Energy Policy 76 (2015) 717

Contents lists available at ScienceDirect

Energy Policy
journal homepage: www.elsevier.com/locate/enpol

Developing compressed natural gas as an automotive fuel in Nigeria:

Lessons from international markets
Olufemi O. Ogunlowo n, Abigail L. Bristow, M. Sohail
School of Civil and Building Engineering, Loughborough University, Loughborough, LE11 3TU Leicestershire, United kingdom

H I G H L I G H T S

We examined the NGV policies and implementation strategies in selected countries.

The use of legislative mandates help deepen NGV penetration.

Aligning stakeholder interest is critical to NGV adoption.

Making national interest a priority ahead of regional infrastructure is a critical success factor.

Government support drives participation.

art ic l e i nf o a b s t r a c t

Article history: The Nigerian government proposed the use of compressed natural gas (CNG) as an automotive fuel in
Received 16 April 2014 1997 as part of the initiatives to harness natural gas (NG) resources but progress has been slow. This
Received in revised form paper examines the natural gas vehicle (NGV) implementation approaches and outcomes in seven
12 August 2014
countries with diverse experiences in order to gain an understanding of the barriers to the NGV market
Accepted 28 October 2014
development in Nigeria. The analysis employs hermeneutic principles to secondary data derived from
Available online 24 November 2014
academic literature, published reports from a variety of international agencies, grey literature, and text
Keywords: from online sources and identies eight success factors for NGV market development namely: strategic
Nigeria intent, legal backing, learning and adaptation, assignment of responsibilities, nancial incentives, NG
Compressed natural gas
pricing, consumer condence, and NG infrastructure. The paper concludes that the principal impediment
Natural gas vehicles
to NGV market development in Nigeria is the uncoordinated implementation approach and that greater
Transportation
government involvement is required in setting strategic goals, developing the legal and regulatory fra-
meworks, setting of clear standards for vehicles and refuelling stations as well as assigning responsi-
bilities to specic agencies. Short-term low cost policy interventions identied include widening the
existing NG and gasoline price gap and offering limited support for refuelling and retrotting facilities.
& 2014 Elsevier Ltd. All rights reserved.

1. Introduction
Nigeria is the world's 10th most populous country (World Bank,
2014), the 6th largest producer of crude oil, the 7th largest natural
gas (NG) reservoir and the 4th leading exporter of liqueed natural
gas (LNG) (EIA, 2013). The country is endowed with 187 trillion
cubic feet (tcf) of proven reserves of high quality NG that is rich in
liquids and low in sulphur; most of which is associated gas (AG),
found during oil exploration and production (NLNG, 2011). Oil and
gas exports account for over 98% of export earnings and are the
major drivers of the economy which is the largest in Africa and the
26th largest in the world with a GDP of $522.6 billion in 2013
(World Bank, 2014).
Nigeria faces two major challenges relating to its oil and gas
assets: rstly, fugitive emissions, i.e. the intentional and uninten-
tional release of greenhouse gases (GHG) during the extraction,
processing and delivery of oil (World Bank, 2004) and secondly,
energy vulnerability characterised by frequent power outages and
persistent domestic shortages of rened petroleum products (EIA,
2013).
Fugitive emissions result mainly from the disposal1 of AG

n
Corresponding author. Tel.: 2348022234055.
1
E-mail addresses: o.ogunlowo@lboro.ac.uk (O.O. Ogunlowo), Until recently, AG was considered as a by-product to be disposed for safety
a.l.bristow@lboro.ac.uk (A.L. Bristow), m.sohail@lboro.ac.uk (M. Sohail). considerations.

