The Nation Newspaper

Category: Energy

  • Govt extends flared gas commercialisation bid deadline

    The Federal Government has extended the submission date for the first phase of the licensing round for uptake of flared gas to February 20,2019.

    Before now, the deadline for registration and submission of Statement of  Qualification for the Request for the National Gas Flare Commercialisation Programme (NGFCP) was January 20, 2019.

    According to Africa Oil+Gas Report, the new date has been fixed for February 28, 2019, quoting the NGFCP Programme Manager, Justice O. Derefaka.

    Departmnt of Petroleum Resources (DPR) said the government is working to utilise and commercialise flared gas. It noted that the Federal Government has come up with the National Gas Flare Commercialisation Programme (NGFCP) to harness the flared gas and put it into productive use.  Under the NGFCP, the Federal Government will seek for qualified investors with financial, technical and technological expertise to harness the flared gas.

    According to the DPR report, “National Gas Flare Commercialisation Programme (NGFCP) is key to Nigeria’s flares-out agenda with a target for zero routine gas flaring in Nigeria by 2020.

    The report said flared gas in Nigeria can attract $3.5 billion investments and enough to generate 2.5 gigawatts (Gw) of power or produce 50 million barrels of oil equivalent (boe). It also noted that flared gas in the country can produce 600,000 metric tonnes of liquefied petroleum gas (LPG) per year, produce 22 million tonnes of carbon dioxide (CO2), feed two-three liquefied natural gas (LNG) trains and generate 300,000 jobs.

    It further noted that although Nigeria’s gas flaring level is dropping, the quantity of gas flared last year was as high as 324 billion standard cubic feet (bscf), which is a worrisome volume. The report said about 888 million standard cubic feet of gas was flared daily in 2017. This is despite Nigeria’s efforts at increasing utilisation and commercialisation of flared gas over the years. It stated that Nigeria still ranks the world’s seventh highest gas flaring country, adding that there are about 139 gas flare locations spread across the Niger Delta both in onshore and offshore oil fields. Flared gas constitutes about 11 per cent of the total gas produced in the country, it added.

    Derefaka said other milestones of the NGFCP include the shortlist of qualified applicants, which was to end by March 31, 2019; Issue of Request for Proposal (RFP), which was limited to first quarter of 2019; Submission of Proposals and Selection of Preferred Bidders, both of which were not expected to last beyond the end of September 30, 2019.

    Would be bidders have been hoping for postponement of the submission deadline, largely because the first announcement of the licensing round came in during the last six weeks of 2018.

    The Nigerian Gas Flare Com-mercialisation Programme is the first auction targeted at licensing of subsurface hydrocarbon property in 11 years. It is not a conventional licensing round. It is for uptake of natural gas that is currently being flared in different sites in Niger Delta basin, he said.

    The government expects bid winners to take over the flare sites, monetise the gas and boost the micro and macro economy in the process. “The auction presents a significant opportunity for domestic and international developers alike to participate in the largest market driven flare gas monetisation programme undertaken on this scale globally.

    “Bidders will have flexibility of choosing which flare site (s) to bid for, determine the gas price, and their end-use market or gas product, as well as the technology to be deployed. Interested parties will need to demonstrate project development experience and proposed proven technology, which we expect to be in commercial application.

  • 2019 budget financing: Egina, others offer succour

    Nigeria may not find it difficult to finance the N8.7trillion 2019 budget contrary to analysts’ and industry stakeholders’ view. The rise in crude oil output by 200,000 barrels per day (bpd) from Egina field alone and other oil recoveries, according to former Managing Director, Nigeria Liquefied and Natural Gas (NLNG) Mr. Godswill Ihetu, will come handy.

    The 200,000 barrels per day production from the Egina facility, Ihetu said, is a good omen to Nigeria, especially as oil price has begun to rise after falling to $51 per barrel at the close of last year.

    In an interview with The Nation, he said the development meant more money for Nigeria. “Funding the budget has been a source of concern in view of the downward trend in the price of crude oil. However, the anxieties of the Federal Government have been removed following the increase in oil production from about 1.9 million bpd to 2.1 million bpd. Besides, there will be incremental oil production from existing oil fields following the peace in the Niger Delta. This means more money for the country.

    “The Minister of State for Petroleum Resources, Dr Ibe Kachikwu, said some oil blocks were not only renewed, but would help in providing $2 billion for the country,” he said.

    According to him, Nigeria needs to sustain the projects – Egina and other producing assets, adding that they will help in buoying the government’s purse for a longer period of time.

    “Why is Nigeria afraid of not being able to finance its fiscal projects now that the country’s loss has been compensated by the coming on stream of the new deepwater field?” he asked.

