Govt plans deregulated gas price regime

31 March 2015, Abuja –

Nigerian National Petroleum Corporation (NNPC) and the Department of Petroleum (DPR) have advised manufacturers using gas to prepare for a ‘deregulated gas price’ mechanism.

The new regime may be introduced before the implementation of the Nigerian Gas Transporation Network Code (NGTNC).

The Group Executive Director,  Gas and Power, NNPC, Dr David Ige, who made this known in Lagos, said the time had come for manufacturers and other domestic gas users to buy the product at varying prices.

NNPC and DPR are asking foreign and indigenous firms to prepare for a market where price would be determined by supply and demand and not by the government as the NGTNC gets underway.

The execution of the NGTNC code, according to DPR, is in three stages: The manual (2015); partial auto (2016) and full auto implementation in 2017.

NGTNC is  being introduced by NNPC nad DPR, following complaints by the Manufacturers Association of Nigeria (MAN) that its members that the supply of gas is not transparent.

The government fixed the price of gas at $2.5 per 1000 standard cubic feet (scf) for power plants; methanol, fertiliser and petrochemical firms will buy at $3 for 1000 scf.

Ige said the manufacturers complaints that the exchange rate of  one dollar to N197 (official price) had eaten deep into their production costs was understandable, urging them to wait for the code.

He said the differential rates were bound to come up because of the government’s efforts at making operators access the product.

Customers he said, could buy gas at  $2.5, $2.8, and $3, depending on the sellers.

Ige, represented by the General Manager, Gas Pipeline Infrastructure, NNPC, Sam Mbakwe, said  buyers and sellers would start choosing from various customers in the market.

He said: “We are heading to a period where there would be willing buyers and willing sellers in the gas industry. The government regulated price is going to disappear soon. The regulated price is there because there are no commercial structures in place to guide the operation of the market. Once there are structures that would guide commercial activities, there would be change in the ways transactions are conducted. This will be made possible by the Nigerian Gas Transportation Network Code.

“You don’t expect somebody to bring his money, invest it by laying gas pipelines and charge lower prices for transporting gas from his base to where users or buyers would use the product. The economy is becoming market driven. What the government is saying is that people should handle gas from the commercial point of view.”

The Deputy Director, Gas Monitoring and Regulation, DPR, Antigha Ekaluo, said: “The goal of the code is to allow the forces of demand and supply to govern the market. DPR wants to reduce its intervention in the sector by taking a back seat. Though the DPR would perform its oversight functions or roles of ensuring that everything works out fine in the oil and gas industry, the body will take a back seat position to encourage growth.”

He said gas price fixing was out-side DPR’s purview, stressing that the industry would decide the price. “If you are a manufacturer and you have an item to sell, you fix your price and sell. Whoever is willing to buy your product would come and vice-versa. The same thing is what we are advocating for in the gas sector. The slogan is free entry, free exit.”

Ekaluo allayed fears that manufacturers would leave the market, saying the market is big to accommodate many players. He said no gas producers would sell at a fixed price.

The Director-General, Lagos Chamber of Commerce and Industry ((LCCI), Mr. Muda Yusuf, said manufacturers were using their own power plants because electricity supply is irregular. He said plants use gas, noting that  the huge cost of gas is inhibiting economic growth.

Yusuf said: “Manufacturers rely on alternative source of energy for growth. But the questions are: At what rate are they buying diesel to power their generators? At what price are they procuring gas for their power plants? The price is huge. This informed the decision of manufacturers to use advocacy as a tool of making the government reduce electricity tariff.’’

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