http://dx.doi.org/10.1016/j.enpol.2014.10.025
0301-4215/& 2014 Elsevier Ltd. All rights reserved.
8 O.O. Ogunlowo et al. / Energy Policy 76 (2015) 717
through venting2 and aring.3 These create social and environmental
problems and result in the waste of valuable natural resources (World
Bank, 2004). Nigeria produced 8529 mbbls of crude oil and 22 trillion
standard cubic feet (tscf) of AG between 2003 and 2012, an average4 of
2.5 thousand standard cubic feet/barrel, and ared 7.2 tscf or 32.87%
(NNPC, 2013). The country contributes between 10 and 15% of global
ared volume and is consistently ranked second after Russia (World
Bank, 2011). Estimates suggest losses of up to $72 billion in unearned
revenue between 1970 and 2006 due to gas aring (The ERA Fact
Sheet 2008, cited in Bassey, 2008).
As a result of gas aring, fugitive emissions constitute the lar-
gest source of energy related GHG emissions (31.34%) of which
Methane is dominant (50.76%); unlike most countries where CO2
dominates (WRI, 2010). This presents long-term socio-economic
and environmental risks as hydrocarbons have signicantly higher
impact on public health and a greater potential for global warming
and climate change than CO2 (IPCC TAR WG1, 2001).
To abate aring, the country initiated efforts to exploit the AG for
NG export, domestic power generation and transportation, and as
industrial feedstock. Major initiatives include the Nigeria Liqueed
Natural Gas Limited (NLNG) that has exported over 3.7 tcf of LNG
(NLNG, 2013), the Oso Condensate Natural Gas Liquefaction, the Brass
River LNG the rst offshore LNG plant in the world (Alexander's Gas
& Oil Connections, 2003), the Olokola LNG plant, the Escravos Gas
Projects for LPG and the Escravos Gas-to-Liquids facility. There are
three gas turbine power plants (Afam, Egbin and Okpai) and two gas-
red thermal plants (Ughelli and Sapele) and 17 other gas power
plants at various stages of construction. International pipeline projects
include the 678 km West African Gas Pipeline (WAGP) which runs
from Nigeria to Ghana and the proposed Trans-Saharan Gas Pipeline
(TSGP) which is planned to terminate in Algeria. Domestic pipeline
projects include the Oben-Geregu pipeline which is to supply a power
Plant, the Obiafu-Obrikom-Oben pipeline intended to connect the
western and eastern parts of the country, and the Escravos to Lagos
Pipeline System which would increase supply capacity to the South
Western part of the country.
These initiatives have contributed to the reduction in the per-
centage of gas ared from 77% in 1990 to 23% in 2012 (NNPC, 2001,
2013). However, satellite images indicate that the absolute volume
ared has increased (WRI, 2010).
Nigeria has a crude oil distillation capacity that exceeds domestic
demand but imports over 80% of the rened products consumed lo-
cally because of low renery utilisation rates (EIA, 2013). Energy vul-
nerability is further compounded by the large and growing population
and government subsidy on the pump price of petroleum products.
Nigeria has witnessed increases in energy demand and GHG
emissions in all sectors between 1960 and 2013 as the population
grew from 45.2 million to 173.6 million (384%) with a signicant
urban drift from 14% to 50% and per capita income growth from
$580 to $1100 (World Bank, 2014).
The prices of gasoline and kerosene are regulated and sub-
sidised by up to 40% while that of diesel is deregulated following
the withdrawal of subsidy on the product in the early 2000s. The
subsidy administration is fraught with corruption, ineptitude and
inefciency (Mark, 2012) and this sometimes results in delays in
the imports which in turn results in perennial fuel scarcity. The
NNPC, which hitherto was not involved in downstream operations,
2
Discharge of the entire constituent of AG, predominantly methane into the
atmosphere.
3
The burning of AG during discharge which emits gases that range between
raw NG and ideal methane combustion emissions of water vapour and CO2 due to
inefciency (Buzcu-Guven et al., 2010).
4
This provides only a quantitative context. The Gas Oil Ratio and the compo-
sition of AG depend on multiple factors e.g. Nature and the degree of depletion of
the reservoir and the type of lift used (PFC Energy, 2007).
initiated a Mega Station scheme to address the supply gap but the
intervention has not solved the problem.
The foregoing calls for a holistic rethink in the efforts to exploit
NG especially as existing efforts have focused on export and do-
mestic use for power and industry. However, in the transport
sector, despite the government's proposal in 1997 to adopt CNG as
automotive fuel, of 5,686,485 registered vehicles in 2013 only 2210
are NGVs (NGVA Europe and the GVR, 2013).
The objectives of this research are, to identify the barriers to
the NGV market development and identify ways forward based on
the expectation that the automotive use of CNG provides an op-
portunity to signicantly reduce the emissions inventory, reduce
gas aring and increase domestic gas utilisation.
Studies including Collantes and Melaina (2011), Nijboer (2010) and
Yeh (2007) have examined NGV adoption strategies for various
countries but studies on Nigeria are sparse and focus on other areas
e.g. Nwaoha and Iyoke (2013) which assessed the viability for emis-
sions reduction. This study will contribute to the discussion of the CNG
programme in Nigeria particularly with respect to the barriers to
market development and pathways towards successful implementa-
tion and provide lessons for oil rich developing countries and coun-
tries experiencing rapid urbanisation in their efforts to deploy NGVs in
particular and alternative fuels vehicles (AFV) in general.
The paper is organised as follows: Section 2 draws on evidence
from the wider literature on the potential of NGVs; Section 3
outlines the methodology; Section 4 presents the country analysis;
Section 5 the cross-country analysis and Section 6 the conclusions
and policy implications.
2. NGV potential
The global NGV population grew from 415,855 in 1991 to
16,733,098 in 2012 with much of this growth occurring between
2003 and 2012. The AsiaPacic region had the most growth
(35.7%), while North America, declined by 0.9% and Europe, Latin
America and Africa grew by about 15% each (NGV Global, 2012).
The top 10 countries with the highest NGV population, Iran, Pa-
kistan, Argentina, Brazil, China, India, Italy, Ukraine, Columbia and
Thailand, accounted for 87% of global NGVs and 70% of refuelling
stations (ibid.).
Economic benets, environmental considerations, energy se-
curity, and NG availability are the major drivers for NGV adoption
(Pike Research, 2012 and Yeh, 2007). The three, main policy in-
struments are vehicle technology and fuel regulations, consumers
and/or suppliers incentives and market creation focused on gov-
ernment eets and direct investment in infrastructure (Yeh, 2007).
NGVs offer superior engine performance compared to gasoline and
diesel equivalent because NG has higher octane and lower cetane
numbers and does not require anti-knock additives (Oando, 2014). The
horsepower, acceleration, and cruise speed are also comparable (DOE,
2013; NGVi, 2013; SCGC, 2013). A major disadvantage is the lower
driving range resulting from the lower energy density of NG. None-
theless, this can be increased by providing extra storage cylinders al-
beit at the detriment of cargo volume.
NG reduces GHG emissions by 1525%,5 eliminates evaporative
emissions,6 produces little or no particulate matter and shows a
reduction of up to 80% in ozone-forming emissions compared to
gasoline (NGVAmerica, 2013 and Marbek, 2010). Many studies e.g.
Goyal and Sidhartha (2003), Mena-Carrasco et al. (2012),
5
Depending on the vehicle segment with the greatest reductions occur in
medium and heavy duty, light duty and refuse truck segments (Marbek, 2010, p.
