Gas supply, inappropriate tariff stifle gas-to-power projects
The failure of the federal government to decisively tackle the lingering gas supply challenges and charging appropriate tariff for electricity stifle gas-to-power projects in Nigeria.
The inability of power generation plants built under the National Integrated Power Project (NIPP) to fully come on stream has been blamed on the lingering gas supply challenges. Stakeholders at the recent power investment summit organised by the International Finance Corporation (IFC) in Abuja, decried the idle state of the over $5 billion NIPP plants should be blamed on government.
Owan Ransome, group managing director on Power, AITEO Group said that notwithstanding the over $5 billion invested in the NIPPs, “the plants are down because of unavailability of gas to power them”. He called on the federal government to take on the responsibility for supplying gas to power companies because of its role as “a major player with international oil companies (IOCs), and also owns the Nigerian gas pipeline and its associated infrastructure”.
Bolaji Osunsanya, president of the Nigerian Gas Association and chief executive officer of Oando Gas and Power, said that it would appear as if the NIPP was designed by government to fail.
“Nobody builds that size and scale of power plants without being sure of dispatch and gas supply. The solution of gas supply risk will be a federal government-backed instrument but the gas transporter, the IOCs, and other parties must also give assurance of supply within their purview,” said Osusanya.
Appropriate tariff will be added incentive
In addition to ensuring sustainable gas supply to the power sector, appropriate tariff would be an added incentive for the greater integration between gas supply, infrastructure and power generation to improve efficiency.
The stakeholders in the oil and gas industry who reviewed recent development in the gas section in relation to power supply said for investment to flow in the power sector all those involved, especially the government must create an enabling environment for all operators in the industry.
“If the tariff is good there would be investment in both the gas and power sectors”, said an energy analyst.
It is estimated that between 600-700 megawatts on the average is rejected everyday by some electricity distribution companies because of the their attempt to reduce the bill of market operator. The Market Operator engages in wholesale electricity to the distribution companies.
This issue of power rejection is said to more pronounced among the distribution companies which have the bulk of their consumers rural areas. Market operator which charge the companies for whatever energy that is wheeled to them from the generation companies, has been described by industry analyst as a factor of the energy received by the distribution companies and since the companies would be made to pay for whatever energy they are given, despite the challenges of getting some of their customers to pay for what they consumed, they tried to reduce the bill pay to the market operator.
Chikwu Edoziem ,president of the Nigeria Association of Petroleum Explorationists( NAPE) has said lack of coherent policies on gas to power has significantly hindered the integration and long term investment required to ensure the supply of gas to the power plants .“This, together with pipeline vandalism. Non cost reflective tariff, lack of adequate capacity to process gas and transport to gas plant, are directly responsible or the low generation in the country”
Meanwhile Godknows Igali , Permanent Secretary, Federal Ministry of Power has charged participants in the electricity market to imbibe best business practices in order to bequeath a well-established electricity market to the next generation.
Igali, who currently supervises all activities in the Federal Ministry of Power, was speaking during the closing ceremony of a 2-day interactive workshop on ‘Interpreting and Understanding the Market Rules’ for the electricity market participants in Abuja recently.
He urged the market participants to be open, willing to learn and become better operators as the sector was still going through a learning curve.
The Permanent Secretary who expressed confidence and optimism said the current challenges would be surmounted with time and the objectives of the privatization achieved to position Nigeria on the path to sustained industrial development.
He told the market participants that the Ministry was discussing with relevant Federal agencies such as Central Bank of Nigeria and Pension Commission for the purposes of providing a pool of funds that can be accessed at single-digit to ramp up operations and service delivery.
He also informed the workshop that bi-lateral discussions were on-going with several international agencies on how to build flared-gas power plants, micro-grids and other renewable energy plants in order to provide more power for the grid and for Nigerians.
OLUSOLA BELLO AND FRANK UZUEGBUNAM