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Regulator creates new domestic base price for gas

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has established a new Domestic Base Price (DBP) framework and applicable gas wholesale price for the strategic domestic sector. Chief Executive Officer, NMDPRA, Engr Farouk Ahmed, who disclosed this in a statement made available to newsmen on Sunday in Abuja, explained that the new framework was in fulfilment of the relevant sections of the Petroleum Industry Act (PIA) 2021.

 

The statement partly reads: “The law, which was assented to by the President on the 16th of August 2021 and gazetted on August 27, 2021, provides a clear regulatory framework for the determination of a market-based pricing regime for the domestic gas market in Nigeria in line with Section 167 and Third and Fourth Schedules of the Act, which require the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) determine the Domestic Base Price (DBP), three months following the effective date of the Act.”

While stating that the applicable wholesale gas price for the power sector shall be the established domestic gas price, Ahmed hinted that the DBP would be determined annually based on the criteria set in the third schedule of the Act, which includes; reference DBP to prices of gas in countries with significant reserves and production of natural gas, ensuring base price considers the lowest cost of gas supply based on a three-tier cost of supply framework, and that DBP is related market-prices tied to international benchmarks for strategic investors.

 

“Domestic Base Price shall be the Export Parity Price at the delivery point where there is a dominant supply of gas in Nigeria. Export Parity Price in this context is defined as a market- driven pricing framework, responsive to fiscal changes and weighed to ensure pricing flexibility while moderating swings to protect fragile domestic industries,” he said.

 

He further explained that the pricing framework for gas conversion industries namely: ammonia, urea, methanol, polypropylene, Low Sulphur Diesel (GTL), shall be as currently specified under the Fourth Schedule, adding that the other commercial sector consisting of cement, non-grid power, iron and steel industries, aluminium and all such industries requiring gas for heating shall be DBP +US $0.50.

 

Furthermore, Ahmed stressed that the prices shall apply to gas supplied under the domestic gas delivery obligation which shall be determined by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) under Section 110 of the PIA, even as he revealed that the NMDPRA was presently consulting with industry stakeholders in the development of DBP and applicable wholesale prices for the domestic gas market

 

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