The federal government has paid $120 million of the $1.3 billion owed to gas companies for the supply of gas to run gas-fired power facilities throughout the country.
Nigeria is currently experiencing poor power supply since many providers of the product have restricted their supply, while others have stopped selling the commodity to power-generating companies due to the Gencos’ debts to gas-producing enterprises.
Chief Adebayo Adelabu, Minister of Power, recently acknowledged that the power generation crash and subsequent low supply since January were caused by providers of the commodity ceasing to deliver gas for electricity generation due to the sector’s debts to its producers.
More than 70% of Nigeria’s electricity comes from thermal power facilities that run on gas. The remainder of the electricity comes from hydroelectric power plants.
Speaking at the ongoing 7th Nigeria International Energy Summit in Abuja on Thursday, the Director of the Decade of Gas Secretariat, Ed Ubong, expressed his delight that the Federal Government has cleared $120 million of the $1.3 billion in gas debt.
The Decade of Gas Secretariat is part of the Federal Ministry of Petroleum Resources (Gas). The Federal Government is subsidising electricity by paying for the gas needed to generate it, as Nigerian power customers are currently not paying the correct amount for electricity.
“As of last year, that (gas debts) was about $1.3bn, depending on how you add up the numbers. But I am pleased that between October and the end of January, the government has paid over $120 million to offset some of that money,” Ubong stated.
According to reports, the indebtedness of Nigeria’s power sector to electricity-generating companies and gas producers had risen to about N3.3 trillion.
The article also indicated that an electricity subsidy for 2024 would cost around N3 trillion, although only N450 billion was allotted for this purpose in this year’s budget, and that the government had stated that it was now extremely difficult to sustain power subsidies.
The power minister stated that Nigeria must begin to transition to a cost-effective pricing model, revealing that the country is currently indebted to electricity-generating businesses for N1.3 trillion, with a debt of $1.3 billion owed to gas companies.
Meanwhile, Ubong told participants at the conference on Thursday that the government was building a framework to address the errors that frequently result in such massive gas debts in the power sector.
“More importantly, the government is also now working on a framework that can mitigate most of that failure. That’s a piece of work that is ongoing, and we hope that it will be approved and then the industry can move away from that legacy issue.
“We must build capacity for that. Capacity for the engineers and technicians that will work in this new gas sector that we are looking at for the next eight months. And as the secretary, we are committed to that,” he stated.
He stated that the Decade of Gas Secretariat was seeking competent professionals to assist the government in realising the aims of Nigeria’s gas industry.
“We are looking for interns; we are looking for young people who are willing to join us and then provide their time and energy to support the wider and bigger goals of the sector.
“For the first time, we now have a ministerial committee. One that involves the Minister of State for Gas and the Ministry of Power, because power and gas go together.
“We are confident that when that becomes fully operational, that critical link between gas and power will lead to more sustainable solutions going forward,” Ubong stated.
The statement by Ubong came as the Nigerian National Petroleum Company Limited, NNPCL, urged for greater collaboration among upstream operators, particularly independent producers, to address the constraints impeding the proper development of divested assets in the oil sector.
The company’s Executive Vice President, Upstream, Oritsemeyiwa Eyesan, made the plea during a panel session at the ongoing conference in Abuja while speaking on the theme, ‘Innovation, Collaboration, and Resilience: Empowering Independent Producers in the Dynamic Energy Era.’
Eyesan claimed that previous experiences with divestments and asset operations had left much to be desired, as the majority of them resulted in a decline in production rather than growth.
“In the industry, if you want to measure success, there are some basic indicators that you use: production growth, reserve growth, and asset integrity. If I were to evaluate prior investment initiatives and scale the actors using these indices, I would be untrue to myself if I said everybody had done well.
“Yes, we acquired the assets, but today, we are worse off in terms of production than we were when we did the acquisition,” she stated.
However, Eyesan admitted that there had been some success in the activities of independent producers.
She cited some of the problems as instability, a lack of cash, and a lack of technological competence, emphasising that the challenges might be overcome by collaboration among industry actors.
“Collaboration cannot be overemphasised. Somebody said we should be in a state of emergency, and I agree with that. It’s not by sitting here and talking about the challenges.
“I think we should have a war room where we raise the issues and set out concrete plans to resolve them rather than wait for stakeholders individually to take them on. We need collaboration, collaboration, and collaboration,” she stated.
