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FG fixes new price for gas

By Yemie Adeoye & Oscarline Onwuemenyi
ABUJA—FEDERAL Government, yesterday, announced a new price regime for gas to power, even as it also indicated that the much-awaited and controversial Petroleum Industry Bill, PIB, would finally become law by early August.
The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, who made this known to newsmen during a Ministerial briefing on Domestic Gas, said this was part of government’s strategic effort to boost the supply of power nationwide through increased power generation.

Mrs. Alison-Madueke said that to drive home the new gas regime and ensure sustainability, the Federal Government had also concluded plans to ensure a full implementation of the Gas Master Plan.

Mrs.-Diezani-Alison-Madueke, Minister of Petroleum Resources

She said the government had outlined a focused two-point agenda for gas, stressing that this included an expeditious implementation of the Nigerian Gas master plan to attain focused short-term objectives and a few sustained medium term objectives.

The other objective, she said, was to position Nigeria competitively in global gas export by securing the Final Investment Decision of Brass LNG, while refocusing efforts on OKLNG and TSGP.

Sustained gas supply to power sector

The minister said: “One of the most critical enablers for sustained gas supply to the power sector is the price of gas. Current price of gas to power is about 0.2 dollars per Million Metric British Thermal Unit, MMBTU. A new price regime was introduced last year as part of the pricing policy. That price regime proposed a steady migration of the gas to power price to one dollar per mmbtu by the end of 2012. However, that regime has not been implemented in any of the GSPAs.

“At the moment, the gas sector consumes about 700 million metric cubic feet of gas per day, mmcf/d. However, this is set to increase to about 2500 mmcf/d by 2014. This is a significant growth requiring a major growth in investment by suppliers over the next few years.

“The current gas price clearly can not support such investments. Similarly, whilst the revised price proposed last year enabled growth in supply, that growth was limited to supplies coming from existing sources. To grow supply significantly, brand new supply sources are required and the investment required for such is more significant hence the need for a new pricing.

“In view of the above, I have secured Mr. President’s approval for the immediate implementation of a new gas to power price in the domestic market. This new pricing arrangement has been very positively received by the industry and should stimulate a major growth in new supplies critical to both our aspirations for power, but also for other gas based industries.”

Giving a breakdown on the new pricing regime, Mrs. Alison-Madueke said that by the end of year 2010, gas to power would increase to $1 dollar per mmbtu, and would move to 1.50 per mmbtu the following year.

She said it would move to $2 per mmbtu by end of 2013, while 2014 price would be determined by inflationary trends.
She added: “The price above will be capped by export parity, which means that at no time will Power Holding Company of Nigeria, PHCN, pay more for gas than the export projects are paying for gas.”


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