32).
6
Responsible for at least 50% of hydrocarbon emissions in conventional
vehicles.
 O.O. Ogunlowo et al. / Energy Policy 76 (2015) 717
Suthawaree et al. (2012) have demonstrated the public health
benets of NG compared to gasoline and diesel. We however note
the concerns raised by Ejaz et al. (2009a, 2009b) on the healing
process in mice and foetal development in the vivo chicken em-
bryo model.
NG is safer than gasoline and diesel. NG is non-toxic, non-
corrosive, mixes easily and evenly with air when dispersed, has no
potential for ground or water contamination in the event of a re-
lease, is less combustible, has signicantly higher kindling point
and can only ignite between 5% to 15% concentration in air. It re-
quires high compression energy for auto-ignition and is less likely
to auto-ignite on hot surfaces as it has a high ignition temperature
of about 640 C, compared with 230280 C for gasoline (J.E. Sinor
Consultants Inc., 1994). NGV cylinders are more durable than ga-
soline and diesel tanks as they undergo intense safety tests, are
cast from a single piece of special steel alloy (no welded joints)
and have burst discs that rupture in case of inadvertent high
pressure or re and prevent excessive pressure inside the cylinder
(Oando, 2014). A survey of 8331 NGVs which covered 178.3 million
miles showed that compared to the gasoline powered vehicle eet
per 100 million miles these NGVs recorded a 37% lower injury rate,
a 31% lower collision rate and zero fatalities as opposed to 1.28
deaths. Seven re incidents occurred with only one adjudged to be
caused by fuel system failure (CVEF, 2010). The safety credentials
have also been demonstrated in developing countries such as Iran,
Pakistan and India as there is no evidence of safety disadvantage
relative to liquid fuels.
NGVs have service lives two to three years longer than com-
parable conventional vehicles (DOE, 2013) because NG is a cleaner
burning fuel, the time between routine maintenance checks is
longer. However, the acquisition cost is typically about 1015%
higher. Nonetheless, this can be offset over the life span as NGVs
offer savings on life cycle fuel and maintenance costs (Pike Re-
search, 2012; NGV Global, 2005). The cost and the limited avail-
ability of original equipment manufacturer (OEM) NGVs en-
couraged the conversion of conventional vehicles to dual-fuel or
bi-fuel globally. The retrotting cost varies across countries and is
subsidised in some.
Byrne and Polonsky (2001) and Ewing and Sarigollu (2000)
identied impediments to the growth of AFVS and these remain
pertinent and relevant to NGVs. Byrne and Polonsky (2001) noted
that the success of AFVs requires stakeholders' nancial commit-
ment and depends on the availability of: affordable low carbon
AFVs, affordable alternative fuels, convenient fuel delivery outlets,
maintenance services, appropriate transport easements, and con-
sumer education. They observed that speed, acceleration, and
driving range before refuelling are some of the major concerns for
consumers. Ewing and Sarigollu (2000) observed that vehicle cost,
performance, safety, socio-cultural considerations, refuelling,
maintenance and relative emissions can deter consumer adoption.
Yeh (2007) noted that the initial acquisition cost, availability and
reliability of vehicle technology and components, and retail NG
prices of 4050% of gasoline equivalent encourage consumers and
concluded that none of the countries studied (Argentina, Italy,
Pakistan, India and the US) is likely to achieve self-sustaining NGV
markets without government support. In the UK, Kirk et al. (2014)
examined the light commercial vehicle market for NGVs and
concluded that the most important barrier was the lack of re-
fuelling infrastructure. They argued that a number of relatively low
cost initiatives could help kick-start the market.
3. Research methods
As the purpose of the study is to produce a rounded under-
standing, a qualitative enquiry approach is deemed appropriate;
9
hence the study adopted the interpretivist stand point. The scope
of the study includes the NG policies, implementation approaches
and market outcomes in the transportation sector of the selected
countries and Nigeria. It excludes the evaluation of alternative uses
of NG as there is progress in this respect and the automotive in-
dustry assessment because the country is import dependent.7
3.1. Country selection criteria
The countries studied were selected based on three criteria:
presence of NG reserves; experience with NGV and the stage of the
market in the life cycle. 86 countries with an NGV presence were
identied from the data bases of NGVA Europe and the GVR
(2013). Historical data and growth rates in NGVs were used
alongside infrastructural development indicators to categorise the
countries into life cycle stages. Leading countries in each category
were selected for the comparative analysis giving seven countries,
categorised into ve market life cycle groups as follows: early
development: India; sustained growth: Argentina and Brazil; rapid
growth, Pakistan and Iran; low penetration: The US; and collapsed
market: New Zealand. Fig. 1 illustrates the life cycle stages of the
various markets.
3.2. Data collection and analysis
Initial investigation showed the sufciency of authentic, cred-
ible and reliable data and information on NGV implementation
and outcomes generally. Hence, the paper uses secondary data
from academic literature, published reports by a variety of inter-
national agencies, online sources and grey literature comprising of
government publications, reports, statistical publications, news-
letters, fact sheets, working papers, technical reports, conference
proceedings and policy documents.
Data analysis employed hermeneutics8 principles involving the
development of an organising system with the aim of identifying
the predominant themes through which narratives can be mean-
ingfully organised, interpreted and presented (Tesch, 1990). This
choice was based on two factors: hermeneutics promote a more
holistic understanding of a phenomenon by showing the inter-
relationships amongst themes while retaining a rich characteristic
of individual themes and allows themes to emerge from the data
unlike content analysis which starts with predetermined cate-
gories into which data are coded (Patterson and Williams, 2002).
We followed the steps identied by Patterson and Williams (2002,
pp. 4749) and conducted the analysis at two levels: the individual
country (idiographic) and across countries (nomothetic).
The forestructure of understanding applied was gained through
literature review and was in three parts: (1) simultaneously
achieving economic viability, environmental soundness and social
equity in the transportation system requires difcult trade-offs
(Byrne and Polonsky, 2001); (2) sustainable transportation re-
quires the cooperation of all stakeholder groups (Chilton, 2000;
Clift and Wright, 2000; Yosie and Herbst, 1998); and (3) the initial
acquisition cost, availability and reliability of vehicle technology
and components, and retail NG prices of 4050% of that of
equivalent gasoline are critical elements for consumers (Yeh,
2007). Although the fundamental structure for the analysis was
preconceived based on the forestructure of understanding, the
eventual organising system evolved from the analysis and has the
following themes: background, strategic intent, legal backing,
learning and adaptation, assignment of responsibilities, nancial
7
Over 85% of the vehicles imported are previously used (NAC, 2013).
8
The theory of interpretation, i.e. the theory of achieving an understanding of
texts, utterances, and so on (not a certain twentieth-century philosophical
movement).
10 O.O. Ogunlowo et al. / Energy Policy 76 (2015) 717

