Nigeria eases grip on gas price to boost power

Nigeria’s electricity regulator will approve higher prices for natural-gas supply to ensure increased deliveries to the national ailing power plants.

The Nigerian Electricity Regulatory Commission will is now disposed to endorsing contracts above the regulated rate between a “willing buyer and willing seller,” Chairman Sam Amadi told Bloomberg in an interview in Lagos.

Any proposed gas deals from energy companies must be “prudent,” Amadi said. “The bottom line is that because the tariff in the electricity industry is regulated, the cost of gas will be regulated.”

Nigeria, which holds Africa’s largest gas reserves, raised the price of the fuel to power plants to $2.50 for 1,000 standard cubic feet last August from about 50 cents to help spur deliveries but gas producers have insisted they need more than that to guarantee supplies.

The nation produces about 9 billion cubic feet of gas a day, of which half is exported as liquefied natural gas. One billion cubic feet is flared during oil production and another 1 billion is reinjected into oil wells to maintain pressure. Almost 2 billion goes to industries and power plants, where demand is forecast to more than double to 5 billion cubic feet a day in two years.

Demand for electricity is more than triple Nigeria’s capacity. Efforts to boost gas supply to power stations have been hampered not only by prices but by sabotag, according to Amadi.

If we do not have vandalism on the existing pipelines, we can ramp up to about 5,000 megawatts from the 3,800 we are doing, he said.

Bloomberg