Chigozie Ikpo
Experts in Nigeria’s gas sector have called for open access to gas infrastructure, payment security and strict adherence to contracts before the country fully transitions to a willing buyer, willing seller gas market.
The experts spoke during a panel session at the Gas Market Maturity Workshop held on Thursday at the Petroleum Technology Development Fund in Abuja.
The panel, titled “PIA Context and Vision for a Willing Buyer, Willing Seller Market,” featured the Managing Partner, ENR Advisory, Mr Gbite Adeniji; Study Group Coordinating Chair, Nigerian Gas Association, Mr James Odiase; and Managing Partner, TENO Energy Resources, Dr Tim Okon.
They stressed that while the Petroleum Industry Act provides a framework for developing a competitive gas market, several structural and commercial issues must be addressed to make the transition sustainable.
Adeniji said Nigeria needed clear regulatory triggers for determining when the gas market had attained the level of maturity required for a willing buyer, willing seller model. He identified the existence of multiple buyers and sellers, adequate infrastructure and effective competition as important conditions for a functioning market.
According to him, infrastructure owners must be effectively unbundled to separate gas supply from transportation, noting that allowing a single entity to control both could create market power capable of distorting competition.
Adeniji also called for open access to pipelines and other critical infrastructure, saying producers should be able to sell directly to end-users without being compelled to transact through a particular pipeline or intermediary.
He said competitive procurement and open-season arrangements could provide greater opportunities for buyers and sellers while strengthening price discovery in the market.
Odiase said the Nigerian Gas Association had advocated a two-year transition to a willing buyer, willing seller market as far back as 2020, but noted that several conditions required to achieve the model remained unresolved.
He said investment in gas production and infrastructure would depend heavily on the ability of market participants to secure adequate returns and certainty over transactions.
According to him, open access, payment assurance and sanctity of contracts were among the most critical issues that must be resolved.
Odiase cited difficulties being experienced in a gas supply contract with a power plant despite the presence of what he described as a “gold standard” payment guarantee and a willing buyer, willing seller price.
He said limitations on the ability to enforce contractual remedies, including shutting down a defaulting power plant or drawing on guarantees, could undermine confidence in the market.He also called for further refinement of the gas network code to ensure that parties receive and transport the volumes covered by their contracts.
Odiase said parts of Nigeria’s wholesale and commercial gas market were already sufficiently developed to support more bilateral willing buyer, willing seller transactions, but warned that pricing arrangements alone could not resolve problems within the power sector.
He said payment assurance remained crucial because a high gas price that could not be realised by the supplier was ultimately unsustainable.
Also speaking, Okon identified infrastructure, open access, market and hub development, access for wholesale buyers, financial market instruments and proper sequencing as key pillars of a mature gas market.
He said Nigeria must develop mechanisms that would allow supply and demand to be balanced efficiently while ensuring that buyers and sellers could access infrastructure on transparent and non-discriminatory terms.
Okon also warned against excessive government intervention in a market that was expected to operate on commercial principles.
He said while guarantees could help de-risk investments, an overly state-guaranteed market could undermine the development of a genuine free market.
He noted that financing was available for bankable gas projects, including through institutions such as the Africa Energy Bank, but stressed that investors would only commit capital where projects had credible commercial structures. He further identified challenges in the power sector as a major constraint to gas market development, given the sector’s importance as a major gas consumer.
Okon called for stronger coordination between the gas and power regulators, saying weaknesses in the electricity market could have direct consequences for gas suppliers and projects.
The panel also examined gas pricing, with the experts noting the need to balance affordability for consumers with sufficient returns for producers and investors.
Odiase said gas-to-power pricing could not simply be reduced without addressing the underlying challenges in the electricity market, particularly payment security.
He stressed that suppliers needed confidence that they would be paid for the gas supplied, arguing that sustainable pricing must be accompanied by mechanisms capable of protecting contractual obligations.
The experts agreed that the transition to a willing buyer, willing seller market should therefore be supported by clear rules, competition, infrastructure access, reliable payment mechanisms and enforceable contracts.
The discussions formed part of broader efforts by stakeholders to establish measurable conditions and milestones for Nigeria’s transition towards a more commercially driven domestic gas market under the Petroleum Industry Act.
