IMPROVED ELECTRICITY SUPPLY: FG PLANS NEW MEASURES

                                                         Prof Chinedu Nebo, Power Minister

 

Burdened by the decline in power generation even at the peak of the rainy season, the federal government yesterday rolled out what it called a “pragmatic and creative” short term approach to address challenges in the power sector, particularly the issue of  adequate gas supply to thermal generation plants across the country.

 

From the new measures which are expected to take effect immediately, the government said it expected to ramp up grid power generation and supply in the country by at least 5000 megawatts (MW) within the next four months.

The government, in an inter-ministerial press briefing involving the ministries of petroleum resources, power, Nigerian Electricity Regulatory Commission (NERC), Central Bank of Nigeria (CBN), Nigerian National Petroleum Corporation (NNPC) among others, said collective effort was being made to find a lasting solution to shortages in gas supply to power plants in the country.

 

The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, stated that following the challenge of inadequate gas supply, successes had been recorded in sorting out outstanding issues around current gas pricing regime as well as fast-tracking additional development of gas supply sources which will in the short term result to an addition of at least 370 million metric cubic feet per day (mmscf/d) of gas to the power plants.

 

Apart from the petroleum resources minister,  Minister of Power, Prof. Chinedu Nebo, Chairman of NERC, Dr. Sam Amadi, Governor of CBN, Godwin Emefiele, and Group Managing Director of NNPC, Dr. Joseph Dawha, were present at the briefing in Abuja.

Alison-Makueke stated that as part of the new intervention, the CBN and the Bankers’ Committee had agreed to setup a Special Purpose Vehicle (SPV) to offset about N25 billion outstanding legacy gas related debts owed to gas suppliers by the defunct Power Holding Company of Nigeria (PHCN) while also working out further financial aid to the power sector.

This, she added, was expected to give confidence to stakeholders in the gas sector, regarding their willingness to supply gas to power plants.

 

The minister disclosed NERC’s approval of a new gas-to-power pricing benchmark from what used to be about $1.50 per mcf of gas supplied to $2.50/mcf and $0.80/mcf as transportation costs for new capacity. The benchmark which, according to her, reflects a realistic gas market parity will equally rise with the United States annual inflation statistics.

In addition to the new gas-to-power price, Alison-Madueke said that NERC will now require from suppliers firm commitments that they will supply the agreed quantities of gas to generation companies as along as payment terms are met.

 

The minister also said that further gas supply projects that would help cushion the effects of gas supply shortages in the short term had been initiated by the ministry and were at various stages of maturation.
The projects, she said, include the Utorogu field expansion comprising accelerated workover of some wells and completion of the new gas plant that will give in 60mmcf/d, expansion of Oben gas plant and drilling of new wells to add 100mmcf/d as well as the re-entry of Odidi field and revamping of its processing plants and flow-lines to deliver 40mmcf/d.

 

Others are the hooking up of already drilled oil wells in Pan Ocean’s Oil Production Licence (OPL) 275 to add 40mmcf/d, as well as a total of 130mmcf/d from the Nigerian Gas Company (NGC) in the eastern axis, Shell and Seven Energy.

“As you know, the problem of inadequate gas supply is one that has been ongoing for almost 20 years and was inherited by this administration. Since then, various interventions have been put in place to bridge the supply challenges.

"Although, gas supply has grown significantly in the last two years to about 1500mmcf, demand growth continues to outpace supply both in the power and non-power sectors. This mismatch has created a short term gas supply crisis,” Alison-Madueke said.

 

She further noted: “Currently, about 750mmcf/d of gas is supplied to the power sector, resulting in an aggregate generating capacity of about 4000MW. However, various outages reduce the actual availability of power. Since November 2013, when the new owners took over the PHCN successor companies, concerns have continued to be raised about the quality of power supply.

“One of such concerns is the lack of adequate infrastructure needed for sufficient gas supply to the power plants. Had there been sufficient gas supply, current generation capacity would have crossed the 6000MW target today.”

 

Alison-Madueke said on the new intervention that: “The ministries of petroleum resources, power, CBN, NERC and NNPC are working assiduously to find a lasting solution. Collectively, we have developed additional interventions that will address outstanding issues around gas pricing, fast-track additional gas supply development, particularly in the short term.

“A review of gas pricing is being implemented to further reflect market value. NERC has approved a new benchmark price of $2.50/mcf for gas supply and $0.80/mcf as transportation costs for new capacity, from 2014. This benchmark will rise with US inflation annually.

 

“NERC is presently concluding the review of the Aggregate Technical, Commercial and Collection (ATC&C) losses studies submitted by the distribution companies. This will be followed by a review of the revenue requirement for the power sector that is to be covered by a revised MYTO path. While the detailed tariff is being worked out, NERC reaffirms its commitment to ensure cost recovery for all prudent and efficient operators.”

“To give confidence to stakeholders in the gas sector, regarding the willingness of the power sector to settle its outstanding debts for gas, the CBN will support initiatives to clear up the most recent gas related debts of the power sector.

 

"Specifically, the CBN is looking at banking sector led measures to pay off N25 billion of debts owed to gas suppliers. This will be subject to reconciliation efforts and adequate provision for this support in a revised Multi Year Tariff Order (MYTO) that ensures repayment within five years."

The minister added that the CBN will also play a key role in financial arrangements that would guarantee payment for gas supply by the power sector. Emefiele in this regard explained that the CBN had in partnership with the Bankers’ Committee decided to take up extant challenges in the power sector considering its relevance to Nigeria’s economic growth.

 

Alison-Madueke further spokeon the expected outcome of the intervention measures saying: “These projects should unlock an additional 370mmcf/d of gas, assuring us of a total of 5000MW inclusive of hydro within 4-5 months to the year-end.

"In order to minimise disruptions to supply, NNPC has also concluded a harmonisation plan of the maintenance schedule of all gas plants from various suppliers. Therefore, between August and September, all planned maintenance activities will be carried out.

 "Whilst this will create temporary disruption in supply to power, it will ensure that from October, disruptions due to planned maintenance activities will be minimal, enabling steady supply of power to Nigerians.”