N2trn Debt: Darkness Looms As NMDPRA Halts Gas Supply To GenCos

An electricity blackout is imminent following the Nigerian Midstream and Downstream Petroleum Regulatory Authority’s directive to gas producers to cease supplying gas to indebted generation companies (GenCos).

The Authority stated that the substantial debts owed to producers had hindered their ability to sustain operations. It called on gas off-takers, particularly power generation companies, to ensure timely payment for the gas supplied.

The federal government and some GenCos currently owe over N2 trillion in legacy debts to gas producers in Nigeria.

Speaking at a stakeholder sensitisation workshop on wholesale supply operations in Nigeria, the Chief Executive Officer of the Authority, Farouk Ahmed, announced the decision. Represented by Joseph Tolorunse, the agency’s legal adviser, Ahmed explained that gas producers had been instructed to halt further supply to gas receiver companies due to non-payment for delivered gas.

The issue was highlighted by Emmanuel Cofie-Spiff of Oando, who reported that only 28 per cent of the total gas supplied to off-takers had been received. He said this had placed considerable financial strain on the company, while the Authority had not adequately supported producers’ demands for payment.

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Ahmed, however, dismissed this claim, stating that upon receiving complaints, the Authority directed the affected companies to stop supplying gas until payment was received.

Additionally, during the event, stakeholders and the regulator failed to reach a consensus regarding responsibility for collecting the 0.5 per cent levy on gas supplied on behalf of the federal government.
Ahmed noted that the purpose of the engagement was to address concerns raised during the initial phase of the NMDPRA sensitisation programme. The aim was to reach an agreement that would facilitate the effective implementation of wholesale supply operations.

He recalled that the Petroleum Industry Act (PIA), enacted in August 2021, introduced licences for wholesale supply operations as stipulated in Sections 142 and 197 of the Act. These licences are required for entities engaged in, or intending to engage in, the sale and delivery of natural gas and petroleum liquids for domestic use or export.
Ahmed highlighted that wholesale gas and petroleum liquids supply operations represent a significant evolution from the Petroleum Act of 1969, which focused solely on production and exports. The 2021 PIA prioritises domestic energy security alongside exports.
He emphasised the benefits of wholesale supply operations, including fostering investment across the petroleum value chain, enhancing transparency in hydrocarbon measurement, enforcing domestic obligations, ensuring fair market practices, and enabling willing buyer-willing seller transactions for Nigeria’s hydrocarbon resources.
However, unresolved issues persist, and the NMDPRA has faced challenges arising from disagreements over the implementation of wholesale supply operations.