Ahead of its plan to fully deregulate the downstream sector of the petroleum industry, the Federal Government has said that it plans to work with marketers to convert 200, 000 vehicles from using petrol to compressed natural gas (CNG) usage this year.
The government said the ultimate plan was to have at least one million vehicles converted in three years.
Speaking at a meeting with marketers yesterday in Abuja, the Minister of State Petroleum Resources, Chief Timipre Sylva said government was looking at providing 50 percent funding for marketers to bring equipment from Original Equipment Manufacturers (OEMs) for both vehicle conversion kits and petrol station conversion technologies.
Chief Sylva noted that the government wants to have the CNG system running across the country to provide Nigerians with an alternative fueling before petrol subsidy is removed some time in the future.
He told the marketers, “Today I invited you hear specially just to discuss one issue, the issues of the structures that we need to put in place before removal of subsidy. We all agreed more than a year ago that before we deregulate or going side by side with deregulation we must provide an alternative fuel to our people.
“And the alternative we agreed upon was the autogas alternative to provide for our people. Since this agreement between us, a lot work have been going on and we have come to stage where we need to take it further but we cannot move further without ensuring that you as our partners are fully on board”, he stated.
He explained that for the project to move forward there have to be critical amount vehicles converted and a corresponding critical amount of dispensing stations in place.
“If not, you will have a situation where converted vehicles do not have places to refuel or you will have a situation where fuel stations do not have converted vehicles to fuel”, he added.
Chief Sylva who admitted that a year after the project was launched by President Muhammadu Buhari in Abuja vehicle conversions have not been going on, said effort has been in putting in place the system for the conversion.
“We have been talking to country OEMs and we have come to some arrangement with them. We have received commitments from the country OEMs that will give us half of what we require and the government will match them with the other half”, he stated.
He disclosed that the OEMs need local partners to put the equipment in place in existing facilities across the country.
He said the funding would come from the N250 billion provided by the Central Bank of Nigeria (CBN).
But expressing reservations on the viability of the project, the marketers pointed out that the CNG system in Benin City, Edo State, owned by NIPCO Plc has not been profitable after many years in operation.
The immediate past Chairman of Major Marketers Association of Nigeria (MOMAN), Tunji Oyebani explained that a lot needs to be done to bring investments in.
“The bottom line is that if we are being frank with ourselves as at now it (NIPCO investment) hasn’t proved to be a profitable venture and if I am to read the body language of my investors it is such that if may be they had known that this is how things would work out they would not have gone into the venture at all.
“What we feel is that once the numbers are right you don’t necessarily need to tell any Nigerian investor or indeed any investor anywhere to invest”, he pointed out.
Earlier, the Chairman of MOMAN, Olumide Adeosun disclosed that the group has working groups looking what was needed to partner with the government on the project.
Mr. Adeosun noted that financials around the project was a major issue including interest rate and gas availability from the supply side.
Clarifying some of the issues, the Technical Adviser on Gas Business to the Minister, Brenda Ataga said the government would pay 50 percent equity contributions to the export credit that the OEMs would provide.
She explained that the export credit loans would be at 2-4 percent with a payback period of five years.