Nigerian Regulatory Authority Raises Natural Gas Prices for 2024, Citing Market-Based Pricing Framework

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The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), a key Federal Government agency, has announced the adjustment of domestic base price and wholesale prices of natural gas for 2024. The new rates, unveiled by NMDPRA Chief Executive Farouk Ahmed, see an increase to $2.42 per metric million British thermal units (mmbtu) for domestic base price, up from the previous rate of $2.18mmbtu.

Ahmed said the move which aimed at aligning with the Petroleum Industry Act 2021, as signed into law by President Bola Tinubu and gazetted in August 2021, the regulatory authority has established a market-based pricing regime for the domestic gas market. This regulatory framework, as outlined in section 167 of the Act, empowers NMDPRA to determine the Domestic Base Price and wholesale prices of natural gas supplied to strategic sectors.

According to Ahmed, the pricing adjustments are designed to ensure a sufficient supply of natural gas for the domestic market while maintaining competitiveness. The principles guiding the price determination include factors such as bringing forward adequate gas supplies, aligning with international benchmarks, and considering the lowest cost of gas supply based on a three-tier framework.

He said “The DBP at the marketable gas delivery point under Sector 167(1) and other provisions of the PIA shall be determined based on regulations which incorporate among such other matters, the following principles.

“(a) The price must be of a level to bring forward sufficient natural gas supplies for the domestic market on a voluntary basis by the upstream producers.

“(b) 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.

“(c) Lowest cost of gas supply based on three-tier cost of supply framework. (d) Market-related prices tied to international benchmarks.”

Emphasizing the consultative process with stakeholders and compliance with the PIA and Gas Pricing Regulations, NMDPRA set the 2024 Domestic Base Price at $2.42/mmbtu and wholesale prices for natural gas in strategic sectors.

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