Nigeria: Gas Flaring - NNPC, Others Frown Over Gas Price Cap

Gas flaring.
8 October 2019

The Nigerian National Petroleum Corporation, NNPC, has expressed dissatisfaction as the Federal Government continues to fix the price of gas in Nigeria.

This, according to the corporation discourages investment, desired to end gas flaring in the country.

Speaking on the sideline of the just concluded Gastech conference in the United States, the group managing director, GMD, NNPC, Mallam Mele Kyari, stated that "the main suppliers are not comfortable with the fact that price of gas is fixed because the investment required to produce it is not fixed."

The GMD, who was represented by Managing Director, Nigerian Gas Company (NGC), Dr. Salihu Jamari, said, "So you buy the equipment, you buy pipeline and you buy compressors at the international market price, and when you get home, government has already fixed the price of gas. Therefore, that is not encouraging for suppliers to invest in gas capturing. So, that was one of the reasons why efforts at even producing gas are not forthcoming as expected."

He said: "Other issues like fiscal regimes, particularly on some partnerships like production sharing contracts (PSCs) where there are concerns that the fiscal regimes are not very clear, some are not firm and other matters like that because most of them were based on oil. So, the suppliers would like to have some kind of firm fiscal regime on gas in order to make investments."

He added: "The fact is that if the commercial arrangement is attractive, investors can stake funds on harnessing the gas and recoup cost from the market under willing seller-willing buyer arrangement.

"If you know you are going to make a good margin, you will stake money on infrastructure and it is not a big deal. However, with the kind of fixed price arrangement we have suppliers to sell gas to power sector, fixed price for textile industry and fixed for other utilities, it has not been encouraging."

However, he said: "One assurance I can give you is that government is very much aware of that, NNPC is also aware of that, and we are doing everything possible to see that we create an environment where suppliers will be comfortable in developing infrastructure and in developing gas.

"The fixed prices are very contrary; and they are being reviewed from time to time and updated. Recall the fact that about two to three years ago, the price of gas was about $1/1000scf but as I talk to you today, the price of gas is $2.50. "So, it is undergoing review and giving hope to our suppliers to put more investment into making gas available, and government on its own is devoting a lot of money in providing infrastructure for supply of gas to various markets."

Also speaking, the managing director, NLNG Limited, Mr Tony Attah, stated that NLNG would continue its primary role of mopping up gas from oil production sites by providing ready market for any investor that is able to bring gas to its feed channels.

"Once gas gathered, we are willing to buy it. That was the bane in the past when people say if we gather it who is going to buy it. Today, we declare that we are willing to buy it. We take 3.5 billion standard cubic feet (Bcf) of gas every day.

"Therefore, we can do with more gas."

On the back of train seven, we can take another 2.5 Bcf. The company alone would absorb about 6.0 Bscf/d when its seventh train comes on-stream."

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