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NMDPRA releases new gas pricing template for power sector, industries

By Collins Olayinka and Kingsley Jeremiah, Abuja
29 November 2021   |   2:54 am
A new Domestic Base Price (DBP) framework and applicable gas wholesale price for the strategic domestic sector has been released by the Nigerian Midstream and Downstream Petroleum Regulatory Authority

A new Domestic Base Price (DBP) framework and applicable gas wholesale price for the strategic domestic sector has been released by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

Chief Executive Officer (CEO) of NMDPRA, Farouk Ahmed, who disclosed this in Abuja at the weekend, explained that the new framework is in fulfilment of relevant sections of the Petroleum Industry Act (PIA) 2021.

The law, which was assented to by the President on August 16, 2021, and gazetted on August 27, 2021, provides a clear regulatory framework for the determination of a market-based pricing regime for the domestic gas market in Nigeria.

In line with Section 167 and the Third and Fourth Schedule of the Act, which requires the NMDPRA to determine the DBP, three months following the effective date of the Act, Ahmed said the Authority has now advanced the process of emplacing a new applicable wholesale gas price for the Strategic Sector of the Domestic Gas Market.

The Chief Executive Officer indicated that the applicable Wholesale Gas Price for the power sector will be the established Domestic Gas Price.

He hinted that the DBP will be determined yearly based on the criteria set in the Third Schedule of the Act, which is: reference DBP to prices of gas in countries with significant reserves and production of natural gas; ensuring that Base Price considers the lowest cost of gas supply based on a Three-tier Cost of Supply Framework; DBP is related market-prices tied to International Benchmarks (for strategic investors).

He said: “Accordingly, the Domestic Base Price shall be the Export Parity Price at the delivery point where there is a dominant supply of gas in Nigeria. Export Parity Price in this context is defined as a market-driven pricing framework, responsive to fiscal changes and weighed to ensure pricing flexibility while moderating swings to protect fragile domestic industries.”

He further explained that the pricing framework for gas conversion industries namely: ammonia, urea, methanol, polypropylene, Low Sulphur Diesel (GTL), shall be as currently specified under the Fourth Schedule.

The NMDPRA helmsman highlighted that the other commercial sector consisting of cement, non-grid power, iron and steel industries, aluminium and all such industries requiring gas for heating shall be DBP +US $0.50.

He stressed that these prices shall apply to gas supplied under the domestic gas delivery obligation, which shall be determined by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) under Section 110 of the PIA.

The NMDPRA boss revealed that the Authority is currently consulting with industry stakeholders in the development of DBP and applicable wholesale prices for the domestic gas market.

He assured that an industry-wide stakeholder engagement will equally be conducted before the final declaration of the 2022 DBP and wholesale price of gas to the strategic sectors.