Fig. 1. NGV population growth in selected countries.

Source: Gumber (2009), NGV Communications Group (20102011), ICNGA (2011), NGV Global (2012).

incentives, NG pricing, building market condence, and NG infra- increase in transportation demand and vehicle population which
structure development. grew from 2.35 million in 1975 to 21 million in 1991, and then to
41.4 million by 1998 (De, 2004; Gumber, 2009). This rapid growth
led to a substantial increase in ambient air pollution particularly in
4. Country analyses cities. The Central Pollution Control Board reported that the
transport sector was responsible for between 65 and 70% of total
This section presents the individual country analyses. air pollution in Delhi in 1998 (De, 2004). In a bid to curb air pol-
Tables 1 and 2, discussed further in the analysis that follows, lution and safeguard public health, the Supreme Court mandated
present the gures and global rankingsfor gas reserves and pro-
the government in 1985 to take steps towards the use of CNG as a
duction, NGV population, the refuelling and pipeline infrastructure
transport fuel in Delhi and subsequently in other cities. This re-
and the vehicle to refuelling infrastructure ratio (VRI) for the
sulted in the launch of CNG pilot programmes in Delhi, Mumbai,
countries studied. The VRI benchmark used for the analysis is the
Baroda and Surat (De, 2004; Gumber, 2009).
range of 6001000 suggested by the IGU (2009) as the commer-
Despite vast crude oil resources, India depends largely on petro-
cially sustainable ratio for relling stations.
leum imports to satisfy domestic demand. The petroleum import bill
4.1. India increased by approximately 45% between 1985 and 1992 and the es-
timated cost within the same period amounted to USD 4.1 billion (IMF,
4.1.1. Strategic intent 2011) and the situation was compounded by the institutionalised
India experienced rapid urbanisation and signicant economic subsidy on pump prices. The use of CNG as a transport fuel therefore
growth following independence and this led to a signicant provides the dual opportunity of alleviating petroleum import de-
pendency and reducing the economic pressure especially from foreign
Table 1 exchange and subsidy expenditure.
NGV Statistics.
4.1.2. Legal backing
Total Global Global NGV to re- Total NGV
number share rank gistered vehicle per This originated from the Supreme Court ruling of 1985 which
of NGV (%) vehiclesa per 1000 ordered government to promote the use of CNG. Subsequent rul-
(%) 1000 persons ings include the 1995 order which established the Environmental
persons
Pollution (Prevention and Control) Authority; the 1998 ruling
India 1,500,000 8.467 6 3.55 34 1 which ordered the conversion of all city bus eet, taxis and auto
Iran 3,300,000 18.612 1 27.09 161 44 rickshaws in Delhi, and the establishment of 71 refuelling stations,
Pakistan 2,790,000 15.736 2 85.16 18 16
the 2001 upholding of the report submitted by the Environmental
Argentina 2,244,346 12.658 3 17.53 311 55
Brazil 1,743,992 9.836 4 4.97 177 9 Pollution (Prevention and Control) Authority, and the 2003 di-
US 250,000 1.410 13 0.13 786 1 rective for the formulation of strategies for the introduction of
New Zealand 201 0.001 64 0.01 695 0.05 CNG in 11 cities (De, 2004; Marbek, 2010 and Nijboer (2010)). In
Nigeria 2210 0.012 50 0.04 34 0.01
2006, government enacted the Petroleum and Natural Gas Reg-
Data Sources: NGVA Europe and the GVR (2013). ulatory Board (PNGRB) Act which provided for the creation of the
a
Two wheelers not included. PNGRB. Various regulations have also been established including
 O.O. Ogunlowo et al. / Energy Policy 76 (2015) 717 11

Table 2
CNG infrastructure.

CNG relling Global share of CNG re- Global rank in CNG re- NGV per CNG re- Transmission pipeline Distribution pipeline
stations lling stations (%) lling stations lling station (km) (km)

India 724 3.27 7 2072 10,800 15,477

Iran 1992 8.99 3 1657 28,000 150,000
Pakistan 2997 13.52 2 931 10,985 122,183
Argentina 1916 8.65 4 1171 11,000 93,000
Brazil 1793 8.09 5 973 9219 18,000
US 1438 6.49 6 174 513,484 3,441,103
New Zealand 14 0.06 47 14 3400 11,600
Nigeria 6 0.03 55 368 1250

Data Sources: Omidvar (2009), Nigerian Gas Company Limited (2010), Collantes and Melaina, (2011), Infraline (2011), Ministry of Petroleum & Natural Gas [MoPNG] (2013),
NGVA Europe and the GVR (2013), PHMSA (2013a, 2013b), Gas Association of New Zealand (n.d.).

