Setting Up A Compressed Natural Gas (CNG) Refilling and Conversion Hub in Nigeria; The Feasibility Report.

As the world transitions towards cleaner energy solutions, compressed natural gas (CNG) has emerged as a key player in the global energy market. Its environmental benefits, economic viability, and compatibility with existing infrastructure make it a preferred alternative to traditional fossil fuels. For Nigeria, a country rich in natural gas reserves but heavily reliant on petrol and diesel, establishing a CNG refilling and conversion hub in Nigeria is a strategic move towards a more sustainable energy future.

Globally, the demand for CNG is on the rise, fueled by growing awareness of environmental issues and efforts to reduce greenhouse gas emissions. The global CNG market is projected to grow significantly, driven by increased adoption in transportation, industrial processes, and power generation. According to industry reports, the global compressed natural gas market was valued at US$ 112.64 Bn in 2020. It is estimated to expand at a compound annual growth rate (CAGR) of twelve point three percent (12.3%) from 2021 to 2031. The global compressed natural gas market is expected to reach the value of US$ 465.52 Bn by the end of 2031.

Key growth markets include Asia-Pacific, Europe, and North America, where governments are actively promoting CNG as a cleaner fuel alternative. Incentives, policy support, and the development of robust infrastructure have propelled CNG’s adoption, particularly in the transportation sector.

In Nigeria, the demand for CNG is gaining momentum as the government and private sector recognize its potential to address pressing energy challenges. Several factors contribute to the growing CNG demand in Nigeria:

Environmental Concerns: Urban centers in Nigeria face significant air pollution issues. Transitioning to CNG, which emits lower levels of pollutants compared to petrol and diesel, aligns with the global push for cleaner air.

Economic Benefits: CNG is cheaper than conventional fuels, offering cost savings for individuals, businesses, and industries.

Energy Security: Nigeria boasts one of the largest natural gas reserves in Africa. Leveraging this resource to expand the CNG market in Nigeria reduces dependence on imported petroleum products.

Government Policies: The Federal Government’s Decade of Gas initiative emphasizes harnessing Nigeria’s gas resources for domestic use, including promoting CNG as a viable fuel alternative.

Establishing a CNG refilling and conversion hub in Nigeria involves creating facilities that cater to two primary functions:

1. Refilling Stations: These stations provide CNG to vehicles, industrial machines, and other end-users.
2. Conversion Centres: These facilities convert petrol or diesel-powered vehicles to CNG-powered systems, ensuring a seamless transition for consumers.

Key inputs for developing a CNG hub include:

Natural Gas Supply: Securing reliable access to Nigeria’s abundant natural gas reserves.
Compression Units: To compress natural gas for storage and distribution.
Storage Tanks: Ensuring adequate supply for consumers.
Pipeline Networks: Connecting natural gas sources to refilling stations.

Production and Distribution Process

Extraction and Processing: Natural gas is extracted, processed, and transported to compression facilities.
Compression: The gas is compressed to high pressure, making it suitable for storage and transport.
Distribution: CNG is distributed to refilling stations via pipelines or specialized transport vehicles.
Vehicle Conversion: Conversion centers retrofit internal combustion engines to run on CNG by installing appropriate kits.

Modern technology and strict adherence to safety standards are essential throughout the process to ensure efficiency and consumer confidence.

The CNG market in Nigeria is at a nascent stage but holds immense potential. With rising fuel costs and increasing awareness of environmental issues, CNG adoption is expected to accelerate in the coming years. Several sectors are poised to drive demand:

Transportation: Public transport systems, logistics companies, and private vehicle owners are key adopters of CNG, given its cost efficiency.
Industrial Applications: Manufacturing and energy-intensive industries are exploring CNG as a cleaner alternative for power generation and production processes.
Power Generation: With the country’s electricity challenges, CNG-powered generators offer a more sustainable solution.

The government launched its national gas expansion programme (NGEP) on Dec. 1, 2020, focusing on the distribution of autogas (CNG) and liquefied petroleum gas (LPG) across gas stations operated by state energy company Nigerian National Petroleum Corporation (NNPC).

