The Federal Government will release a new gas pricing template before May 29, to address what it describes as ‘unreasonable tariffs’ imposed by gas distributors on natural gas used by commercial consumers in the manufacturing sector.
The Minister of State for Petroleum Resources, Dr Ibe Kachikwu, during an interactive session on National Gas Policy and Regulation last week, said $7.45 per standard cubic feet of gas paid by manufacturers was too high, especially as they did not operate in the upstream sector of the economy where there was sector-based pricing.
The minister, who was speaking through his Special Technical Assistant on Fiscal and Regulation, Dr Timothy Okon, said there was no distinction in the pipelines that supplied gas to the manufacturing sector, adding that they were smaller and delivered lower pressure, and so did not call for a high tariff.
The government in 2008 had specified that the price of gas should be market derived, and based on the Export Parity Price, which is the destination price less transportation.
The minister said the lack of enforcement of that policy had resulted in people fixing all kinds of prices for gas.
He said the government was making some changes to the 2008 regulation.
He said, “Government is relying on market-derived pricing mechanism which matches the international pricing. This is the law that people are overlooking and manufacturing figures from nowhere.
“If the international price of gas is $5, why should the end user in Nigeria pay $8?”
“We are unable to see how the current structure conforms to the rules that have been set.”
He added, “The proposed pricing will be done before May 29.”
He advised the Manufacturers Association of Nigeria to prepare constructive advocacy ahead of the new policy.
The Chairman, Gas Users Group, MAN, Dr Michael Adebayo, recalled that the gas pricing controversy started in 2008 when one of the franchisers increased gas price from N21.05 per SCF to N67.63 on the basis that the company was benchmarking its price with the Petroleum Products Price Regulation and Monitoring Agency’s template for fixing petroleum products.
Over the years, according to him, the companies kept increasing the prices to an unbearable level.
In addition, he said the benchmarking of the price of gas to the United States dollars had made the process very volatile and was responsible for the current increase in the prices of gas.
“It is instructive that while the average price of gas globally is $2.5 per SCF, in Nigeria, it is $7.54 per SCF. Nigerian manufacturers cannot compete with such pricing,” he said.