New Gas Price Regime Soon

Fri, Apr 3, 2015
By publisher

Energy Briefs


THE Nigerian National Petroleum Corporation, NNPC, and the Department of Petroleum Resources, 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 Transportation Network Code, NGTNC.

David Ige, group executive director, gas and power, NNPC, 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 and DPR, following complaints by the Manufacturers Association of Nigeria, MAN, 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.

He said buyers and sellers would start choosing from various customers in the market. “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,” Ige said.

Why Residential Power Consumers Pay More


THE Nigerian Electricity Regulatory Commission, NERC, has given reasons why it excluded electricity consumers on the Residential 1 and 2 (R1 and 2) tariff cadre from enjoying the average 50 percent slash in electricity tariff that it recently announced. NERC, from its clarification at a meeting with the Electricity Consumer Association of Nigeria, ECAN, a consumer group in Abuja, explained that because it had earlier excluded R1 and 2 consumers from paying the reviewed tariff that brought about the increase which other consumers are complaining about, it will not extend the reduction to the class again.

It cited poor service delivery and inadequate electricity generation and supply to those classes of consumers as its reasons for such freeze, and hoped that by June when it reviews the tariff again, these anomalies would have been corrected. Giving clarification on the 50 percent tariff reduction, Sam Amadi, chairman, NERC, stated at the meeting that only industrial, commercial and high-end residential electricity customers (R3) are those who would benefit from the reduction starting from the end of March 2015.

“We have always tried to listen to complaints from consumers and operators alike and we carry out tariff reviews when necessary. We are a responsive and accountable regulator. Majority of the residential customers in R2 and R1 categories did not experience the January 1, increase in tariff. They will not also see any reversal or reduction in tariff as the industrial, commercial, and high end residential consumers whose tariff were increased. It was a reduction based on the impact collection loss had on the tariff,” Amadi said, stressing that NERC took the action because it saw that there were merits in the argument put forward by the Manufacturers Association of Nigeria, MAN, which had been vocal that the January 1,  tariff increase would impact heavily on their businesses.

According to him, the reduction in tariff was a decision reached in line with the commission’s business rules after consideration was given to protests from MAN on the implication of January 1, increase in tariff on their businesses. MAN had at a public forum on the tariff review, highlighted its challenges with the new tariff and warned that if left unattended to, majority of its members could be forced to close shops and put Nigerians under their employ out of work.

MAN also alleged that it was not consulted for its input by the commission in the run off to its review of the tariff, to which Amadi stated will be considered. The commission however held another meeting with MAN shortly after the public hearing where their concerns were comprehensively deliberated on for further action.

— Apr. 13, 2015 @ 01:00 GMT