Business

As FG slashes gas-to-power price from $2.50 to $2.18

ADEOLA YUSUF, in this report, takes a look at the latest Monthly Financial and Operational Report of the Nigerian National Petroleum Corporation (NNPC) and it’s effect on the reduction in the prices of gas-to-power

 

More facts have emerged on Federal Government’s policy to reduce gas to power prices from $2.50 to $2.18 with immediate effect.

 

The policy, which was announced seven days before the release of the April Monthly Financial and Operational Report (MFOR) of the Nigerian National Petroleum Corporation (NNPC), showed that government may afterall have been more serious about its power economy.

 

In the 69th edition of MFOR released on Sunday, a total of 209.27 billion cubic feet (bcf) of natural gas was produced in the month under review, translating to an average daily production of 6,975.72 million standard cubic feet per day (mmscfd).

 

For the period of April 2020 to April 2021, a total of 2,902.52bcf of gas was produced, representing an average daily production of 7,369.76mmscfd during the period.

 

Period-to-date production from Joint Ventures (JVs), Production Sharing Contracts (PSCs) and NPDC contributed about 62.07 per cent, 19.95 per cent and 17.98 per cent respectively to the total national gas production. I

 

n terms of natural gas offtake, commercialisation and utilisation, out of the 206.40bcf supplied in April 2021, a total of 126.83bcf of gas was commercialised consisting of 42.92bcf and 83.91bcf for the domestic and export markets respectively.

 

This translates to a total supply of 1,430.90mmscfd of gas to the domestic market and 2,976.94mmscfd of gas supplied to the export market for the month.

 

This implies that 61.45 per cent of the average daily gas produced was commercialised, while the balance of 38.55 per cent was either re-injected, used as upstream fuel gas or flared.

 

Gas flare rate was 9.74 per cent for the period under review (i.e. 670.19mmscfd) compared with average gas flare rate of 7.42 per cent (i.e. 542.22mmscfd) for the period of April 2020 to April 2021.

 

A total of 795mmscfd was delivered to gas-fired power plants in the month of April 2021 to generate an average power of about 3,416 MW. NNPC started publishing its Monthly Financial and Operation Report in October 2015, making the April 2021 edition the 69th in the series.

 

It is published in line with the commitment of the Corporation’s management to be more transparent, accountable to its stakeholders and the Nigerian public.

 

Dipping the gas-to-power price

 

President Muhammadu Buhari  had earlier announced the reduction while declaring open the 2021 Gas Sector Stakeholders (Ajaokuta- Kaduna-Kano, AKK Gas Pipeline Project) forum held in Kano.

 

A statement from the Ministry of Petroleum Resources sighted by New Telegraph showed that the reduction, which has been communicated to the relevant stakeholders for compliance, was buoyed by the negotiation between government and the labour unions.

 

Understanding the April MFOR and its effects

 

 

The Nigerian National Petroleum Corporation (NNPC) announced a trading surplus of ₦43.57 billion in April 2021, representing a 23.64 per cent increase over the ₦35.24 billion surplus it recorded in the previous month of March 2021.

 

This is contained in the April 2021 edition of the NNPC Monthly Financial and Operations Report (MFOR), according to a press release by the Group General Manager, Group Public Affairs Division of the Corporation, Dr. Kennie Obateru. Trading surplus or trading deficit is derived after deduction of the expenditure profile from the revenue for the period under review.

 

According to the report, the NNPC Group operating revenue in April 2021, as compared to March 2021, increased by 17.73 per cent or N80.67 billion to stand at N535.61 billion. Similarly, expenditure for the month increased by 17.24 per cent or N72.34 billion to stand at N492.05 billion, while expenditure as a proportion of revenue stood at 0.92, same as last month.

 

The report attributed the rise in trading surplus to the activities of the Corporation’s upstream subsidiary, the Nigerian Petroleum Development Company (NPDC), such as crude oil lifting from OML 119 (Okono Okpoho) and OMLs 60, 61, 62, 63 (Nigerian Agip Oil Company), as well as increase in gas sales.

 

The positive outlook was further consolidated by the robust gains of two other subsidiaries namely Duke Oil and the National Engineering and Technical Company (NETCO).

 

In the downstream, to ensure uninterrupted supply and effective distribution of fuel across the country, a total of 1.67 billion litres of premium motor spirit (PMS) translating to 55.79mn liters/day were supplied in the month under review.

 

The report also showed a 34.29 per cent reduction in the number of pipeline points vandalised from 70 in the previous month of March 2021 to 46 in April 2021. While Port Harcourt area accounted for 54 per cent, Mosimi area accounted for 46 per cent of the vandalised points.

 

Direct from the minister on gas and AKK

 

Quoting the Miniater of State for Petroleum Resources, Timipre Sylva, the document read: “Following the successful negotiation between the Federal Government and the organised labour unions and the detailed review of the gas pricing framework in Nigeria, the price of gas to power has been reduced from $2.50 to $2.18 with Immediate effect.

 

“The outcome of the negotiation and reviews have been communicated to relevant stakeholders,” he stated. Sylva said that the completion of the project would help in revitalising the industries and create more job opportunities in the benefitting states, which include Kano, Kaduna and Nasarawa states.

 

“The project is the focus on facilitating increase Gas Penetration in the Northern part of the country, especially the AKK pipeline corridor of FCT, Kano, Kaduna, Kogi, Niger, Nassarawa and other neighboring states.

 

“Therefore, the forum is geared towards sensitising the entire northern parts of Nigeria of the upcoming opportunities to bring both new and hitherto moribund companies  back

 

to life. “Kano State alone is dotted with several industrial parks.

 

These and others in other states justify the need to optimise value creation from these industries. “Experts estimate that it will take at least two to three years to rehabilitate and position these industries for optimal performance.

 

Thus, today’s collaboration with all stakeholders is geared towards kick-starting the required activities that will guarantee full usage of the delivered gas through the AKK pipeline when completed.

 

“Today’s event reinforces our commitment to realising the inherent potential of gas usage as the national catalyst for achieving economic diversification from crude oil and transition fuel from fossil fuels of today to the renewable energy of tomorrow.

 

“It is this commitment that informed our support and commission of two gas-powered plants, vessel pipeline operated in Kano State in December 2020 in achieving the uninterrupted delivery of over 30 megawatts of power supply to the industrial hubs.

 

“Our successful collaboration and the completion of the AKK in 2023 will significantly enhance Mr President’s vision and current drive for increase domestic gas utilisation as the mainstay for national industrialisation, increase foreign investment, government revenue growth and ultimately provide more job opportunities for Nigerians,” Buhari stated.

 

Kyari’s view

 

On his part, the Group Managing Director (GMD) of NNPC, Mr Mele Kolo Kyari, said they were working assiduously at ensuring timely completion of the project. Kyari said that some of the equipment has already been delivered to Nigeria from abroad.

 

He said the AKK project, when completed, will provide about one million jobs.

 

AKK host community of Kano

 

In his speech, Governor Abdullahi Umar Ganduje of Kano State said the AKK project would help immensely in reviving over 200 industries in Kano, which have been in coma for a long time.

 

He said his administration had taken bold steps that would enable the project to be completed successfully, saying the people of Kano State would benefit from the project, especially in the aspect of boosting their businesses.

Meanwhile, the stakeholder’s forum was themed: “Optimizing the Economic Development Capacity of the Ajaokuta-Kaduna- Kano”AKK” Gas pipeline Project.”

 

Last line

 

The reduction in the price of gas to power is laudable. More of this should be encouraged because of their positive marks on the economy

 

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