Potential in Nigeria’s autogas segmentFebruary 15, 2023
Felix Ekundayo of Asiko Energy talks to The Energy Year about the company’s drive to push the usage of LPG in Nigeria and the policy changes required.
How has Asiko Energy differentiated itself from other competitors in the gas market?
Asiko Energy is an integrated energy company that deals with natural gas and renewable energy. We provide propane and natural gas power generation while our subsidiary Gas Terminalling owns assets in LPG distribution. We have nearly 100 trucks that we either own or operate for third parties. We recently signed a contract with NLNG to distribute LNG. This has enabled us to operate along the value chains of three different gases: natural gas, LPG and propane.
We will be the first entity in Nigeria to distribute propane, LPG and LNG simultaneously. We deliberately invested in equipment that can use all three gases. We take it as a challenge to procure and use the cheapest form of energy to deliver power to clients at an economical price.
We have had offtake contracts with many hinterland gas producers since 2009. We encouraged and supported them during construction and commissioning and are now contracted with them beyond the commissioning phase.
What needs to be done to swiftly develop Nigeria’s gas infrastructure?
Both gas and electricity grids have serious problems. Gas-related infrastructure does not have a lot of coverage. It is currently present mainly along the coastline. The AKK pipeline is supposed to bring gas to the north and hinterland, which is necessary. However, gas distribution should be tied to gas-driven power generation.
The process of transporting gas becomes more expensive the farther you go. It is therefore better if one consumes as much as possible within the geographical bounds of the producing region. At this time, it is still unclear where terminal stations will be built in the north. Essentially, we are developing a gas network without developing power plants to anchor the demand.
The federal government needs to develop an integrated energy plan to spur the industrialisation of these regions. The boundaries between the Ministry of Petroleum Resources and the Ministry of Power, Works and Housing should be clarified.
What policy changes are necessary to spur the usage of LPG in Nigeria?
There are four areas associated with LPG in the National Gas Policy: power, industry, domestic usage and autogas. To move forward, we must functionally link each area. The federal government is mainly focusing on domestic utilisation while other areas are trying to pick up. A critical aspect that needs to be assessed is heating, which has a significant impact on reducing the burden on the national electricity grid.
If we calculate the number of electric water heaters on the national grid in a country that does not have electricity and the number of challenges obtaining and installing gas water heaters in a country that has gas, there is a clear policy anomaly
A while ago the tax on electric water heaters was 5%, whereas on gas water heaters, it was over 35%. There are incentives for the former, but not for the latter. Electric water heaters add a transient (less than one hour) and coincident load (all coming on at approximately the same time) to each home and, consequently, the grid can be eliminated with a clearer and more co-ordinated policy. Small steps count. We should prioritise gas-based water heaters to reflect the intentions of the Decade of Gas initiative.
What potential does LPG have in the autogas sector?
The autogas segment has the potential to double the domestic consumption of LPG. We have targeted Toyota Corollas of a certain age because that is what ride-hailing services, such as Uber and Bolt, use. We converted these vehicles, both branded and unbranded. All vehicles are dual fuel because nobody is going to directly procure an autogas vehicle due to the expense. We need to convince customers to convert, which is a difficult conversation. The main challenge is pricing because of the gasoline subsidy. LPG prices need to be cheaper than gasoline to foster its wider penetration, which cannot be achieved with subsidised gasoline.
What questions should the nation be asking regarding its energy transition?
OECD data shows that 50% of energy will come from fossil fuels – mainly gas – and 50% from renewables by 2050. This brings into play several questions. Why should a country that is sitting on large reserves of natural gas bring its natural gas production down to below average? Why should we shut down production to satisfy markets like Europe and America that have industrialised off of the back of natural gas?
Nigeria has plenty of gas to supply Europe, America and the country itself for generations to come. Nevertheless, there is a carbon-neutral push and incentives in place to foster renewables. Due to the Ukraine war, the European Union suddenly requires gas, and it has now been classified as clean energy. They have quickly changed the narrative, which fits with Nigeria’s stated position. We will continue to utilise gas as a clean fuel to industrialise.
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