Gas pricing intrigues hurting new deals

The intrigues trailing the formalisation of the gas pricing at $2.50 may have been jeopardising numerous gas-to-power supply deals anticipated by the operating firms in the sector.

The price was approved by the former Minister of Petroleum, Mrs Diezani Alison-Madueke since August last year, but The Guardian gathered that the price has not been properly formalised by the appropriate quarters, thereby making it difficult for prospecting contractors to sign various supply agreements.

A source in the ministry said the former minister refused to sign the necessary document that would allow the companies to operate based on the new pricing mechanism for reasons yet to be known to stakeholders.

Nigeria’s gas pricing trend has been on the rise, increasing from 20 cents to 70 cents, $1.50 and then $2.50 in 2014. Stakeholders however advocated for a higher price that could guarantee returns for the operators and spur the domestic gas supply, especially in the gas-to-power value chain.

The Senior Consultant, Nigeria Infrastructure Advisory Facility, Frank Edozie, who also lamented the shortfall in gas-to-power in country, said if the problem of gas supply is not solved, with adequate consideration for transmission and distribution, the industry may not achieve the desired growth.

According to him, one of the key measures to be taken should be eradicating the menace of pipeline vandalism, which obstructs the lines that are expected to feed the power plants.

Lamenting the huge loss that the sabotage is causing the economy, he said each time a pipeline is vandalised, it costs not lesser than N100 million to get it repaired.

He noted that with the body language of the new government against vandalism has scared the vandals away. “We have had less effect of pipeline vandalism and this is already reflecting on improved electricity supply. “Therefore, a conscious decision has to be made in allocating more gas to the power plants, so that we can utilise the installed capacity optimally,” he said.

He also enjoined the Federal Government to initiate policies that would encourage the gas traders to invest massively in the sector. Edozie however urged the gas producers such as Chevron, Nigerian Agip Oil Company (NAOC), Pan Oceon, Seplat, Shell Petroleum Development Company (SPDC), and Total, to deliver additional gas volumes in other to meet their domestic obligations.

Meanwhile, the Managing Director, Seplat Petroleum Development Company (SPDC), Austine Avuru, was highly optimistic about the climbing trend of gas price, adding that the producers would be more comfortable at a market price of about $3.50, as it would guarantee returns on their investment. “Challenges of infrastructure development and pricing are the two key issues in the industry.

Ones we solve the problems, the gas sector is good to go,” he said. Avuru however urged the Federal Government to fast track the completion of the ongoing projects and also encourage private operators to buoy the infrastructure network in other to spur gas boom in the country. “We are very bullish about gas and we think domestic energy security is critical for this country’s future development and it is achievable in the next five years, if the proper environment is put in place,” he said.