The Petroleum Industry Act (PIA) 2021 assented to by the President on the 16th of August 2021 and gazetted on the 27th of August 2021 provides a clear regulatory framework for the determination of a Market-based Pricing Regime for the domestic Gas market in Nigeria.

In line with Section 167 and Third & Fourth Schedule of the Act, which require the Nigerian Midstream & Downstream Petroleum Regulatory Authority (NMDPRA) to determine the Domestic Base Price (DBP), three months following the effective date of the Act, the Authority has advanced the process of emplacing a new gas pricing regime as defined below:

Domestic Base Price is to be determined annually based on the criteria set in the Third Schedule of the Act:

  1. a) Reference to Countries with significant reserves and production of natural gas
  2. b) Lowest cost of gas supply based on Three tier Cost of Supply Framework
  3. c) Market related prices tied to International Benchmarks (For Strategic Investors)

Accordingly, the Domestic Base Price shall be the Export Parity Price at the delivery point where there is dominant supply of gas in Nigeria. Export Parity Price in this context is defined as a market driven pricing framework, responsive to fiscal changes and weighted to ensure pricing flexibility while moderating swings to protect fragile domestic Industries.

The pricing framework for gas conversion Industries namely: Ammonia, Urea, Methanol, Polypropylene, Low Sulphur Diesel (GTL) shall be as currently specified under the Fourth Schedule. The other commercial sector consisting of cement, non-grid power, iron & steel industries, aluminium and all such industries requiring gas for heating shall be the Domestic Base Price + US $0.50.

These prices shall apply to gas supplied under the domestic gas delivery obligation which shall be determined by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) under Section 110 of the PIA.

The Authority is consulting with Industry Stakeholders in the development of the DBP and Applicable Wholesale Prices for the domestic gas market and an Industry Wide Stakeholder engagement will be conducted before the final declaration of the 2022 DBP and Wholesale Price of Gas to the Strategic Sectors.

We thank and appreciate all Investors in the Domestic Gas Market Sector and assure you of the Authority’s commitment to ensuring transparency, deepening of domestic gas market, and creating investor-friendly business environment, as we dutifully implement all the provisions of the new regulatory framework.

Signed

Engr. Farouk A. Ahmed

CEO NMDPRA