Business & Economy - News - Oil & Gas - March 30, 2021

DPR wants gas prices to be deregulated to guarantee investors’ returns

The prices of natural gas should be deregulated by allowing the market forces of demand and supply to be a determinant factor, the Department of Petroleum Resources (DPR) has said. The Director and Chief Executive Officer of DPR, Sarki Auwalu, who spoke at the pre-summit conference on “Decade of gas’ in Abuja, on Monday said the deregulation of gas prices would guarantee the security of supply and demand of the commodity.
Auwalu said the right and market-based pricing of gas was critical, as it would assure producers of returns on their investments.
He also outlined five critical levers for gas development in the country, especially as Nigeria moves to leverage its abundant gas resources for national growth, diversification of the economy as well as using gas as the fuel for economic transformation.
The levers include availability, accessibility, affordability, acceptability and deliverability, describing them as critical for utilising Nigeria’s proven gas reserves of 203 trillion cubic feet (TCF) for national development.
“Whereas references have been made to the other elements in this discussion, right pricing of gas is requiring particular attention to ensure the security of gas supply and security of credible gas demand.
“This is because upstream gas producers must be assured that they will receive fair and equitable returns for their investments, whereas the price must be such that the end-users are able to pay for gas offtake in a reliable and consistent manner.
“Accordingly, the most robust and sustainable pricing mechanism is that which ‘let the market speak’ in a way that all costs are reflective of prevailing market conditions and for which the economic dynamics of demand and supply are allowed to interplay in an open, transparent, and free-market environment.
“Thus, our drive as a nation should be early attainment to the ‘willing buyer; willing seller’ market status. Any transitional pricing arrangements, today, must be structured to quickly give way for market-led pricing regime and conditions,” he said.
Auwalu commended President Muhammadu Buhari and the Minister of State for Petroleum Resources, Timipre Sylva, for their outstanding leadership in deepening gas utilisation in Nigeria.
He said efforts by the government towards gas development had culminated in the establishment of the National Gas Expansion Programme, National Gas Transportation Network Code and the National Gas Flare Commercialisation Programme.
Others, he noted, include the ongoing construction of the Escravos-Lagos Pipelines System (ELPS-II), Obrikom (OB3) and Abuja-Kaduna-Kano (AKK) pipelines as critical backbone gas infrastructure required to improve gas deliverability and availability in the country.
The government, he said, was also working toward the expeditious passage of the Petroleum Industry Bill (PIB) which would enhance clarity in legislative, regulatory, fiscal, and administrative frameworks in the industry.
“This bill, when passed into law, will eliminate the uncertainties and bottlenecks associated with gas development in Nigeria and accelerate the growth of the Nigerian gas market to a fully developed and matured status.
“Specifically, on gas matters, the PIB provides for the following: promotion of dedicated gas exploration and development, gas terms, fiscal separation of gas as a commodity.
“It will also enhance the domestic gas delivery obligation, tariffing structure and methodology, open access regimes and revised gas pricing framework, to mention but a few,” Auwalu said.
The DPR, he added, would continue to be an enabler and an opportunity provider in the oil and gas industry.
“Our focus remains the effective implementation of all policies and strategic programmes of the government in an efficient manner that optimises the value of our petroleum resources for all stakeholders, all in the overriding national interest,” he said. (NAN)

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