â¢ Companies must provide a guarantee of gas equivalent supply of 1,000 MW
â¢ Government threatens to take action against MDAs for indebtedness to utilities
â¢ announce the details of phase 1 of mass counting today
Concerned about the continued shortage of gas supplies for the country’s thermal power plants, the federal government said there was an effort underway involving some key government establishments in the gas and electricity value chain to raise the challenge of gas supply and increasing production. electricity production companies (Gencos).
THISDAY found this weekend that the government establishments and agencies involved in the collaboration and discussions overseen by the Energy Ministry are the Nigerian National Petroleum Corporation (NNPC), the Nigerian Electricity Regulatory Commission (NERC), the Transmission Company of Nigeria (TCN), and Niger Delta Power Holding Company (NDPHC) Plc.
One of the expected returns from the current effort would be a specific commercial intervention by the NPDHC and the NNPC which would guarantee production companies nearly 1,000 megawatts of gas equivalent.
While efforts to deal with the gas supply were underway, the federal government also said it would take decisive action against the ministries, departments and agencies (MDAs) that depend on it due to their high indebtedness. towards Gencos and distribution companies (Discos). This situation contributes significantly to the liquidity challenge of the sector and to the poor electricity supply of Nigerians.
In response to THISDAY’s questions over the weekend about the government’s efforts to address the issue of gas supply constraints, the President’s Special Advisor on Infrastructure and Secretary of the Task Force on Sector Reform electricity, Ahmed Zakari, said talks were underway to sort out gas supply issues. Zakari attributed the gas supply challenge to the lack of firm gas deals backed by power purchase agreements (PPAs) between some of the Gencos and their gas suppliers.
THISDAY had reported the penultimate week that Gencos called on the NNPC to intervene in the gas supply challenge it faced, demanding that the NNPC, as the holder of 50% of the shares of the joint venture (JV) with gas producers, intervenes by resuming their gas obligations. to gas suppliers to allow them to have enough gas to be able to produce more electricity.
Twenty-eight thousand megawatts (28,000MW) of gas equivalent are required by the country’s thermal power plants, according to the National Control Center, the Ogbomosho-based data house of the country’s power sector, and only 13 percent has been supplied to thermal power plants since privatization have lasted for seven years, the Gencos had said.
Association of Power Generation Companies (APGC) Executive Secretary Ms Joy Ogaji made the request on behalf of her association during a recent session in Abuja, noting that one of the main challenges Gencos faced was the demand of gas suppliers for Gencos to provide âsecuritizationâ before being able to supply them with gas.
âMy proposal is that we want the NNPC, which owns 50% of the joint ventures, to assume the gas obligation of the production companies, and we will generate as many megawatts as you want, if you are able to consume it or use it. âOgaji had asked, explaining that such a proposal would help make gas available for all thermal Gencos to generate without restriction and would also help reduce the electricity tariff.
However, Zakari, in a conversation with THISDAY over the weekend, explained that only four Gencos in the country have firm gas deals with AAEs with their gas suppliers, listing them as Shell Afam VI, owned by Shell. Petroleum Development Company Nigeria Limited (SPDC); Okpai Power Plant, owned by Agip, and Olorunsogu and Omotosho Power Plants, both owned by Pacific Energy.
He pointed out that the Calabar Power Plant, one of the independent national power plants operated by the NDPHC, had a firm gas deal but no PPA.
The presidential aide added that the existence of some form of payment insurance between Gencos and gas producers enabled gas producers to supply them with gas, noting that late payments through subsidies had impacted the appetite of gas producers for other factories that lacked solid payment assurances. .
He said: âThe Gencos with firm PPAs that support firm gas deals are Azura, Shell Afam VI, Okpai, Pacific Olorunsogu and Omotosho. Calabar NIPP has a firm gas agreement but no PPA. The fact that these plants have some form of payment insurance allows gas producers to have a comfortable supply.
âIf you are a Genco and you have a contract with a gas producer that guarantees your income, you can also give a guarantee to the gas supplier. So, it’s a back to back thing. The gas suppliers know that if they supply you with gas for 100 million; you pay them $ 100 million because your money is guaranteed.
âBut for these other Gencos, apart from the five who have this guarantee, one, they have no capacity. Thus, they cannot sign any take-or-pay gas supply agreement. But also, secondly, sometimes, as before, when the discounts were very low, there was the question of when the gas producer would be paid, because the market only pays part and then the balance is not paid. .
âSo this has caused the gas suppliers (to decide not to supply) because they just don’t have a gas supply agreement with the Gencos. They are making the best effort. They are now sometimes reluctant to supply gas.
âHistoric payment delays through subsidies have impacted the appetite of gas producers for other factories that do not have strong payment guarantees. NERC, Department of Energy, NNPC and TCN are making continuous efforts to secure gas supplies and commit to increased power output.
Zakari revealed that one of the expected returns from the current effort would be a specific commercial intervention by NPDHC and NNPC that would guarantee production companies nearly 1,000 megawatts of gas equivalent.
He said: âThis will be linked to ongoing payment assurances that can be provided to gas suppliers who are either NNPC subsidiaries or JV partners. There is also a specific commercial intervention for NPDHC with NNPC which will guarantee them nearly 1000 MW of gas equivalent.
He assured that there would be a substantial improvement and stability of supply by the second half of the year as the government settles trade issues and ensures that firmer gas supply agreements. were activated.
Zakari argued that the fact that the tariff reforms improved nightclub collections and receipts in just a few months by more than 60 percent gave the government comfort that payment assurances for gas suppliers would solve the problem. sustainable gas supply.
On what the government is doing to settle the MDA’s debt to the Gencos and Discos, Zakari said the government will take decisive action to settle the debts in the coming months, saying the government is in talks with the Gencos, Discos and gas producers on this.
Egbin Power Plc said last week that the total debt of Nigerian Bulk Electricity Trading Plc (NBET) to the power generation company is currently 388 billion naira.
Egbin Power Plc director Kola Adesina disclosed the latest figure when the Senate Committee on Privatization and Commercialization visited the Lagos plant recently. Adesina warned that the huge debt NBET owed the plant could call into question the sanctity of contracts in the country and discourage investment in the power sector. He said gas-related constraints had cost the company 106.34 MW since June 2020, adding that in 2021 alone the company had lost 13.68 billion naira due to the challenges he highlighted earlier. .
But Zakari, who declined to disclose details of these steps to settle MDAs’ debts to private power companies, said the federal government would take decisive action to address this in the coming months.
âI cannot comment on the details now, but we will be taking some very decisive action to settle the debt over the coming month. We are in talks with discos, gencos and gas (producers), âZakari said.
Providing updates on the National Mass Measurement Program (NMMP), the Presidential Assistant revealed that plans for the start of Phase 1 of the program have reached an advanced stage and the latest figures would be announced today. .
âThe latest figures will be released on Monday. We are making progress and preparing to enter phase 1, âhe said.