Why Nigeria is Pressing for Energy Transition by 2030

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By Sam Akanimo

Serious environmental concerns and massive job creations are at the base of the intensified pressure for a successful energy transition in Nigeria by 2030, just six years away.

That is why the Minister of State Petroleum Resources (Gas), Ekperikpe Ekpo, on Tuesday flagged off the Decade of Gas Grassroots Liquefied Petroleum Gas (LPG) Penetration Programme in Abuja.

At the event which will be continuing in different states in the six geopolitical zones of the country, Ekpo urged stakeholders in the gas sector to work towards achieving the Federal Government’s goal of having inexpensive, safe, and clean cooking energy available to every household in Nigeria.

The mission of the scheme, according to Ekpo, is to change millions of Nigerians’ lives by converting 250,000 houses annually to LPG use by 2030

Continuing, he said the outreach is a proof of President Bola Tinubu’s steadfast dedication to lessening the suffering of Nigerians from using firewood, kerosene and charcoal as cooking fuel for homes, to a cleaner and safer energy source – gas.

“The goal of this effort is to improve women’s inclusion and provide employment opportunities for our youth. Transitioning to clean cooking will be especially beneficial for women, who are disproportionately affected by the health hazard of traditional cooking methods”, he added.

Excited, Minister of Women Affairs, Mrs. Uju Kennedy-Ohanenye, thanked President Tinubu and Ekpo for the cooking gas distribution initiative saying women are the worst affected from the hazards of the use of charcoal and firewoods as cooking fuel.

“This programme is just the begining of the things that President Tinubu and the Gas Minister have promised to do to alleviate the suffering of Nigerian women, and we are happy and very proud of them”, she said

Minister of Youths, Dr. Jamila Bio Ibrahim, in her speech described the event as a ground breaking initiative that will impact millions of Nigerians who use firewood, charcoal and kerosene for cooking.

The minister said there were lots of job creation opportunities along the LPG value chain and expressed delight with the Gas to Prosperity programme of the federal government.

Permanent Secretary of the Ministry of Petroleum Resources, Nicholas Agbo-Ella, said the commencement of the programme was of great significance in ongoing efforts to transit from the use of firewood and kerosene stoves as cooking fuel for homes to the use of LPG.

He said the challenges in this transition, though enormous, are not insurmountable if all stakeholders were committed to the cause.

Coordinating Director of the Decade of Gas, Ed Ubong, thanked the gas minister for the support in kick-starting the programme in Abuja.

He said the target was to empower as many Nigerian women and youths to use cooking gas in their homes.

“If we all work together, we will be able to banish the use of firewood and kerosene from our homes”, he said.

Beneficiaries commended the Tinubu administration for considering women and youths in their gas penetration programme.

Worrisomely, with a riotous price regime in the energy sector of Nigeria since President Tinubu gleefully aborted fuel subsidy the previous May, the journey to energy transition has been, arguably, quite turbulent.

In January 2019, the administration of former President Muhammadu Buhari set a target which aims at achieving a 40% energy switch from the consumption of petrol, kerosene and diesel to the use of LPG.

Under the arrangement, efforts are being intensified to promote the wider use of LPG in vehicles, households, power generation and industrial applications.

At the time, the Federal Ministry of Petroleum Resources explained that government initiated the LPG Expansion Programme in order to effectively drive the switch to LPG consumption across the country.

The LPG Penetration Framework was designed to reduce the national energy consumption of petrol and diesel by achieving a 40% fuel switch to LPG in 10 years, that is by 2029.

The programme also promotes the wider use of LPG as Autogas, in households, power generation 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. That implies this 2024.

The ministry also said that the LPG Penetration Programme is a component of Nigeria’s intended nationally designed contributions under the Paris Agreement for reducing annual greenhouse gas emissions by the year 2020, four years back.

Checks by this reporter showed that the National Gas Expansion Programme (NGEP) requires around 2.6 million metric tonnes of LPG production by 2025.

