Hamisu Muhammad
28 August 2009
The price of gas may go up from 40 cent to between $1 and $2 per thousand standard cubic feet, Daily Trust reliably gathered. A senior official in the ministry of power who pleaded for anonymity told Daily Trust that a memo has been written to President Umaru Yar' adua on the recommending the hike.
He said the idea of the proposed new price is to serve as an incentive to the major oil companies and other operators in the gas sector to gather and supply the gas needed by the Power Holding Company of Nigeria and independent power producers.
The official noted that the acute shortage of dry gas is threatening the attainment of the federal government 6000 mw of electricity by December 2009 target and 10,000mw by 2011.
According to the source, all consideration has been included in the proposal including the ability for PHCN to afford to pay as much as $1,50 cents per one thousand standard cubic feet of gas if that will guarantee steady supply of gas. "We ran the scenario and even if we increase the cost of gas to $2 per one thousand scf, it will not change electricity price by more than N3."
When contacted the Group General Manager, Public Affairs, PHCN, Mrs Efuru Igbo said PHCN said has nothing to do with the drafting policy. She said the PHCN is working base on the federal government directives, "whatever government decide to collect for Gas, the company as a responsible organisation will comply".
Asked whether the increase in gas price will affect electricity price in the country, Mrs Igbo said only the Nigerian Electricity Regulatory Commission can determine that and electricity price is not only determine by gas price but many other factors.
But the official at the ministry said "The average price of electricity in Nigeria today N17. No company today is buying electricity either directly from PHCN or through generators at less than N15 or N17 per unit and talk less of the damage and the discomfort which the generators cause."
Daily Trust learnt that many international oil companies are against the current price of gas at 40 cent /scf, saying that the price is not competitive enough to supply the domestic market.
Despite several threats by the federal government to the OICs on the domestic gas obligation the responses have so far been unimpressive.
The source said the proposal needs the backing of the Nigerian
Electricity Regulatory Commission, the Ministry of National Planning, Ministry of Finance and the Nigerian National Petroleum Corporation before actualisation. Reports said majority of the thermal power plants in the country are out of gas and some are producing below installed capacity as a result in shortage of gas supply.
Egbin Power Station, the largest thermal power station was forced to shut in about 500 megawatts recently due to cut in gas supply. Sapele Power Station has been down since November 2008, while Geregu, Omotosho and Olorunsogo Power Stations are similarly affected by gas supply limitations.
Nigeria needs about 1560 million metric standard cubic feet of gas daily to power its electricity plants in order to generate 6,574MW.
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Unfortunately, this is the only way to go. In the long run, only the people can pay for anything, and they must pay the full price for everything. The more directly they do so, the better supply and demand work in directing labor and investment. It will take a little time, but you will all benefit from this. Hopefully, this very steep hike will be enough to collect the gas being vented and flared, and feed it to your nation's industry. Make sure your government uses the money to do so.