the adoption of Euro I, II, III and IV emission standards in 2000,
2001, 2005 and 2010 respectively (Gumber, 2009).
4.1.3. Learning and adaptation
At the time the Supreme Court issued the mandate to use CNG
in the city bus eet, local knowledge of NGV technology and its
implementation was sparse and this prompted research into the
NGV standards in other countries particularly New Zealand and
Italy. The New Zealand design and safety standards were used for
the pilot projects in Delhi, Mumbai and Baroda in 1992 to de-
termine the feasibility, understand the technology and provide the
framework for an effective programme (De, 2004; Purwaha, 2006;
Gumber, 2009).
4.1.4. Assignment of responsibilities
GAIL (India) Limited was charged with the implementation of
the CNG programme. Following the successful implementation of
the pilot programme, various joint ventures were established for
the roll-out. The prominent ones are: Mahanagar Gas Limited
(MGL) a joint venture between GAIL (India) Limited, British Gas
and the Government of Maharashtra established in 1996 and
Indraprastha Gas Limited (IGL) a joint venture between GAIL
(India) Limited, Bharat Petroleum Corporation and the Delhi
Government established in 1998. MGL and IGL were responsible
for developing the Mumbai and Delhi markets respectively.
4.1.5. Financial incentives
Government provided incentives including sales tax exemption
on the purchase of CNG and CNG conversion kits, subsidised VAT
when replacing old diesel vehicles with NGVs, reduced interest
rates on loans for acquiring taxis and 3-wheelers, and reduced
customs duty on CNG conversion kits.
4.1.6. NG pricing
Government gradually phased out subsidy on the pump price
of petroleum products and completely withdrew it in 2010. Diesel
continues to be regulated; however, denite price increments have
been set as the rst step towards complete deregulation. The new
regime allows the oil companies, under supervision of a regulator,
to set retail product prices based on an import parity pricing for-
mula. In 2010, CNG energy equivalent price in Delhi and Mumbai
was 53% and 69% of gasoline and diesel prices respectively (Nij-
boer (2010)).
4.1.7. NGV infrastructure development
India has about 26,277 km of NG pipelines which pre-
dominantly service the northern and western regions (De, 2004;
Gumber 2009). The CNG refuelling stations are concentrated in
three states: Gujarat (35.64%), New Delhi (33%), and Maharashtra
(22.65%) (Khanna, 2011) and this may be associated with the
economic position of New Delhi and Maharashtra's access to NG
transmission pipelines. Only 56% of the refuelling stations are
open to the public (NGVA Europe and the GVR, 2013). The high VRI
(Table 2) suggests the need for more stations.
4.2. Argentina
4.2.1. Strategic intent
Economic concerns, particularly the trade decits recorded
between 1980 and 1982 as a result of high oil prices, were the key
driver for the adoption of NG as a transportation fuel (Kojima,
2001). In the 1980s, Argentina was a net importer of diesel as the
urban bus eet, light duty trucks, and farm machinery were all
running on diesel (Collantes and Melaina, 2011). Although NG was
in use in industries, power plants and domestically for cooking
and heating (Honor, 2004), the discovery of the Loma de Lata NG
reservoir in the early 1980s accelerated government's considera-
tion of its use as a road transportation energy source with the
establishment of the Liquid Fuel Substitution Programme in 1984
(Collantes and Melaina, 2011). Replacing diesel with NG in public
transport eet provided an avenue to improve the balance of trade
(ibid.).
4.2.2. Legal backing
Resolution 150/83 provided for the establishment of a com-
mittee to develop and implement the essential codes and stan-
dards to govern the Liquid Fuel Substitution Programme. Resolu-
tion 273/84 provided for the adoption of the established codes and
standards, Decree 1752/87 declared CNG a matter of national in-
terest, and the 1992 Gas Law provided for the privatisation of the
NG industry (ibid.).
4.2.3. Learning and adaptation
The NGV guidelines, codes and standards are an amalgamation
of the Italian, New Zealand and Canadian standards and the ap-
plication of local technical know-how (Goldin, n.d.).
4.2.4. Assignment of responsibilities
Yacimientos Petrolfero Fiscales (YPF), a state-owned petroleum
and NG exploration and production company, was charged with
implementation while Gas del Estado, a state-owned NG trans-
mission and distribution company was assigned the supervisory
function (Collantes and Melaina, 2011).
4.2.5. Financial incentives
Government offered credit lines to cover the incremental cost
of acquiring an NGV or the conversion of a conventional vehicle
(ibid.).
12 O.O. Ogunlowo et al. / Energy Policy 76 (2015) 717
4.2.6. NG pricing
The country operated a regulated pricing regime through Re-
solution 30/85 which pegged the price of CNG at 45% of premium
gasoline price by energy equivalence.
4.2.7. Building consumer and market condence
Argentina has an impeccable safety standard. Creating demand
through the conversion of the government eet and pioneering
the development of refuelling infrastructure with three strategi-
cally located CNG stations one a few blocks from the government
house boosted consumer condence (Goldin, n.d.; Collantes and
Melaina, 2011).
4.2.8. NGV infrastructure development
Argentina has the fourth largest network of stations in the
world and the VRI is marginally over the benchmark (Table 2). One
of the factors that facilitated CNG adoption was the existence of a
good NG transportation and distribution system which covers
11,000 km and 93,000 km respectively (Table 2). Necessary work
included the construction of transmission pipelines to link Loma
de la Lata to gas markets and the development of a network of
refuelling stations.
4.3. Brazil
4.3.1. Strategic intent
Economic considerations and environmental concern are the
main drivers for the CNG programme in Brazil (Nijboer (2010)).
Though the use of alternative transport fuel began on a small scale
in the 1920s, air pollution, resulting from rapid population growth
and the international oil crisis in the 1970s prompted an intensive
search for alternative transport fuels. This led to the large scale
production of transport fuel from biomass, mostly sugar cane
ethanol, and culminated in the launch of a CNG programme for
urban bus eets in 1991/92 and subsequently, all vehicle types in
1996 (NGV Global, 2009; Nijboer, 2010). Brazil has a strong auto-
mobile manufacturing industry and is one of the leading countries
in the production of AFVs.
4.3.2. Learning and adaptation
Brazil employed domestic research to develop sound regula-
tions, codes and standards (Marbek, 2010).
4.3.3. Assignment of responsibilities
Inmetro was charged with the responsibility of establishing quality
and safety regulations, Ibama was responsible for providing environ-
mental related regulations, and Petrobras was responsible for the
production and transportation of NG (NGV Global, 2009).
4.3.4. Financial incentives
There is a reduced sales tax on NGV compared to conventional
vehicles. Government also provided loans for conversion kits for
taxis and rebates of up to 75% of annual vehicle registration fees. In
2009, the CNG: Green Sign for the Economy programme was
launched offering new users 400 m3 of CNG free of charge and a
10% discount on vehicle conversion (Marbek, 2010; Nijboer, 2010).
4.3.5. NG pricing
NG was priced at about 50% of gasoline (Marbek, 2010; Nijboer,
2010). The average cost for NG was R$1.213 compared to R$2.538
for the gasoline equivalent. Low ethanol prices led to a reduction
in NGV growth between 2005 and 2009 (Nijboer, 2010). However,
the market is recovering with rising price of ethanol.
4.3.6. NGV infrastructure development
OEM NGVs are available and conversion workshops are wide-
spread. Brazil has developed tri-fuel cars which can run on etha-
nol, petrol and NG. NGVs represent almost 5% of the total vehicle
stock, 4% of total road fuel consumption and 10% of NG demand
(Nijboer, 2010). The country has the fth largest CNG refuelling
station network in the world with a VRI that falls within the
