Peter Uzoho
Nigeria’s plan to postpone a market-based gas pricing regime by up to two years is already drawing pushback from industry, with experts warning the delay risks stalling the development of the Non-associated Gas (NAG) fields critical to the country’s energy and industrial future.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) had said last week in Lagos that the transition to a willing buyer, willing seller framework will take effect in the next year or two as infrastructure expands and market access improves.
Chief Executive of NMDPRA, Mr. Rabiu Umar, however, acknowledged the frustration of producers, but stated that: “We haven’t reached that level of maturity.”
But speaking with THISDAY, Group Chief Executive Officer of HSI Energies Limited and former Chairman of the Society of Petroleum Engineers (SPE), Mr. Chikezie Nwosu warned that the deferring transition to a market-based price regime will stall development of NAG fields in the country
According to him, associated gas will continue to flow as long as oil is produced but the problem is reliability. However, Nwosu argued that the associated gas production cannot be totally relied on because as oil production declines, the associated gas production will also be affected.
He explained that gas buyers need long-term certainty, adding that power plants, fertiliser factories and petrochemicals typically contract gas on 15 to 20-year bases, which cannot be delivered efficiently from associated gas alone.
“So, if the pricing of gas is not on a willing buyer, willing seller basis and is regulated, it will not encourage the development of non-associated gas reservoirs. That’s where the challenge lies,” Nwosu said.
Also, geologist and Publisher of Africa Oil+Gas Magazine, Mr. Toyin Akinosho noted the tension between producers and the power sector, telling THISDAY that the gas producers are yearning for quick transition to a willing buyer, willing seller price regime while the power companies are strongly opposed to it.
“The producers want it quickly, but I can assure you that the electricity companies don’t want it at all. It’s the electricity lobby that is slowing it down,” Akinosho said.