Power shortage: CBN to offset N25bn gas debt, FG to stabilize Electricity in Oct

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The Federal Government yesterday initiated a multi-sectoral approach towards addressing acute supplies of gas to power generating plants with a view to stabilizing power by October and achieving at least 10,000 Mega Watts of electricity supplies by the year 2020.
One the major planks of the approach sees the Central Bank of Nigeria (CBN) undertaking to pay off N25 billion debts owed to gas suppliers. This move is expected to give confidence to the stakeholders in the gas sector.

Also, the CBN is expected to further play a key role in financial arrangements to guarantee payment for gas supply by the power sector so as to ensure that there is adequate gas supply to the sector to guarantee power generation and supply nationwide.

This strategic intervention measures aimed at achieving the target, in the short term, is expected to add at least 370mmcf/d of gas and assure a generation capacity of at least 5000MW within four-five months.

The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke flanked by the Minister of Power, Professor Chinedu Nebo, Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele and the Chairman of the Nigeria Electricity Regulatory Commission (NERC), Dr. Sam Amadi, marshalled out the intervention strategies in a joint press conference yesterday, at the Corporate Headquarters of the Nigerian National Petroleum Corporation (NNPC), Abuja.

Also in attendance was the newly appointed Group Managing Director of the NNPC, Dr. Joseph Thlama who was formally introduced to journalists by the Minister of Petroleum Resources.

Other intervention strategies include the review of the current gas pricing to reflect market value with the NERC approving a new benchmark price of $2.50/mcf for gas supply and $0.80/mcf as transportation costs for new capacity and the price would be reviewed annually in line with the US inflation rate.

Alison-Madueke explained that apart from the gas pricing review and the debt payment, the Ministry of Petroleum Resources was focusing on completing a number of gas supply projects that would add at least 370mmcf/d of supply by end of the year.

The projects include the Utorogu field expansion and completion of the new gas plant and is expected to impact about 60mmcf/d; Expansion of Oben gas plant and drilling of new wells to add 100mmcf/d; re-entry of the Odidi field and revamping of the progressing plant and flow lines to deliver 40mmcf/d; and hooking up already drilled oil wells in Pan Ocean’s OPL275 to add 40mmcf/d.

She explained that the total output of the projects would add at least 240mmcf/d, stressing that as it has reached advanced stages of delivery, its impact would be steadily felt from October till end of the year.

She further enumerated that on the Eastern axis, NGC is building a six kilometre bypass line to enable alternative supply of 60mmcf/d to Alaoji, adding that with stabilization of the supply of 40mmcf/d expected from Shell, all Alaoji’s requirement for gas is expected to be met by end of the year.

Also, in the East, she said that Seven Energy would deliver 30mmcf/d in the first instance to Calabar National Integrated Power Plants (NIPP) while Gbaran and Omoku Power plants would be completed by end of first quarter of 2015 making available 130mmcf/d of gas.

According to her, currently about 750mmcf/d of gas is being supplied to the power sector resulting to aggregate generating capacity of 4000 MW, but outages reduce the actual available power.
She said: “Having identified the gap between the availability of gas and the actual delivery to the end consumer, we have been working tirelessly to bring about a robust and sustainable solution to this issue. Had there been sufficient gas supply, current generation capacity would have crossed the 6000 megawatts target today.
“Collectively, we have developed additional interventions that will address outstanding issues around gas pricing, fast-track additional gas supply development particularly in the short term.
“It is expected that barring unforeseen developments, these interventions will add at least 370mmcf/d of gas and assure a generation capacity of at least 5000MW four-five months.”
On the new gas pricing, she said: “In the short term, it is anticipated that this will quickly boost gas supply and in turn power output. In the medium to long term, this new price should trigger additional investment in the infrastructure for gas to power.
“In addition to the new price, NERC will require firm commitments from gas suppliers, that they will supply the agreed quantities of gas to the generation companies as long as payment terms are met.
“NERC is presently concluding the review of the Aggregate Technical Commercial and Collection (ATC $ C) losses studies submitted by the distribution companies. This will be followed by a review of the revenue requirement for the power sector that is to be covered by a revised Multi Year Tariff Order (MYTO) part.

“To give confidence to stakeholders in the gas sector, regarding the willingness of the power sector to settle its outstanding debts for gas, the CBN will support initiatives to clear up the most recent gas related debts to the power sector.

“Specifically, the CBN is looking at banking sector led measures to pay off N25 billion of debts owed to gas suppliers.”

Mrs Alison-Madueke, however, lamented that there were typical challenges confronting gas supplies such as rapid reservoir decline, pipeline vandalisation, community disruptions of projects and funding and appealed to the public to assist in solving the problems.

On his part, the Minister of Power applauded the strategies marshalled out in solving gas shortages, describing it as unprecedented cross-sector collaboration to solve long exiting problem.

Also, the CBN governor said that it was the agreement of the Bankers Committee to offset the N25 billion debt owed to gas suppliers so as to give further confidence in gas supplies, adding that the adjustment in gas supply prices would make it competitive.