The Nation Newspaper

Category: Energy

  • Issues in power sector reform

    At a symposium to mark 2012 Democracy Day, former  President Goodluck Jonathan pointed out that the Federal Government owed N185 billion in judgment debts. The litigations arose from top government officials’ decisions that were not thoroughly evaluated. No doubt, the judgment debts would have risen by now.

    Last May, it was reported that two arbitration awards totalling $8.9 billion (about N2.7 trillion) have been made against Nigeria. The judgment obligations emanated from contractual actions of the Olusegun Obasanjo, Umaru Yar’Adua and Goodluck Jonathan administrations.

    The present administration seems not to have learnt from these cases going by recent developments in the power sector. According to the Minister of Power, Works and Housing, Babatunde Fashola, SAN, “the electricity distribution companies (DisCos) bought these (power) assets with their eyes open and they must compete to deliver or exit.”

    At a July 9 briefing on the state of the power sector, he said all the stakeholders had a share of the blame. He did not say anything about the government’s responsibility in the Nigerian Electric Supply Industry (NESI.) All the challenges in the industry are traceable to the belligerence and inefficiency of the DisCos. The minister shied away from the truth. The economy is already burdened and nobody should add to it with their disregard for the fine points of contracts.

    The core investors paid the government over $1.3 billion for 60 per cent equity in each of the 11 DisCos. They did not invest in the sector to be told off by anybody.  The investments are backed by contracts entered into with the government and provides for arbitration and adjudication by the courts. Over three years after, the core investor for Yola DisCo, Integrated Energy and Distribution Marketing Company, returned the firm to the government, it has yet to get the $87 million agreed to by both parties as recompense for its investment. It had paid $59 million for 60 per cent equity in the firm. The question then arises: can the government meet the payment demands of 10 DisCos? If arbitration and /or court adjudication favours them, does the minister believe that the investors will exit without adequate recompense?

    Hindsight is always 20/20. It seems lost to authorities that when the prospective core investors were bidding for the enterprises, they were unable to undertake sufficient due diligence on the distribution assets because of the restiveness and militancy of the labour unions in the power sector.  The sale of the distribution power assets was predicated on cost-reflective tariff which would encourage the core investors to rehabilitate and improve the performance of the DisCos.

    That understanding was met in breach.  It is important to state that if tariffs are not cost-reflective, it becomes demanding for the DisCos to be able to raise the necessary funds to pay back the principal and the interest on the loans. In March 2015, the Nigeria Electricity Regulatory Commission (NERC) removed the collection losses component in the Multi-Year Tariff Order (MYTO). That reduction in electricity tariff was seen by industry operators and observers as politically influenced, and was described by a former NERC Commissioner for Market Competition and Rates, Mr.  Eyo O. Ekpo, as “patently bad”. How do you explain that a sector whose tariffs were not initially cost-reflective could absorb a reduction in tariff? No wonder within months, some DisCos had to declare force majeure.

    As if that was not bad enough, the electricity market has experienced at least six tariff review suspensions since November 2013 when the power assets were handed over to the investors. Even the introduction of eligible customers’ regulation came too early and affected the premium class of customers that account for 60 per cent of the revenue of the DisCos. Section 28 of the Electric Power Sector Reform Act provides thus: “If the minister determines, following consultation with the President that the directive given under Section 27 will  result in decreasing electricity prices to such an extent that a trading licensee or distribution licensee would have inadequate revenue to enable payment  of its committed expenditures or is unable to earn permitted rates of return on its assets, despite its efficient management, the minister may issue further directives  to the commission (NERC) on the collection of competition transition charges from consumers and eligible customers, the distribution of the funds collected to the trading licensee described in Section 25(a) and to the distribution licensees, and the duration of the competition transition charge.”

    The import of this provision is if the minister makes the eligibility declaration, it is incumbent on him  to ensure that the declaration does not have negative financial impact on the DisCos.

    Fashola spoke glowingly of the N213 billion Central Bank of Nigeria’s Nigerian Electricity Market Stabilisation Fund (NEMSF), which the apex bank began disbursing to DisCos and GenCos (generation companies) in 2015.

    He failed to inform the public that the soft loan was meant to cover the difference between the actual tariffs charged by the DisCos and what ought to be charged if the actual Aggregate Technical Commercial and Collection (ATC&C)  losses of the Discos had been known at the time  of handover in November 2013.

    Moreover, the shortfall in revenue which was prompted by the absence of reliable data at the date of handover was made to appear as liabilities in the books of the DisCos. This decision had significant impact on the balance sheet of the DisCos, thereby inhibiting their ability to borrow additional money to fund their capital expenditure.

    It is apt to point out that the major factor inhibiting massive inflow of funds from overseas to the power sector is the unresolved risks of the sector, particularly the short fall in the revenue value chain.

     

    • Aminu writes from Lagos.

  • Renewable energy records $200m investments

    Nigeria’s renewable energy segment has recorded $200million worth of equity investments, Stanbic IBTC Bank’s Head, Power & Infrastructure, Mr Abiodun Oni, has said.

    He said the capital is small in view of the investment gap in the off-grid sub-sector of the electricity industry.

    According to him, more private investments are coming to the sector to make more Nigerians access electricity for growth.

    He said bonds of between five and 10 years’tenure were issued by operators to raise liquidity that will be enough for the implementation of key infrastructure in the energy sector.

    Speaking on the sideline of a workshop with the theme ‘Nigeria energy mix: Nigeria off-grid  investment infrastructure opportunities,’ held in Lagos, Oni said there were opportunities calling for investments in solar, wind, biomass, coal and other sources of generating electricity off-grid for Nigeria’s over 190 million population.

    He said investors were sure of getting returns on investments, if they invest with the right price mechanism provided for operators in the industry.

