Manufacturers urge government to revisit gas pricing as oil price dips
With global oil prices plunging, local manufacturers have asked the Federal Government to revisit the price of gas to reflect the current market realities.
According to them, there is need for the diligent application of the pricing mechanism under the new gas regulation to bring down the price of gas drastically given the current low price of crude oil at the international market;
The equally argued that the government addresses the categorization of manufacturers’ users of gas as commercial users in the natural gas pricing gazette instead of Strategic Industrial Sector.
Indeed, the pricing mechanism to both sectors in the new Regulation is expected to be based on the export parity of oil which is the price paid to the Upstream producers by Nigeria Liquefied Natural Gas Company (NLNG) and is market-driven as it reflects the movement in the price of oil in the international market.
They stressed the need to structure the Natural Gas Pricing Act to allow for “free buyer and free seller” in order to avoid monopoly in areas of supply coverage.
Hitherto, the former Senior Technical Adviser to the immediate Minister of State for Petroleum, Timothy Okon, had stated that a new regulation will be unveiled in June this year to address issues bordering around gas pricing, monopoly and licensing.
Okon at a gas interactive session with the Manufacturers Association of Nigeria (MAN) Gas Group in Lagos, said the bill will also address structural issues in the industry.
Earlier, the Director-General, MAN, Segun Kadir, represented by the Director, Corporate Communications, MAN, Ambrose Oruche, expressed deep concerns over the high price of gas offered to manufacturers in the country, saying the sector is already beset with myriads of challenges.
In his words, “We have cried out to the government and nothing yet has been done so far. We have a situation where gas franchises are threatening a further increase in the price of gas. We have to put a stop to this. We need a new regulation that would regulate the gas industry.”
He also called on the need for manufacturers to be classified as a strategic industry under the gas master plan, urging the government through the Ministry of the Petroleum Resources to suspend ant gas increase.
He stated that many jobs would be threatened if the price of gas is increased, adding that some manufacturing outfits have already closed shops due to the harsh operating environment in the country.
“After conducting a survey, we observed that the energy cost accounts for over 40 per cent of the cost of production. This is disheartening, so any gas price increase would only impact negatively on our operations,” he added.
Okon, on his part, said: “In the lobby contemplated that will be passed in June, monopolies will not be allowed, because of a new regulator, not DPR, but a new entity will regulate and license the activities of distribution companies and once that law comes into effect, it would address the structural issues in the industry, such as price-fixing. All these things are in the proposed relegation just that it has not been promulgated. What this would do is to take us back to willing buyer-willing seller arrangement.
“We do not anticipate the government fixing the price of gas. It is not the role of the State, but what we expect is that commercially derived pricing arrangement such as the Export Parity Price (EPP) which is not set by the government will form the basis of the pricing while the pricing formula will now be in the regulation.”
According to him, when formulated, the gas pricing regulation would be one of the first to come out of the regulation.
“The principle legislation should be passed in June of this year which the first will be the gas pricing regulation that will come out of the new regulation. It will not be fixing the price of gas; its intention is to make sure pricing is market-based and not imposed by monopoly. It will check market abuse and it would allow you to have market-based contracts where prices will reflect in the markets.”
He said differential pricing is at the heart of aggregation, stressing that without differential pricing, gas suppliers will have difficulties to supply gas, there will be a preference to supply gas only to certain sectors and we want to ensure that those who need gas get it at a market-based price and not a price to be fixed.