FG introduces new pricing guidelines for domestic gas sale
The Federal Government through its Nigerian Midstream and Downstream Petroleum Regulatory Authority on Sunday said it had a new Domestic Base Price framework and applicable wholesale gas price for strategic domestic sectors.
The Chief Executive Officer, NMDPRA (Nigerian Midstream and Downstream Petroleum Regulatory Authority), Farouk Ahmed, said the new framework was in fulfilment of the relevant actions of the Petroleum Industry Act 2021.
He said the law, which was assented to by the President on August 16, 2021, and gazetted on August 27, 2021, provided a clear regulatory framework for the determination of a market-based pricing regime for the domestic gas market in Nigeria.
Ahmed said in a statement he issued in Abuja that the move was in line with Section 167 and third and fourth schedules of the Act, which required the NMDPRA to determine the Domestic Base Price, three months following the effective date of the Act.
“The CEO indicated that the applicable wholesale gas price for the power sector shall be the established domestic gas price”, the statement read in part, but did not mention that actual price.
Ahmed said the DBP would be determined annually, based on the criteria set in the third schedule of the Act.
He outlined the criteria to include referencing DBP to prices of gas in countries with significant reserves and production of natural gas supply based on a three tier cost of supply framework.
He said the DBP was related market-prices tied to international benchmarks for strategic investors, adding that it shall be the export parity price at the delivery point where there was dominant supply of gas in Nigeria.
“Export parity price in this context is defined as market-driven pricing framework, responsive to fiscal changes and weighed to ensure pricing flexibility, while moderating swings to protect fragile domestic industries”, Ahmed stated.
He further explained that the pricing framework for gas conversion industries namely, ammonia, urea, methanol, polypropylene and Low Sulphur Diesel shall be as currently specified under the fourth schedule.
The NMDPRA helmsman said the DBP for other commercial sectors consisting of cement, non-grid power, iron and steel industries, aluminum and all such industries requiring gas for heating shall be plus $0.50.
He said these prices shall apply to gas supplied under the domestic gas delivery obligation which shall be determined by the Nigerian Upstream Petroleum Regulatory Commission under Section 110 of the PIA.
Ahmed said his agency was presently consulting with industry stakeholders in the development of DBP and applicable wholesale prices for the domestic gas market.
He said an industry-wide stakeholder engagement would equally be conducted before the final declaration of the 2022 DBP and wholesale price of gas to the strategic sectors.
