Government Gas Price Hike Creates Fresh Challenges for GenCos

Electricity Generation Companies (GenCos) are set to experience a spike in the price of gas used in thermal plants as the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) announced an increase in the price of gas supplied to the domestic market.

A notice posted on the official X handle of the NMDPRA on Tuesday, stated that gas supplied to the power sector has been increased to $2.18 per metric million British thermal units (MMBTU) from the $2.13 MMBTU current price.

For commercial users, the price is now $2.68 MMBTU from $2.63, this suggests an increase of $0.5 MMBTU for both customers.

The notice which was signed by the Authority Chief Executive of NMDPRA, Engr. Saidu A. Mohammed, however, said the increase will take effect from April 1.

The notice noted that: "The Petroleum Industry Act (PIA) 2021 assented to by the President on the 16th of August 2021 and gazetted on the 27th of August 2021 provides a clear regulatory framework for the determination of a Market-based pricing regime for the domestic gas market in Nigeria."

"In line with Section 167, the Third and Fourth Schedule of the PIA 2021, the Nigerian Midstream & Downstream Petroleum Regulatory Authority (NMDPRA) is mandated to determine the Domestic Base Price (DBP) and the marketable wholesale price of natural gas supplied to the strategic sectors as defined in Table below.

"The Domestic Base Price at the marketable gas delivery point under Section 167 (1) and other provisions of the PIA shall be determined based on regulations which incorporate among such other matters, the following principles.

"The price shall not be higher than the average of similar natural gas prices in major emerging countries that are significant producers of natural gas. Lowest cost of gas supply based on three tier cost of supply framework. Market-related prices tied to International Benchmarks.

Accordingly, taking into cognizance the provisions of the PIA, market realities, as well as the gazetted Gas Pricing and Domestic Demand Regulations, the NMDPRA hereby establishes the new Domestic Base Price as $2.18/MMBtu and wholesale prices of natural gas in the strategic sector, effective 1 April 2026, as highlighted."