Nigeria risks nationwide blackout as NMDPRA halts gas supply to GenCos Over N2trn debt
Onome Amuge
The Nigerian electricity sector is on the brink of a crippling blackout following the directive issued by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to gas producers, mandating them to stop supplying gas to generation companies (GenCos) that are in arrears for gas purchases.
NMDPRA stated that the debts owed by GenCos to gas producers had severely impacted the latter’s ability to sustain operations and maintain profitability.
The authority also urged gas off-takers, particularly power generation companies, to honor their financial obligations by paying for the gas supplied on a timely basis.
As a consequence of the debts, the federal government and some GenCos are reported to owe about N2 trillion in legacy debts to gas producers, underscoring the enormity of the financial challenge faced by the Nigerian gas industry.
Farouk Ahmed, the CEO of NMDPRA, announced the decision to halt gas supply to gas receiver companies during a keynote address at a recent stakeholder sensitisation workshop on wholesale supply operations.
Ahmed, who was represented by Joseph Tolorunse, the legal adviser of NMDPRA, laid out the reasons behind this decision, explaining that gas producers had been ordered to stop supplying gas to receiver companies because of the latter’s non-payment for the gas delivered.
The implications of this issue was addressed by Emmanuel Cofie-Spiff, a representative of Oando, who reported that only 28 percent of the total gas supplied to gas receiver companies had been received.
This, he explained, had placed Oando and other gas producers under immense financial pressure, compounded by the alleged lack of support from NMDPRA in enforcing payment from the indebted receiver companies.
Cofie-Spiff dwelled further on the producer’s frustration with the current situation, lamenting that while they were struggling to recover payments for the gas already supplied, there seemed to be little assistance from the NMDPRA to resolve the problem.
However, the NMDPRA CEO, denied Cofie-Spiff’s claims, countering that the Authority had responded to complaints from gas producers about unpaid gas deliveries by directing those companies to withhold any further gas supply until they received payment.
The sensitisation workshop not only highlighted the challenges faced by gas producers regarding payment, but also revealed a lack of consensus between stakeholders and the regulator regarding the collection of the 0.5 percent levy on gas supplied on behalf of the federal government.
Ahmed stated that the event was designed to engage in constructive dialogue with stakeholders, following the concerns raised during the initial phase of the NMDPRA sensitisation programme.
The ultimate goal, he noted, was to find a mutually acceptable solution that would enable the seamless implementation of wholesale supply operations in Nigeria.
Ahmed, referring to the Petroleum Industry Act (PIA), pointed out that the legislation, passed in August 2021, had introduced licensing requirements for wholesale supply operations in line with Sections 142 and 197 of the Act.
He asserted that any entity involved in, or planning to enter into, the sale and delivery of natural gas and petroleum liquids for domestic use or export was required to obtain a licence for wholesale supply operations.
Ahmed underscored the transformative impact of the PIA on the Nigerian hydrocarbon industry, signaling a shift from the narrow focus on production and exports under the Petroleum Act of 1969 to a more holistic approach that prioritized domestic energy security alongside exports.
He also emphasised advantages of wholesale supply operations, including spurring investments across the petroleum value chain, promoting transparency in hydrocarbon measurement, enforcing domestic obligations, ensuring fair market practices, and facilitating willing buyer-willing seller transactions that would optimise the value of Nigeria’s hydrocarbon resources.