows the potential for the Nigerian market on a switch to Autogas once adequate infrastructure is put in place (probably on a state-by-state basis), as the taxis in Tema did due to the cost-saving nature and availability of LPG filing stations.

Similarly, the government of Netherlands used tax incentives to make Autogas cheaper, thereby directing consumers to Autogas vehicles. In 2017, a litre of Autogas cost 0.42% of the price of petrol and 0.52% of the price of diesel. Autogas currently meets 1.4% of Netherland’s road fuel demand, a reduction from past years due to less government encouragement.

The popularity of Autogas amongst Ghanaian taxi drivers shows what is possible in the Sub-Saharan region, and the regulations from Netherlands show how Nigeria can encourage the use of Autogas rather than petrol.



Conclusion
Energy plays an important role in the development of a nation, and the availability and affordability of energy must not be overlooked. Electricity can be supplied to the separate regions in Nigeria by constructing gas pipelines to those places, and using gas-fired engines to meet their electricity needs. This will also reduce the cost of electricity borne by the end-user in the long run. For the transportation sector, the use of Autogas will reduce the operational cost of the vehicle. If adopted by vehicles used for mass transit, the cost of transportation will reduce.


KiakiaGas Limited is a leading Gas business in Lagos,Nigeria with expertise in LPG retailing, New Gas Market development, Building of Gas Plants and Gas strategy advisory
If you need a partner with hands-on local expertise in the Nigerian Gas space or any of our bespoke solutions/services, write us at gaspreneur@kiakiagas.com or call/Whatsapp: +2348085269328