Lagos, Nigeria – The Nigerian government will gradually allow domestic gas prices to rise in line with international market prices, in a move aimed at attracting more investment to tackle the supply crisis in the country’s power sector, state-owned Nigerian National Petroleum Corporation (NNPC) said Monday.
The government will raise the price of gas for power plants to $2/MMBtu from $1/MMBtu currently by the end of this year, and also raise the price of gas for industrial users to $3/MMBtu from $2/MMBtu, NNPC’s director in charge of gas and power, David Ige, said.
“The government has continued to develop new gas supply projects to meet the projected demand especially in the gas sector, and to do this we want to ensure that gas prices are competitive,” said Ige.
“We will have a gradual increment in domestic gas prices so that we will achieve export parity by early next year,” Ige said.
Nigeria has the world’s ninth biggest gas reserves, with about 187 Tcf of proven gas, and current production is estimated at 8.24 Bcf/day – the majority of which is exported – but the power sector continues to grapple with gas supply shortfalls.
Industry officials said the low gas prices set by the government, which barely cover the cost of producing and processing gas, let alone investing in gas infrastructure, provide little incentive to companies.
Ige said the recent reform introduced by Nigeria in the gas sector, including the review in prices and embarking on new infrastructure, are geared towards doubling domestic gas supply to 3 Bcf/d by 2016.
International oil companies, he said, also back Nigeria in its bid to build additional infrastructure to boost domestic gas supply. He added however that a major challenge facing operators is the sabotage of facilities.
“Last year alone, direct attack on major gas pipelines resulted in outages for seven months with painful impact on supply,” Ige said.