A Review of the Nigerian Energy Industry

No commercial excuses in new gas-to-power regime – NERC

nerc126 August 2014, Abuja – The Nigerian Electricity Regulatory Commission (NERC) has said that gas producers in Nigeria will no longer have tangible commercial excuses to flare gas and not supply thermal generation plants in the country with its recent review of the commercial price of gas-to-power.

NERC said that by implication, its upward review of gas-to-power price from $1.50 to $2.50 per million cubic feet per day (mcf/d), in addition to $0.80 per mcf/d as transportation costs, is expected to punctuate whatever existing commercial excuses of gas producers in the country.

Chairman of NERC, Dr. Sam Amadi said in a recent interview with THISDAY in Abuja that the commission’s review of the commercial framework of gas-to-power is expected to tidy up the sub-sector and engender competitive commercial operation as regards gas production and supply to the electricity sector.

Amadi explained that the commission will as a matter of necessity request the commitment of industry players to the new regime. He said that NERC will insist on performance-backed implementation of the new price regime.

“The implication is that there is no longer commercial reason why flare should continue, the second one is that we are going to demand that this price is contingent on improved commitment from the gas players,” Amadi said in response to a question in that regard.

He further explained: “We had meetings with some of the gas players and the Central Bank of Nigeria (CBN) and this was made clear. We expect improvement; the last domestic supply obligation showed that these gas suppliers failed woefully. The oil majors failed woefully to live up to their commitments and so they treated the domestic supply obligation cavalierly and without any sense of commitment.”
“All that NERC is doing is to take away the excuses first; we want to make sure the price is good, we want to make sure that we create for them securitised guarantee in the value-chain of gas so that they will not say that they are dealing with delinquent buyers.

We will get a contract that is enforceable with some security and build confidence. We will commit to timely payment for gas supplied and the converse of that is that unlike before, they will commit to volume that is certain and they will commit to financial and legal liability for failure to perform,” he added.

He spoke more on the commission’s demand for a contract based regime, saying: “We cannot give the gas suppliers the kind of leeway that they had where they are not bound by their commitment to supply gas and where the supply of gas was based on best endeavour and so they had legal rooms big enough to at the shortest inconvenience refuse to supply gas according to their commitment.

We are looking for a new regime entirely; we consider the crisis a good thing to waste because it should lead to a revision of the gas-to-power framework in terms of policy, regulation and commercial.”

“Yes, we will not accept best endeavour. What is best endeavour? It has got us stuck where we are today. Because of the joint venture nature of operation in the petroleum sector, gas has been a side-look for the petroleum industry, but the petroleum minister and everybody do not want gas-to-power in particular to be a side-look but a major focus because that will help if we really care about putting Nigeria off the generator economy,” Amadi stressed.



– This Day

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