    On  Organisation of Petroleum Exporting Countries’ (OPEC’s) cut, Ihetu said it would be wrong for Nigeria to limit production, since OPEC has not issued any directive in that regard.

    He said the fall in crude oil price was affecting every oil producing nation, adding that Nigeria is making up for the loss in price by getting more oil from critical assets such as Egina and the fields, whose licences are being renewed.

    He urged the Federal Governmen, to provide infrastructure required to boost gas production, stressing that increased gas production is crucial for economic development.

  • Meter providers seek single digit interest rate

    To  help them achieve their goal, Meter Asset Providers (MAPs) have appealed to the Central Bank of Nigeria (CBN) for a single digit interest rate at which they can get loans.

    In an interview with The Nation,  Unistar Hi-tech System Limited Managing Director, Mr. Taiwo Oladotun, said the development became necessary to enable them bridge the metering gap.

    Oladotun whose firm is one of the indigenous meter manufacturers, said the decision to seek CBN‘s intervention was paramount in view of the huge funds required by the operators to supply meters to consumers nationwide.

    Part of the issues being discussed with the CBN, he said, is on  reducing interest rate in the country. He said MAPs  need single digit rate for operation as against the double-digit interest rate charged on facility by banks.

    “We are talking to the CBN on how to provide interventions in the area of providing facility at a single digit rate. The CBN gave terms and conditions for providing interventions in the operation of meter asset providers. In the terms, the apex bank intends to provide facility at double digits interest rates. However, we appealed to CBN to make the interest rate single digit,” he said.

    Similarly, the Managing Director, Momas Electricity Meter Company Nigeria Limited, Mr. Kola Balogun, said CBN’s intervention is vital if the operators in the metering sub-sector would make any meaningful impact.

    He urged the CBN to intervene in the new metering arrangements unfolded by the government with a view to ensuring that meters are adequately provided to consumers across the country.

    According to him, double digit interest rates are prevalent in the banking industry, adding that the government needed to bring the interest rates down for operators in order to achieve growth.

    Balogun said: “What we are asking the CBN to do is to give meter asset providers single digit interest rate as they commence operation soon.

    “Through this means, meter asset providers would be able to play well in the industry by manufacturing, supplying and installing meters in the country. Without CBN interventions, it would be difficult for the operators in the metering value chain to record success.”

     

  • ‘Deregulation’ll unlock oil sector’s potential’

    Stakeholders in the economy, especially the oil and gas sector, have renewed the push for total deregulation of the downstream oil industry. Their worry is that the huge foreign exchange (forex) spent on fuel importation through subsidy has become outrageous as it depletes the national treasury, denies critical sectors and infrastructure of funds and, most importantly, fuels jobs exportation. EMEKA UGWUANYI reports.

    Stakeholders in oil and gas industry are of the opinion that total deregulation of the downstream sector of the petroleum industry will unlock the huge investment potential in the sector. They beleive it will stimulate sustainable growth as private investors will come in.

    They expressed worry over the huge money spent by the Federal Government on subsidy payment annually, which they said could be used to develop other sectors of the economy.

    According Minster of State, Petroleum Resources, Dr Ibe Kachikwu, the subsidy on premium motor spirit (PMS), popularly called petrol, stands at over N1.4 trillion.

    The stakeholders said with the huge money spent on subsidising petrol, it has become imperative for the government to embark on total deregulation of the downstream oil sector to attract investors and save the country from the huge amount spent on subsidy.

    The Director-General,  Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said perhaps the biggest burden on the economy today is the petrol subsidy regime.

    Yusuf said the government should encourage private sector players to take over the downstream sector of the petroleum business.

    He said: “When this is done,  most of the challenges we see as regards subsidy, refineries and others will be adequately addressed. The government should only play a regulatory and not an operational role.

    “Government has no business refining petroleum products, retailing or distributing fuel as well as the marketing of these products. We cannot continue to carry that kind of burden in the oil sector.

    “It is a big hole in the finances of government.  It puts tremendous pressure on the foreign exchange market and foreign reserves, just as it exerts immense stress on the nation’s treasury.

    “It remains a cause for concern that the subsidy regime had subsisted, especially at a time when the economy is facing unprecedented fiscal challenges;  at a time when productivity in the economy is constrained by acute infrastructure deficit;  at a time when public institutions are finding it hard to pay salaries. There cannot be a better example of resource misapplication.

    “There are two components of this; the first is the genuine subsidy, which is the differential between the pump price and the landing and other costs of fuel. The second and more disturbing component is the transparency problems inherent in the fuel subsidy administration, including the petroleum equalisation policy. For several years, the economy suffered severe bleeding from this phenomenon.”

