At the Pre-Summit Conference of the Nigerian International Petroleum Summit (NIPS), on the theme: ‘The Decade of Gas – Towards a Gas-Powered Economy’, the Director of the Nigerian Department of Petroleum Resources (DPR), Auwalu Sarki, advocated that market forces should be allowed to determine gas prices to guarantee the security of supply and demand of the commodity.
He said the right and market-based pricing of gas is critical, as it would assure producers of returns on their investment, ensure that the commodity is affordable to consumers and contribute meaningfully to the economic development of Nigeria.
He outlined five critical levers for gas development to be: availability, accessibility, affordability, acceptability, and deliverability. He noted that the levers are critical to utilising Nigeria’s proven gas reserves of 203 trillion cubic feet (TCF), especially as Nigeria is moving towards leveraging its abundant gas resources for national growth and diversification of the economy.
He commended President Muhammadu Buhari and the Minister of State for Petroleum Resources, Timipre Sylva, for their commitment to increasing gas utilisation in Nigeria. He said the ongoing construction of the ELPS-II, OB3 and AKK pipelines are critical backbone gas infrastructure that will improve gas deliverability and availability.
He also said the government is working towards the expeditious passage of the Petroleum Industry Bill (PIB) which would enhance clarity in legislative, regulatory, fiscal, and administrative frameworks in the industry.
Excerpts from his submission: “Whereas references have been made to the other elements in this discussion, right pricing of gas is requiring particular attention to ensure the security of gas supply and security of credible gas demand. This is because upstream gas producers must be assured that they will receive fair and equitable returns for their investments whereas, the price must be such that the end-users are able to pay for gas offtake in a reliable and consistent manner.”
“Accordingly, the most robust and sustainable pricing mechanism is that which ‘let the market speak’ in a way that all costs are reflective of prevailing market conditions and for which the economic dynamics of demand and supply are allowed to interplay in an open, transparent, and free-market environment.”
“Thus, our drive as a nation should be early attainment to the ‘Willing Buyer; Willing Seller’ market status.”
“Any transitional pricing arrangements, today, must be structured to quickly give way for market-led pricing regime and conditions.”
“This bill [PIB], when passed into law, will eliminate the uncertainties and bottlenecks associated with gas development in Nigeria and accelerate the growth of the Nigerian gas market to a fully developed and matured status.”
“Specifically, on gas matters, the PIB provides for the following: promotion of dedicated gas exploration and development, gas terms, fiscal separation of gas as a commodity.”
“It will also enhance the domestic gas delivery obligation, tariffing structure & methodology, open access regimes and revised gas pricing framework, to mention but a few.”
“Our focus remains the effective implementation of all policies and strategic programmes of the government in an efficient manner that optimises the value of our petroleum resources for all stakeholders, all in the overriding national interest.”