N30bn Gas Supply Debt Weighs down Power Sector Growth


The inability  of power sector operators to pay up the over N30 billion they owe the Nigeria Gas Company, a subsidiary of the Nigerian National Petroleum Corporation (NNPC), is posing a big challenge to the success of the power sector privatisation and slowing down the growth of the gas sector.

The debt is crippling gas suppliers’ efforts to expand their operations and increase the volume of gas supply to the generating plants as well as undermining the ability of the generating plants to deliver sufficient electricity to the distribution companies.

The debt owed by the generating companies and the over N200 billion borrowed from banks by the new investors to purchase the power assets have slowed down the power sector growth post privatisation.

“One key disincentive to gas supply growth is the payment performance of the power sector broadly, whilst NIPP has had a relatively better performance in terms of paying for gas,” said Diezani Alison-Madueke, minister of petroleum resources.

But the new investors say they are currently more concerned with non-availability of gas than their debts to the banks. More gas will mean that they will be in business and therefore be able to service their loans, they say.

Egbin, Ughelli, Afam and Sapele power plants formerly owned by the defunct Power Holding Company of Nigeria (PHCN) are the ones that are most indebted, BusinessDay further learnt.

For sustained growth in gas supply, Alison-Madueke said there must be improved payment performance, assuring that efforts were being made to ensure gas supply growth in line with increasing demand.

In the short term, she said, about 130mmcf/d was expected in the West Niger Delta. Also, almost 1,000mmcf/d forecast to be added between 2014 and 2015 would bridge the gap in demand by the NIPP, other industry sources said.

While the current demand by the National Integrated Power Projects (NIPP) in the Western Niger Delta is about 260mmcf/d, it was estimated that by the end of 2013, gas demand by NIPP would have grown by an estimated 340mmcf/d, coming notably from Geregu and Ihovor power plants.

David Ige, group executive director, gas and power, NNPC, described the gas supply shortage as a short-term challenge, adding that it would ease before year-end.

Meanwhile, the new investors in the power sector stress that lack of gas supply is affecting their efforts at improving electricity supply.

Biodun Ajifowobaje, managing director, Ikeja Electricity Distribution Company, said the burden of debts owed the gas supplier would have a spiral effect on all parties involved.

“If the gas supplier is not paid, the generating plants would not get gas and the distribution companies would not get enough power to supply, and this would affect their revenue drive. Because they are not able to collect revenue, they would also not be able to pay the gas supplier,” Ajifowobaje said.

BusinessDay investigations revealed further that over the last three years there has been a huge growth in gas supply development. The NNPC has maximised its efforts in infrastructure as it has been building new pipeline infrastructure. Gas supply has grown from 500mmscf/d three years ago to 1.5 billion standard cubic of feet per day (bscf/d).

However, the Nigerian Electricity Regulatory Commission (NERC) has started holding monthly meetings with sector stakeholders in an effort to ensure that the debts are paid.

Dolapo Kukoyi of Detail Solicitors said high level moves were being made at the stakeholder meetings to ensure that the debts were paid up.


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