Nigeria Oil Market: Alternative Fuel to the Rescue

In Nigeria today, petrol is sold for N97 in the west, between N120 and N150 in the East, and in the North it is sold for as much as N180. To make things even worse, the people there have to endure long queues to buy a few liters of fuel. The state of the electricity supply in the country has made power generators a necessity. So that even if you did not have a car you still ended up in the queue at the fuel station for hours on end.

Tolu Ogunlesi, a Nigerian creative writer, stated in one of his write-ups that, “we are Africa's biggest producer of crude oil, and one of the top 10 in the world, and at the same time one of the world's biggest importers of refined petroleum.” The major reason why we import is that our refineries are not working.

Fuel is so vital to the economic development of any country that it could be simply described as the blood in the veins of its economic existence as well as country’s assurance of a progressing economic status. Nigeria has a policy on bio-fuels entitled Nigerian Bio-fuel Policy and Incentives (2007) through a Policy Document that was approved by the Federal Executive Council on June 20th, 2007, but the country still relies on petroleum for energy generation and is thus vulnerable whenever there is a crises.

For many years now, Nigeria has been facing an extreme electricity shortage. This deficiency is multi-faceted, with causes that are financial, structural, and sociopolitical, none of which are mutually exclusive.

Peter Kayode Oniemola, McArthur Foun¬dation researcher into the use of Alternative fuel in Nigeria, said, “The Nigeria National Petroleum Corporation (NNPC) was in 2007 given the mandate to create an environment for the take-off of a domestic ethanol fuel industry. The aim is to gradually reduce the nation’s dependence on imported gasoline, reduce environmental pollution while at the same time creating a commercially viable industry that can precipitate sustainable domestic jobs.”

In its search for an alternative, the Olusegun Obasanjo led administration had approved the use of biofuels which are fuel produced from organic components. Bioetha¬nol and biodiesel are two of the most common forms of biofuels. Others include biomethanol, biodimethylether and biogas.

Bioethanol is produced from crops such as sugarcane, maize, beet, wheat and sorghum. A new generation of ‘lignocellulosic’ bioethanol also includes a range of forestry products such as short rotation coppices and energy grasses. Biodiesel is made from seeds such as rapeseed, sunflower, soy, palm, coconut or Jatropha. It is considered as a renewable energy source.  Although renewable energy is used mostly to generate electricity, it is often assumed that some form of renewable could be used to create alternative fuels.

Media reports quoted the Minister of Petroleum Resources, Mrs. Diezani Allison Madueke thus: “The nation’s actual crude oil (+condensate) production rose to an average of 2.39 million barrels per day, consistently maintained above the budgeted production level of 2.30 million barrels per day.” She also said: “Gas sales rose by more than 70% to an average 4 billion standard cubic feet per day in 2011 and for the first time, industry supplied more domestic gas than was consumed by the power and industrial sector. The Nigerian Liquefied Natural Gas company (NLNG) had one of its most successful years, with production peaking at 21.2 Million metric tons in 2011 alone.”

It all sounds good but the electricity supply is still epileptic and the fuel price is still ‘volatile’. The only conclusion is that petroleum supply at its ‘’peak’’ is still not enough. Nigeria’s power generating capacity is stated as below 5000KV, which extremely low. The truth is that whatever the disadvantages of alternative fuel, any country that relies on one source of fuel is exposed to pressure whenever there is an external crises.

Daniel Eze, a human right activist and leader of Ijaw youths of the Niger Delta, said, “Whatever the disadvantages of this alternative fuel, any country that rely so much on a single means like Nigeria is bound to be subjected to unnecessary pressure whenever there is an external crises. That is why the price of crude oil has also remained the drive of our economy; all these should not be.”

Environmental Impacts

Apart from the challenges of the reliance on crude oil, the environmental damage (including air and water pollution and deforestation) also boost the argument for the use of alternative fuels which is sourced mostly from farm produce and refuse.

The government had pledged to end gas flares on December 31, 2008, but that did not happen. Reports say it is simply cheaper for the oil companies to flare the gas than to ‘collect’ it for use.

Other countries have made successful attempts at producing alternative fuel; corn-derived ethanol in the United States,  sugar-derived ethanol in Brazil, synthetic crude from oil sands in Canada, coal-to-liquids production in South Africa, natural gas-to-liquids production in Qatar and Malaysia, and small amounts of biodiesel production in the United States and Europe.

The advantages of expanding the production of alternative fuels go beyond economic and national security benefits. It would also reduce the demand for crude oil, and thus lower world oil prices and cause greater supply diversity.

Increase Food Prices

The food prices increase with the fuel price for these major reasons:
•    Transportation prices: These rise with the fuel prices and farm produce since food stuff (fresh or processed) require transportation.
•    Power generation: Power is required for preservation of food, for food processing, and packaging.
With alternatives like biofuels, the food prices would stay low. Biofuels on the other hand can be derived from biomass, including organic matters like plants or their metabolic byproducts like cow manure which offer environmental benefits over conventional fossils fuels. The production and use of biofuels derived from palm oil, soy, corn, rapeseed, and sugar cane would drive up the demand and supply of local farm produce, increase employment as well as bring down the cost of fuel and food (especially as more youths go back to the farms).

The amnesty arrangement for the Niger Delta militants has improved the situation in the Niger Delta but temptation obviously remains. Reports say that about 150, 000 barrels of oil, valued at N2.6 billion, were stolen daily in Nigeria, according to oil giant, Shell, which accounts for half of national oil output. Ian Craig, Shell’s Director for Sub-Saharan Africa, was recently speaking at the Nigeria Oil and Gas Forum in Abuja, where he attributed the development to the failure of the NNPC to meet its funding commitments.

“The greatest challenge, however, is the massive organized oil theft business and the criminality and corruption which it fosters. This drives away talent, increases costs, reduces revenues both for investors and the government and results in major environmental impacts.” He said.

However to salvage the energy crisis, there will be need for additional physical infrastructure despite political and social resistance. In the energy policy of 2003, NEPA (now PHCN) outlines a plan to diversify its energy sector and pursue renewable energy. In particular, NEPA endorses an increase in the utilization of oil, natural gas, tar sands, coal, nuclear, hydropower, solar, biomass, hydrogen, wind and other renewable. Today, Nigeria as a nation is more conscious of the advantages of having alternatives to crude oil especially with the success other countries have recorded with similar projects as well as the devastating weather changes in the country. It is time we stopped talking and started walking.