Nigeria’s gas subsidy costs $ 90 mm annually

Jul 13, 2004 02:00 AM

The Federal Government of Nigeria is currently subsidising gas supply to the power sector to the tune of about $ 90 mm (N 11.97 bn) annually. The subsidy, according to figures released by the Nigerian National Petroleum Corporation (NNPC), represents the difference between the production cost of gas and the selling price of the fuel to the National Electric Power Authority (NEPA).
NEPA is the biggest consumer of natural gas in the country, with intake of over 300 mm cfpd of gas for its Lagos Egbin Thermal Power Plant, Delta IV Power Plant in Ughelli, Delta State, Afam Power Station in Port Harcourt and Sapele Power Station also in Delta State.

The power utility currently pays N 14 per thousand cf of gas, compared to the market price of N 422 per 1,000 cf. Gas producers, led by the NNPC, ChevronTexaco and Shell, are however, pressurising the Federal Government to make NEPA pay commercial price for gas.
"Domestic gas prices are still below the costs of supply, and this is largely responsible for the low utilisation of natural gas in the country," a senior NNPC official said. There is also the issue of N2 bn debt NEPA owed the Nigerian Gas Company (NGC), a subsidiary of the NNPC, on gas supplied.

Official statistics showed that of the current 1,879 bn cf of natural gas produced yearly in the country, about 1,080 bn or 57.4 % is utilised while the remaining 799 bn cf or 42.6 % is flared. The waste, according to the NNPC, translates to about 2.0 bn a year "or about 20 % of world total of gas flared."
To improve gas utilisation and increase revenue earned from the sector, the Federal Government is considering developing new fiscal regime for gas projects, with Production Sharing Contract (PSC) terms for producing companies. A draft bill for "Downstream Act" for the gas sector has already been submitted.

Part of the strategy, it was further gathered, includes the development of the LPG market and the unbundling of the NGC into two, namely, the Nigerian Gas Transport Company (NGTC) and the Nigerian Gas Marketing Company (NGMC).
The Federal Government, began implementing its plan to supply 300,000 tons of cooking gas to the domestic market, with the first shipment of 7,000 tones of LPG, from ExxonMobil NGL plant in Rivers State, to Lagos.

NNPC Group Managing Director, Engineer Funso Kupolokun, had disclosed that the Federal Government aimed at a yearly income of $ 6 bn from gas.
"Our major objective is the elevation of natural gas to be at par with oil through gas monetisation," said Kupolokun, adding that to turn the gas currently being wasted to resources, various gas projects are either being executed or planned.

Source: THISDAYonline
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