Oil Companies Urge Gencos to Offset $1bn Gas Supply Debts to Restore Confidence

•Industry regulator says new price regime ready

Emmanuel Addeh in Abuja

Oil majors operating in the country yesterday called on the federal government to compel electricity Generation Companies (Gencos) to offset the about $1 billion legacy gas debts owed them.

However, the generation companies have several times called on the federal government to pay all the debts owed them, apparently to enable them liquidate their creditors’ debts.

Speaking through the Managing Director, Chevron Nigeria Limited, Mr. Richard Kennedy at the opening of the ‘Decade of Gas’ secretariat at the Nigerian Midstream and Downstream Petroleum Regulatory Authority office in Abuja, the operators said the payment will help restore confidence in the sector.

Kennedy, who was represented  by the Joint Venture Director of the company, Mr. Cosmas Iwueze, also assured of the companies’ support for the initiative which ends in 2030.

In all, the decade of gas policy is expected to deliver 10 projects that would significantly impact the economy in which the government’s target is to attract $14 billion in foreign direct investment, raise $12 billion in revenue through royalties and taxes, and create two million jobs during the period.

“The decade of gas is to ensure that we re-establish investors’ confidence in the industry. You do this by ensuring that all the legacy debts owed to the industry operators are paid and also ensuring that we have a cost-reflective gas pricing,” Kennedy added.

According to him, when that is done, the fiscal incentives must be very clear and would thereafter apply to all other projects while the industry must also get the infrastructure to bring them to the market right.

Also speaking, the Special Adviser to the President Bola Tinubu on Energy, Olu Verheijen, said the development of gas was a priority programme for the current administration.

“It’s been a long journey with gas in this country. We have gone from being a major exporter of LNG to looking into our future when gas is going to play a big role in the industrialisation of our country,” she noted.

She also said the government was determined to resolve all the legacy issues that had bedevilled the industry and therefore attract investment into the gas sector.

The Chief Executive, NMDPRA, Farouk Ahmed, said as part of efforts to make the gas supply to power sector attractive, a new gas price regime would be announced soon after the approval by the president.

He added that the decade of gas declaration by the federal government was a deliberate effort to ensure that between 2021 and 2030, gas would become the main source of energy in the country.

Farouk noted that to make the project successful, the government put together a team of stakeholders composed of the oil companies (sponsors group), and government agencies regulating the sector.

“The new price of gas will be revealed after further consultations and approval from the president. We need a price that gas is sold to power and to industry at a level that incentivises the producers to invest in the sector and so that they can produce more gas,” he stressed.

He noted that the authority had already engaged the relevant stakeholders like the Nigerian Electricity Regulatory Commission (NERC) on the matter.

He added that NMDPRA had also consulted the commercial sector that have all aligned with the new pricing template.

 “Recently we have been engaging with all the stakeholders in arriving at the domestic price for gas.

“Very soon after the review with the Adviser today (Wednesday), we want to release the new price for the sector.

“We have consulted with NERC. We have consulted with the commercial sector and we have all aligned on the pricing and today we want to release the new price,” he stated.

The Coordinator of the Decade of Gas Centre, Mr Ed Ubong, who also spoke at the event, also aligned with the stakeholders reasoning that the Lagos debts have to be settled to make considerable progress in the sector.