Nigerian Gas Shortages Stalling Start of Electricity Market

Persistent gas shortages at power stations in Nigeria, Africa’s second-biggest economy, halved electricity output, delaying the start of a market-driven industry due this month, an energy regulator said.

Nigeria is producing 2,000 megawatts, or half its total capacity, due to gas shortages caused by sabotage of pipelines, Sam Amadi, chairman of the Nigerian Electricity Regulatory Commission, which oversees the power industry, said in an interview in the capital, Abuja, yesterday.

“That’s a serious challenge for a country that has to get all the power it can to the grid to improve the performance of the new market,” Amadi said. “Part of the problem is also making gas supply to power more competitive through proper contractual framework and incentivizing the producers.”

Blackouts are a daily occurrence in Africa’s most populous country where demand for electricity is more than double the industry’s 4,000-megawatt capacity. At least 70 percent of Nigeria’s total power output is supplied by gas-fired plants, according to the Ministry of Power.

Nigerian authorities in September finalized the sale of 60 percent stakes in 15 power distribution and generation companies spun out of the former state-owned monopoly, Power Holding Co. of Nigeria. New owners include Siemens AG (SIE), Korea Electric Power Corp. (015760) and Forte Oil Plc (FO), ending five decades of government control of the market.

NERC, as the regulator is known, licenses power-generating and distribution companies, and also regulates prices and transactions among companies. It guarantees the stability of legislation and has taken measures to reduce business risk and improve profits for investors, Amadi said in a Feb. 13 interview.

An interim power market will begin next week and last until gas shortages end, probably before the second half of 2014, Amadi said. The following five- to 10-year transitional phase will see the Nigerian Bulk Electricity Trading Plc, which acts as a clearing house for power-generating and distribution companies, guarantee all purchases.

“The transitional phase will be declared when the market is ready,” Amadi said. “We’re not fixated on a date, we want to ensure that the market moves to 100 percent performance.”

To contact the reporter on this story: Elisha Bala-Gbogbo in Abuja at ebalagbogbo@bloomberg.net

To contact the editors responsible for this story: Dulue Mbachu at dmbachu@bloomberg.net Michael Gunn, Andrew Atkinson

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