Firms to produce from neighbouring countries over new gas prices, others

The Guardian

Nigeria ‘accidentally’ discovers 206tcf gas reserves
• FX scarcity, gas dollarisation may spike inflation
• Gas users to pay $5.10/mmbtu from July despite shortages

With the new gas price regime expected to kick off on July 1, alongside challenges of currency devaluation and access to foreign exchange for raw materials, local manufacturers have told The Guardian they are contemplating moving their production hubs to neighbouring African countries under the African Continental Free Trade Area (AfCFTA) regime.

According to the manufacturers, it is increasingly difficult to produce locally and remain competitive, going by the new challenges they encounter.

With an upward review in the price of natural gas used for local production and dollarisation of the commodity by franchisers, which operators describe as preferred option to exporting the commodity, the cost of production is expected to rise further, spiking inflation when costs are passed to consumers.

Unlike Premium Motor Spirit (PMS) that is subsidised, the price of gas is determined by gas aggregators and franchises.

Poor access to gas undermines government’s domestic gas utilisation agenda and target to get industrial clusters to adopt gas a preferred source of energy.

Between 2019 and 2020, manufacturers spent about N143.29 billion on alternative power supply, a situation they have described as unsustainable, especially now that the cost of gas is equally rising.

This development is coming as the Minister of State for Petroleum, Timipre Sylva, at the weekend, disclosed that the country accidentally discovered 206 trillion cubic feet (tcf) of gas reserves while in search of crude oil.

Sylva, who disclosed this in Abuja at a News Agency of Nigeria (NAN) forum, said the country could discover an additional 600 tcf reserve to enable it achieve the desired development required of a gas nation.

“We have a lot of gas in this country. We have 206 tcf of gas reserves. This number is already discovered in gas reserves and this 206 tcf reserve was found while looking for oil, so it was accidentally discovered. We were actually going to look for crude oil and we found gas, and in that process of accidentally finding gas, we have found up to 206 tcf. So, the belief is that if we really aim to look for gas dedicatedly, we will find up to 600 tcf of gas,” he said.

According to the Minister, the country’s transition from gas to renewable fuel will be gradual when it has fully utilised the benefits associated with gas.

TO check the rising cost of Liquefied Natural Gas (LNG) and unstable supply in recent time, local producers are exploring migration to Compressed Natural Gas (CNG), which they have described as cheaper than the former.

LNG and CNG form sources of alternative power to local producers due to the failure of the national grid to meet their demands. But the switch to LNG and CNG has remained a mirage due to high cost, infrastructure and policy framework.

Read the full story in The Guardian