The Bola Ahmed Tinubu administration in Nigeria has embarked on an ambitious plan to develop compressed natural gas (CNG) infrastructure across the country, aiming to create a viable market for CNG as an alternative to premium motor spirit (PMS), commonly known as petrol. A critical element of this plan is the construction of CNG stations, including three "Mother stations" nationwide. In this blog post, we delve into the important aspect of the cost associated with building these CNG Mother stations, compare it with the existing LPG infrastructure, and explore the potential benefits of tax incentives on CNG.
Cost Analysis of CNG Mother Stations
The Nigerian National Petroleum Company Limited (NNPCL) has partnered with Nipco Gas Limited to construct 35 state-of-the-art CNG stations nationwide, including three Mother stations. To understand the financial implications of building these Mother stations, we turn to Kelvin Emmanuel's analysis with Nairametrics. According to Emmanuel, each Mother station, capable of supplying up to sixteen CNG trucks, comes with an estimated price tag of approximately $1.2 million on average. This cost encompasses various aspects of setting up the Mother station, including infrastructure, equipment, and operational considerations.
The investment in such Mother stations underscores the growing emphasis on cleaner fuel alternatives like CNG and the infrastructure needed to support their adoption in the transportation sector. However, it's important to note that this cost estimate can vary depending on factors such as location, local regulations, the scale of the station, and technological advancements that may influence construction and operational expenses.
CNG Infrastructure Development Challenges
Gas Supply Network: Success depends on a robust supply network, with Lagos better positioned due to an existing pipeline. Kano's challenge lies in a 614-kilometer pipeline, managed by NGIC, to connect Ajaokuta-Kaduna to Kano, crucial for power and transportation.
Regulatory and Pricing Issues: Government hesitance to deregulate gas prices hampers competitiveness, affecting sector efficiency.
Manifold Infrastructure: Inadequate manifold infrastructure leads to losses in potential gas resources, requiring substantial investments.
Escalating Costs: Rising Engineering, Procurement, and Construction (EPC) costs deter investors. High steel import costs inflate infrastructure expenses.
Comparing CNG with LPG Infrastructure
While CNG infrastructure development is gaining momentum, it's essential to compare it with existing energy alternatives. One notable alternative is Liquified Petroleum Gas (LPG), also known as propane or butane. LPG has been a widely used clean energy source in Nigeria for cooking and heating. The LPG infrastructure is relatively well-established, with numerous filling stations across the country.
Compared to CNG, the cost of setting up LPG filling stations is generally lower. LPG cylinders and dispensing equipment are readily available and cost-effective. This presents an opportunity for the Nigerian government to promote LPG as a low-hanging fruit in the quest for cleaner energy solutions. Encouraging the use of LPG in the transportation sector, alongside CNG, can provide a balanced approach to reducing carbon emissions and promoting sustainable energy practices.
Tax Incentives for CNG
To further reduce the cost burden of CNG infrastructure development, the Nigerian government has implemented tax incentives. These incentives aim to make CNG more attractive to investors and stakeholders. By providing tax breaks and other financial benefits, the government hopes to expedite the expansion of CNG infrastructure.
These incentives can significantly contribute to lowering the average cost of building CNG Mother stations, making them a more appealing investment. However, it's essential to ensure that these incentives are balanced and do not inadvertently affect other sectors or revenue sources negatively. We have discussed the topic of tax free incentives for LPG, click here to read on it.
Building CNG Mother stations is a pivotal component of Nigeria's plan to develop CNG infrastructure as a cleaner and more sustainable energy source. Understanding the associated costs, comparing them with existing LPG infrastructure, and exploring the potential benefits of tax incentives on CNG are all critical steps in realizing this vision. While the commitment to CNG infrastructure development is evident, a comprehensive and balanced approach that considers other clean energy alternatives like LPG is necessary. This approach can help Nigeria reduce carbon emissions, promote sustainable energy practices, and create a diverse energy landscape that caters to the needs of its growing population.
Do you agree with these observations? Let’s hear your opinion in the comment section.