Executive Secretary of the Nigerian Content Development Monitoring Board (NCDMB), Simbi Wabote, shared this information during his speech at the 4th Edition of the Nigerian Oil & Gas Opportunity Fair (NOGOF) in Yenagoa, the Bayelsa State capital.

Wabote highlighted the growth in LPG consumption, which rose from 360,000 tonnes in 2015 to 1.4 million tonnes in 2022. Despite commendable progress, he emphasized that half of Nigeria’s LPG demand is still met through imports.

Wabote emphasized the need to bridge the gap between local production and market demand, with NGEP setting a projection of 4 million tonnes by 2025.

He identified various opportunities for investment, including local processing, storage depots, trucking, cylinder manufacturing, distribution pipelines, and conversion kits. To encourage increased production and meet consumption targets, Abuja must implement fiscal policies that motivate stakeholders in the LPG industry.

Wabote acknowledged that current policies, guidelines, regulations, and statutes have made the business environment attractive to investors.

He mentioned former President Buhari’s declaration of the Decade of Gas in 2021, which aims to stimulate gas development for domestic use and exports to boost revenue generation.

Other policies, such as the automotive gas policy promoting Compressed Natural Gas (CNG) as an alternative fuel for vehicles, have created opportunities for conversion kit suppliers and installation. Industries have also adopted CNG or LNG for their power generation to manage costs.

Wabote highlighted the Nigerian Gas Flare Commercialisation Programme (NGFCP) as another policy targeting gas development and utilisation while reducing greenhouse gas emissions in line with global climate change efforts.

He emphasized that each policy and regulation present opportunities that can yield significant benefits when harnessed and utilised effectively.

To meet the NGEP goals for Nigeria, several methods can be implemented:

Nigeria can focus on boosting domestic production of LPG to reduce reliance on imports. This can be achieved through exploration and development of gas fields, incentivizing investment in LPG production facilities, and promoting partnerships with international companies to transfer technology and expertise.

Enhancing the infrastructure for LPG production, storage, and distribution is crucial. This includes establishing more processing plants, storage depots, and distribution networks to ensure efficient supply and meet the growing demand. Investment in transportation infrastructure, such as Pipelines, terminals, and trucking facilities is also necessary.

Encouraging the use of conversion kits for vehicles and power generation plants to switch from traditional fuels to LPG or CNG can significantly increase domestic consumption. The government can provide incentives and support for the adoption of these conversion kits, making them more accessible and affordable for consumers.

Implementing favorable fiscal policies, guidelines, regulations, and statutes can attract investment and create an enabling environment for the LPG industry. This includes providing tax incentives, streamlining licensing and permit processes, and ensuring clarity and stability in the regulatory framework.

Conducting awareness campaigns and educational programs to promote the benefits of LPG and CNG, such as their affordability, cleanliness, and environmental advantages, can encourage greater adoption among the population. This can be done through media campaigns, workshops, and collaborations with industry associations and community organisations.

Collaborating with private sector entities, both domestic and international, can accelerate the development of the LPG sector. This can involve joint ventures, technology transfer agreements, and investment partnerships that leverage the expertise and resources of both public and private entities.

Investing in research and development initiatives focused on LPG production, storage, and utilisation technologies can lead to innovations that improve efficiency, reduce costs, and enhance safety in the industry. Supporting research institutions and facilitating knowledge exchange among Industry stakeholders can drive progress in this area.

Interestingly, the gas minister is virtually employing these methods, His spokesman, Louis Ibah, told this reporter in an online chat that his principal is working hard to meet the country’s LPG production targets and realise the objectives of the NGEP, fostering economic growth, energy security, and sustainable development.

However, despite the market volatility with gas price regime, Ekpo is assiduously pushing towards the country’s energy transition since gas has become a critical energy resource.

Nigeria has an estimated 209 trillion cubic feet (TCF) of proven gas reserves, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

Realising the critical role of gas in this era, Abuja has since adopted gas as its transition fuel. For instance, in March 2021, former President Buhari, declared 2021-2030 as the Decade of Gas.

The initiative aims at making Nigeria a gas powered economy by 2030 by deepening domestic utilisation of gas, reducing carbon emissions and addressing issues around poverty in the country.

