Gas to power value chain not viable
Electricity consumers in the country may have to wait longer than expected before they are able to enjoy stable and steady power supply, as current gas-to-power value chain is neither viable nor sustainable according the Nigerian Gas Association.
The association in a communiqué issued after its 11th international conference and exhibition in which a lot of issues concerning the gas sector were raised said the nation is facing an energy crisis and therefore called on the federal government to declare a power sector emergency in order to develop a holistic intervention plan to rescue the gas-to-power sector from collapse.
It also urged the government to put in place plans for the immediate liquidation of the over one trillion naira debts within the gas-to-power value chain and assurances for payment of generation and gas invoices from 1st January 2019.
“The illiquidity crisis in the power sector is exacerbated by added market imperfections which do· not provide for adequate incentivisation of the entire value chain, including: a non-market reflective pricing framework; ineffectual securitization and guarantees; infrastructure deficits; inadequate tariff; and the current situation in the foreign exchange market which creates significant exposures, losses and value erosion for investors”
The association asked the government to urgently review the progress of the incomplete Nigerian Electricity Sector reform and take necessary steps to conclude the process and solve the pending issues.
Emphasis was placed on decentralisation of the national grid and making way for catchment power generation across the nation if the power sector was to meet the needs of Nigerians
Pricing and payment assurance are strong determinants for private-sector operators and investors in gas projects, particularly for gas supply to power. The power sector represents the largest gas off-takers in the domestic market and because of this it is advocating that appropriate legislation and regulations should be put in place to set market-reflective tariffs that assure operators can recoup their investments.
“The conference notes the drive to attain parity of domestic gas price to export to encourage entrepreneur investments in the Gas sector. However, consideration must be given to the fact that the gas supplied to Nigeria Liquefied Natural Gas (NLNG), based on export pricing, is unprocessed gas, whereas the requirement for domestic gas supply is for processed gas which requires significant additional capital investment”.
The challenge of a shallow domestic financial market it stated is working against the local financing of the sector through high interest rates and shorter-tenured credit facilities and a mismatch of investment currency in US Dollars and income in Naira.
OLUSOLA BELLO