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🇳🇬 Nigeria /Energy & Infrastructure

Nigeria's Gas Pricing Delay Risks Stalling Key Field Development, Experts Warn

From ThisDay · () English

Translated from English, summarized and contextualized by DistantNews.

At a glance

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  • Industry experts warn that Nigeria's plan to delay market-based gas pricing by up to two years could stall the development of crucial Non-associated Gas (NAG) fields.
  • Producers are frustrated by the delay, as a regulated price regime discourages investment in NAG fields, which are essential for reliable gas supply beyond associated gas.
  • The delay creates tension between gas producers eager for market-based pricing and power companies that oppose it, with the latter's lobby reportedly slowing the transition.

Nigeria's proposed delay in implementing a market-based gas pricing regime is facing significant pushback from industry experts who argue it risks hindering the development of Non-associated Gas (NAG) fields. These fields are considered vital for the country's energy and industrial future.

We haven’t reached that level of maturity.

— Mr. Rabiu UmarChief Executive of NMDPRA, acknowledging producer frustration over the delayed market-based gas pricing regime.

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) indicated that the transition to a "willing buyer, willing seller" framework would take effect in one to two years, contingent on infrastructure expansion and improved market access. However, NMDPRA Chief Executive Rabiu Umar acknowledged producer frustration, stating the market has "not reached that level of maturity."

Chikezie Nwosu, Group Chief Executive Officer of HSI Energies Limited and former Chairman of the Society of Petroleum Engineers (SPE), warned that deferring market-based pricing will stall NAG field development. He explained that while associated gas production is linked to oil output, its reliability is questionable as oil production declines. Gas buyers, such as power plants and fertilizer factories, require long-term certainty with contracts typically spanning 15 to 20 years, which cannot be reliably met by associated gas alone. "So, if the pricing of gas is not on a willing buyer, willing seller basis and is regulated, it will not encourage the development of non-associated gas reservoirs. That’s where the challenge lies," Nwosu stated.

So, if the pricing of gas is not on a willing buyer, willing seller basis and is regulated, it will not encourage the development of non-associated gas reservoirs. That’s where the challenge lies.

— Mr. Chikezie NwosuGroup Chief Executive Officer of HSI Energies Limited, explaining the impact of regulated pricing on NAG field development.

Geologist and Publisher of Africa Oil+Gas Magazine, Toyin Akinosho, highlighted the existing tension between producers and the power sector. "The producers want it quickly, but I can assure you that the electricity companies don’t want it at all. It’s the electricity lobby that is slowing it down," Akinosho told THISDAY, underscoring the significant opposition from power companies to a market-driven gas price.

The producers want it quickly, but I can assure you that the electricity companies don’t want it at all. It’s the electricity lobby that is slowing it down.

— Mr. Toyin AkinoshoGeologist and Publisher of Africa Oil+Gas Magazine, describing the conflict between gas producers and the power sector over pricing.
DistantNews Editorial

Originally published by ThisDay in English. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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