    The LCCI  chief said one of the critical elements of the oil and gas sector reform, particularly the downstream, is the complete deregulation of the sector. “This is the spirit of the Petroleum Industry Bill (PIB) which, regrettably, has again got stuck in the legislative process.   The reform of the oil and gas sector would create a number of advantages for the economy,” he said.

    Total deregulation of the downstream, he said, would free resources for investment in critical infrastructure such as power, roads, the rail systems, health, and education sectors, among others.

    He said deregulation will also unlock the huge private investment potentials in the downstream oil sector, especially in petroleum product refining, adding that this will ultimately reduce importation of petroleum products and ease the pressure on the foreign exchange market as well as the burden on our foreign reserves.

    To him, deregulation will eliminate the patronage, rent seeking activities and corruption that currently characterise the downstream oil sector. “Full deregulation will create more jobs for the teeming youths of the country in the downstream as investment in the sector improves. It will permanently eliminate the fuel queues. The subsidy regime has done incalculable damage to the economy over the years.

    “The citizens have in the past suffered untold hardships resulting from scarcity of petrol and in many instances buying the product far above the regulated price. The nation’s treasury and foreign exchange market has been under severe pressure from the funding of petroleum product importation. This should not continue if the Nigerian economy must make progress.

    “Understandably, it may be difficult to undertake this reform at this time because of the elections; it should be top on the agenda of government post-elections. The current management model of the oil and gas sector is surely not sustainable,” he added.

    An energy expert, Mr. Felix Andrew, said continuous payment of subsidy is not sustainable, and urged the government to liberalise the downstream and encourage free entry, free exit system to attract investors in the sector.

    Andrew, who is also the Executive Director, Blue-Sea Energy Limited, said Nigeria spends about N1.7 trillion on fuel subsidy annually, while its education and health sector can only access a paltry part of budget. According to him, it is obvious, that the fuel subsidy programme is placing a huge financial burden on the nation’s resources.

    “Hence, there is no better time to deregulate as this initiative is an enabler in freeing up scarce resources to address the concerns clearly expressed by the citizens for which political leadership is unable to find the resources to satisfy such as providing adequate funding to support the health and education sectors; improved infrastructure and better working conditions for the average Nigerian worker.

    “One of the proposed reforms in the petroleum industry bill is the deregulation and liberalisation of the downstream oil and gas industry, which recommends total deregulation proposition. If fully implemented, will eradicate waste and corruption ravaging the country as a result of the tightly regulated economy; and that monies saved from fuel subsidy can be optimised for development projects that will be beneficial to the people.”

    He said fuel subsidy in Nigeria has brought about industry degradation such as poor maintenance of, and inadequate investment in facilities (jetties, depots & stations), infrastructure (roads, bridges, rail & pipelines), human resources, transportation (vessels & trucks), existing refineries and poorer implementation of health, safety, environment & quality matters.

    Subsidy spending in the sector, he said, amounts to a disproportionally high percentage of the country’s budget, adding that funds that  would have yielded better returns on investment in education, health services and agriculture, among others, are gobbled up in the subsidy of petroleum products.

    “The opportunity cost of the present regime of petroleum subsidy includes inability of government to achieve human development, which enables every Nigerian reach his or her full potential.

    “The current labour demand for wage increase at all levels could also be directly addressed through the savings that would be made from elimination of the subsidy, which will lead to a more efficient use of resources to address the diverse individual concerns in the country,” he said.

    Chairman, Independent Petroleum  Marketers  Association of Nigeria (IPMAN), Western  Zone, Alhaji Debo Ahmed, urged the government to liberalise and enforce total deregulation of the downstream sector to boost the country’s economic growth.

    Ahmed said deregulation remained the best option to move the economy forward, adding that full deregulation would bring in investments into the sector, adding that  only deregulation will encourage the establishment of private refineries in the country.

    According to him, the government should summon the courage to fully deregulate and remove subsidy totally to open the market for investors. “If the government likes, it can introduce gradual removal of subsidy, but it should not go beyond six to 18 months. If fully deregulated with rules, you will have serious investors coming to invest adequately.

    “Deregulation is the answer and the government must talk to the people and let them understand the advantages. The government must also show that where there is deregulation, people gain because the funds used in subsidy will be used for the benefit of the people,” he said.

    Ahmed said the passage of the Petroleum Industry Bill (PIB) remained the best options that would usher in deregulation, adding that even if it is not perfect, it could be amended after the passage.

    “Once you deregulate, these refineries will be coming up. So, we will plead that we get the National Assembly to expedite action on the passage of the PIB.