The Nigerian National Petroleum Corporation (NNPC) has estimated that domestic demand for natural gas will rise from current levels of one billion, five hundred thousand (1,500,000,000) cubic feet per day (Bcf) to seven billion, four hundred thousand (7,400,000,000) cubic feet per day (Bcf) by 2027.

Nigerian Independent Petroleum Company, NIPCO Plc, a downstream petroleum and gas operator, reports the number of vehicles in the country utilizing compressed natural gas (CNG) now more than six thousand (6,000), up from the five thousand (5,000) NGVs reported in August 2015.

NIPCO’s Managing Director, Mr Venkataraman Venkatapathy, says the diversification of the company’s operations into natural gas fuel for transportation created a vista of opportunities for enhancement and empowerment of local content in the industry.

There are eight compressed natural gas (CNG) stations in Benin, Edo State and Ibafo, Ogun State along with four compressed natural gas (CNG) workshops.

Innoson Vehicle Motors (IVM) based in Nnewi is primed to produce cars that run on compressed natural gas (CNG), a second foray in Nigeria after a pilot project in Benin City in 2010 by NIPCO Gas.

As of June 2020, about seven (7) compressed natural gas (CNG) stations have been built with about seven thousand, five hundred (7,500) cars running on compressed natural gas (CNG) in Benin City where major companies such as Coca-Cola, 7up, and yongxing steel are using compressed natural gas (CNG) to power their fork-lifts/trucks.

The business of compressed natural gas (CNG) filling station has marked its place in the country through growth during the last few years.

This growth has opened up new opportunities and more compressed natural gas (CNG) filling stations are being setup all over Nigeria. The prime reason for this is the low cost of the fuel. Along with that, compressed natural gas (CNG) fuel is less hazardous to the environment as compared to the traditional petroleum fuel.

Creating a CNG refilling and conversion hub in Nigeria represents a pivotal step towards achieving energy sustainability and economic growth. By leveraging its vast natural gas reserves, Nigeria can establish itself as a leader in clean energy adoption, benefiting consumers, businesses, and the environment.

The growing CNG demand in Nigeria, coupled with global trends favoring cleaner energy solutions, underscores the urgency of developing robust infrastructure and fostering collaboration between stakeholders. With the right policies, investments, and awareness, the CNG market in Nigeria is poised to thrive, driving the nation’s transition to a more sustainable and economically resilient future.

Table of Contents

EXECUTIVE SUMMARY 1.0 Business Overview 1.1 Description of the Business 1.2 Vision and Mission Statement 1.3 Value Proposition 1.4 Critical Success Factor of the Business 1.5 Current Status of Business 1.6 Description of the Business Industry 1.7 Contribution to Local and National Economy 2. Marketing Plan 2.1 Description of the Products 2.2 Product Delivery 2.3 The Opportunity 2.4 Pricing Strategy 2.5 Target Market 2.6 Distribution and Delivery Strategy 2.7 Promotional Strategy 2.8 Competition 3. Production Plan 3.1 Description of the Location 3.2 Raw Materials 3.3 Production Equipment 3.4 Distribution Process 3.5 Legal Requirement 3.6 Production Cost 3.7 Stock Control Process 3.8 Pre-Operating Activities and Expenses 3.8.1 Operating Activities and Expenses 3.9 Project Implementation Schedule 4.0 Organizational and Management Plan 4.1 Ownership of the Business 4.2 Profile of the Promoters 4.3 Key Management Staff 4.3.2 Management Support Units 4.4 Details of Salary Schedule 5. Financial Plan 5.1 Financial Assumption 5.2 Start- up Capital Estimation 5.3 Source of Capital 5.4 Security of Loan 5.5 Loan Repayment Plan 5.6 Profit and Loss Analysis 5.7 Cash Flow Analysis 5.8 Viability Analysis 6.0 Business Risks and SWOT Analysis 6.1 Business Risks 6.2 SWOT Analysis

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