The Federal Government is in talks with eight oil companies for a new sales purchase agreement for the supply of a total of 1.09bscf/d of gas to provide up to 5,000 megawatts (MW) of electricity for the country, according to a government official who spoke with Platts.
These oil companies include Shell and ExxonMobil and would be involving 10 power plants in the country.
The power plants were built to tackle chronic energy supplies in the country.
The non-availability of gas had hindered plans by the government to conclude the sale of the power plants previously set for the third quarter, Joe Anichebe, a spokesman for the state privatisation agency, Bureau of Public Enterprises (BPE), said.
“The Ministry of Petroleum Resources, Ministry of Power and the Niger Delta Power Holding Company are currently negotiating new gas sales and purchase agreement with eight suppliers,” an official close to the deal said.
“When these agreements are concluded, it will go a long way to solving the problem of availability of gas to the independent power plants the government has just built and preparing to privatise.”
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Both local and foreign oil companies are currently in negotiations with the Nigerian government for gas deals. These companies include Chevron, Total, Eni as well as local players in the likes of Seplat, Seven Energy and state-run Nigerian Petroleum Development Company (NDPC).
Officials added that the government wants to agree a new deal with Shell, the country’s biggest oil producer, to supply a total of 175,000mcf/d of gas to the power plants, while ExxonMobil is expected to supply 150,000mcf/d of gas.
Chevron is expected to supply 115,000mcf/d of gas; Total, 100,000mcf/d; Eni, 110,000mcf/d; Seplat, 140,000mcf/d and NPDC, 185,000mcf/d.
The country is hoping to use the newly approved domestic gas price of $2.50/1,000mcf to convince the companies to agree to the deals “with hopes the talks could be concluded before the year end,” according to a government official.
The new power plants located in the Niger Delta and the South West regions have a total nameplate capacity of over 5GW.
The country earlier this year shortlisted 42 companies to bid for the 10 gas-fired plants, coming in the wake of the successful transfer of most of the country’s power generation and distribution to the private sector late last year.
Anichebe told Platts that the sale of the 10 plants had been put on hold pending conclusion of the gas sales and purchase agreements with oil companies.
“What has happened is that the bidders are afraid the banks will not lend them money if they can’t get gas to operate the plants. The privatisation process will resume when the gas companies can guarantee gas supply to the power plants,” he said.
“But I can confirm that the consultations are ongoing and the gas supply issues will soon be resolved”, he adds.
