Bleak Christmas Ahead as Nationwide Blackout Looms

With just few days to Christmas and New Year celebrations, there are fears of possible shut down of the electricity sector, following fresh threats by gas producers in the country to stop gas supply to Power Generation Companies (GenCos).

The gas producers are protesting the huge debt arising from non-payment of gas supplied to the GenCos.

The threat, if carried out, would lead to a nationwide blackout, as 85 per cent of the country’s electricity is generated from thermal (gas fired) plants.

LEADERSHIP gathered that gas producers are owed in excess of $500 million (N153.125 billion at N306.25 per dollar) and are having problems keeping their operations going, repaying their loans and investing in new gas projects.

To this effect, president of the Nigerian Gas Association (NGA) has warned that the trend has the potential to plunge the entire sector and the nation into a crisis unless the Central Bank of Nigeria (CBN) releases the N701 billion intervention fund meant for the sector.

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He said the systemic illiquidity and build-up of debt is the major challenge affecting the power sector.

He also said that removing the burden of foreign exchange risk/exposure, which is currently being unfairly borne by the gas suppliers, will have remarkable positive impact.

According to him, past debts should be cleared, invoices for gas supply paid in full as at when due and gas producers should be able to access foreign exchange at the same rate at which their invoices are paid to guarantee stable electricity supply.

Thomas who is also the chief executive officer (CEO) of Frontier Oil and Gas told LEADERSHIP exclusively that the electricity industry challenges stem from a number of systemic problems that have not been properly addressed for decades.

He said, “Let me state categorically that in the gas-to-power value chain, gas producers and generating companies are not the problem. The problem lies with the Distribution Companies (DisCos), particularly the poor state of the 33Kva power distribution infrastructure of the DisCos and the inability of the Discos to improve collection efficiency of power sold to consumers.

“Currently, collection efficiency is below 30 per cent, which entails that there is very little money to share with the various service providers along the gas-to-power value chain via the Nigerian Bulk Electricity Trading”.

He warned that the gas producers may not have any other choice but to stop further gas supplies to the GenCos, a situation he said could complicate the power sector challenges and ultimately lead to total blackout.

Thomas, however, said the quick passage of the Petroleum Industry Governance Bill (PIGB) will help in resolving certain thorny issues in the entire oil and gas sector.

Confirming the current fragile situation, spokesperson for the Generation Companies, Joy Ogaji, said the situation at the moment is critical because the threat from the gas producers is beginning to create apprehension in the sector.

Corroborating the NGA president’s position over mounting debts from gas supply, Ogaji also told our correspondent on telephone that a major crisis is hanging in the horizon, as the GenCos are handicapped to offset the debts owed gas producers.

She said, “We have often been threatened by the gas producers. The issue of debt is an old thing because we have taken it up with all stakeholders and government authorities and have warned of the dire consequences that may arise if our suppliers decide to stop supplies.

“Gas is a product that must be paid for if purchased and we use the gas to generate electricity, which is a product we sell to the DisCos and in return, we expect immediate payment to enable us to get the product to run our business.

“As at 2016, the gas invoice stood at N600 billion and from the N701 billion government intervention fund, we have only been paid up to July. Our monthly invoice is N36 billion and if you consider in that region what government has paid, you will see that we are moving to 2018 with more debts hanging on us and since we cannot offset this debt the gas producers are now more determined to carry out the threat and this will create additional crises in the sector”.

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