Business
Operators seek tariff increase to stave off N6trn gas debt
Oil and gas operators have expressed fear over Nigeria’s electricity and gas pricing structure, saying that failure to adopt cost-reflective tariffs could leave the country’s gas-to-power sector with a debilitating N6 trillion debt burden, especially if generation expands to 10,000 megawatts.
Expressing views on the sidelines of the Nigerian Oil and Gas (NOG) Energy Week in Abuja yesterday, industry stakeholders noted that the sector risks perennial underfunding, which could derail efforts to achieve a stable and reliable power supply.
This reality is against the backdrop of the Federal Government issuance of a firm warning to oil firms hoarding or underutilising their allocated resources even as players gave conditions to attain the target of three million barrels per day of oil production.
According to data drawn from the Nigerian Electricity Regulatory Commission (NERC), the current average electricity tariff of N116 per kilowatt-hour is far below what is required to sustain the sector.
Analysts projected that a more realistic tariff, something close to current Band A, which is about N204 per kilowatt-hour, is needed to provide sufficient liquidity for investments, infrastructure upgrades, and timely payment to gas suppliers.
The players also insisted that the government could not continue to control the price of gas through legislation, stressing that unless the current fundamental pricing imbalance is addressed there is hope of financing gas supply sustainably or encouraging investments needed to support increased gas generation.
Industry participants at the conference further argued that Nigeria has not yet removed the structural bottlenecks blocking fresh investment into its oil and gas sector. These include infrastructure constraints, insecurity in host communities and uncertainty around regulatory frameworks.
Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, told delegates at the Abuja event, organised by dmg Event, that any operator sitting on dormant fields must either develop them or relinquish their licences.
He noted that the newly-restructured Nigerian National Petroleum Company Limited board had been tasked to review operatorship arrangements and ensure that oil assets are put to productive use.
“The government has done a lot and is willing to do more, but the results must now speak for themselves,” the minister added, warning that licences would be withdrawn from non-performing operators.
In a related intervention, the Chairman of the Independent Petroleum Producers Group (IPPG), Abdulrazaq Isa, said Nigeria’s ambition to lift crude oil production to three million barrels per day remains feasible provided stakeholders move decisively to harness recent reforms and asset transfers.
Isa described the moment as a “critical phase” for Nigeria’s energy sector, pointing out that the bulk of incremental oil and gas output would come from assets recently divested in onshore and shallow water acreages.
“These assets are now primarily in the hands of IPPG members, who have already begun implementing strategic plans to ramp up production,” Isa explained.