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FG unveils new gas prices

*Now $3 mcf for manufacturers

By Clara Nwachukwu & Yemie Adeoye
LAGOS—FEDERAL Government, Thursday, announced a new gas pricing regime for the industrial sector, with a view to revamping and boosting indigenous manufacturing capacity.

Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, disclosed this yesterday, in a keynote address at the August Conference on Gas to Power-_ Prospects and Challenges, organized by energy correspondents.

She said the gas reprieve for the manufacturers would be segmented into two separate pricing structures _ producer to wholesaler/local distribution company, LDC, and the wholesale/LDC to end user or manufacturers.

Mrs. Madueke said the new gas pricing, capped at $3 per million cubic feet, mcf, was targeted at effectively freeing gas price to manufacturers from low pour fuel oil, LPFO, or black oil indexation, especially for the wholesaler and manufacturers. She said:

“The price will be negotiated on a ‘willing buyer, willing seller’ basis, not only to ensure transparency but also reflect the true cost of distributing and marketing of gas.”

The minister added, however, that pricing for the producer and wholesaler/LDC will continue to be based on LPFO indexation, stressing: “unlike in the past which was uncontrolled, the new price is capped at $3/mcf. This provides a major protection for downstream pricing arrangement between the wholesalers/LDC and their end user manufacturing customers.”

New pricing structurers

The implementation of the new pricing structures is expected to run between now and 2013, to address the challenge of unpredictability in pricing. But the implementation of the pricing between the producer and wholesaler/LDC will be done in phases _ now to end 2012, $2/mcf; end 2012 to end 2013, $2.50/mcf; and end 2013 and beyond inflation corrected, $3/mcf.

Mrs Madueke noted that the new manufacturing gas pricing complemented the recently approved increase in gas to power price, to ensure that producers get an aggregate price that was at or close to export parity.

Until now manufacturers had continued to groan under the high cost of gas, which impacts on production cost and eventually passed on to the final consumers, thus making made_in_Nigeria products uncompetitive at the international market.

The minister who explained that the pricing structure, “will create transparency and efficient management of the dynamics of pricing within each relationship,” added that the move was approved by President Goodluck Jonathan in acknowledgment of that fact that the “growth of the manufacturing sector is crucial to the delivery of the economic agenda.”

Noting that one of the issues the Petroleum Industry Bill, PIB, was meant to address was the imperfection in the value chain structure, she said: “The PIB recognizes three distinct stakeholder groups in the gas supply chain to the manufacturing sector, namely, the producers, transporters and wholesaler/LDC.

This ensures transparency in the value chain, with the resulting impact of a more attractive end user price.”

With regard to the PIB, which she said would soon be passed into law, Mrs. Madueke said that in view of the planning and strategies put in place for its smooth transition, investment inflow afterwards are expected to generate about 30,000 jobs locally, despite the poor funding of gas infrastructures in the country.

She said: “Addressing these challenges has been our focus lately, and significant progress is being made. In the last few months we have focused aggressively on implementing the most aggressive reform of the commercial framework for gas supply to power in Nigeria.”

Mrs. Alison_Madueke also stated that the country’s four refineries were currently working at an optimal capacity utilisation of 60 percent.

She said that in line with its objective to own 50 percent of retail outlets in the country, the Nigerian National Petroleum Corporation, NNPC, had also acquired about 437 service stations nationwide in addition to its 37 mega_stations across the country and 12 floating mega_stations.


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