benchmark (Table 2). The transmission and distribution pipelines
cover 9219 km and 18,000 km respectively (Table 2) with 45.71%
located in Sao Paolo and 27.49% in Rio de Janeiro (Nijboer, 2010).
The Blue Corridor initiative, a proposed regional pipeline to link
Argentina, Brazil, Chile and Uruguay may boost NGV market
growth (NGV Global 2009).
4.4. Iran
4.4.1. Strategic intent
Economic considerations and energy security prompted the use
of CNG as a transport fuel in Iran (Korin and Luft, 2006; and Nij-
boer, 2010) as energy consumption rose from 1.6 to 4.5 quadrillion
Btu between 1980 and 1998, with gasoline representing the largest
share (EIA, 2000). About 50% was imported as domestic demand
exceeded local rening capacity (Nijboer, 2010) thus making Iran
the second largest importer of gasoline in the world (Oil & Gas
Directory Middle East, 2011). The high cost of government subsidy
on petroleum products (e.g. about $3.1 billion in 2004) com-
pounded the situation (NGV Global, 2004). The nuclear pro-
gramme makes Iran susceptible to international sanctions and
there were fears that an embargo could have adverse effect on the
economy. Substituting gasoline with CNG therefore provided a
potential solution to a number of challenges (Korin and Luft, 2006;
Nijboer, 2010). Iran aims to account for 810% of the total global
gas trade by 2025 and various NG infrastructure investment plans
have been developed (Omidvar, n.d.).
4.4.2. Legal backing
Government placed a mandate on OEMs to make 40% of their
annual production NGVs (Nijboer, 2010).
4.4.3. Learning and adaptation
Iran started its automotive use of NG with LNG and initiated
pilot projects in 1977 but could not continue due to the difculty
supplying the LNG and thus switched to CNG (ICNGA, 2011). Fol-
lowing the success achieved with CNG, the Iranian Fuel Con-
servation Organisation (IFCO) developed the Iranian NGV master
plan in 2002 using the Italian, Argentine and New Zealand stan-
dards (NGV Global, 2004, 2008). IFCO supports a variety of re-
search and development on CNG technology and conservation
(NGV Global, 2008).
4.4.4. Assignment of responsibilities
IFCO was established in 2000 to oversee fuel consumption,
undertake national conservation activities, and manage and pro-
mote the utilisation of CNG as a transport fuel (NGV Global, 2004,
2008, IFCO, 2013).
4.4.5. Financial incentives
Government provides incentives for purchase of OEM NGVs
and subsidises the cost of retrotting gas stations to supply CNG
(NGV Global, 2004, 2008).
4.4.6. NG pricing
The price of CNG is regulated by government and is set at 25%
of the gasoline equivalent price.
 O.O. Ogunlowo et al. / Energy Policy 76 (2015) 717
4.4.7. Building consumer and market condence
National and international fairs and multimedia campaigns
were undertaken to promote CNG and provide safety information
(NGV Global, 2004; 2008; Korin and Luft, 2006).
4.4.8. NGV infrastructure development
Iran has the third largest CNG refuelling station network,
nevertheless, the VRI exceeds the benchmark (Table 2); suggesting
the need for more refuelling stations and an additional 508 were
planned (NGV Global, 2012). The transmission and distribution
pipelines as at 2007 covered 28,000 km and 150,000 km respec-
tively (Table 2).
4.5. Pakistan
4.5.1. Strategic intent
Environmental considerations, economic concerns and energy
security are the main drivers in Pakistan (Raza and Farah, 2008).
Rapid growth in the number of vehicles between 1980 and 1998,
from 680,000 to 3.8 m, led to a signicant increase in air pollution
particularly in urban areas due to high vehicle concentrations
(Society for Human Rights and Environmental Pollution, n.d.).
About 82% of the country's petroleum products are imported and
the road transport sector is responsible for 47.2% of total con-
sumption (Khwaja and Khan, 2005). Increasing international crude
oil prices and the resulting pressure on the country's foreign re-
serve made the need for alternative fuels inevitable. Consequently,
CNG was adopted to boost balance of trade by reducing import
expenditure, reducing dependency on petroleum imports and
improving ambient air quality.
4.5.2. Legal backing
Government promulgated the CNG (Production and Marketing)
Rules in 1992 and formulated the Petroleum Policies of 1994 and
1997 (Raza and Farah, 2008). In 1998 a mandate was set to attain
150 CNG refuelling stations and 100,000 NGVs by 2000.
4.5.3. Learning and adaptation
CNG adoption was pioneered by Hydrocarbon Development
Institute of Pakistan (HDIP) in 1982 with the development of the
country's rst CNG refuelling station (Raza and Farah, 2008).
4.5.4. Assignment of responsibility
The Ministry of Petroleum & Natural Resources provided policy
initiatives, the Oil & Gas Regulatory Authority (OGRA) was re-
sponsible for the regulation, and HDIP provided research and de-
velopment (Raza and Farah, 2008).
4.5.5. NG pricing
A free market pricing system was employed; nevertheless, CNG
price did not exceed 50% of gasoline price (Sarwar, 2001).
4.5.6. Financial incentive
Government provided incentives such as a subsidy for cylinder
testing (Nijboer, 2010), granting CNG companies' a 5-year ex-
emption from duties and sales tax (Raza and Farah, 2008) and
import duty and sales tax exemption for vehicle conversion kits
and refuelling station equipment (Sarwar, 2001).
4.5.7. NGV infrastructure development
CNG adoption benetted immensely from the NG infrastructure
already in place before the commencement of the CNG pro-
gramme. Pakistan possesses one of the most developed NG
transmission and distribution networks in South Asia (Kalim,
2003). There are NGV OEMs as well as CNG conversion kit and
mass ow digital dispenser manufacturers in the country (Raza
13
and Farah, 2008; Nijboer, 2010). Pakistan has the second largest
number of CNG refuelling stations in the world (Table 2). The VRI
is within the benchmark. To ensure market penetration, govern-
ment instituted a liberal system for CNG retail licensing and
prioritised the provision of NG distribution infrastructure to CNG
stations (Raza, n.d.).
4.6. United States of America
4.6.1. Strategic intent
The US, though the world's third largest producer of crude oil,
is the largest net importer (IEA, 2013). To reduce this import de-
pendency, the government initiated steps towards energy in-
dependence including the automotive use of CNG. The key drivers
for NGV adoption are energy security, reduction of GHG emissions,
improving local air quality and economic growth (Marbek, 2010).
4.6.2. Legal backing
The Natural Gas Act 1938 which empowered the erstwhile
Federal Power Commission (FPC) to regulate the rates charged by
NG transmission companies was the rst occurrence of regulation.
The FPC was dissolved in 1977 and renamed Federal Energy Reg-
ulatory Commission within the Department of Energy. The prin-
cipal legal instrument for NG activities is the United States Code
Title 15, Chapter 15b. Review of the major legislation indicates the
use of incentives rather than mandates for the adoption of NG as
automotive fuel.
4.6.3. Learning and adaptation
Government provides funds for research and development of
AFVs. One such initiative is Clean Cities, a governmentindustry
partnership, sponsored by the U.S. Department of Energy's Vehicle
Technologies Programme (VET). Clean Cities advances the use of
alternative fuels and vehicles by promoting advanced technologies
to the general public through demonstrative use in school buses,
transit buses, airport vehicles, taxis and delivery eets.
4.6.4. Financial incentives
There are a number of initiatives at both Federal and State le-
vels geared at fostering a sustainable NGV market. Key initiatives
at the Federal level include The Energy Policy Act 2005 which al-
lows an income tax credit of 30% of the cost of NG refuelling
equipment, up to $30,000 for large stations and $1000 for vehicle
refuelling appliances (VRA), effective on purchases placed in ser-
vice between December 31, 2005 and December 31, 2010. The
Emergency Economic Stabilisation Act/Energy Improvement and Ex-
tension Act 2008 extended the dates on many of the existing en-
