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The federal government (FG) has announced a hike in the wholesale price of gas supplied to power plants by 11%, increasing it from $2.18 per MMBTU (Million British Thermal Unit) to $2.42/mmbtu.
Gas suppliers had reduced their supply to power plants since January due to outstanding invoices totaling over $1.2 billion.
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To address this, the government intervened last month by paying $120 million to the suppliers, as power supply across the country dwindled.
In a notice issued by the Chief Executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Engr Farouk Ahmed, the government also raised the commercial wholesale gas price from $2.42/mmbtu to $2.92/mmbtu.
The notice, titled “Announcement on establishment of the 2024 domestic base price and applicable wholesale price of natural gas for strategic sector,” stated that the Petroleum Industry Act, 2021, empowers the authority to set domestic base prices for the local market.
“In line with Section 167, the Third and Fourth Schedules of the PIA 2021, the Nigerian Midstream & Downstream Petroleum Regulatory Authority (NMDPRA) is mandated to determine the Domestic Base Price (DBP) and the marketable wholesale price of natural gas supplied to the strategic sectors.”
It further added: “The Domestic Base Price at the marketable gas delivery point under Section 167 (1) and other provisions of the PIA shall be determined based on regulations which incorporate among such other matters, the following principles: a) The price must be of a level to bring forward sufficient natural gas supplies for the domestic market on a voluntary basis by the upstream producers. b) The price shall not be higher than the average of similar natural gas prices in major emerging countries that are significant producers of natural gas. c) Lowest cost of gas supply based on three-tier cost of supply framework. d) Market-related prices tied to International Benchmarks.
“Accordingly, after due consultation with key stakeholders and taking into consideration the provisions of the PIA, as well as the gazetted Gas Pricing and Domestic Demand Regulations, the NMDPRA hereby establishes the Year 2024 Domestic Base Price as USD 2.42 / MMBTU and wholesale prices of natural gas in the strategic sector.”
