Introduction

In Part 1 of this article series on Nigeria’s evolving gas pricing mechanism, we discussed the foundational principles guiding Domestic Base Pricing (DBP) in Nigeria’s domestic gas market. We also analysed the natural gas pricing framework overseen by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (“the Authority”), as well as the pricing frameworks within the strategic sectors. In Part 2 of this series, we discuss the regulated and unregulated domestic natural gas markets, compliance measures for gas distribution licenses as well as outline the criteria for transitioning to free market status in the strategic sectors.

Regulated and Unregulated Domestic Natural Gas Markets

Prior to the 1^st of March each year, the Authority is to determine and publish the domestic gas demand requirements for the strategic sectors and subsequently communicate this information to the Commission. These requirements represent the aggregate volume of marketable natural gas needed by all wholesale customers operating within the strategic sectors categorized as the regulated and unregulated domestic market.

1. Regulated Domestic Market

The Regulated Domestic Market consists of wholesale customers of the strategic sectors who elect to be customers of the Domestic Gas Aggregator (DGA). The role of the DGA (i.e. the Nigerian Gas Aggregation Company Limited “NGAC”) is basically to bring together natural gas from various sources, both producers and suppliers, and supply it to the domestic consumers of the strategic sectors. Section 11 of the Gas Pricing Domestic Demand Regulations (GPDDR) mandates the gas aggregator to obtain from the Commission domestic gas delivery obligation volumes allocated to gas producers before March 15^th annually. This aggregation helps streamline the distribution and utilization of natural gas within the country.

The DGA is also empowered to among other things; upon notification of the domestic gas demand requirement from the Authority, support the implementation of the DGDO, implement a natural gas management model, through which the demand and supply of natural gas for use in the strategic sectors are monitored, ensure transparency in dealing between natural gas suppliers and wholesale customers of strategic sectors. The DGA is also mandated to establish an escrow account into which customer clients shall contribute their payments for the marketable natural gas received and from which the domestic gas aggregator shall pay the producer clients for their supplies of natural gas.