CNG Adoption in Nigeria: Legal Frameworks, Economic Significance, Risks, and Mitigation Strategies -By John O. Oladipo

Introduction

Nigeria, as one of the largest economies in Africa, is striving to diversify its energy sources to ensure sustainable and environmentally friendly energy solutions. Compressed Natural Gas (CNG) has emerged as a promising alternative to conventional fuels in Nigeria.

Compressed natural gas (CNG) is a form of natural gas that is compressed to less than one percent of its original volume at standard atmospheric pressure. It is mainly composed of methane, the simplest and most abundant hydrocarbon in nature. CNG can be used as a fuel for vehicles, power generation, cooking, and other applications, as an alternative to gasoline, diesel, and liquefied petroleum gas (LPG).

CNG has several advantages over conventional fuels, both in terms of environmental and economic benefits. According to the International Energy Agency (IEA), CNG emits about 25 percent less carbon dioxide (CO2) than gasoline and about 20 percent less than diesel when burned[1]. CNG also produces fewer nitrogen oxides (NOx), sulfur, mercury, and particulate matter, which are harmful to human health and the environment. CNG is also cheaper than gasoline and diesel in many countries, including Nigeria, where the government subsidizes the price of CNG to encourage its adoption[2] .

Legal Framework

The Federal Government has initiated several policies and programs to promote the utilization of natural gas in Nigeria. One of them is the National Gas Flare Commercialisation Programme (NGFCP), which was launched in 2016 with the aim of reducing gas flaring by capturing and commercializing flared gas. The NGFCP is expected to create 300,000 jobs, produce 600,000 metric tons of LPG per year, and generate 2.5 gigawatts of power from new and existing plants. One of the potential uses of flared gas is to produce CNG for vehicles and industries.

Another policy is the National Gas Expansion Programme (NGEP), which was launched in 2020 to stimulate the growth of the domestic gas market and create a natural gas-based economy. The NGEP focuses on four key areas: Auto gas (CNG and LPG), industrial clusters, virtual pipelines, and power generation. The NGEP aims to convert one million vehicles to run on CNG by 2021 and create 12.5 million direct and indirect jobs by 2025.

The Nigerian government has laid the foundation for CNG adoption through the National Gas Policy, which aims to create an enabling environment for gas utilization across various sectors, including transportation.

The Petroleum Industry Act passed in 2021, provides a regulatory framework for the entire oil and gas sector, including CNG. It encourages investment in gas infrastructure and guarantees investors fair returns.

Lastly, environmental laws and regulations play a crucial role in CNG adoption, as they ensure the environmental sustainability of this clean energy source.

CNG in Nigeria

The country has abundant natural gas resources, estimated at over 200 trillion cubic feet, ranking ninth in the world[3]. However, most of the gas produced in Nigeria is either flared or exported, due to a lack of infrastructure and market for domestic consumption. Flaring gas not only wastes valuable resources but also contributes to climate change and air pollution. Between 2012 and 2022, Nigeria flared an estimated 80 billion standard cubic metres of gas worth about N9tn as part of its oil production process.[4]

The Federal Government is also encouraging Nigerians to switch from petrol to CNG, which it says would cost about N230 per kg as opposed to petrol which is sold at a higher rate.

The CNG value chain, including production, distribution, and retail, has the potential to create numerous job opportunities, fostering economic growth. A shift to CNG can reduce the demand for imported petroleum products, leading to significant foreign exchange savings for the country. CNG is a cleaner fuel with lower emissions, contributing to reduced environmental damage and healthcare costs associated with air pollution.

Risks and Strategies for Mitigation

However, despite these initiatives, CNG still faces some challenges in Nigeria. One of them is the lack of infrastructure for CNG production, distribution, and consumption. The government and private sector must collaborate to invest in infrastructure development, such as refuelling stations and transportation fleets. While CNG is generally safe, safety risks include gas leaks and fire hazards. Stringent safety standards, training programs, and regular inspections can mitigate these risks.

There is also a need for more vehicles that can run on CNG or dual-fuel systems that can switch between CNG and petrol. Another challenge is the regulatory framework for CNG pricing and taxation. The NGA has called for a clear and consistent policy that would ensure a fair return on investment for CNG producers and distributors

It is important to note that raising awareness about the benefits of CNG is crucial. Public campaigns and education can encourage adoption and dispel misconceptions.

Conclusion

The adoption of Compressed Natural Gas in Nigeria is a promising step towards a cleaner, more sustainable, and economically robust energy landscape. With the right legal frameworks, infrastructure development, and risk mitigation strategies, Nigeria can unlock the full potential of CNG, contributing to its economic growth, energy security, and environmental preservation.

John Oladipo, Partner at Chayfield Law Practice, is a leading authority on CNG regulations.  His expertise empowers companies to navigate the legal complexities of CNG adoption, maximizing the potential of this clean energy source.

(Contact:[ johnoladipo@chayfieldlaw.com ] [ chayfieldlawpractice@gmail.com ])

[1]ZongyanLv, Lin Wu, et al., “Comparison of CO2, NOx, and VOCs emissions between CNG and E10 fueled light-duty vehicles“ (Science of The Total Environment, Volume 858, Part 2, 1 February 2023, 159966) https://www.sciencedirect.com/science/article/abs/pii/S0048969722070668 Accessed: 11/02/2023

[2]Eklavya Gupte,     Newsdesk-Nigeria “Nigeria to push CNG as alternative transport fuel, reduce reliance on gasoline”, (S&P Global Insights, 2020), https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/oil/120120-nigeria-to-push-cng-as-alternative-transport-fuel-reduce-reliance-on-gasoline Accessed: 11/02/2023

[3] Lars Kamer, “ Natural gas reserves in Africa as of 2021, by main country “ (Statista, 2023), https://www.statista.com/statistics/1197585/natural-gas-reserves-in-africa-by-main-countries/ Accessed: 11/02/2023

[4]OpeoluwaniAkintayo, “Amid economic crunch, Nigeria flares N9tn gas in 11 years”, (Punch, 2023) https://punchng.com/amid-economic-crunch-nigeria-flares-n9tn-gas-in-11-years/ Accessed: 11/02/2023