FG Announces New Gas Price for Electricity Generating Companies

The Federal Government of Nigeria, through the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), has announced a new domestic base price and wholesale prices for natural gas for the year 2024.

This decision marks a significant increase in the cost of natural gas supplied to power generation companies, with the domestic base price rising from $2.18 to $2.42 per metric million British thermal units (mmbtu).

The NMDPRA, led by Chief Executive Farouk Ahmed, stated that the new pricing regime is in line with the provisions of the Petroleum Industry Act (PIA) 2021, which mandates the regulator to determine a market-based pricing framework for the domestic gas market.

This framework aims to encourage the voluntary supply of natural gas to the domestic market by upstream producers, while ensuring that the price remains competitive with similar gas prices in major emerging countries that are significant producers of natural gas.

The new pricing structure also takes into account the lowest cost of gas supply, based on a three-tier cost of supply framework, and is tied to international benchmarks.

The wholesale price of gas for the commercial sector has also been increased, from $2.5mmbtu to $2.92mmbtu.

The decision to increase the gas prices for electricity generating companies is expected to have a substantial impact on the power sector in Nigeria, as natural gas is a crucial input for power generation.

The move is part of the Federal Government’s broader efforts to reform the energy sector and ensure a stable and reliable supply of electricity to the Nigerian population.

However, the impact of the price increase on end-users and the broader economy remains to be seen, as it may lead to higher electricity tariffs and increased production costs for industries that rely on natural gas for their operations.