“Nigeria is gas nation, rich in oil. But the country has focused on oil over the years. This is a paradox that we have decided to confront by declaring the Decade of Gas”, Buhari said at the launch of the initiative.

“The rising global demand for cleaner energy sources has offered Nigeria an opportunity to exploit gas resources for the good of the country. We intend to seize this opportunity”, Buhari had noted.

“Global developments have indeed presented us an opportunity. Gas will become the dominate fuel for generating power, not only globally, but in Africa as well. The question now is ‘Can we rise up to the challenge?”

But, despite having huge gas reserves, over 70 per cent of households in Nigeria are still using firewood as a source of cooking energy. According to the International Centre for Energy and Environmental Development (ICEED), this has led to deforestation and is responsible to the death of over 93, 000 Nigerians annually.

One of the key elements of the national gas policy is centered around developing the LPG, which is also know as cooking gas. As part of its commitment to addressing the problems associated with the use of dirty fuels for cooking, Abuja removed Value Added Tax (VAT) on LPG few years ago.

It was aimed at accelerating LPG penetration. Initially, the government targeted a 40 percent adoption rate (i.e. 13.8 million households) in five years, and 73 percent adoption in 10 years (33.3 million households).

“We believe that the sub-sector can create up to two million new direct and indirect jobs in Nigeria. Our determination to prioritise the LPG sector development culminated in the Federal Executive Council’s approval of the National Gas policy in 2017, with dedicated input for the enhancement of the LPG sub-sector.

“Our driving vision has been to transform the sub-sector from a commodity sector based on export to a value creation sector based on domestic utilisation and industrialisation”, former Vice President Yemi Osinbajo said in 2019.

Disturbingly, the soaring LPG price appears to be eroding the progress that has been made by the government. The price rose by 17 per cent then, with 12.5kg selling for N10,250 from N8,500 as recorded in August 2023. In some areas in Uyo, the Akwa Ibom State capital, the price of 1 Kg soared by 11 per cent to N900 from N800 to currently between N1,350 and N1,400.

While a litre of petrol is selling between N800 and N900, a litre of kerosene is drilling the sky at N1,350.

This is forcing many LPG consumers to reverse to charcoal, sawdust and other dirty fuels as source of cooking energy. This is understandable, considering that 133 million people in Nigeria, representing 63 percent, are multi-dimensionally poor, according to the National Bureau of Statistics (NBS) in its 2022 Multidimensional Poverty Index (MPI) Survey that was released in November 2022.

The National Association of Liquefied Petroleum Gas Marketers (NALPGAM) even predicted 1kg to reach N1,500, if something drastic was not done by the government to stabilise the domestic market.

The association believes that the rising cost of LPG can be curtailed if major marketers and off-takers can build more storage facilities. NALPGAM is appealing to the government to give more incentives to investors in the sector.

President of NALPGAM, Oladapo Olatunbosun, told Vanguard recently, “we are appealing to the federal government to provide incentives to the LPG investors to make the price affordable. Similarly, our union believes that the incessant rise in LPG price would be contained if more storage facilities are built by the major marketers and off-takers.”

The domestic consumption of LPG exceeded one million metric tonnes in 2020, the first time in Nigeria’s history. The defunct Petroleum Products Pricing Regulatory Agency (PPPRA) said so in January 2021.

“Nigeria consumed 840,594.37 MT LPG in 2019, indicating an increase of 60.5 per cent over 635,452.061MT recorded in 2018.

“This steady and sustained pattern of growth culminating in the over one million metric tonnes of LPG domestic consumption milestone in 2020 has placed the country 1st in West Africa and one of the leading LPG consuming nations on the continent.

“With this laudable feat, the country is on track to meet the five million MT by 2022 target, set in the Nigeria Gas Policy (NGP) of 2017”, the former Executive Secretary of the agency, Abdulkadir Saidu, said in a statement.

The remarkable growth in the domestic LPG market in 2020 could be attributed to the impact of the government’s policies and programmes, coupled with the efforts of relevant stakeholders and regulatory bodies in the industry.

