FG, Oil Firms to Review Gas Sale Agreement

Minister of Power, Prof. Bartholomew Nnaji

The Minister of Power, Prof. Bartholomew Nnaji,  has disclosed that the Federal government was currently working out modalities for the execution of a market-based pricing regime for gas supply to power plants from oil companies in the country.

Nnaji said the new pricing regime on gas supply to existing gas turbine power plants in the country was scheduled to be reviewed within this month to reflect government’s plan to incentivise gas supply to the power plants by distributors.

According to him, the price regime, which currently stands at 60 cents per unit will likely increase to about $1 per unit at the completion of negotiations between the government and oil companies.

He said: “Government is working out modalities for the execution of a market-based pricing regime for gas supply to power plants as agreed with oil companies, the regime is scheduled to be reviewed within this month to reflect government’s plan to incentivise gas supply to the power plants by distributors and I think gas price which is currently at 60 cents per unit will increase to about $1 soon.”

The minister explained that the review became necessary at this point when government was poised to improve power generation, adding that the challenges of getting gas to power plants has continually hampered the generation and distribution of adequate power by these plants. He added that the Federal government was working round the clock to offset these challenges.

Nnaji equally stated that the availability and sustainability of gas supply to existing gas turbine power plants in the country has remained stable for a while now with adequate gas feedstock available for distributed to the power plants.  But he added that the country still contended with the challenges of poor gas distribution infrastructures.

“At this point, in terms of quantum there is adequate gas availability, it is just about getting the gas to all the plants particularly, gas going to plants in the western axis. There is an ongoing work to ensure that the gas line that will ensure reliability is standardised. I cannot tell you right here the exact date of its expected completion but the government is committed to addressing the problem of gas supply in that axis.

“What we will like to do with gas supply is line up the plants that are being designed with gas supply for those that are gas fired so this way before the plants get completed you have gas available. And the government has moved to ensure that other relevant ministries like petroleum resources are involved in this processes to ensure proper alignment of stakeholders and agencies in this regards, so there is actual commitment for the infrastructure for gas delivery to be delivered as well as the actual gas itself,” Nnaji said.

Other plans by the government in the power sector as revealed by the minister include the planned privatisation and or concessioning of the National Integrated Power Projects (NIPPs) by 2014 when the country must have achieved some modicum of stability in power generation and distribution.

He stated that by 2014, each of the NIPP plants would,  according to worked-out plans by the government, be treated as individual companies with duties and responsibilities delegated to its constituted management just like what is currently obtained at the Egbin and Shiroro power plants.

He disclosed that   government would,  in line with this plan, compel the Nigerian Electricity Regulatory Commission (NERC) to issue operating licences to the companies that will emerge from the NIPPs. According to him,   the licences will pave the way for them to enter into power generation and distribution agreements with relevant agencies of the government.

“By 2014, when we expect more power in the national grid, each NIPP plant will be treated as an individual firm, the NIPP plants will also become individual companies and we will have to talk to the electricity regulatory commission to issue them licences otherwise it becomes difficult for them to sign power agreements like power purchase and gas supply agreement with relevant agencies, by then we will have to determine whether they will be concessioned or privatised,” he stated.