GenCos get gas price slash amid N2tn debt

The Nigerian Midstream and Downstream Petroleum Regulatory Authority has slashed the price of natural gas for power generation companies.

This is coming amid about N2tn debt owed to gas companies by the power generation companies as a result of illiquidity.

GenCos are now expected to pay $2.13 per million British thermal units, according to a document released by the NMDPRA.

The PUNCH recalled that in March 2024, the regulator introduced a revised pricing structure for natural gas in strategic sectors, resulting in an 11 per cent increase in power sector prices.

The Domestic Base Price for the power sector increased from $2.18 to $2.42 per MMBTU, while commercial sector pricing was adjusted to $2.92 per MMBTU.

However, in the document titled ‘Announcement on Establishment of The Year 2025 Domestic Base Price and Applicable Wholesale Price of Natural Gas for the Strategic Sectors’, the NMDPRA said natural gas will now be sold at the rate of $2.13 per MMBTU.

The new pricing framework took effect from April 1, the NMDPRA disclosed.

The document signed by the Chief Executive of NMDPRA, Farouk Ahmed, said in line with Section 167, the Third and Fourth Schedule of the Petroleum Industry Act 2021, the NMDPRA is mandated to determine the Domestic Base Price and the marketable wholesale price of natural gas supplied to the strategic sectors.

It was stated that the DBP was agreed on based on the principle that 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.

“Accordingly, after due consultation with key industry stakeholders and taking into cognisance the provisions of the PIA and market realities, the NMDPRA hereby establishes the new Domestic Base Price as USD 2.13/MMBtu and wholesale prices of natural gas in the strategic sector, effective 1 April 2025,” the NMDPRA announced.

For the commercial sector, the DBP is put at $2.63 per MMBTU.

Reacting, the President of the Nigerian Gas Association, Mr Akachukwu Nwokedi, commended regulators such as the Nigerian Upstream Petroleum Regulatory Commission and Nigerian Midstream and Downstream Petroleum Regulatory Authority for championing commercialisation and introducing a revised domestic gas pricing framework.

He said, “We have to acknowledge, and I must commend the recent release by the NMDPRA of the domestic gas pricing framework.

“While pricing remains a very sensitive issue, this move signals greater clarity and structure and, if implemented effectively, could help unlock more supply for the domestic market and spur industrial consumption.”

In December 2024, it was gathered that the Federal Government had to intervene in tackling gas supply to generation companies after suppliers of the product reportedly planned to halt gas supply to GenCos due to a debt of about ₦2.7 tn.

Over 70 per cent of Nigeria’s power plants are fired by gas, and the lack of feedstock could plunge the nation into darkness.

Faced with N4.7tn debt, our correspondent gathered that generation companies are facing challenges in running their power plants.

It was learnt that gas-fired thermal plants are mostly affected as they are unable to pay gas companies supplying them with feedstock.

Experts said the current gas price slash will lessen the burden on the GenCos going forward.

Speaking with our correspondent recently, the Chief Executive Officer of the Association of Power Generation Companies, Dr Joy Ogaji, disclosed that the GenCos are suffering and need urgent and pragmatic solutions to ease their liquidity crisis, stressing that the liquidity crisis is N4.7tn.

“As for liquidity, GenCos are seriously suffering and urgently need pragmatic solutions to ease the liquidity crisis, totalling N4.7tn,” Ogaji stated.

There are fears that some power plants may shut down due to mounting debts as gas companies would stop supplying feedstock.

However, the Minister of Power, Adebayo Adelabu, through his media aide, Bolaji Tunji, told our correspondent that the issue is currently getting the required attention, promising that all the players in the value chain will be paid.

He said, “We are always intervening. I can assure you that no power plant will shut down; nothing like that will happen because of the effect of that on the economy.

“The minister has already made a case for them for the government to pay the outstanding and the legacy debt. The government will not allow things to get to where the GenCos will now say they can no longer generate electricity.

“Both GenCos and gas suppliers; all the value chain (will be paid). The government will not allow anything to happen that will cause a problem for the economy,” he said.