During a panel session featuring several energy stakeholders on Nigeria’s gas-to-power masterplan in the ongoing Nigeria Energy conference, Dr Nnaemeka Ewelukwa, the managing director/chief executive officer, Nigerian Bulk Electricity Trading (NBET) said the country needs more gas power plants.
According to him, the Edo state-based independent power producer (IPP), Azura power plant signed a gas purchase agreement with Seplat Energy in 2014, which gave Seplat a line of revenue for over ten years. This line of revenue enabled Seplat to invest about US$300 million to expand its gas facilities. He alluded to the fact that the Seplat expansion would not have been possible without the Azura power plant.
“To build more gas-based power plants, there is a need for power purchase agreements and there is a need for full payments, otherwise, there will be a gap in the value chain,” he says.
An efficient electricity value chain scenario
Dr. Ewelukwa told the event attendees that once the downstream works, the upstream will work. He said the entre value chain will be efficient as it should be when all customers are metered and are paying their bills when due, and distribution companies (Discos) are collecting payments.
“When discos are efficient in their operations and are making payments to NBET, it becomes possible for NBET to pay generating companies (Gencos). In turn, Gencos would be able to pay gas suppliers. Our goal is to get the system working to the point where NBET is no longer needed to transfer funds from Discos to Gencos, because we now have a truly competitive electricity market,” he concluded.
Dr Ewelukwa also emphasised on the need for NBET, Discos, Gencos, Transmission Company of Nigeria (TCN) and the Gas Aggregation Company of Nigeria (GACN), to work together, so as to accelerate the drive towards having an efficient electricity market.
Bridging financing gaps
As Nigeria currently lacks enough infrastructure to enable maximization of natural gas resources, incentives are needed in order to encourage the development of more gas to power infrastructure. Olakunle Williams, the chief executive officer of Tetracore Energy Group, spoke about the need for gas-to-power projects financing.
“There is a lot of emphasis on export projects like the Nigeria-Morocco gas pipeline. However, to enable gas-to-power projects development, there is a need to create certain market conditions that will enable these projects.
“We need to strengthen the value chain very quickly by creating conditions to ensure that sanctity of contracts, full payments and offtake assurances are done,” he says.
Paying for darkness?
Dafe Akpeneye, the commissioner for legal, license and compliance at the Nigeran Electricity Regulatory Commission (NERC) told attendees that coordination and communication between policymakers and regulators is key to pushing the value chain forward.
“There is a massive mismatch in the power sector. Only until recently, the government was subsidizing our power consumption. We have had tariff review battles with labour unions because there is a perception that consumers are paying for darkness,” he says.
He called for patience on the part of Nigerians, stating that power supply tariff payments should be made, so as to play the long game and at the end of the day, the power sector will be better off for it. He also reminded stakeholders that Nigerians need to know the roadmap to power sector success, which outlines the journey and cost to get to the destination, so, they can make better choices.
What you should know
- Nigeria is more of a gas nation than an oil nation
- The Russia-Ukraine war has altered energy policies and prices all over the world
- Nigeria’s current electricity demand is about 19,000 megawatts, but the supply is only 5,000 megawatts. For our growing population, we need to upgrade to 40,000 megawatts but we need to process about 10 billion standard cubic feet of gas per day to achieve that.
- Diesel needs to be displaced in favour of gas as a solution to decarbonizing the energy sector.
- 70% of gas produced in the country is being consumed by the power sector.