ergy efciency tax incentives including those of The Energy Policy
Act 2005. Safe, Accountable, Flexible, Efcient Transportation Equity
Act: A Legacy for Users, (SAFETEA LU) governs the federal surface
transportation spending and offers an excise tax credit of $0.50 per
gallon gasoline equivalent (GGE) for both CNG and LNG provided
the gas is used as automotive fuel. The American Recovery & Re-
investment Act 2009 (ARRA) was intended to stimulate the econ-
omy following the recession of 2008. It enhanced incentives under
The Energy Policy Act 2005 by increasing the tax credit for the
purchase of equipment brought into service during 2009 and 2010
to 50% of cost up to $50,000 for refuelling stations and $2000 for
VRA.
4.6.5. NG pricing
CNG is priced lower than other fuels partly as a result of lower
taxes. The average price of CNG is $2.33/GGE, about 67% of the
average price of gasoline ($3.46/gallon) and 61% of that of diesel
($3.81/gallon). The price differential of 33% with CNG is not as
strong as in some more successful markets and may not be
14 O.O. Ogunlowo et al. / Energy Policy 76 (2015) 717
perceived as adequate given that the OEM NGV is about 15% more
expensive than a gasoline equivalent.
4.6.6. NGV infrastructure development
The US has experienced limited penetration of NGV at 0.13%
(Table 2). With 1438 CNG refuelling stations, 46 LNG stations and
4747 vehicle refuelling appliances (VRA), the VRI of 174 falls far
below the economically sustainable growth range.
4.7. New Zealand
4.7.1. Strategic intent
Recession, unemployment, the oil crisis in the 1970s, (a time
when the country depended mainly on imported oil), and an ex-
isting NG supply surplus under the take-or-pay9 agreement
prompted the government to explore CNG as a transportation fuel
(Gwilliam 2000; Kojima, 2001). CNG offered the opportunity to
improve the balance of trade and reduce the level of unemploy-
ment (Kojima, 2001).
4.7.2. Legal backing
Upon the commencement of the CNG programme in 1979,
government established a mandate of 150,000 NGVs by 1985
subsequently revised to 200,000 NGVs by 1990 (Gwilliam, 2000;
Kojima, 2001).
4.7.3. Learning and adaptation
The government established a research and development pro-
gramme and funded various studies. This led to the development
of the CNG standards and implementation plan (Gwilliam, 2000;
Kojima, 2001).
4.7.4. Assigning of responsibilities
Government instituted the CNG Coordination Committee (CCC)
to coordinate the implementation of the CNG programme (Gwil-
liam, 2000; Kojima, 2001).
4.7.5. Financial incentives
Government provided various incentives including loans for
refuelling station development, 25% grants for mechanical equip-
ment in refuelling stations, NZ$200 grant for conversion kits, ac-
celerated depreciation for vehicle conversion, NZ$300CNG refuel-
ling voucher upon vehicle conversion, and 100% loan for vehicle
conversion kits (Gwilliam, 2000; Kojima, 2001).
4.7.6. NG pricing
The government regulated CNG pricing and pegged it at 50% of
premium gasoline price on energy equivalent basis (Gwilliam,
2000; Kojima, 2001).
4.7.7. Building consumer and market condence
Government launched various awareness campaigns to en-
lighten the general public (Kojima, 2001).
4.7.8. NGV infrastructure development
The CNG industry attained a peak of 110,000 NGVs and 450
CNG refuelling stations in 1984. The market collapsed in 1985
following the sudden withdrawal of the nancial incentives and
this was compounded by the departure from established conver-
sion standards which caused technical problems and resulted in
negative publicity (Gwilliam, 2000; Kojima, 2001). The population
9
An agreement which required the buyer to pay for a contractually de-
termined minimum volume, even if delivery was not taken.
of NGVs and CNG stations declined to 201 and 14 respectively by
2011 (Table 2).
4.8. Nigeria
4.8.1. Strategic intent
The need to reduce gas aring is the driving force for the do-
mestic utilisation of NG.
4.8.2. Legal backing
There are no legal provisions to promote the automotive use of
CNG. However, successive governments have promulgated laws
aimed at abating gas aring but these have failed to achieve the
desired results as paying the stipulated nes continued to be more
economical than utilising or re-injecting gas (Ayoola-Daniels,
2008a; 2008b; Otiotio, 2013). The legislation includes: The Petro-
leum (Drilling and Production) Regulation 1969 which requires the
submission of NG utilisation plan; The Associated Gas Re-injection
Act 1979 which prohibited unapproved gas aring effective Jan-
uary 1984; The Associated Gas Re-Injection (Continued Flaring of
Gas) Regulation 1984 which stipulates stiffer conditions for the
issue of aring permits and; The Associated Gas Re-injection
(Amendment) Decree 1985 which provided for steeper nes.
Following the failure of legislation, incentives were provided
through the Associated Gas Framework Agreement of 1992 and
later through Section 39 of The Companies Income Tax Act 2007. The
most recent legislative efforts are the Associated Gas Re-injection
(Amendment) Bill 2010 which sought to stipulate a gas are out
date of December, 2012 but failed in the National Assembly and
the Petroleum Industry Bill 2012 which seeks to comprehensively
restructure the oil and gas industry but is yet to be passed into law
since its rst introduction in 2008. According to the NNPC website,
a National Gas Master Plan was launched in 2008 with the aim to
reposition the country as a regional gas supply hub by 2014 but
there is no public information on the plan or on the progress of the
implementation.
4.8.3. Learning and adaptation
The government owned Nigerian Gas Company Limited (NGC)
which is wholly responsible for gas transmission and sales, and a
local company entered into a joint venture agreement in 2007 to
establish a chain of CNG relling stations. The pilot scheme is in
Benin City, within the Niger Delta region, where gas is produced.
Targets included the conversion of 50,000 vehicles in the rst four
years and the construction of 810 CNG stations, 50 km of steel
pipeline and 2 conversion workshops in the rst two years. As at
the end of 2013, seven years after the commencement of the pilot
programme, only the target for conversion workshops has been
met.
4.8.4. Assignment of responsibilities
There are no specic agencies set up to promote the auto-
motive use of CNG. However, the NGC was established in 1988 and
according to its website, it has the mandate to efciently gather,
treat, transmit and market Nigeria's NG and its by-products to the
domestic and regional markets.
4.8.5. Financial incentives
There are no known incentives by government. The market
operator offers a soft loan scheme to encourage conversion. The
loan repayment is through a price adjustment mechanism during
relling.
4.8.6. NG pricing
The government instituted the National Domestic Gas Supply
Policy and the National Domestic Gas Supply and Pricing
 O.O. Ogunlowo et al. / Energy Policy 76 (2015) 717
Regulation in 2008 to address gas pricing, sustained domestic gas
supply, and export revenue (FRN, 2008). The Policy mandates all
NG producers to dedicate a proportion of their production for
domestic supply, categorises the market into 3 sectors and sets the
supply rates. The sectors are: the Strategic Domestic Sector, ef-
fectively the power industry; Strategic Industrial Sector-the users
of gas as a feedstock and the Commercial Sector-the users of gas as
a fuel; cement manufacturing and industry (but not transport).
The Policy also established a Strategic Gas Aggregator as an in-
terface between gas producers and suppliers to ensure domestic
supply. The policy contributed 28 mcm of NG daily to the domestic
market between 2011 and 2012 MPR (2012).
The Regulation stipulates a oor price that ranges from about
$0.1/mmscf for the strategic domestic sectors to over $2/mmscf for
the commercial sectors. These prices are below international
market rates thus, rising gas prices in key international markets
continue to pull production into the export market. Consequently,
there is a disproportionate focus by gas suppliers on LNG export. A
major shortcoming of both the policy and the regulation is the