    “We believe that the PIB will go a long way in encouraging deregulation, but if we want a PIB that will be faultless before it will be passed, we are thinking that we are not human beings. Why do we have the word amendment? How many amendments have they done on the American Constitution?

    Also, President of the National Association of Liquefied Petroleum Gas Marketers, Mr. Nosa Ogieva-Okunbor, has said only full deregulation can bring the much needed investment to the sector.

    Ogieva-Okunbor said full deregulation remained the best option to attract investors for sector development against the backdrop of huge amount spent on subsidy. He said full liberalisation and deregulation of Nigeria’s downstream oil sector will remove all hindrances and bottlenecks that have been discouraging improvement of private investment and market competition.

    According to him, the government should fully deregulate the downstream sector to attract investors. “We need full deregulation of the downstream sector to boost the economy,” he said. He lauded government’s commitment to reposition the Liquefied Petroleum Gas (LPG) sector, especially as Nigeria is one of the lowest LPG consuming countries in Africa, which he said, is pathetic.

    Nigeria spent N2.582 trillion on fuel importation in nine months, from January to September 2018, rising by 12.9 per cent from N2.289 trillion recorded in the first three quarters of 2017. The amount spent on fuel import in the nine-month period is  28.3 per cent of Nigeria’s N9.12 trillion budget for the 2018 fiscal  year and 36 per cent of the N7.17 trillion proposed expenditure in the budget.

    This came as the Nigerian National Petroleum Corporation, (NNPC), said the government has paid petroleum products marketers N236 billion, being first tranche of the outstanding fuel subsidy claims owed marketers.

    According to data obtained from the National Bureau of Statistics (NBS), foreign trade statistics for the third quarter of 2018, Nigeria’s fuel import stood at N845.12 billion, N720.4 billion for the first and second quarters of 2018 respectively. However, in the third quarter of 2018, the report noted that fuel importation rose sharply by 41.03 per cent from N720.4 billion recorded in the second quarter to N1.016 trillion in the third quarter of 2018.

    This, according to report, was in comparison to fuel importation of N802.4 billion, N744.28 billion and N742.82 billion recorded in the first, second and third quarters of 2018 respectively.

    In its month-on-month analysis of the nation’s fuel importation, the report showed that in January, February, March, April, May and June 2018, Nigeria imported fuel valued at N384.59 billion, N357.45 billion, N103.08 billion, N190.26 billion, N380.7 billion and N149.44 billion respectively.

    For July, August and September 2018, the NBS report said N343.25 billion, N378 billion and N295.03 billion worth of fuel were imported respectively.

    The report further pointed out that fuel importation in the third quarter of 2018, accounted for 24.4 per cent of Nigeria’s total imports in the period under review.

    Specifically, the report stated that total imports into Nigeria in the third quarter of 2018 stood at N4.172 trillion, rising by 73.8 per cent from N2.4 trillion in the second quarter of 2018. The report further attributed the sharp rise in the third quarter to the importation of an oil rig.

    Particularly, the report said the floating or submersible drilling or production platforms worth N1.159 trillion was imported from South Korea in August 2018. In the same way, there was a rise of 67.7 per cent when compared with the importation value of the corresponding quarter in 2017.

    The huge increase in import value during the quarter resulted into a decrease in the country’s trade balance from N2.103 trillion in the second quarter to N681.3 billion in third quarter representing a decrease of 67.6 per cent.

     

  • KEDCO plans 20 per cent loss cut to meet N48b target

    The Kano Electricity Distribution Company (KEDCO) has perfected plans to cut Aggregate Technical, Commercial and Collection (ATC&C) losses to less than 20 per cent this year, its Managing Director Dr Jamilu Gwamna, has said.

    Gwamna, who spoke while interacting with reporters in Kano, that it would be difficult to meet the N48 billion target of the firm, if such losses were not reduced to 20 per cent. The company, he said, was committed to blocking all the loopholes to achieve the desired result to enhance the sustainability of its role in meeting the financial demands of staff and customer’s satisfaction.

    “Our focus in 2019 is to reduce our aggregate Technical, Commercial and Collection losses to less than 20 per cent amongst other things toward achieving the target of N48billion.

    “We must cut all losses to the barest minimum, if we hope to achieve our target in 2019 so as to sustain our robust role of workers welfare as well as keep up with our Corporate Social Responsibilities (CSR) in different communities.

    “The analytical assessment carried out by our team shows that losses through vandalism, equipment sabotage, energy theft, non-payment of bills and other unfriendly acts were gulping the company’s money that could have boosted our revenue.

