*Also fuel 1m cars per day
03 January 2016, Sweetcrude, Houston — Ubani Nkaginieme is the Chief Executive Officer of Total Support Energy Group, a Nigerian firm committed to providing comprehensive energy solutions aimed at filling the existing gaps. In this interview with Hector Igbikiowubo, he talks about his latest passion – ‘driving the use of compressed natural gas, CNG, locally for power generation and vehicular use. He also talks about domestic refining, gas flare reduction cum monetization, while decrying petroleum subsidy but advocating subsidizing production.
We understand that your group is redefining the use of compressed natural gas, CNG, to revitalize industrial growth in Nigeria. Can you tell us how exactly you’ve gone about getting companies to use CNG?
Thank you Sir. Before I address above specific question, I will like to frame our current national energy situation.
Nigeria’s national energy situation:
- LESS THAN 5% OF DESIRED PIPELINE FOOTPRINT
- UP TO 30% OF COMPLETED/NEAR-COMPLETE IPPs LACK GAS
- GAS FLARING ACTIVE AND ONGOING …
- GAS FLARING CREATES UNACCEPTABLE WASTAGE & POLUTION
- VIRTUAL PIPELINE INFRASTRUCTURE LESS THAN 1% OF DESIRED MINIMUM
- VEHICULAR USE OF NATURAL GAS LESS THAN 0.01% OF VEHICLE POPULATION
- INADEQUATE GENERATION CAPACITY
- WEAK & INADEQUATE TRANSMISSION NETWORK, CAPACITY AND REACH
- WEAK & INADEQUATE DISTRIBUTION NETWORK
- ONE OF WORLD’S BIGGEST DIESEL GENERATOR MARKETS
- REFINERIES FUNCTIONING WAY BELOW CAPACITY
- PETROL STILL SUBSIDIZED …. & REPRESENTS THE SINGLE BIGGEST LINE ITEM ON OUR IMPORTATION BILLS
- LOW AVAILABILITY OF LONG-TERM FUNDS/FINANCE
What We Should Be Doing:
- IMMEDIATE CAP ON GAS FLARING …. AND SUBSEQUENT BAN OF SAME
- ACCELERATED CAPTURE OF FLARED GAS FOR DOMESTIC USE
- ACCELERATED VEHICULAR USE OF NATURAL GAS
- RAMP UP DISTRIBUTED GENERATION WHEREVER GAS IS AVAILABLE
- WITH VIRTUAL PIPELINE INFRASTRUCTURE INCREASE DISTRIBUTED GENERATION
- BUILD MANY SMALL MODULAR REFINERIES(WITH NNPC/CBN BACKING)
- CBN WILL NEED TO INTERVENE TO MAKE LONG-TERM FUNDING AND/OR GUARANTEES AVAILABLE TO CREDIBLE NIGERIAN COMPANIES
Now … back to your original question/observation ….. What we have done is give industries and power clusters a cheaper, cleaner, sustainable and price-stable alternative to diesel.
As you may be aware the natural-gas pipeline network in Nigeria is grossly inadequate. And most times the volumes of gas needed by industries and clusters outside the existing pipeline network is too small to justify building new pipeline to supply them.
We basically take natural-gas from producer, or distributor pipeline (e.g. Shell) and compress it into our special trucks. That way, we can deliver enough volumes of gas for their operations that is still cheaper and cleaner than diesel.
Your group is also driving the use of captive power plants and a case in point is that of the University of Port Harcourt where you have been able to restore 24/7 power supply. Can you shed some light on what exactly it is you did for the university and if this can be replicated for other critical public infrastructures across the country.
We are just taking the use of natural-gas one step further in the energy conversion chain.
Besides use of diesel for vehicular fuel, the other significant use of diesel in Nigeria is for power generation. So smart power consumers like Uniport will actually opt to just buy power, if it is available. Big bonus if it is also cheaper and cleaner. The fact that natural-gas fueled power generation is both cheaper and much cleaner is a major driver for consumers that need uninterrupted power 24/7.
With respect to Uniport, it is a classic case of University Management doing a straight-forward analysis and decision making. We are now delivering 24/7 clean power, at cost of about 20% less than what they previously spent to get less than 12 hours of power daily. However this decision is not always straight-forward, if the will to do what is right is not there.
Yes, UNIPORT-IPP can easily be replicated.
In terms of cost, how much does per kilowatt hour of electricity generated with the use of CNG cost compared to electricity from the national grid?
Currently cost of electricity from the grid ranges from N9 to N26 per KwHr, depending on category of consumer. Unfortunately, availability of power from the grid is still below 30% for most Nigerians.
At today’s diesel prices, it costs about N45-N53 per KwHr using diesel generators.
It costs about N32-N38 per KwHr running on CNG
Obviously the CNG is still a relatively young industry with growth potentials. Can you throw some light on what the possibilities are in terms of job creation?
