Nigeria to endorse higher gas price to ensure delivery to power plants

Nigeria to endorse higher gas price to ensure delivery to power plants

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The Nigerian Electricity Regulatory Commission NERC says it will endorse gas price higher
than the regulated price between a willing seller and a willing buyer if it will ensure
uninterrupted delivery to the buyer.

The regulated cost of electricity in Nigeria means the government continues to set gas price below international price in other to ensure power plants remain profitable. The government raised the price of gas from $1.8/1000 standard cubic feet (scf) to $2.5/1000 scf in August 2014. However, over half of Nigeria’s 6billion scf daily production is still exported as LNG and another 2billion scf either flared or re-injected into oil wells.

Less than 2billion scf made its way into the country for industrial and power generation use.
Gas demand for power in Nigeria is expected to reach 5billion scf by 2017 and supply is
likely to fall short as the low price gives little incentive to companies to invest in gas
processing plants and pipelines to supply the local market.

Analysts say the development could increase interest from gas producers who could secure off takers for produced gas at higher price although they believe the regulated price of electricity will continue to limit the ability of power plants operators to raise price of feedstock. Government thus need to raise price closer to the international price in other to spur local distribution.

In another development, the Nigerian Electricity Regulatory Commission (NERC), which regulates the Nigerian Electricity Supply Industry (NESI), has imposed a ban on importation of meters into the country. The new ban will require all import requests to show that the demanding distribution company is unable to source the demand from the local market.

The decision follows complaints received by the agency from local manufacturers whose operations are being affected by the high level of imported substitutes. Electricity Meter Manufacturers Association of Nigeria requested from the NERC strict sanctions on distribution companies who violated the directive. The demand for electricity metering device is expected to spike in Nigeria as NERC continue to pressure distribution companies to install a meter for all customers.

The lack of metering device has exposed some customers to overbilling due to the estimated cost allocated by distribution companies. Estimated billing and power theft are the major sources of collection losses incurred by distribution companies who continue to fall behind in remitting revenue to the Nigerian Bulk Electricity Trader NBET. Although the locally produced meters are likely more expensive than the imported ones, the distribution companies are still able to recoup the investment based on the tariff structure.

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