FG Plans New Model to Equalise Gas Prices across Nigeria

By Chineme Okafor in Abuja

The federal government would work out a new gas pricing and supply model – likely to be the type adopted by it to ensure equal pump price for petrol across Nigeria, to get gas to all parts of Nigeria, especially the northern states, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has disclosed.

Kachikwu, stated this in Abuja when a Gas Sale Aggregation Agreement (GSAA) was signed between the Nigerian National Petroleum Corporation (NNPC), Total Exploration and Production Nigeria (TEPNG) joint venture (JV), Gas Aggregation Company of Nigeria (GACN) and Greenville Oil and Gas for the supply of natural gas for liquefaction at a $500 million mini Liquefied Natural Gas (LNG) plant to be built by Greenville in Rumuji Rivers State.

According Kachikwu, the government would adopt a price equalisation model to ensure that gas was supplied at equal and competitive rates to industries and other end users across the country. He noted that the price equalisation plan would be targeted at states in the north where he said industries were likely to fold up because of high cost of gas supplies to them.

The minister explained that the ministry would have to work out a payment or offset mechanism that will guarantee gas supplies to all parts of Nigeria at the same rate.
“Under the leadership of His Excellency, President Muhammadu Buhari, we are going to see whatever we can do to provide the needed incentives that this sector needs to be able to move adequately and fairly fast and from an oil-focused zone into a gas-focused zone,” Kachikwu said.

He further explained: “Obviously, we are going to be looking at the (Petroleum Equalisation Fund) PEF type model – how do we ensure that gas is provided both in the north and south at about the same pricing model because right now most of the industries in the north are dying because of their inability to provide power quite frankly to some of the industries there at competitive prices.”
“This virtual supply (mini LNG) can be the bedrock but additionally we need to as an incentive, work through a payment or an offset mechanism that enables everybody in the country get gas at about the same pricing equation, that is still some extra work to be done,” the minister added.

Currently, the PEF which was established in 1975 is charged with the primary responsibility of reimbursing petroleum marketing companies for any losses suffered by them, solely and exclusive, as a result of sale of petroleum products at uniform prices throughout the nation.
It was set up by the government to bridge the inequality in the transportation cost of distributing petroleum products throughout the country.