The federal government of Nigeria has inaugurated a committee to review and evaluate the pricing framework of domestic gas in furtherance of its ambition to deepen the penetration of Liquefied Petroleum Gas (LPG) and Compressed Natural Gas (CNG), which are expected to serve as alternatives to petrol.
The Minister of State for Petroleum Resources, Timipre Sylva, in a statement issued in Abuja on Tuesday, emphasized the significance of an appropriate price system that would not only benefit the manufacturing sector or Nigerians but also stimulate growth in the gas industry in and outside the country.
“Without appropriate pricing, we can’t have it right. We have to ensure that gas becomes affordable. It is sad to note that we sell gas cheaply to investors while the price is high in the domestic sector to the extent that some Nigerians say diesel is cheaper than gas. Once we solve the issue of gas in Nigeria, we would have solved a lot of problems in the country. Luckily for us, gas is something we have in abundance,” he said.
According to Mr Sylva, the committee members have a duty to review domestic gas price and benchmark, make recommendations for proper gas pricing, make technical suggestions and evaluations, and have 30 days to hand in their recommendations.
Recall, following the Nigeria LPG Assembly webinar organised by the Oil Trading and Logistics (OTL) Africa Downstream Limited recently, LPG operators resolved to establish a local pricing index for LPG to reflect the current realities in the value chain.
Addressing stakeholders during the webinar, Dayo Adeshina, Programme Manager, National LPG Expansion Programme said that it had become increasingly clear that Nigeria needed a pricing index that was not US-based.
“Nigeria currently operates an LPG pricing index that is US based because the Nigeria Liquefied Natural Gas (NLNG), whose market was predominantly US Mont Belvieu, was set up solely for export, but circumstances made it come into the domestic market and so they decided to use the same pricing index minus the freight rate from Bonny to Lagos.”
Adeshina noted that this was not the best pricing index especially for a country with frequent swings in the value of the naira. He stressed that issues around pricing could be addressed by significantly reducing exports and increasing inland production and competition among other producers as well as marginal field operators in the long run.
Also speaking, Nuhu Yakubu, President, Nigerian LPG Association (NLPGA) said that domestic LPG is priced in USD and expressed optimism that as soon as Nigeria attained a one million ton per annum target, it would qualify as a market that can have its own pricing platform.
The Nigerian government has intensified efforts to encourage the adoption of LPG and CNG as alternative fuels in the country’s energy mix.