The Department of Petroleum Resources says the pump price of petrol in
Nigeria may rise up to as much as N1000 per litre when the petrol
subsidy regime comes to an end without an alternative energy source.
DPR Director, Sarki Auwalu, stated this while responding to questions
and comments generated by a paper he delivered in Lagos, recently, at
the Second Quarter, 2021 Business Dinner of Petroleum Club Lagos.

Responding to the subsidy concerns and the disparity in the petrol
consumption figures given by the Nigerian National Petroleum
Corporation and the DPR, Auwalu acknowledged that Nigeria was spending
so much on petrol subsidy.
He said eliminating it would require making alternative fuel available
to Nigerians and that failure to do that could plunge Nigerians into
paying higher petrol prices when subsidy is removed.
According to a statement on the DPR website on Monday titled, ‘DPR:
Without Alternative Energy, Petrol Price Will Rise On Subsidy
Removal’, Auwalu stated that Nigerians may pay as high as N1, 000 to
buy one litre of petrol in the country when subsidy on petrol is
removed and when the alternative energy or autogas gas policy becomes
fully operational.
He, however, said the alternative fuel regime comes with initial cost
as it will lead to spending $400 to convert one vehicles from running
on petrol or diesel to running on either Liquefied Natural Gas or
Compressed Natural Gas.
Auwalu maintained that converting eight million public vehicles
currently present in Nigeria to gas-powered will cumulatively cost
$3.2 billion to achieve.
He said, “So, to eliminate subsidy, they don’t call it subsidy anymore
now, it’s under-recovery of purchase. So, to eliminate under-recovery,
what you need is alternative fuel. Without an alternative, you will
subject people to higher prices and that is why we go for price
freedom.
“As at today, there are 22 million cars in Nigeria. Eight million are
for public use. Imagine if you want to convert every car into gas, the
average cost of conversion is $400. Converting eight million cars
requires $3.2 billion. To do that, there are a lot of environmental
investors which can invest and recover from the sale of gas and we are
encouraging that.
“Once that is achieved, you will see that PMS can be sold at N1,000.
After all, the average distance covered by one-gallon equivalent when
you compare it with LNG or CNG with respect to energy for mobility is
2.7 against one. One for PMS, 2.7 for LNG or CNG.
”So, with that advantage, you will see that it creates an opportunity
for this industry again. The issue of subsidy, the volume will all
vanish and that is what we are working towards.”

Gencos Seek NNPC’s Intervention as Gas Supply Challenge Persists
With gas supply to thermal power plants around 13 per cent more than
seven years after the power sector privatisation, power generation
companies (Gencos) have called on the Nigerian National Petroleum
Corporation (NNPC) to intervene and save the sector.
Twenty-eight megawatts (MW) of gas equivalent is required by the
thermal power plants in the country, according to the National Control
Centre, the data house of the nation’s power sector, and only 13 per
cent has been supplier to thermal plants since the last seven years.
Consequently, the Gencos are demanding that the NNPC, as holder of 50
per cent stake in the Joint Venture (JV) with gas producing companies,
should intervene by taking over their gas obligations to gas suppliers
to enable them generate more power.
The Executive Secretary of Association of Power Generation Companies
(APGC), Mrs Joy Ogaji, made the request on behalf of her association
during a panel session at the recently held 2021 Nigerian Oil and Gas
Conference and Exhibition (NOG) in Abuja.
The panel session centred on, “Developing the Domestic Gas Market to
Deepen Gas Utilisation.”
Ogaji noted that one of the major challenges facing Gencos was the
request by gas suppliers that Gencos provide “securitisation” before
they could supply them gas.
She explained that the Nigeria Bulk Electricity Trader (NBET) was
expected to provide the securitisation in the form of a bankable
commercial letter of credit from a commercial bank to the Gencos, but
that NBET had not given them such since privatisation in 2013.
Ogaji said: “One of the challenges that we generation companies are
facing is gas suppliers requesting for securitisation. And again, as
lawyers, you know that contracts have to be back-to-back. If it is not
back-to-back, it is not possible for me to be able to post to you what
has not been posted to me.
“So, the way the power sector is designed is such that a value chain
is as strong as its weakest link. So, it is designed such that we have
a bulk trader, NBET, as a securitisation agent or an obligor or a
buffer for the Gencos.
“So, NBET is expected to provide a securitisation in the form of a
bankable commercial letter of credit from a commercial bank to the
Gencos, who in turn, will now post it to the gas suppliers.
“As you all know, we have not received that and this is why we are not
able to post it to the gas suppliers. My proposition is, we want NNPC,
who has 50 per cent of the JVs to take up the gas obligation of the
generation companies, and we will generate as much megawatts as you
want, if you are able to consume or utilise it.”
She explained that such proposition would help the country as it has a
two-pronged approach including making gas available for all thermal
Gencos to generate unrestrained and also help to reduce the
electricity tariff.
According to her, 60 per cent of the current generation tariff is the
gas component, which in essence, makes the Gencos the debt collectors
for the gas suppliers.
Giving the status of the Nigerian energy demand and gas requirement,
with data from the National Control Centre (NCC), Ogaji, said that
Nigeria’s estimated 203 population has gas demand of 28000MW.
She added that the Nigerian Electricity Regulatory Commission (NERC)
had issued over 160 licences to power generation companies but that
only 25 of them are operating currently.
According to her, 124 power generation companies, majorly thermals,
were not functioning as they are, “watching on the sidelines, watching
when the market gets serious before coming in.”
Ogaji noted that the idle licences would have cumulatively added
another 30000MW to the network if they were actively involved.
The Gencos’ spokesman recalled that in 2015, the current
administration launched a Vision 2030, which seeks to generate 30000MW
by 2030, down from the 40000MW projected by the previous
administration for 2020.