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  • Oil & Gas - News
  • Updated: April 02, 2024

FG's gas price increase signals potential electricity tariff hike

FG's gas price increase signals potential electricity tariff

The Federal Government has announced a hike in the price of natural gas for power generation companies, setting it at $2.42 per metric million British thermal unit (mmbtu), up from the previous rate of $2.18mmbtu.

This adjustment may lead to an increase in tariffs for power consumers pending a tariff review by the Nigerian Electricity Regulatory Commission, as Nigeria heavily relies on thermal power plants fueled by gas for electricity generation.

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) disclosed the updated domestic base price and wholesale prices of natural gas for 2024.

Commercial gas now stands at $2.92mmbtu, up from the previous $2.5mmbtu, according to the announcement signed by Farouk Ahmed, Chief Executive of NMDPRA.

Previously, the Multi-Year Tariff Order issued by NERC in January 2024 factored in the former gas price. With the latest adjustment, a revision of power tariffs is likely, given gas's pivotal role in electricity production.

Gas producers, both international and domestic, have advocated for price increases to incentivize production.

The Petroleum Industry Act 2021, enacted in August 2021, provides a regulatory framework for determining market-based pricing in the domestic gas sector.

Farouk Ahmed emphasized that the action aligns with the provisions of the PIA 2021, particularly Section 167 and its schedules, which empower the regulator to set the Domestic Base Price and wholesale gas prices.

The 2024 Domestic Base Price of $2.42/mmbtu, along with wholesale prices for natural gas, has been established after consultations with stakeholders and compliance with regulatory frameworks, ensuring market competitiveness and supply sustainability.

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