*Now $3 mcf for manufacturers
LAGOS—FEDERAL Government, Thursday, announced a new gas pricing regimefor the industrial sector, with a view to revamping and boostingindigenous manufacturing capacity.
Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, disclosed this yesterday, in a keynote address at the August Conferenceon Gas to Power-_ Prospects and Challenges, organized by energycorrespondents.
She said the gas reprieve for the manufacturers would be segmented into two separate pricing structures _ producer to wholesaler/localdistribution company, LDC, and the wholesale/LDC to end user ormanufacturers.
Mrs. Madueke said the new gas pricing, capped at $3 per million cubic feet, mcf, was targeted at effectively freeing gas price tomanufacturers from low pour fuel oil, LPFO, or black oil indexation,especially for the wholesaler and manufacturers. She said:
“The price will be negotiated on a ‘willing buyer, willing seller’ basis, not only to ensure transparency but also reflect the true costof distributing and marketing of gas.”
The minister added, however, that pricing for the producer and wholesaler/LDC will continue to be based on LPFO indexation, stressing:“unlike in the past which was uncontrolled, the new price is capped at$3/mcf. This provides a major protection for downstream pricingarrangement between the wholesalers/LDC and their end usermanufacturing customers.”
New pricing structurers
The implementation of the new pricing structures is expected to run between now and 2013, to address the challenge of unpredictability inpricing. But the implementation of the pricing between the producer andwholesaler/LDC will be done in phases _ now to end 2012, $2/mcf; end2012 to end 2013, $2.50/mcf; and end 2013 and beyond inflationcorrected, $3/mcf.
Mrs Madueke noted that the new manufacturing gas pricing complemented the recently approved increase in gas to power price, toensure that producers get an aggregate price that was at or close toexport parity.
Until now manufacturers had continued to groan under the high cost of gas, which impacts on production cost and eventually passed on tothe final consumers, thus making made_in_Nigeria products uncompetitiveat the international market.
The minister who explained that the pricing structure, “will create transparency and efficient management of the dynamics of pricing withineach relationship,” added that the move was approved by PresidentGoodluck Jonathan in acknowledgment of that fact that the “growth ofthe manufacturing sector is crucial to the delivery of the economicagenda.”
Noting that one of the issues the Petroleum Industry Bill, PIB, was meant to address was the imperfection in the value chain structure, shesaid: “The PIB recognizes three distinct stakeholder groups in the gassupply chain to the manufacturing sector, namely, the producers,transporters and wholesaler/LDC.
This ensures transparency in the value chain, with the resulting impact of a more attractive end user price.”
With regard to the PIB, which she said would soon be passed into law, Mrs. Madueke said that in view of the planning and strategies putin place for its smooth transition, investment inflow afterwards areexpected to generate about 30,000 jobs locally, despite the poorfunding of gas infrastructures in the country.
She said: “Addressing these challenges has been our focus lately, and significant progress is being made. In the last few months we havefocused aggressively on implementing the most aggressive reform of thecommercial framework for gas supply to power in Nigeria.”
Mrs. Alison_Madueke also stated that the country’s four refineries were currently working at an optimal capacity utilisation of 60 percent.
She said that in line with its objective to own 50 percent of retail outlets in the country, the Nigerian National Petroleum Corporation,NNPC, had also acquired about 437 service stations nationwide inaddition to its 37 mega_stations across the country and 12 floatingmega_stations.
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