    “As far as 2019 is concerned no more losses. We are poised to blocking all loopholes to achieve our target of N48billion,” he said.

    The KEDCO boss also listed revenue generation, customer intimacy, improved operational efficiency and improved working environment as the other objectives of the firm in 2019.

  • Oil, gas outlook unpredictable this year

    AN expert, John Adidi said there is likely not to be any remarkable price increase in oil and gas this year, because of instability in the market.

    He advised the government to review the 2019 budget, which is based on $60 per barrel benchmark, pointing out that oil price is lower than the benchmark. The government, he said, should review the volume and value forecast before the budget is passed by the National Assembly.

    The budgeted 2.3million barrels of oil daily, he said, did not consider the Organisation of Petroleum Exporting Countries (OPEC) quota, which is now about 1.6million barrels per day. “There is need to really look at both the volume and price,” he said, adding that both appear to be on the negative.

    He urged the government to increase the production of condensates, adding that its production is not affected by the OPEC quota.

    Adidi, who spoke with The Nation on telephone, said the budget appeared very unrealistic because of the assumptions underlining it. “There’s the need for the government to look at the parameter, particularly the oil benchmark, they need to review it again, may be at the level of the National Assembly before the budget is passed. Otherwise the budget based on these assumptions makes no sense,” he said.

    He said the Petroleum Industry Governance Bill (PIGB) may not be passed into law. The  Petroleum Industry Bill (PIB) was broken into four components, including the PIGB which was passed by the National Assembly but rejected by the president.

    Adidi said: “Other parts of the PIB are in the works, but with the way things are going, the National Assembly is not in a position to seriously look into any bill.

    “Once nothing is done on these other parts, the 9th Assembly when they come on board this year, will have to start from the scratch all over again.”

    “The United States is currently the biggest oil producer in the world, they have overtaken Saudi Arabia and Russia,” he observed, adding that they even planned to increase and contribute up to 25 per cent to the global market in the next two years. They want to become the total supplier of oil.

    “We have no control over oil market in the world, we are just a member of OPEC and OPEC is not even in control, it’s just a major player in the market, we are looking at how it affects our economy,” he stated.

    “The current strategy to curtail oil glut and price slump is production cut by OPEC and non-OPEC alliance, that’s why the Nigeria quota was reduced of recent. The reduction cuts across member countries of OPEC and non-OPEC alliance with the hope that it will help to stabilize and improve on the pricing, but it appears to be too little, and the price is still not going up as expected.

    “Our budget this year, even though it’s a little bit lower than that of last year, if you look at the breakdown, the debt servicing alone is almost 25 per cent and the revenue expectation is based substantially on oil revenue and oil production. The 2.3million barrels per day budget projection is on the high side because Nigeria’s production between 1.7million barrels and 1.8million barrels per day.

    “On the other hand supposing the price comes to $40 per barrel, which could happen, where will the government get the money to fund the budget, adding the budget already has a deficit which has to be funded?” he asked.

  • More power, oil, gas output

    Available fundamentals have shown that the sector will be robust in 2019. With an expected 2.5million barrels per day, there will be more power supply and more oil and gas production, writes EMEKA UGWUANYI.

    The power industry has, over the years, been replete with excuses, accusations and counter-accusations.  Previously, it was due to more than 16 years of neglect by successive military administrations. It shifted to lack of gas supply to thermal power plants – the major source of electricity supply.

    The inadequate gas supply was attributed to pipelines’ vandalism by Niger Delta militants and low gas pricing, which made gas producers shun supply for domestic consumption.

    However, these problems have been substantially resolved. Militancy and pipeline vandalism have drastically reduce; domestic gas price has improved. Besides, though privatised five years ago, the Federal Government still has 40 per cent equity shares in the distribution companies (DisCos) as well as control over them. Will there be more actions, less excuses and blame game this year?

    As at the last count, available power generation was 7,000megawatts (Mw)  and installed capacity was over 12,000Mw with transmission capacity of 7,000Mw and distribution capacity of 5,222Mw.

    The Minister of Power, Works and Housing, Mr Babatunde Fashola, on assumption of office, introduced the incremental power policy. It is an initiative that seeks to put into use existing megawatts as against building new generation facilities.

    According to the Minister, every megawatt is defined. To him, Nigeria cannot have 12,000Mw installed and be concentrating on new ones without optimising the existing ones – Egbema and Gbarain power plants are not finished. Olorunsogo, Omotosho, and Geregu are not optimising because gas is not enough. In some places there are transmission problems.