non-inclusion of the transportation sector.
The market operator has set the price of CNG at N91 per energy
equivalent of a litre of gasoline, as a deliberate strategy to en-
courage conversion. The price of gasoline is N97 with a subsidy of
N49.81 representing 34% of the actual market value. The price
differential of N6 (6.2% of the price of gasoline) is marginal and
insufcient to stimulate the market. The results, seven years after
commencement of the pilot, support this argument. Government
attempted to withdraw the subsidy on gasoline in 2012 by in-
creasing pump price from N65/l to N140/l but this was resisted by
the people and led to widespread national crisis which resulted in
partial reinstatement of the subsidy with a price of N97/l.
4.8.7. NGV infrastructure development
There are six CNG refuelling stations, located in Benin City, and one
mother station10 with attached relling station, in Lagos. The low VRI
suggests that further growth can be accommodated in the NGV po-
pulation within the geographical location of the stations. The NGV
eet of 2210 is largely retrotted and mainly light duty vehicles.
5. Comparative analysis
Table 3 summarises the analysis and shows the diversity in the
experiences of the countries examined. Based on the analysis, the
following issues arise as barriers to market development in Nigeria:
The absence of a legal and regulatory framework: Apart from
making pronouncements at public functions, government has
not demonstrated any seriousness towards the implementation
of NG in the transportation sector as there are no standards or
regulations. As revealed by the analysis, the establishment and
enforcement of sound guidelines, codes and standardsas well
as the use of legislative, regulatory and/or judicial mandates
help deepen penetration. Divergence from established conver-
sion standards in New Zealand caused technical problems
which resulted in unfavourable publicity and uctuations in
vehicle conversion rates, while adherence to standards in Ar-
gentina spurred growth. In India, the various mandates issued
by the Supreme Court were pivotal to CNG adoption. In Paki-
stan, Iran and New Zealand, mandates were used to foster ve-
hicle conversion, obtain OEM participation and achieve CNG
infrastructure development.
10
A Mother station is used to ll large volumes of CNG into mobile storage
trailers.
15
Lack of government support: There is no known form of gov-
ernment support unlike the other markets investigated where
government support drives participation. However, CNG pro-
grammes must not rely on excessive government subsidies. The
programme in New Zealand was over reliant on government
incentives and, as such, the removal resulted in the collapse of
the market. In Argentina, fuel price differentials and credit lines
were the incentives provided, while in Pakistan custom duty
and tax exemptions were the major incentives provided. The
experience of Pakistan, which has highest NGV penetration rate
in the world, suggests that incentives to corporations to invest
in the CNG programme may have higher impact, as opposed to
consumer incentives.
Insufcient price advantage: The current price gap of 6.3% be-
tween gasoline and NG does not appear to be compelling as the
subsidy on gasoline erodes the long term economic benet of
CNG. As seen in the countries examined, the price differential is
a key success factor and ranged between 33% (USA) and 75%
(Iran).The fastest growth is in Iran where the price differential
is the greatest while Pakistan, having the highest saturation,
has CNG priced at 50% of equivalent gasoline. NGV penetration
in India is less than 5% and this could be due to the long period
of subsidy for gasoline and diesel which depressed the poten-
tial price differential.
Misplaced priority: Nigeria embarked on the development of the
regional and international export markets ahead of domestic use as
demonstrated by the WAGP and NLNG export terminals which
were developed ahead of domestic distribution network. This
prioritised the export market ahead of domestic supply. Making
national interest a priority ahead of regional infrastructure is a
critical success factor as seen in Argentina, Pakistan and Brazil. The
Argentine and Pakistani successes are in part due to their well-
developed NG transmission and distribution network and as seen
in Brazil, the country developed national pipelines ahead of the
Blue Corridor initiative.
Non-alignment of stakeholder interest: The current implementation
approach lacks coordination and is without focus. As seen in the
countries studied, aligning stakeholder interest is critical. Each
country had a main focus for the implementation and assigned
responsibilities for the critical elements of market development.
CNG Programmes must offer incentives to all stakeholders for
successful adoption. The removal of restrictions relating to proxi-
mity of refuelling stations in Argentina encouraged investment and
competition as companies could site their stations in locations
considered feasible without any restrictions.
6. Conclusion and policy implications
Though the motives, applications, political support, regulatory
environment and energy market dynamics of the countries ex-
amined are diverse, we note that concerns for ambient air pollu-
tion, energy security and economic considerations are issues that
resonate with Nigeria. We conclude that the principal impediment
to the market development of NGV in Nigeria is the lack of co-
ordination in implementation. This is evidenced by the absence of
legal backing, the lack of government support, insufcient price
advantage, misplaced priority and non-alignment of stakeholder
interests. We posit that government has to play a more central
role, set strategic goals, formulate policies, establish the necessary
legal and regulatory frameworks and assign responsibilities to
relevant agencies in order to develop the market and encourage
the entry of both local and global players. Meanwhile, the fol-
lowing short term policy interventions might encourage market
development:
16 O.O. Ogunlowo et al. / Energy Policy 76 (2015) 717
Pricing reform: There is an urgent need to address both retail
and wholesale prices. Wholesale prices are set below world
prices and need adjustment to encourage supply into the do-
mestic market. With respect to the retail market, a holistic
approach to the pricing of petroleum products is required to
develop a framework which will accommodate the dynamics
that exist for gasoline and create headroom for NG to thrive
concurrently. This is considered possible as the cost of gasoline
without the subsidy is N146.81, and using the global average
differential of approximately 50%, it may be possible to offer
CNG below N75/gasoline litre equivalent. We note that the
government recognises that the pump price subsidy of gasoline
is not sustainable and has attempted to remove it but public
resistance forced the government to rescind the decision. There
may be lessons from India in the gradual removal of subsidies.
Support for the establishment of refuelling infrastructure: Al-
though the current VRI is low, stations are very limited in
number (7) and concentrated in Benin City. To stimulate private
sector involvement, we recommend that the NNPC through its
mega station scheme, establish CNG stations in strategic loca-
tions following the example of Argentina. Refuelling infra-
structure is critical to market development as the most suc-
cessful markets have VRI that is within the recommended
benchmark or even higher.
The key lessons for Nigeria are in the areas of government in-
volvement, implementation coordination, and attractive NG retail
pricing and strategic refuelling infrastructure development. While
the conclusions reached may be useful for other countries with
similar situation, they may not be transferable to countries with
different dynamics in the energy markets.
The next steps of our research will be to identify the interests
and concerns of all stakeholders with a view to align them and
chart pathways for a successful CNG implementation programme.
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