Gas-to-power: Joda committee proposes merger of DPR, NERC

The Nigerian Government may be considering the establishment within the next 30 days of an inter-ministerial energy committee that would undertake the regulatory functions of the Department of Petroleum Resources (DPR) and the Nigerian Electricity Regulatory Commission (NERC) in the gas/electricity value chain, to ensure uninterrupted supply of natural gas from the oil companies to the power plants in the country.

Under the National Gas Master Plan, the DPR is mandated to implement a Gas Pricing Regulation framework of 2007, which provides the legal basis for gas supply to domestic market, particularly the power sector, to provide the energy required to power productive activities in the economy.

On the other hand, NERC has the responsibilities under the Electric Power Sector Reform Act to undertake the technical and economic regulation of the tariff, approval of capacity expansion and business plans in the electricity industry value chain.

To guarantee the energy necessary to drive productive activities in the economy, the Finance and Economy sub-committee of the Ahmed Joda-led Transition Committee set up by the ruling All Progressives Congress to assist the smooth take off of the President Muhammadu Buhari administration, recommended that the creation of the committee that would merge and streamline decision making processes between the two agencies and increase regulatory certainty and investor confidence in the power sector.

Equally, the committee advised the Federal Government to consider the establishment of a uniform electricity pricing template for operators in the power sector, including the NERC, Transmission Company of Nigeria, Nigerian Bulk Electricity Trading Plc., Nigerian National Petroleum Corporation, and its Nigerian Gas Company subsidiary as well as the Niger Delta Power Holding Company.

The recommendations, contained in the over 800-page document submitted to the President shortly on assumption of office, a copy of which was exclusively obtained by PREMIUM TIMES, also proposed the adoption of a new technological solution for streamlining and auditing all energy industry transactions at the NNPC.

The committee expressed the conviction that if the proposal was accepted by the government, it would help manage risks in the above oil industry agencies and optimize operational and financial decisions in real time as well as report progress on activities, prepare balance sheet and project backlog on investment plans.

The new solution, the committee noted, would not only guide operators in monitoring key performance indicators by these agencies, it would also boost efforts to block leakages in the system, by providing real-time ability to capture and audit all oil and gas transactions, production, imports, tax obligations and payments to the Federal Government.

The committee said the new system, which the Presidency and the Ministry of Petroleum Resources must facilitate its introduction within the next 90 days, would facilitate the reduction of the industry exposure to sharp and unpredictable price changes by applying risk management strategies through hedges.

To provide a mechanism for real-time overview of the entire energy sector and allow for effective planning and project management, the Joda committee urged the Ministry of Power to work with the Ministry of Petroleum Resources to develop template within 90 days to guide the operation of the system.

To increase the volume of natural gas available to the power sector by at least 1,000MW within the next 18 months and free up government funds, the Joda sub-committee proposed the construction of more gas processing projects already funded by the NNPC/NPDC.

The Presidency and the Ministry of Petroleum Resources, the committee said, should consider the need to facilitate the concession of non-funded government- owned and operated gas fields/projects to competent third party operators to significantly enhance reserves output and revenues, while creating major linkages with other key sectors of the country’s economy.

Apart from restructuring the agreements in the gas industry, the committee also recommended that the Ministry of Petroleum Resources should within 90 days enter into fresh arrangements, including private public partnerships, to expand the country’s gas grid, gas processing and gas pipelines.

The new arrangement, the committee noted, would help create more jobs, while raising revenue and allowing the private sector to drive development of the gas midstream and downstream sectors, which the government can ill-afford on its own.

The committee noted Nigeria’s estimated loss of about 1.9 million barrels of crude oil, or about $66.46 billion (about N10.23 trillion) through crude oil theft and sabotage between 2010 and April 2015, and emphasized the need for the new government to upscale relevant security hardware and personnel to eliminate vandalism to critical pipeline infrastructure and unauthorized offshore vessel loading by unpatriotic elements.

The report advised the National Security Adviser to work with the authorities in the ministries of Defence, Interior & Petroleum Resources as well as the Nigerian Police Force and Nigerian Customs Service to ensure adequate security to the oil facilities with the next 90 days.