    The ministry’s focus was to give gas to power stations that have transmission facilities, and transmission facilities to stations that have access to gas, but no facilities to evacuate the generated power.The policy has helped in increasing output from Egbema, Gbarain and Omoku, among other power plants. These power plants were supposed to be completed last year. There are plans to complete their rehabilitations this year to enable them contribute to the incremental power.

    “We are optimising the capacities of the power plants and other facilities that we have.  We are focusing on taking gas to power plants that are idle because of lack of gas.We are continuously working on how to solve gas supply problems with the Nigerian National Petroleum Corporation (NNPC), gas firms and others. The 7,000Mw we produce now doesn’t come from the sky; we are only making what was not working to work.

    ‘’Sometimes just by completing a transmission line, you get more power on the grid. Sometimes just by doing routine maintenance as we did in Afam IV plant, you get more power. The transformer of Afam IV plant was shut in January 2015 and nobody touched it. By repairing the transformer, we had 100Mw back on to the grid. By completing one section of Ikot-Ekpene switching station, we evacuated some stranded power from Ibom Power and Alaoji plant.

    “Zungeru project will give us 700Mw, but was locked up in court for three years before we came. We have got the parties out of court. It will deliver in 2019. We signed the partial risk guaranty for Azura power plant in Edo State. Azura project is on track and will be finished in 2019. So, we have to quickly build a 14-km 330kv line so we can evacuate power produced there to the grid. We will get 10Mw wind plant in Katsina State into operation this year.

    “The Mambilla power is also ongoing, but will take some time to complete.We are completing Kaduna, Kashimbilla, Guarara, Dandikowa, Katsina windmill, among others. We are also completing transmission lines, using Transmission Company of Nigeria (TCN). We are also trying to complete some rural electrification projects, using Rural Electrification Agency (REA).

    “But it is instructive to note that we are dealing with human beings, the more power we produce every day, the more people that are being born that need power and more people that are getting into business that need power. So, when one takes a stock I can say we have walked our talk and fulfilled our promise. Power is an economic enabler, hence the incremental power, which will lead to stable power and to uninterrupted power. Stable power is to enable businesses to be competitive, efficient, sustain growth and produce jobs. It is for manufacturing, agriculture not just production but processing, packaging and storage, among others, which form part of the fundamental for driving economic growth. That is why this government is not just committed to power as an enabler but to infrastructure as an enabler for business, job creation and economic growth.

    “On reports that work on Mambilla power has been stalled, Mambilla is not just a power project but infrastructure. It is a $5.7 billion project. I cannot recall in recent times when Nigeria dedicated such money to one project. It will take about six years to construct. During construction, it will require 18 million bags of cement, 18 million tons of aggregrates – sand, stones, among others, 42,000 tons of steel. At the moment, not less than 116 Nigerian companies have expressed interests in participating. They include shipping, insurance, logistics, transport and security companies. This is the way to create jobs. Over the six years, they will be shipping, banking and transporting, among others. That is what Mambilla signifies because it will create job opportunities. The power plant will generate 3050mw on completion and will create irrigation opportunities for agriculture in Taraba and other parts of north east.

    “On the 10mw Katsina wind plant, the project delivery date slipped because of the contractor. But I can say that out of the 37 wind turbines, 15 are operational; remaining 22. It was changes to pricing requested by the contractor that made us terminate it. The contractor was using local people to do the work. So, the contract has been re-awarded to a local contractor to complete it. The wind plant is already producing 2mw from which Kano DisCo benefits. We will complete the project this year and also run over 37km of line to connect Musa Yar’ Adua University in Katsina.

    “We are also encouraging private investors to go into generation and have factored coal into the energy mix. We are expecting coal power from a private investor who has coal mining licence and power generation licence. What is remaining is power purchase agreement. But coal power takes longer time to deliver than thermal power that uses gas. It takes longer time because it requires constant mining of coal, accessibility to water for cooling, conveyor belts to take the coal from the mines to the plant and boiler rooms, among others. Let me also say that there is zero import duty for solar parts that are brought in and assembled  in the country, but if you bring fully assembled system, you pay a five per cent duty because you have taken the jobs away.”

     

    Challenges

    To Niger Delta Power Holding Company (NDPHC) Managing Director Mr. Chiedu Ugbo, power generation capacity has risen. So also has population and demand for electricity supply. Merging these has not been easy. But Nigeria’s power distribution system has been enhanced with hundreds of injection sub-stations, 11KV lines and 33KV lines added. Work is also in progress in many transmission and distribution projects. The massive construction of these power projects by the NDPHC has prevented the collapse of electricity supply in Nigeria. Although a 100 per cent supply is yet to be attained, supply is being stabilised while work on incremental power supply is ongoing. Achieving stable electricity supply from almost nothing is not a day’s work. It takes time and huge efforts, especially where economic sabotage of gas pipelines persist and transmission lines are being vandalised. When most of the National Integrated Power Projects (NIPP) are completed and are operational, power supply to Nigerians is expected to be better and drive the economy of Nigeria,’’ he added.

