Overview
IntroductionThe energy industry is a global market, and domestic energy policies and implementations are predominantly shaped to align with international trends and standards. This pattern for domestic alignment with global trends is not unconnected from the need to demonstrate capacity, conformity, and unionistic behaviour to avoid being red-flagged or sanctioned in the international market, which would have varying damning effects on a country like Nigeria. Discussions on energy transition date back over 4 decades ago after the 1973 oil crisis, when it was perceived that there would be a decline in global oil production in the future. This discussion was later globalised by the United Nations in 1981 after the 1979 second oil shock.
In recent years, the debates on energy transition have been underpinned by the immediate need for climate change mitigation, preservation, and sustainability of the earth's habitation. This discussion culminated in the Paris Agreement, in which the parties committed to limiting global warming to 1.5°C and ensuring that greenhouse gas emissions must peak before 2025 at the latest and decline 43% by 2030. This requires a rapid energy transition with a downshift of traditional fuel production to stay within the carbon emissions budget. At the COP26, H. E. President Muhammadu Buhari announced Nigeria’s commitment to carbon neutrality by 2060. This commitment was followed by the passing of the Climate Change Act 2021, and Nigeria’s Energy Transition Plan (ETP) was also unveiled.
The Energy Transition Plan acknowledged the role Natural Gas must play as a transition fuel on Nigeria’s path to net zero, considering Nigeria’s abundant gas reserves and energy security considerations. Recent developments in the Nigerian energy industry have indicated a motivation for energy diversification, promotion, and investment in Natural Gas as an alternative to diesel fuel is not limited to environmental preservation but is also geared towards economic emancipation, revitalisation, and improvement of the standard of living due to natural gas's cost-effectiveness. This insight focuses on developments in the concerted effort to adopt and commercialise CNG as an alternative to traditional fuels like petrol or diesel.
It also highlights the opportunities for investment in CNG in Nigeria and risks or barriers that deserve investors' consideration to properly articulate an effective risk management strategy for the investment. Nature of Compressed Natural GasAs Nigeria strives towards promoting cleaner energy and reducing the emission of greenhouse gases (GHG), the adoption of CNG as an alternative to traditional fuels like petrol or diesel is a significant step towards achieving cleaner energy and limiting environmental degradation. This is because road transportation has been the dominant mode of transportation in Nigeria, and over the years, most automobiles in Nigeria rely heavily on these traditional fuels.
When considering the environmental footprint of GHG in Nigeria, the transport sector alone accounted for 24 per cent of Nigeria’s GHG emissions in 2020. Without concerted efforts, there are indications that this may increase by up to 50 per cent before 2035. In the face of escalating global concerns about climate change and environmental degradation, Nigeria stands at a critical juncture where, even if crude oil plays a crucial role in the short and medium terms, concerted efforts are required to transition to cleaner energy. Given the current high cost of traditional fuels like petrol or diesel in Nigeria, the adoption of CNG presents a promising opportunity for Nigeria to align with this global shift and ensure climate sanity.
Compressed Natural Gas is a gaseous fossil fuel consisting primarily of methane (CH4), the shortest and lightest hydrocarbon molecule, and is preferred as an alternative to diesel fuel because it is lighter than air and so tends to dissipate. It is a natural gas under pressure that remains clear, odourless, non-poisonous, and non-corrosive. The storage of CNG inside a cylinder is achieved through compression at a higher-pressure range of 200–300 bar, and since CNG is lighter than natural air, it typically disperses after leakage, thereby providing a considerable benefit over liquefied petroleum gas and conventional fuels.
