Ihenacho is also worried that the inability of customers to offset the huge gas debt is threatening the industry.
He said that the company has invested about $800,000,000 to boost gas infrastructure but all the efforts are being hampered by the current price regime and huge debt profile of customers.
Speaking with LEADERSHIP in an interview, Ihenacho noted that most of the pronouncements of the previous administration were in connection with the domestic supply obligation of the international oil companies (IOCs). He explained that the previous government requested that the IOCs supply gas at a certain price and that price was below the commercial price of gas.
He stated that the previous government tried to encourage the IOCs to consider supplying gas to the domestic market by making pronouncements of higher gas prices, but argued that in an ideal world, there should be no government intervention on gas prices.
“The price should be negotiated between the gas buyers and the gas suppliers and price should be down to basic demand and supply and this should work as it does for any other commodity. Ultimately, we need to work on a willing buyer/willing seller basis. Actually, the social impact of a commercial and reliable gas supply is very positive. It means that remote areas and villages could be electrified in the future.
“People in these remote areas are currently using firewood or small diesel generators and as we know, diesel is about four times more expensive than gas. We see this on a macro-scale with our industrial customers where we are significantly reducing their cost of energy by supplying gas as opposed to diesel and other substitutes.
“When a customer pays for gas, they are paying in part for the gas infrastructure, such as pipelines that is required to connect their location, but even when you factor that cost in, it is still far lower than burning diesel” he ,” he said.
Ihenacho pointed out that if more independent operators were given access to gas acreage in order to develop gas businesses to supply the domestic market, it will have a big social impact on Nigeria.
Speaking further, the CEO said, “As the gas price becomes more commercial, the IOCs too will come to the party. We are in an environment that is blessed with plenty gas and over time, provided a commercial price is paid for the gas, the supply will come to meet the demand.”
He recalled that in the past, IOCs made investments in gas infrastructure with the objective of ‘good citizenship’ and the associated tax benefits that came with that, but what is needed is for the gas infrastructure industry to become profitable on a stand-alone basis which is starting to happen.
“Companies will then start investing in gas infrastructure and distribution as a commercial business not just for good corporate citizenship purposes,” he stated.
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