Nigeria’s Bridport aims to trigger quantum leap in gas use as diesel costs soar

By David Whitehouse
Posted on Thursday, 11 August 2022 06:00

Nigeria's Minister of State for Petroleum Timipre Sylva stands near a bus powered by compressed natural gas in Abuja
Nigeria's Minister of State for Petroleum Timipre Sylva inspects a bus powered by compressed natural gas (CNG) during the unveiling of the National Gas Expansion Programme, in Abuja, Nigeria December 1, 2020. REUTERS/Afolabi Sotunde

Surging diesel prices in Nigeria mean the time is right for industrial and transportation energy users to switch to gas, Bridport Energy CEO Jamal Akinade tells The Africa Report.

Privately held Bridport plans to start supplying liquefied natural gas (LNG) in December, targeting industrial, transportation and haulage users nationwide. The move is a partnership with Nigeria LNG, which last year signed sales and purchase agreements with Bridport, Gas Plus LNG Resources and Asiko Energy.

Bridport is developing regasification infrastructure in Lagos to receive and distribute LNG from Nigeria LNG’s terminal on Bonny Island. The company is starting with a storage capacity of 37,000 cubic meters which it hopes to commission at the end of 2022. Akinade says he aims to “demystify” LNG and “proliferate” its use across the country.

Nigeria is a major LNG exporter, with a 6% share of the global export market in 2021. But LNG has yet to make a domestic breakthrough. Bridport estimates that 20 to 25 GW of power is consumed off-grid, generated from imported diesel and premium motor spirit (PMS). That costs about four to five times as much as on-grid gas-fired electricity, the company says.

Over 80m Nigerians out of 200m lack access to electricity, according to the International Energy Agency. Many of those with access rely on intermittent grid power or polluting diesel generators. While petrol in Nigeria is subsidised, diesel prices are unregulated. Diesel prices of N260 per litre late last year are reported to have climbed to over N850 in some parts of the country.

Transportation accounts for 80% of fossil fuel consumption in the country. Nigerian industrial users and the transport sector have “tremendous” potential for gas, Akinade says. He predicts a period of “slow growth,” followed at some point by a “quantum leap”. In the next six to 12 months, he sees “a very radical shift in the market.”

  • That shift depends in part on an increase in the number of suppliers, he says: more competitors in the market will reduce the risk of relying on a single outlet.

Price sensitive

Distribution is a major hurdle that LNG in Nigeria needs to overcome. The trillions of naira which the country spends each year on importing and subsidising fuel means there is less money to be spent on electricity and transportation infrastructure, according to a book by Zainab Usman, Economic Diversification in Nigeria The Politics of Building a Post-Oil Economy, published this year. In 2019, Usman writes, Nigeria spent 2.5tr naira importing processed fuels, or 15% of total imports.

Nigeria tends to import more fuels than it consumes because of its “byzantine” distribution system, Usman writes. Policymakers attribute this to the illicit re-export of fuels to higher-paying regional markets via Benin.

Imported equipment is needed for the switch from diesel to gas, but foreign currency is scarce, says Mickael Vogel, head of research at Hawilti in Lagos. “Industries don’t necessarily have the capex” capacity to invest in the change, he says. Higher energy prices, while providing an incentive to switch, also reduce the money available to do so.

Bridport says that many people have been forced to go back to burning wood or other fuels as liquefied petroleum gas (LPG) became too expensive. Gas remains a “price-sensitive market,” Bridport’s Akinade says.

Political power

Usman argues that the core reason why Nigeria remains dependent on oil exports and has failed to achieve economic diversification lies in unstable distributions of domestic political power, especially since the transition to democratic rule in 1999. That means policy tends to be “short term and episodic rather than the systematic, long-term orientation necessary to drive economic transformation.”

  • Vogel sees huge demand for gas in Nigeria, and lots of spare capacity in processing plants. The fact that it is not being used, he says, “speaks to stagnation in the market” and the inability of the power sector to pay for gas.
  • An injection of private capital, he says, is likely to have to wait until Nigeria has a new administration.

Vogel sees little chance of policy changes before a new administration comes in after elections in May 2023. “On the policy front, little is going to be happening.”

  • Multinationals which operate in Nigeria are accelerating their adoption of gas, but small and medium-sized companies, especially in manufacturing, find it harder, Vogel says. “They will be the ones struggling over the next ten months.”

Bottom line

Major users can make the switch, but waiting for post-election private capital may be too much of a delay for some smaller Nigerian industrial players to bear.

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