NATURAL GAS UTILISATION AND ELECTRICITY IN NIGERIA & THE EUROPEAN
UNION: EXAMINING THE LEGAL AND REGULATORY FRAMEWORKS
Tade Oyewunmi
Doctoral Researcher
Centre for Climate Change, Energy and Environmental Law, University of Eastern Finland,
Joensuu, Finland
+358466341712, [email protected]
Introduction
Examining the legal and regulatory framework
for natural gas utilisation in electricity markets in
Nigeria and the European Union (focus on UK
and Germany).
Instrumental regulation- laws, regulations
and institutions are not ends in themselves, but
a means to attaining defined policy and
economic objectives
Effective and efficient institutions required
to-
curb market opportunism and uncertainties
Support and incentivize sound investments
Liberlised markets depend on effective
institutions and organisations for functionality
and equilibrum.
EU Gas and Electricity: Trends, Outlook, Regulation
Examining the regulatory models
The three central energy policy objectives
A growing paradigm shift from competition and
liberalisation to broader goals like environmental
protection, consumer protection and security of supply
A parallel development of Internal energy market
(IEM) integration/liberalisation regulations and pro-
renewables and climate change regulations
Common rules for internal electricity and gas markets-
Directive 96/92/EC (electricity); Directive 98/30/EC
(gas); Directive 2003/54/EC (electricity); Directive
2003/55/EC (gas).
Third Energy Package- Directive 2009/72/EC
(electricity); Directive 2009/73/EC (gas); Regulation
(EC) No 714/2009 (network access/cross-border
electricity exchanges); Regulation (EC) No 715/2009
(natural gas transmission networks access); Regulation
(EC) No 713/2009 (Agency for the Cooperation of
Energy Regulators (ACER)).
Regulation 1227/2011/EU (Wholesale market integrity
and transparency); Regulation 994/2010/EU (Gas
security of supply)
2001 – 2009 EC Decisions/Directives on renewable
energy use, GHG emissions reduction, 20-20-20
targets, Climate Change National Action Plans and
Emission Trading Scheme
Nigerian Gas and Electricity: Trends, Outlook, Regulation
Gas & Power sector objectives- privatisation and
liberalisation to enhance economic growth.
Electricity sector’s reform on a steady path (2001
– 2014)
• National Electric Power Policy, 2001
• Electric Power Sector Reform Act, 2005
• Commercialisation, unbundling &
privatisation state-owned vertically integrated
monopoly- NEPA – PHCN – 6 generation
companies/11 Distribution companies
• Nigerian Electricity Regulatory Commission
(NERC)- semi-independent regulator.
Prolonged oil and gas industry reforms and
uncertainties.
Inefficient regulatory framework on gas.
Commercial solutions- World bank
PRGs/PRIs???
Conclusion
Good regulatory framework must be- legitimate;
accountable; provide fair, accessible and open
procedures; institutional capacities and efficiency; above
all instrumental to attaining defined economic and policy
objectives.
Traditional energy regulatory models, liberalisation and
privatisation are not ends in themselves but must be seen
as a means to an end i.e. economic & policy objectives
Drive towards privatisation liberalisation and commercialisation of gas and electricity markets
Unbundling vertically integrated utilities, Third Party Access, competition and competitiveness, independent regulators
Concerns on environmental protection, consumer protection, transparency, deregulation vs over-regulation, optimal market contracts and arrangements
Industrialisation economic
growth, sound investments
Defined policies + effective
regulation
Sustainable Gas supply
Reliable electricity
Sustainable energy market
Competitiveness
Sustainability Security of
supply
IEM Liberalisation & Integration
• Competition, unbundling, third party access
• Market led orientation vs. increase state intervention
• Independent regulators and consumer protection
Recent trends and outlook
• Environmental protection vs. competitiveness
• subsidisation of renewables vs. more regulations for gas utilisation
• North American shale gas boom/international gas market dynamics
• Reduction in gas-fired power plants profit margins
• Shutdown of gas-fired generation
• Capacity remuneration mechanisms debate- UK Energy Act 2013- capacity payments to guarantee future supplies; contract for difference
Main Observations
• Minister of Petroleum (Minister)/Ministry of Petroleum Resources (MPR)
• Department of Petroleum Resources (DPR)
• Nigerian National Petroleum Corporation (NNPC)
Institutions and
Administration
•NGC Limited
•NNPC’s Joint Ventures
•Other upstream companies with Gas reserves
•Nigerian Liquefied Natural Gas Limited (NLNG)
•West African Gas Pipeline Co. Ltd
•Local gas distribution companies
Gas Sector Operators
• The Petroleum Act, 1969
• The Petroleum (Drilling and Production) Regulations 1969
• Oil pipelines Act 1956
• National Oil and Gas Policy, 2004
• Nigerian Gas Master Plan, 2008
• National Domestic Gas Supply and Pricing Policy 2008- National Domestic Gas Supply and Pricing Regulations 2008
• The Petroleum Industry Bill, 2008 - 2012
Regulatory framework
Nigerian Gas Industry Trends
• Largest proven gas reserves in Africa and the 9th largest in the world
• a disequilibrium between the power sector and the emerging domestic gas market
• restricted by the lack of infrastructure to monetize gas that is currently flared
• Flares more gas than supplied as fuel and through the Nigerian Gas Company (NGC) NNPC’s subsidiary responsible for gas transmission, distribution and marketing.
• NGC Limited to be re-registered as ‘PLC’ under PIB 2012 rather than unbundled
Nigerian Electricity Supply Industry (NESI) Trends
• Privatization of PHCN successor companies concluded- 6 power generation (Gencos) and 11 power distribution (Discos).
• power generation falls short of demand= load shedding, blackouts, and a reliance on private generators.
• Peak Demand Forecast- 12,800.00 MW (Presidential Task Force)
• National Peak Generation – 3,158.50MW as at 04/04/2014 (NERC)
• 4 out of the 6 Gencos are gas-fired thermal power producers. The National Integrated Power Project (NIPP) is based on gas-fired generation.
• Gas-fired power generation projections- over 20,000 MW by 2020 and contribute over 75% of national grid capacity.
Efficient institutions and energy markets
Certainty, responsiveness
and instrumentality
of laws and regulations
Vertical-integration unbundling Privatisation Liberalisation
Altering institutional settings affects sectoral performance
and productivity positively or negatively.
EU- emergence of stronger institutions; detailed laws,
regulations and policies; risk of countervailing policies and
regulations vs decision-making; market-led developments vs
more state intervention; strained profitability and
sustainability for gas-fired utilities; vulnerability to
international gas market dynamics
Nigeria- inability of NNPC to fund its majority share of JV
capital expenditure; ineffectiveness of anti-gas flaring
regulations; institutional and regulatory inadequacies and
‘opportunism’ by operators; uncertainties and opaque
framework; NNPC/NGC being directly or indirectly both the
regulator and the regulated; unbundling or re-registration of
NGC and capacity to raise finance post-reform, some
international finance solutions.