    “One recurring snag with power supply in Nigeria is in the distribution chain. Despite the targeted increase in generation, if there is no efficient distribution to the end users in their homes and businesses, there will still be disappointment with all the efforts made. There has been huge improvement in gas supply to the built thermal power plants, adequate power is being generated and despite some challenges, the transmission network has improved. The most nagging point is power distribution. Power Distribution companies should take more than what the transmission gives out. This is to allow reduction of redundancies at the various levels and reduce losses while transmitting power from one location to another. The farther you travel with power, the more the quality and the efficiency of the power is reduced. Another problem with the distribution network has been poor town and urban planning which has made it difficult to regulate power distribution and downstream activities, thus overloading the grid.

    “Some challenges that the NIPP has had to grapple with include security and community issues; right-of-way challenges for distribution equipment and transmission lines; port clearing coordination hitches and contractor performance-related problems. Even though the three tiers of government own the NIPP, equipment imported for the power projects are often delayed or seized at the ports by the Nigeria Customs Service (NCS) because of non-payment of import tariffs thereby stalling the execution of some power projects. Sadly, some of the equipment at the ports were at one time auctioned by the port authorities after demurrage charges had accrued on them. It took the intervention of an alarmed Senate to recover some of the equipment sold off under questionable circumstance.

    “To fast-track the attainment of stable electricity for Nigerians, the Federal Government should seriously consider waving duties on equipment for power projects. It needs to seriously educate contractors on their patriotic duty to deliver and on time. There is need for a special para-military unit to ruthlessly tackle the activities of vandals, and address the kidnap of the employees of the contractors. Host communities also need to be educated on the recurring problem of right-of-way for the routes for the 330kv and 132kv transmission lines of the NIPP. Once when NDPHC diverted the transmission line to the Ihovonbor station in Edo State at a considerable cost because of the presence of a shrine, a new shrine emerged overnight on the new route and the villagers went on demanding a huge amount to relocate it. These kind of things can be best handed with proper enlightenment of the responsibilities of civic duties. Also, operatives of para-military agencies, especially men of the National Security and Civil Defence Corps (NSCDC), should be adequately motivated and mobilised to protect power installations from vandals across the country. An existing asset protection mechanism for the safety of power generation/distribution equipment like pipelines and plants must be established with technologically advanced means applied.

    With reasonable improvement in generation through incremental power, substantial reduction in militants attacks, improvement in gas supply, expectations are that Nigerians will have more stable power supply in 2019. There is also need to address the issues highlighted by the NDPHC chief.

     

    Oil and gas industry

    The direction of oil price will, to a very large extent, determine how the oil and gas industry will come out in 2019. Oil price had, after rising above $80 per barrel, fell to less than $52 per barrel before rising again to $56 per barrel. Oil price at $50 per barrel is still profitable but because the cost of production per barrel in Nigeria is one of the highest in the world and the fact that windfalls from previous high oil prices were not well managed and invested, periods of low oil prices are difficult ones for the country.

    In most oil producing nations, when oil prices are low, they embark on aggressive exploration to find more oil because cost of carrying out such activities, including labour, is cheap but that is not applicable here. Therefore, there should be increased exploration to find more oil. This can only be achieved by creating investment-friendly environment and incentives to attract investors. The Federal Government, according to industry players, needs to make provision in 2019 budget and subsequent years for offshore and onshore exploration to encourage new discoveries.

  • Promote new metering plan, expert urges CBN, others

    THE Central  Bank of Nigeria(CBN), African Development Bank (AfDB) and other financial institutions have been advised to work towards the implementation of the new metering introduced by the Federal Government in April, last year.

    In an interview, the Managing Director, Momas Electricity Meter Manufacturing Company Limited, Mr Kola Balogun, said the metering arrangement, which gave the meter asset providers (MAPs) the nod to supply meters to Nigerians and further reduce the metering gap of 4.1 million customers,  needs funding from major financial institutions for growth.

    Balogun said the new regulation allows  operators invest in metering for between 10 and 15 years, adding that meeting that goals requires support from bigger lenders. He said bigger banks need to come into investment profile to guarantee long-term stability of the scheme.

    Balogun said: “The most important thing is that the country must have sufficient headroom in terms of asset base or credit worthiness of each of the operators that apply as MAP, adding that by so doing, they would enjoy long-term credit line from CBN and other front line financial institutions.”

