Why we set three different prices for domestic gas – NNPC

Nigeria’s effort at attracting investors into its gas utilisation drive and creating value for the economy have been responsible for different gas prices in the domestic market.

Currently, three are different gas prices for various sectors of the economy. There is a price for power, which is different for industries and gas based industries such as fertilizers and petrochemicals. With this, investors in various sectors of the economy are encouraged to take advantage.

Bello Rabiu, Chief Operating Officer, Upstream, Nigerian National Petroleum Corporation (NNPC) at Society of Petroleum Engineers, Nigeria Annual International Conference and Exhibition , said, “part of the reason for the gas master plan is to make the domestic gas market viable and reduce entry barriers. As incentives, we have one gas price for power, another for industries, so that they can have cheaper energy. Also, there is a different price for gas based industries such as fertilizers and petrochemicals.” This is aimed at arriving at a willing buyer, willing seller model of pricing.

The NNPC chief who did not specify the exact amount for various categories of gas prices said the end goal of this is so that Nigerian companies in these industries can compete favourably with companies that produce similar products around the world. In this sense a Nigerian fertilizer manufacturer should be able to compete with other fertilizers makers around the world.

To ensure there is willing buyer, willing seller model in the domestic gas market, the NNPC decided 5 billion standard cubic feet of gas daily, will be able to sustain supply and sufficiency of gas to the domestic market.

“Gas is a big source of economic diversification. It can transform agro based industries through the use of fertilizers. But to attract the needed investment, we need fiscal terms that incentivise investors. Some companies have supplied gas but have not been paid. We also need fiscal terms that encourage small and medium term projects” Jeffrey Ewing, chairman and managing director, Chevron Nigeria Limited said.

Corroborating the views of previous speakers, Bayo Ojulari, managing director, Shell Nigeria Exploration and Production Company (SNEPCo), stated that for Nigeria to diversify its economy, it must leverage on the low hanging fruits, such as, agriculture, petrochemicals, which use gas as its feedstock and more importantly, education and technology. He emphasised the need for human capital development, without which every diversification effort will yield little result.

In Nigeria, 2 million people enter the labour market every year and the biggest economies around the world are leveraging on their population, “if your population is productive. It is a blessing. But diversification must be focused and not spread thin” Ojulari said.

To reap the benefits of a diversified economy, an enabling environment is needed. This includes security, transparency and accountability, infrastructure (power, pipeline networks) and effective Public Private and Academia (PPA) partnerships.

“We lack requisite expertise and curricular in our universities are obsolete. We have students specialising in traditional engineering causes such as petrochemical engineering, geology and geophysics but we have few experts in petroleum economics. There new areas of specialisation and we need to start bridging this knowledge and skills gap immediately” Bello Gusau, executive secretary of the Petroleum Technology Development Fund (PTDF) said.