The Federal Government has announced an increase in the price of natural gas for power generation companies from $2.18 per metric million British thermal unit, to $2.42mmbtu.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority, unveiled the new domestic base price and wholesale prices of natural gas for 2024 in an announcement signed by the Chief Executive, NMDPRA, Farouk Ahmed.
The NMDPRA also said the cost of commercial gas was now $2.92mmbtu, up from the previous cost of $2.5mmbtu.
The implication of the increase is a likely hike in electricity tariff at the next tariff review by the Nigerian Electricity Regulatory Commission (NERC) as Nigeria generates over 70 per cent of its electricity from thermal power plants that are fired by gas.
Ahmed said the Petroleum Industry Act 2021 assented to by the President on August 16, 2021, and gazetted in August 2021, provided a clear regulatory framework for the determination of a market-based pricing regime for the domestic gas market.
He further stated that the latest action was taken in line with section 167, the third and fourth schedule of the PIA 2021, which mandated the regulator to determine the Domestic Base Price and the marketable wholesale price of natural gas supplied to the strategic sectors.
“The DBP at the marketable gas delivery point under Sector 167(1) and other provisions of the PIA shall be determined based on regulations which incorporate among such other matters, the following principles.
“(a) 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.
“(b) 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.
“(c) Lowest cost of gas supply based on three-tier cost of supply framework. (d) Market-related prices tied to international benchmarks,” the NMDPRA boss said.
The NMDPRA, therefore, emphasised that it had set the “2024 Domestic Base Price at $2.42/MMBTU and wholesale prices for natural gas in strategic sectors, following consultations with stakeholders and in compliance with the PIA and Gas Pricing Regulations.”
The Multi-Year Tariff Order (MYTO) released by NERC in January 2024 for the electricity distribution companies was calculated based on the previous price of natural gas and going by the latest cost of the commodity, an upward review may be inevitable as gas is a major component used in power production.
There have been persistent calls from gas producers including international and domestic oil and gas companies for the upward review in the price of the product, which they said would be an incentive to ramp up production.
