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Domestic gas price can’t cover production costs – OPTS

By Michael Eboh

Major oil production companies, under the aegis of Oil Producer Trade Section, OPTS, of the Lagos Chamber of Commerce and Industry, LCCI, have lamented that Nigeria’s domestic gas prices are kept at a regulated price, which does not cover its production costs.

In his presentation at a forum in Abuja, Chairman of OPTS, Mr. Clay Neff, disclosed that gas prices and fiscals must be competitive to appropriately cover development, production and transportation costs and make commercial returns possible.

He further stated that the huge debts owed gas producing companies is stifling the oil sector, adding that when outstanding debts are not paid, it is not reasonable to expect investors to commit additional investments to grow domestic gas supply.

In addition, he noted that since 2010, the funding level for the Nigerian National Petroleum Corporation, NNPC, share has not been sufficient to fully implement Joint Venture, JV, business plans.

According to him, the persistent shortfall in funding constrains growth as a significant number of viable projects could not progress. He tasked the Federal Government on the need to create a conducive business environment, as according to him, this is essential to attract investments and for reliable operations in the industry.

He disclosed that the proposed new gas policy should address these issues and others, so as to achieve the desired increase in gas production.

According to him, the policy should ensure the implementation of a Gas Supply Aggregation Agreements contract regime; transition to a willing buyer / willing seller gas market; ensure a power tariff that provides a commercial return and set globally competitive fiscals for gas.

He further stated that the Federal Government should, through the policy, attract investment in infrastructure development; complete critical National Integrated Power Project (NIPP) transmission lines; settle outstanding debts and establish bankable credit support facilities for future gas sales.

Again, he said the Federal Government should maintain stable policies, laws and regulations, while the new gas policy should help create an efficient and effective regulatory bodies; ensure that government honours contracts and maintain access to an independent and fair mechanism for timely resolution; ensure security of life and property and eliminate structural factors that increase operating and capital costs.

To this end, Neff added that the government should make effort to provide enabling commercial and fiscal terms; develop adequate infrastructure; repay outstanding gas invoice arrears; ensure sufficient funding for gas development and promote a conducive business environment.

Again, he said, “NNPC and its Joint Venture (JV) partners are working together to implement sustainable solutions which will fully fund JV budgets.

“To ensure on-schedule completion of projects, once multi-year projects are approved, annual budget provisions should take full account of funding needs over the project life.” Also, in his own presentation, the immediate past President of the Nigerian Gas Association, NGA, Mr. Bolaji Osunsanya, called for the immediate resolution of the challenges hindering the growth of the power sector.


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