HomeIndustry SectorsGenerationNigeria bullish on solving gas to power problem

Nigeria bullish on solving gas to power problem

Nigeria’s federal government has put together a parcel of measures to address the insufficient supply of gas to power plants in the West African country. 

Local news source report that multiple government agencies have worked together to find a solution for the extra 370 million metric cubic feet of gas needed per day to power gas power plants – some of which are standing idle due to lack of supply.

Pay off gas debts

In a bid to restore the faith of gas suppliers owed billions by the power sector, Minister of Petroleum Resources Diezani Alison-Madueke said the Central Bank of Nigeria (CBN) would pay off about N25 billion legacy debt owed to gas suppliers by power generation companies.

The Ministries of Petroleum Resources and Power, the Central Bank of Nigeria (CBN) and the Nigeria Electricity Regulatory Commission (NERC).

Minister of Petroleum Resources Diezani Alison-Madueke, Minister of Power Chinedu Nebo, CBN Governor, Godwin Emefiele, and NERC, Chairman, Dr. Sam Amadi, said.

Hike in gas prices

Ms Alison-Madueke also explained that under government intervention plans, the power industry can be more profitable with a 100 per cent price hike.

“Nigerian Electricity Regulatory Commission (NERC) has approved a new benchmark price of $2.50/mcf for gas supply (up from $1.5/mcf), and $0.80/mcf as transportation costs for new capacity, from 2014. This benchmark will rise with US inflation annually.

“In addition to new price, NERC will require firm commitments from gas suppliers, that they will supply the agreed quantities of gas to generation companies as long as payment terms are met.”

Commenting on the price increases, Dr Sam Amadi, chief executive of NERC, said: “As always the cost we benchmark is the real cost of production, whether of coal, gas or other renewable feed stock, and then compared with the market. So $2.50 is deemed to be a reasonable price if you compare both the cost of gas processing and what other industries pay for gas.”

Enough gas for power sector

Minister of Power, Chinedu Nebo said with the new price, suppliers would be more willing to make their product available to the power sector.

“I am satisfied that the current arrangements will deliver the needed gas to Nigeria power producers. It is very clear that this is unprecedented cross-sectoral synergy between the main players in the power sector, Ministries of Power and Petroleum Resources, CBN, NERC and NNPC getting together to solve age-long problems.

“We have the capacity to solve the problems of this country and we have synergized in a very robust manner to do this. So the answer to whether we will now have enough gas for the power sector is a solid yes.”

No windfall for discos

However, NERC Chairman, Sam Amadi, warned that the N25 billion intervention by the CBN to pay off debts owed to gas suppliers by the power companies is not a windfall for the sector.

Mr Amadi said: “The N25billion or whatever is agreed will still be repaid by the distribution companies through the tariff process. It is like an intervention to secure for us confidence in the gas market but the ultimate responsibilities is on the discos”.

Amadi explained that both the new price and the Central Bank of Nigeria interventions are contingents that will by captured in the Multi-Year Tariff Order, a five-year tariff plan which is based on capturing the real cost of power production.

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