Hike in Electricity Tariff Looms as FG Increases Price of Gas

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As Nigeria continues to battle food scarcity and inflation, the oil and gas sector is caught in the web as the Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA) has announced an increase in the price of natural gas for strategic sectors.

The increase in the price of gas for power Generation Companies (Gencos) which is contained in a statement signed by NMDPRA’s chief executive, Farouk Ahmed, showed a $2.42 per cubic feet increase. The price of gas sold to Gencos had been constant at $2.18 since 2021, while that of commercial gas increased from $2.50 to $2.92 per cubic feet.

The implication of this increment for the electricity sector is that the Multi-Year Tariff Order (MYTO) that was calculated for Distribution Companies (Discos) by the Nigerian Electricity Regulatory Commission (NERC) in January, this year, may no longer be valid.

Until Monday, April 1, the calculation was done at the rate of $2.18 per cubic feet of gas, which was sold to Gencos.

In the statement, Farouk referenced the Petroleum Industry Act (PIA) 2021 assented to by the President on August 16, 2021, and published in the newspapers 11 days later, as providing a framework for the determination of a Market-based pricing regime for the domestic gas market.

He explained that the action was as a result of Section 167, the Third and Fourth Schedule of the PIA 2021, which mandated the Authority to determine the Domestic Base Price (DBP), and the marketable wholesale price of natural gas supplied to the strategic sectors.

The statement partly reads: “The Domestic Base Price at the marketable gas delivery point under Section 167 (1), and other provisions of the PIA shall be determined based on regulations, which incorporate among such other matters, the following principles: the price must be of a level to bring forward sufficient natural gas supplies for the domestic market on a voluntary basis by the upstream producers; the price shall not be higher than the average of similar natural gas prices in major emerging countries that are significant producers of natural gas; lowest cost of gas supply based on three tier cost of supply framework; market related prices tied to International Benchmarks.

“Accordingly, after due consultation with key stakeholders, and taking into cognisance the provisions of the PIA, as well as the gazetted Gas Pricing and Domestic Demand Regulations, the NMDPRA hereby establishes the Year 2024 Domestic Base Price as $2.42 / MMBTU and wholesale prices of natural gas in the strategic sector, and $2.92 for commercial gas,” the statement said.

 

 

 

 

 

 

 

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