Yes ….. CNG is a relatively young industry and fuel in Nigeria. However the technology has been around for decades. It has tremendous potential to create new skilled jobs that did not exist before. For example, our small CNG infrastructure has created over 100 new skilled jobs in the Port Harcourt area. A lot more jobs will be added when we graduate to wide vehicular use of CNG.
I understand that motor cars and other engines can, and do run on CNG. Essentially, development of the use of CNG can positively impact Nigeria’s annual spend on petroleum subsidy if properly harnessed. Can you advise on the necessary catalysts government needs to activate and drive CNG usage in Nigeria?
Absolutely! All our in-house operational cars are already converted to for dual-fuel use. They are able to run on CNG or petrol. We now run on CNG most of the time, at great savings.
As you know well, petroleum products imports is the largest single item on our import bill as a nation. Engines running on petrol and diesel also contribute significantly to atmospheric pollution. Nigeria’s Nox emission is the 2nd worst emission profile in the world.
Therefore a switch to natural-gas fueled vehicles will be a major win-win-win for all. This will:
- Reduce fueling costs significantly
- Create many new jobs
- Significantly reduce our petroleum product import expense
- Significantly reduce vehicular emissions and pollution
- Monetize the gas we currently flare.
You may note that nearly all the LNG produced by Nigeria LNG in Bonny is made from gas we will otherwise have flared.
A recent study shows that Nigeria lost $783m to gas flaring in two years alone. When fully harnessed, how much of this lost revenue do you reckon the use of CNG will enable the country retain?
The actual situation is worse than what this study shows. Even if we go by what the study said, that is a lot of wasted resource by any measure.
If we converted just half of this wasted resource into usable energy, it will translate to over 5000MW of power and fuel for over 1million commercial vehicles every day.
Just as important as above-stated is, the elimination of the pollution caused by flaring is by itself enough reason to stop flaring.
I understand that your Group does not retain the services of any expatriate personnel. Is this by design? And if so why?
It is by design. We bring in experts-(expatriates & Nigerians) when needed, to train our personnel. We believe in giving our young engineers real responsibilities after professional training and supervision,
We then insist our team must meet and exceed global performance standards. Our young engineers & crew have not let us down at all.
Your Group has deployed the use of virtual pipelines to achieve impressive results. Can you explain for the benefit of our readership what a virtual pipeline is?
Virtual Pipeline is any system of moving gas from “point-A” to “Point-B” without the use of traditional pipelines.
This is normally achieved by either by compressing or liquefying the gas into special tanks, and transported (road, rail, sea) to where it is needed.
Why is the use of virtual pipeline so critical between now and whenever the gas masterplan gets implemented?
It reduces fuel cost and at the same time drastically reduces pollution caused by using petrol and diesel.
It also helps to rapidly grow gas utilization clusters that will ultimately get big enough to justify bringing in gas pipeline.
Is it viable?
Definitely yes, otherwise we won’t be doing it.
We heard that you had built a modular refinery. Why is it not operational?
This is probably a topic for another day. But let me touch on a few things.
YES, we completed the 6,000 barrels per day, bpd module of our planned 12,000 bpd refinery. We could not progress the project to a logical conclusion because the enabling environment and incentives required to make projects of that nature happen was not there, it is still lacking.
What does Nigeria need to do to accelerate delivery of local refining capacity?
The government needs to do 3 main things:
Guarantee crude supply at same “export-pricing” we sell our crude internationally, to all local refineries on completion. In project finance parlance, this is called “Supply-Assurance”. This will help Refinery Promoters raise the necessary funding for refinery projects.
- Remove subsidy on petrol. Diesel is NOT subsidized. That is why it is now readily available nationwide, and competitively priced. This is NOT Rocket-science.
- Government MAY also offer to purchase ALL production of local refiners at slightly discounted prices relative to current importation costs. Again ….. in project finance parlance …. This is called “Market-Assurance”. This will help Refinery Promoters raise the necessary funding for refinery projects.
What is your impression of natural-gas pricing in the domestic market in Nigeria?
Natural gas pricing in Nigeria is multi-tiered, depending on application and end use of the gas. This has introduced layers of discretionary mandates, which is not good for the development of the overall gas industry. It can lead to serious abuse and corruption.
Currently prices range from $1 to $7.35 per MMscf. In order for the industry to grow and attract serious investment, gas pricing should reflect international best practice, and also encourage growth from the gas producer to end-user. For gas delivery to be sustainable, the entire value chain from producer to end-user must have beneficial interest and reasons to keep investing.
Currently international price for gas is around $4 per MMscf.
What is your take on government’s subsidy regime so far?
Subsidy application as practiced in Nigeria is generally bad, and has engendered a regime of scam and corruption. The concept may be well-intentioned, but the implementation and administration has been terrible at best.
And we largely subsidize “Consumption”.
If we must subsidize anything at all … We should subsidize “Production”.