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The Federal Government of Nigeria has approved a 400 percent increase in price of gas to power for the domestic market.
President Goodluck Jonathan on behalf of Nigeria approved the increased price on gas from $0.2/ per million metric British thermal units (mmbtu) to $1/mmbtu effective from December this year.
According to this new revelation, power generating companies and other users of industrial gas would be paying more for the commodity.
Announcing the approval yesterday in Abuja at a news conference, Minister of Petroleum Resources Diezani Allison-Madueke said, “By the end of the year, the price of gas to power will increase to $1/mmbtu, by end of 2011 to $1.5/mmbtu and then $2/mmbtu by end of 2013. Beyond 2014, it will increase by inflation.”
With the increase in the gas price, the Power Holding Company of Nigeria (PHCN), which is the major consumer of gas in the domestic market, will begin paying the same price with what obtains in the export market.
Allison-Madueke said government decided to harmonise the domestic and export market rates so as to attract investment in the gas sector and make the domestic gas market more attractive for the operators.
“This new pricing arrangement has been very positively received by the industry and should stimulate a major growth in new supplies critical to both our aspirations for power, but also for other gas based industries,” she said.
When the new price regime takes off, the PHCN and other independent power producers would have to up the tariff rate of electricity, industry operators said yesterday.
Speaking to Daily Trust by telephone last night, PHCN Managing Director Husaini Labo said when the increase in gas price takes off, the company would inform the Nigerians Electricity Regulatory Commission to adjust electricity tariff.
He said already there is provision in the Multi Year Tariff Order template to adjust electricity tariff as a result of inflation, exchange rate fluctuation and gas price increase.
Reacting to news of the gas price hike, President of the Manufacturers Association of Nigeria (MAN), Alhaji Bashir Borodo, said the increase was outrageous. “At least 60 percent of our industries rely on gas to generate power especially in the Lagos–Ogun axis. This will going to be a very serious blow to them,” he said.
“Take companies like NOTORE in Port Harcourt, Rivers State, that produces fertilizer and they rely on gas as a raw material. This increase will lead to very outrageous increase in the price of their final products which means you are putting them out of business.
“At the same time, the petrochemical plant in Eleme, Port Harcourt, again that produces chemical for plastic industry, very soon you will see the cost of plastic bags for bread and pure water going up. So it has a wide implication,” he added.
Borodo said though his association was expecting gas price increase, they did not envisage this much increase.
At the moment the gas sector consumes about 700million metric cubic feet per day of gas, and government set a target to increase the consumption to about 2500 mmcf/d by 2014.
The petroleum minister said, “The current gas price clearly cannot support such investments. Similarly, whilst the revised price proposed last year enabled growth in supply, that growth was limited to supplies coming from existing sources. To grow supply significantly, brand new supply sources are required and the investment required for such is more significant hence the need for a new pricing.”
Allison-Madueke said the new pricing regime was designed in a way that at no time would PHCN pay more for gas than what export projects pay because the price would be capped by export parity.
She said the gas supply performance is now at all time high with about 700 mmcf/d supply for the domestic market, and that there was enough gas to power virtually all operational power plants.
“In fact there is a situation of slight excess supply capacity. There is also excess gas available at the Okoloma gas plant to fire additional PHCN turbines at Afam V whenever they are ready,” she said.
The minister also reiterated government’s resolve to deregulate the downstream petroleum sector, a policy labour groups say would lead to fuel price increase. She said government would soon come up with an implementation plan for the deregulation policy.
The Federal Government of Nigeria has approved a 400 percent increase in price of gas to power for the domestic market.
President Goodluck Jonathan on behalf of Nigeria approved the increased price on gas from $0.2/ per million metric British thermal units (mmbtu) to $1/mmbtu effective from December this year.
According to this new revelation, power generating companies and other users of industrial gas would be paying more for the commodity.
Announcing the approval yesterday in Abuja at a news conference, Minister of Petroleum Resources Diezani Allison-Madueke said, “By the end of the year, the price of gas to power will increase to $1/mmbtu, by end of 2011 to $1.5/mmbtu and then $2/mmbtu by end of 2013. Beyond 2014, it will increase by inflation.”
With the increase in the gas price, the Power Holding Company of Nigeria (PHCN), which is the major consumer of gas in the domestic market, will begin paying the same price with what obtains in the export market.
Allison-Madueke said government decided to harmonise the domestic and export market rates so as to attract investment in the gas sector and make the domestic gas market more attractive for the operators.
“This new pricing arrangement has been very positively received by the industry and should stimulate a major growth in new supplies critical to both our aspirations for power, but also for other gas based industries,” she said.
When the new price regime takes off, the PHCN and other independent power producers would have to up the tariff rate of electricity, industry operators said yesterday.
Speaking to Daily Trust by telephone last night, PHCN Managing Director Husaini Labo said when the increase in gas price takes off, the company would inform the Nigerians Electricity Regulatory Commission to adjust electricity tariff.
He said already there is provision in the Multi Year Tariff Order template to adjust electricity tariff as a result of inflation, exchange rate fluctuation and gas price increase.
Reacting to news of the gas price hike, President of the Manufacturers Association of Nigeria (MAN), Alhaji Bashir Borodo, said the increase was outrageous. “At least 60 percent of our industries rely on gas to generate power especially in the Lagos–Ogun axis. This will going to be a very serious blow to them,” he said.
“Take companies like NOTORE in Port Harcourt, Rivers State, that produces fertilizer and they rely on gas as a raw material. This increase will lead to very outrageous increase in the price of their final products which means you are putting them out of business.
“At the same time, the petrochemical plant in Eleme, Port Harcourt, again that produces chemical for plastic industry, very soon you will see the cost of plastic bags for bread and pure water going up. So it has a wide implication,” he added.
Borodo said though his association was expecting gas price increase, they did not envisage this much increase.
At the moment the gas sector consumes about 700million metric cubic feet per day of gas, and government set a target to increase the consumption to about 2500 mmcf/d by 2014.
The petroleum minister said, “The current gas price clearly cannot support such investments. Similarly, whilst the revised price proposed last year enabled growth in supply, that growth was limited to supplies coming from existing sources. To grow supply significantly, brand new supply sources are required and the investment required for such is more significant hence the need for a new pricing.”
Allison-Madueke said the new pricing regime was designed in a way that at no time would PHCN pay more for gas than what export projects pay because the price would be capped by export parity.
She said the gas supply performance is now at all time high with about 700 mmcf/d supply for the domestic market, and that there was enough gas to power virtually all operational power plants.
“In fact there is a situation of slight excess supply capacity. There is also excess gas available at the Okoloma gas plant to fire additional PHCN turbines at Afam V whenever they are ready,” she said.
The minister also reiterated government’s resolve to deregulate the downstream petroleum sector, a policy labour groups say would lead to fuel price increase. She said government would soon come up with an implementation plan for the deregulation policy.
