This Day (Lagos)

11 December 2012

Nigeria: Lack of Central Regulator Impedes FG's Gas-to-Power Scheme

The seeming non-existence of a central authority to regulate operations of gas producers and suppliers in Nigeria's oil and gas industry is said to be a major constraint to the Federal Government's gas-to-power initiative.

THISDAY was recently informed by sources in the federal ministries of power and petroleum resources that the gas-to-power scheme, which was put together to ensure adequate supply of gas to thermal power plants, by major producers and suppliers of gas may not yield desired results owing to several unhealthy factors, that could have been addressed if there was a stern regulator in place.

These sources who spoke on condition of anonymity explained that for instance, the Gas Supply Agreement (GSA), which was signed by leading gas producers and suppliers to the Power Holding Company of Nigeria (PHCN) is skewed in view of its content.

According to them, the GSA, which was signed by companies like Shell and Agip for the supply of gas to PHCN thermal power plants was without a vital content.

Also, the Gas Transportation Agreement (GTA), it was gathered, was ostensibly extricated by suppliers possibly to shed off the responsibility of transporting their gas to convenient points for PHCN plants.

Accordingly, the GTA is amongst projects expected to be contained in a standard GSA, thus, making it a responsibility of gas producers and suppliers to transport needed gas to points where PHCN plants can conveniently take them up for use in power generation. The reverse is however the case as PHCN directly seeks the services of the Nigerian Gas Company (NGC) in transporting such needed gas to its power plants.

"Shell alongside others negotiated the GSA leaving out that vital component GTA to suit them and place the power plants in a tight corner. The GSA should also include a GTA which will place the responsibility of transporting the gas on the producer/supplier", a source familiar with the project stated at the weekend.

He continued: "The producer/supplier should be directly dealing with the NGC and not the power plants. It should be such that the power plants sign a GSA that contains a GTA and expect that gas will be delivered to points where they can immediately take them up for power generation without having to do anything with the NGC whose dealings should be with the gas supplier only in this respect,".

Another source added: "The whole process is really skewed because we have what could be described as a cabal who understands this very well but will not do it. They know that a standard GSA should contain the transportation element but they went ahead to draw up the GSA leaving out this vital element for the PHCN to handle".

The source expressed doubt over the possibility of any IPP signing a GSA that lacks the GTA now in this sector.

He contended: "I don't think so because they would want the transportation negotiation to normally be done between the producer/supplier and the NGC, all they would want will be that gas be available for their use at certain convenient points for them."

He explained: "You see, that is why we need a firm regulator of the gas sector just like what is expected from the new Petroleum Industry Bill. The PIB will at least set up a regulator that should checkmate these unhealthy activities just like the NERC is expected to do for the emerging power sector.

"No matter the argument of the IOCs against the content of the PIB, I believe it is always based on their selfish interests because the PIB is not a bad document per se. The regulator will monitor these activities and sanction who needs to be sanctioned and then the singular job of gas transportation and perhaps development of gas pipeline network system will be effectively done by the NGC."

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