Comparative Analysis of Commercial Natural Gas Pipeline Economics underthe Extant and Calculated Tariff Systems

摘要

This paper presents a comparative analysis of economics of a commercial gas pipeline using the extant fixedtariff and a calculated tariff based on the Rate of Return Regulation framework. While the extant tariff isfixed at 0.8$/Mscf irrespective of throughput and location, the calculated tariff adjusts tariff levels to costprofiles and aligns it with the operators cost of capital. The arbitrarily fixed gas pipeline tariff has resulted inpoor response by international investors to an otherwise lucrative sector of the gas industry while increasingthe burden of a pipeline development on government in the face of limited resources. Using the proposed48" x 127-Kilometer Obiafu-Obrikom-Oben Pipeline (OB3) as a case study, the discounted cashflow andstochastic analysis methodology are adopted to estimate economic indicators. Results show that the paybackperiod is very attractive at less than 6.5 years for the calculated tariff while the payback period is in excessof 7.7 years for the extant tariff. NPV of the calculated tariff indicate a less likely than not chance of projectfailure while analysis with the extant tariff indicates a 23 percent likelihood of project failure. The paperprovides additive information needed for would-be investors and the Nigerian government towards ensuringa workable framework to engender the envisaged infrastructure for gas pipeline.