ABSTRACT

Nigeria is blessed with a huge reserve of natural gas, currently ranked 8th in the world in terms of proved natural gas reserves with an estimated 203.1 trillion cubic feet (Tcf). Production and consumption however have never reflected this abundance of natural wealth. Nigeria ranks 19th in the world in production of natural gas.

The Nigerian Government recognized the opportunity for growth of its economy with proper utilization of the country's natural gas and as such introduced the Nigerian Gas Master Plan in 2008. It identified three key sectors each with different pricing models with the most controlled sector being the Strategic Domestic Sector due potential multiplier effect it could have on the economy.

The challenge with the pricing model of the Master Gas Plan is the need to provide good profitability levels and keep gas supply constant. So far it hasn’t been successful in providing a high enough profitability level enough to attract investors and bolster supply.

This project work proposes an alternate pricing model that is developed from the perspective of a supplier looking to maximize profits. This is done to ensure it is attractive to investors. More attention is paid to the Strategic Domestic Sector (Power Sector) than other sectors because it is the only sector under a regulated pricing regime while also being the largest consumer of Nigeria’s natural gas (roughly 70%).