FG to hike gas price by 50%

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BY KUNLE KALEJAYE, with agency reports

LAGOS — The Federal Government may have concluded plans to raise the domestic price of natural gas to $1.5 per 1,000 standard cubic feet as it aims to ensure efficient supply of abundant natural gas to thermal power stations nationwide.

This represents a 50 per cent increase in the current $1 price for gas to power plants.

Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, Mr Andrew Yakubu, disclosed this in Abuja, saying the move is aimed at encouraging more gas supplies/sales to power plants.

This is as against the current situation whereby they (suppliers) complain about what they describe as the “uneconomic price” of the resource.

Indications are that the development may result in an increase in electricity tariff with power producers trying to recover cost incurred.

Currently, fertilizer companies pay 90 cents for 1,000 cubic feet of gas while industrial users purchase 1,000 cubic feet of the product at above $2.50.

The price for power producers, who account for about 80 per cent of the domestic gas consumption, was increased about two years ago from $0.1 to $1.0 by the government for the same purpose of encouraging suppliers to sell to power plants.

These prices are, however, below the international market price for gas, which is about $3 per 1,000 standard cubic feet.

Indeed, there have been strong concerns that inappropriate pricing for gas as seen with the existing price regime might frustrate the Federal Government’s efforts at stabilizing power supply in the country.

This, experts said, was already happening as producers were shunning the power plants in favour of industries, thereby negating the government’s intention for the power sector.

Minister of Power, Professor Chinedu Nebo, also indicated the move to raise the price when he stated that appropriate pricing of gas was a necessary factor that would guarantee improved power supply in the country.

Nebo, who spoke of the disparity in price between gas supply to the power industry and the industrial sector, also cited the inability of the defunct Power Holding Company of Nigeria, PHCN, to promptly meet its financial obligations to gas suppliers as a major reason why gas supply to power plants had been erratic, negatively affecting power supply nationwide.

 

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