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PETROLEUM
MINISTRY
INTRODUCES
NEW
GAS
PRICING
STRUCTURE
IN
NIGERIA
LDCs. This is expected to end the
previous practice where the end
manufacturing price was linked to
LPFO, uncapped and resulted in a huge
increase with deregulation of LPFO.
December 2010, Vol. 23 Issue 12
Capping
the
upstream
to
wholesale/LDC gas price is expected to
better regulate the end price of gas and
ensure its affordability to manufacturers
as against the previous arrangement
where they were exposed to the
inconsistencies of the LPFO price.
The Ministry of Petroleum recently
announced a new pricing structure for
gas supply to the manufacturing sector,
which would lead, in the interim, to
reduction of prices.
The new pricing structure would ensure
the supply of gas to manufacturing
companies at prices much lower than
the current N35 per standard cubic
metre. The two distinct pricing
arrangements are aimed at upstream
suppliers to wholesale/local distribution
companies (LDCs) and wholesale/LDCs
to end users/manufacturing sector.
Between the upstream suppliers and
wholesale LDCs, gas prices will be
indexed to low pour fuel oil (LPFO), but
unlike previous practice, this indexation
will be capped initially at $2/million
British thermal unit increasing to a peak
of $3/mmbtu by the end of 2013.
For the supply between wholesale/LDCs
and retail manufacturing sectors, prices
would be negotiated; however, such
prices will be subject to regulatory
oversight in order to protect end users
from any abuse by pseudo monopoly of
Further, the introduction of a three-year
transition period for the price cap
change from $2/mmbtu to $3/mmbtu
also provides a cushion for the
manufacturing sector consumers, a
critical requirement for the sector.
The pricing arrangement also introduces
feasible rates for the transmission and
distribution networks.
The ministry projects the addition of
about 315 standard million cubic feet
per day within the next three months
expected to be generated from Pan
Ocean(65 million standard cubic feet per
day), Chevron(185 million scf/d) and
about NPDC(65 million scf/d).
Ms. Nkay Onyeaso
Tel: +234 1 739 0397
Cell: +234 808 718 0833
Email: [email protected]
Fax: ++1 646 536 8978
©Blackfriars LLP 2010. All rights reserved. This document is for general guidance only. Definitive advice
should be sought from counsel if required. Blackfriars LLP, The Penthouse Floor, Itiku House, 28-30
Macarthy Street, Lagos. Tel: +234 1 739 0397; +234 1 736 9797; +234 1 736 9795; Fax: +1 646 536 8978.
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©Blackfriars LLP 2010. All rights reserved. This document is for general guidance only. Definitive advice
should be sought from counsel if required. Blackfriars LLP, The Penthouse Floor, Itiku House, 28-30
Macarthy Street, Lagos. Tel: +234 1 739 0397; +234 1 736 9797; +234 1 736 9795; Fax: +1 646 536 8978.
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