Economic Confidential, July, 2009

NEWS UPDATE

NNPC to Regulate Gas Master Plan

The Nigerian National Petroleum Corporation (NNPC) in its determined effort to mid-wife the successful implementation of the Nigerian Gas Master Plan (NGMP) is pleased to announce the establishment of a Strategic Aggregator (SA) Company.

The Minister of Petroleum Resources, Dr Rilwanu Likman in giving the approval for setting up the company said the company would be a limited liability company and will have exclusive right to perform the duties of an Aggregator as outlined in the Nigerian Gas Master Plan, for an initial period of five years.

``The company will be subject to strict regulatory oversight by the proposed Mid-Stream Regulator anticipated in the Petroleum Industry Bill (PIB),’’ the minister said.

However, pending the establishment of such Regulator, the office of the Honourable Minister of Petroleum Resources will carry out all necessary oversight roles in respect of the company.

The primary roles of the Strategic Aggregator (SA) Company will include,

1.     Acting as the focal point of contact for would be purchasers and suppliers of gas – looking to secure gas from the domestic supply obligations imposed by the federal government.

2.     Carry out due diligence on the potential gas buyers and facilitate the execution of Gas Supply Purchase Agreements (GSPAs) for successful investors in a timely manner.

3.     Manage the receipt of payments and the disbursement of an aggregate gas price to suppliers according to the agreed aggregation principles.

4.     Facilitate the execution of necessary payment securities in respect of default in gas payment.

5.     Establishment of an Escrow Account.

The Minister stressed the importance of the SA Company to the successful delivery of the nation’s domestic gas agenda. Given the role of the Company, it is essential that the following regulatory controls be adhered to:

1.     The board of the company when formed must include a representative of the buyer community.

2.     All critical processes for the admission or exclusion of a potential gas buyer must be submitted to the office of the Honourable Minister of Petroleum Resources and approved before execution.

3.     In the event that a potential buyer is excluded due to due diligence outcome, a written submission must be made to the office of the Honourable Minister of Petroleum Resources outlining the basis for such exclusion.

NNPC given its role as the most dominant gas supplier will coordinate with the Joint Venture partners and other relevant stakeholders to formalize the proposed company that will be the Strategic Aggregator (SA).

The Minister noted that the move is a significant milestone in the efforts to jump-start a sustainable domestic gas market.