The competitiveness of the Manufacturers Association of Nigeria (MAN) may remain questionable with its attendant risks, if it’s members continue to buy at $7.45 instead of $2.5 per scm.
The President of MAN, Mr Mansur Ahmed draw attention to this on Tuesday, while calling on the Ministry of Petroleum Resources to address the challenges encountered by manufacturers with the high price of gas.
Ahmed who was represented by the Chairman, Economic Policy Committee of MAN, Mr Paul Gbadedohighlighted at an interactive forum on gas pricing in Lagos, stressing that the price of gas had become a major source of conflict between manufacturers and the gas franchisers.
According to him, the persistent increase in the price of natural gas used by members to power plants and machineries had reached a crisis dimension.
He, therefore, expressed hope that the issues would be addressed by the ministry to help with achieving the goals of the association at improving the current contributions of the manufacturing sector to the Gross Domestic Product of the country.
“This meeting is important and timely in view of the fresh challenges that manufacturers are encountering with the price of gas.
“In recent times, the price of gas has become a major source of conflict between manufacturers and the gas franchisers.
“These are areas to be critically addressed to help the competitiveness of our members and the concerted efforts to improve the current contributions of the manufacturing sector to the Gross Domestic Product of the country,” he said.
The MAN President also urged the government to clarify the recent confusion over the amendments of the “Federal Government Official Gazette No. 2, Vol. 106 dated 4th January 2019.
“A new Gazette in the Gas Pricing Framework for Textile Industries surfaces without the inclusion of Manufacturing Sector as previously indicated in the earlier Gazette vide; “Federal Government Gazette No.2 of 4th January 2019, Vol.3: Gas Pricing for Textile and Manufacturing Sector”.
“Our members earnestly seek official clarification of the latest position of government and the operational Gazette they should rely upon to plan their operations and make their business projections,” he said.
Dr Micheal Adebayo, Chairman Gas Users Group, MAN, said the benchmarking of the price of gas to the US dollars had made the process very volatile and was responsible for the various increases in the price of gas witnessed today.
Adebayo added that benchmarking the price of gas to the dollar exchange rate was not in consonance with the CBN directive of transacting businesses in Nigeria in the local currency.
According to him, the average price of gas globally was around $2.5 per scm, and the case in Nigeria, where it was $7.45 per scm, was worrisome and put the manufacturing sector in an uncompetitive position.
Adebayo recalled that in 1999, the step by the government to stop gas flaring encouraged private sector operators to invest in gas infrastructure and utilization, thereby converting their various production technologies and processes to the use of natural gas.
However, in his words: “The gas pricing controversy started in 2008, when one of the Franchisers with the knowledge of the Nigerian Gas Company (NGC), increased the price of gas from N21.05 per Standard Cubic Metre (scm) to N67.63 per scm.
“This, he said was done on the basis that the company was bench-marking their price with the Petroleum Products Price Regulation and Monitoring Agency (PPPRA) template for fixing petroleum products and thereby adjusted its price accordingly.
“Unfortunately, gas franchisers saw this adjustment as an opportunity and used it as the basis to increase prices thereby undermining the Gas Sale Purchase Agreement (GSPA), which was collectively signed by MAN members,” he said.
Adedayo said that gas franchisers be advised to stop their unwarranted threats of disconnection and issuance of outrageous invoices, which was in defiance of the ‘gentleman agreement’ being currently worked out by the Federal Government on the appropriate gas pricing in Nigeria.
Meanwhile, the Vice President, Yemi Osinbajo and the Minister of State for Petroleum Resources, Ibe Kachikwu, on Tuesday had a close door meeting with a delegation of multinational oil and gas firm, Total S.A, at the Presidential Villa.
Kachikwu, who spoke with State House correspondents after the meeting, said the Federal Government was impressed with what Total had done with Egina.
Total’s Egina Oilfield is located 1,600 metres of water depths, 150 kilometres off the coast of Nigeria, with a production capacity of 200,000 barrels of oil per day.
“It is ramping up according to the statistics; so we are very happy with them.
“We are going to keep pushing; our position is that we should not go backwards; once we have achieved a milestone, any other project, we have to do better.
“So, local content fine, investment fine, they are part of Nigerian LNGs; something very close to our heart.’’
He said that Total had given a guarantee that it was going to work with Shell to ensure that an investment decision was taken before the end of the year.
Kachikwu disclosed that he drew Total’s attention to the fact that community issues were key.
He, however, said that the Federal Government had been able to address community issues, adding that efforts would be made to ensure that integrated community concerns were addressed rapidly.
“I will like to see oil companies do a lot more of that; I also pointed out that at Nigeria’s level, we need see more domestic obligations on gas.
”Most oil companies produce gas and they prefer to sell it abroad; we need gas to make sure our power position improves.
“These are the things where we put a lot of energy; we have started the Nigerian Gas Commercialisation Project.
“Every Nigerian oil field where there is a flare, needs to flare out into some investment; we are targeting our 2020/2021 bids; I have drawn his attention that Total needs to do its own beat,’’ he said.
The minister said that Total asked for oil exploration opportunities and new fields to enable it continue to expand its horizon for oil productions.
He said that the vice president would bring Total’s request to the attention of the President.
On his part, Patrick Pouyanne, Chairman of the Board and Chief Executive Officer, Total S.A, said he came to congratulate the president and the vice president over their reelection.
He said that Total had been a big player in oil and gas in Nigeria over the past 60 years as it had accomplished some major achievements.
“The Egina production is almost 200 barrels per day; the largest investment in the last five years and we want to do more.
“We have ambition to continue to be a long partner with Nigeria; we want to explore; we have projects—extension of Nigeria LNGs for example,’’ he said.
Pouyanne said that Total was present in Nigeria across the energy chain, from exploration and production to mid stream gas activities and marketing of petroleum products.