    He, however, did not envisage problems in the new metering programme, when its start fully in the year, adding that rather than causing problem, it would add value to the industry.

    Balogun said: “As for the danger of the scheme, Nigerians should get to the river first and thereafter would know how to cross it. We need to allow the scheme start first before we think or look at its problems. But to me, the MAP policy comes with a lot of benefits. Consumers can as well pay for the prepaid meter willingly and can as well opt not to pay but spread the payment over a period of time.

    On the government’s commitment, he said the administration, especially the Minister of Power, Babatunde Fashola, has brought in a lot of changes in the sector’s value chain by introducing and developing the new metering plan.

    According to him, the government has opened up new business opportunities for people, through the scheme, adding that the sector has made it possible to introduce what he described as new buyer new seller initiative.

    He said the country is improving as it allows private investors to generate and distribute electricity to some clusters areas. He said the arguments in some quarters that indigenous meter manufacturers do not have the required capacity to produce prepaid meters is not tenable, stressing that they have been meeting the needs of the power distribution companies (DisCos) in that regard.

    He said indigenous meter manufacturers need 100 per cent funding in order to effectively perform like their counterparts abroad. Indigenous meter manufacturers, he said, are not importing meter parts and subsequently assembling them together but rather they provide the meter components on their own.

  • NNPC: PSCs account for most of oil production

    Most crude oil produced in the Niger Delta region come from Production Sharing Contracts (PSCs), a report by the Nigerian National Petroleum Corporation (NNPC) has disclosed.

    The NNPC in its monthly operations and financial report for September 2018, explained that between August 2017 and August 2018, the volume of oil produced from PSCs fields were 310,424,845 barrels, while that from Joint Venture Agreements (JVA) were 245,537,573 barrels, indicating a difference of 64,887,272 barrels.

    On the average, the report showed that oil output from PSCs  amounted to 23,878,834.23 barrels per month and 770,284.975 barrels per day; while that of JVA was 18,887,505.61 barrels per month and 609,274.37 barrels per day.

    PSCs and JVA oil production were closely followed by Alternative Financing (AF), which accounted for 102,162,516 barrels in the production-to-date (PTD) period, as well as the Nigerian Petroleum Development Company (NPDC) which also accounted for 51,018,207 barrels of oil within the review period. In the same vein, marginal field operators and independents produced 55,739,537 barrels of oil within the period.

     

  • N236b subsidy payment saves govt litigation, job losses,

    The Federal Government’a approval for the payment of N236billion subsidy to oil marketers has saved the country from litigation and job losses, the Chief Executive Officer (CEO), Petrocam Nigeria Limited, Mr. Patrick Ilo, has said.

    Oil marketers said they would close shops and sack workers as they were unable to continue in business, service loans obtained from banks, among others, as a result of the government’s inability to pay the arrears of fuel import subsidies put at about N800 billion.

    The Petrocam chief said payment of the debt prevented marketers from closing businesses because of huge interest rates on their bank loans and bankruptcy, among others.

    Petrocam is a South African-based oil trading firm with interest in the Nigerian downstream sub-sector.

    In an interview with The Nation in Lagos, Ilo said the country would have been plunged into serious economic crisis if the government refused pay the arrears.

    He said the government’s agreement averted a major crises, adding that marketers had threatened to go on strike.

    He said the payment of the first tranche and the plan by the government to pay both the second and the third tranche of the debts to the marketers prevented them from carrying out their plan.

    Ilo said: “If the government did not pay the first tranche of N236billion with the promise to pay the remaining two later, many of the marketers would by now have shut down businesses. Also, many of the marketers would have either downsized or stopped operation. Such action would have thrown many people into the labour market.

    “Also, there would be litigation following the decision by banks to sell-off the properties of their clients (the marketers). Once marketers do not have money to service their debts, banks are under obligations to take over their properties used as collaterals.”

    According to him, on their hand, banks would increase their interest rates when marketers go back to them for more loans. “If the government failed to pay the debts owed marketers, marketers would go to banks for more money and this may force banks to increase their lending rates,” he added.

    Besides, there would be drop in the sales of petroleum products as marketers would not get enough to improve their operation,” he said.

    Banks, Ilo said, rely on the Monetary Policy Rate (MPR) provided by the Central Bank of Nigeria (CBN), to determine their lending rates.  Through the MPR,  banks can reduce or increase their lending rates, adding that inability of the government to pay subsidy arrears is an indication that marketers must look for money at all cost for operation and will lose their assets.

    The nation’s oil and gas industry lost more than 6,000 jobs to the turbulence in the global oil industry that started in 2014. This was evident by the closure of businesses of oil service firms and other operators.