During the period under review, NNPC had commenced LPG production and load-out in its Nigerian Petroleum Development Company Limited (NPDC) Oredo Gas handling facility, which has an estimated production stream of 330MT daily.

NLNG’s 100% commitment to domestic market. The Board of Directors of the Nigeria LNG had in January 2022 approved the supply of 100 percent of the company’s LPG production (propane & butane) to the Nigerian market. Consequently, NLNG has prioritized the domestic market for 100 percent of its Butane production, otherwise known as cooking gas.

The milestone came just three months after the company supplied its first propane cargo into the domestic market and has developed a scheme to sustainably supply propane for usage in cooking gas blending as well as in agro-allied, autogas, power and petrochemical sectors of the Nigerian economy to further deepen gas utilisation in the country.

These initiatives were designed to increase LPG availability in Nigeria, diversifying its uses and support the Federal Government’s Decade of Gas initiative. NLNG is currently the highest single supplier of LPG into the domestic market, with an estimated 400,000 metric tonnes supplied in 2021.

“We reiterate our commitment to the domestic LPG market and our expansion drive to further improve LPG supply through the startup of Train 7, which will increase our liquefaction capacity by about 35 percent from 22MTPA to 30MTPA”, said Deputy Managing Director of the NLNG, Olalekan Ogunleye, at the 2nd West Africa LPG Expo and Nigeria Liquefied Petroleum Gas Association (NLPGA) Summit 2022, which held in Lagos from June 23 – 24, 2022.

“As a company, NLNG with the approval and support of its Shareholders (NNPCgroup, Shell, TotalEnergies and eni) has committed 100 percent of its LPG production for delivery into the domestic market”, he stated.

“NLNG’s drive to increase the supply of LPG in Nigeria is ably supported by its Shareholders, through its Board, who have shown strong commitment to the growth of the DLPG scheme through consistent increase in reserved LPG volumes.”

However, upstream supply challenges are affecting NLNG’s commitment to the domestic market.

At NALPGAM’s 35th Annual General Meeting in Port Harcourt, the Rivers State capital, NLNG announced that the challenges include the inability of the market to completely absorb its propane production, leading to its scanty export of propane to avoid tank-top situations at its plant.

NLNG said when it made that commitment, the intention was that every molecule of butane and propane that we produce in our facility will come into the domestic market and since then it has made every effort to keep to that since January 2022. It has been successful in achieving supply of 100% of its butane production.

“We have not been able to reach 100% with propane, not because we don’t want to but because the market capacity to absorb the propane is just not there. We intend that all the butane and all the propane that we produce goes into the domestic market whether propane is being used to blend with butane as cooking gas, used as autogas, or used in industry to generate power,” he said.

“Our production capacity as NLNG can supply about 400,000 tons per annum which is somewhere roughly about 40% of the current national demand. This means that the balance has to be imported. Last year, we supplied about 400,000 tons per annum into the Nigerian market.

“But we did that under extremely difficult circumstances where our gas supply into our plant was heavily compromised by numerous upstream factors, the single biggest one of which is crude oil theft. And as a result of the disruption that this created, our capacity utilisation fell. Unfortunately, that remains the case today.

“If we have more gas input to our plant, we can produce more LPG. So the issue of supply for us starts with addressing the upstream supply challenges, the biggest of which is crude oil theft”, NLNG said.

Despite NLNG’s commitment to 100 percent LPG supply into the market, some local producers are allegedly still exporting LPG out of the country. It is calling on all stakeholders to collaborate in reversing the trend.

For NLNG, the Decade of Gas initiative of the federal government is one of the most comprehensive plans in the industry, and is therefore, calling on stakeholders in the industry to work collaboratively to ensure implementation and unlock LPG potential in the country.

They still need some favourable government policies concerning LPG pricing. NLNG says it needs a utilisation policy that encourages the deepening of this market.

That, according to Ibah, is what Ekpo, Nigeria’s Mr. Gas certainly driving at as he battles to achieve a successful energy transition.

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