    He said an in-depth understanding of kilowatts of electricity generated by either solar energy or wind energy was required from the operators, if they wanted to perform well, adding that operators in the off-grid segment of the industry were expected to complement whatever that is produced by the traditional means of generating electricity, such as the turbines and hydro system.

    Also, the Chief Executive officer, Energy Mix Limited, Mr. Noma Olushola Garrick, said investment in infrastructure was required by operators in the public and private sector, if Nigeria is interested in combining on-grid and off-grid methods of generating electricity for growth.

    Garrick, whose firm organised the workshop, said support from the financial institutions was needed to improve the contributions of off-grid players to the sector.

    Similarly, Renewable Energy Association of Nigeria (REAN) President, Mr. Segun Adaju, urged the Federal and the state governments to invest in renewable energies to engender growth of the economy.

    He said South Africa generates  over 40,000megawatts (Mw) of electricity from various sources, such as gas, hydro, solar and coal, stressing that the idea has contributed to the development of the former apartheid nation.

    He advised individuals and companies to invest in solar energy to aid the growth of the economy.

    “When operators invest in solar energy equipment, such as panel, batteries, increase in access to electricity would increase and the better for the country This, directly or indirectly, would reduce the burden of providing electricity to the consumers from the government,’’ he added.

  • Content Board eyes $14b value retention in-country

    The Nigerian Content Development and Monitoring Board (NCDMB) says it will  retain $14 billion from the $20 billion spent in the oil and gas industry yearly.

    Its Finance & Personnel Management Director Mr. Isaac Yalah, said the amount was part of the Board’s 10-year strategic plan (2018-2027) expected to create 300,000 jobs.

    Yalah told reporters in Lagos that the Boardwas positioned to achieve the milestones set out in the 10-year plan. He said: “The roadmap sets an ambitious goal of achieving 70 per cent Nigerian Content level by 2027. The Board has now commenced the implementation of the roadmap.

    “The roadmap stipulates increase of local content level in the oil and gas industry from 26 per cent to 70 per cent by 2027, double the value domiciled in the oil and gas industry by 2027 and increase the oil and gas industry contribution to the national GDP and facilitate access of Nigerian-made goods and services to regional markets.”

    Others, he said, include building effective internal structures in terms of people, skills, processes and systems to support the Board’s operations across the entire oil and gas industry and also facilitate a commercially viable business environment that encourages increased sector investment.

    “The 10-year plan will ensure Nigerian content implementation is enhanced through the mobilisation of appropriate tools, policies and frameworks across the entire value chain of the oil and gas industry and extend and deepen in-country technical capability in the oil and gas industry,” he said.

    Yalah stated that the Board in line with its commitment to ensuring transparency would involve third party forensic audit of Nigerian Content Development Fund (NCDF) and also third party monitoring of its activities and operations.

    Also, in line with the NOGICD Act that established the NCDMB, we compel companies to give first consideration to services provided from within Nigeria and to goods manufactured in Nigeria, among others.

    Yalah quoting the National Bureau of Statistics (NBS) said oil  and gas contribution to GDP increased to 8.7 per cent in 2017

    Other capacity development initiatives, according to Yalah, include the Board’s encouragement of local ownership of marine assets through the marine vessel categorisation scheme.

    Also, the Board seeks to encourage establishment of dry dock for large vessels like liquefied natural gas (LNG) tankers, he said, adding that Nigerian vessel ownership has increased from 10 per cent to 34 per cent.

    “NCDMB fosters institutional collaboration, integrate oil producing communities into the oil and gas value chain, attract investments to the Nigerian oil and gas sector (service providers, equipment suppliers, among others, maximise utilisation of Nigerian resources; that is, goods, services and assets and link oil and gas sector to other sectors of the economy,” he added.

  • BEDC inaugurates 1,694 transformers

    Benin Electricity Distribution Plc (BEDC) has inaugurated 1,694 distribution transformers to boost power supply in Edo State.

    The company disclosed this in a Customer Information Update on Edo State.

    It said power availability has improved from two hours in 2013 to between six and 10 hours in some locations in the state with severe infrastructure limitations, including Okada, Oluku, and part of Sokponba, Evbuotubu, Oliha and Siluko.

    BEDC stated that improved power was also recorded from eight hours to between 12 and 15 hours for locations with more improved infrastructure, such as Auchi, Government Reserved Areas (GRA), Ugbowo, Okhoro and new Benin in Benin City.

    The firm said: “Some of these improvements can be seen in large companies, hotels, teaching hospital, central hospital, universities, government establishments, including Government House, High court and state House of Assembly.”

    The company said: “Most importantly several customers can now predict when they will have power supply based on our regimented load management schedule which are published.”

    On power supply to communities, BEDC disclosed that it has connected 12 communities, which were without power supply before the take-over, including Aduhanhan, Orhua, Evbuehkhae, Evbuovbuke, Ogbekpen, Ekuobore and Ikhueniro.

    The Distribution Company (DisCo) also said transformers of 16 communities were replaced, while 11 transformers donated to others.

    On the Ossiomo power project, BEDC said: “To the extent permitted by applicable legal and regulatory framework, BEDC has been and continues to be willing to work with all such thrid parties, including Ossiomo Power and Infrastructure Company to increase power supply within the ambit of the law, without compromising quality of power supply, affordability and safety of our customers.”

    It stated that it has achieved over 65per cent metering of customers and was committed to closing the gap in its coverage areas and also committed to ensuring credible billing for power consumed.

    “NERC has introduced a new process of using third parties as Meter Asset Provider (MAP) to accelerate the metering process. This should help substantially to eliminate the gap in due course. Estimated billing will continue to subsist in locations where 100 per cent metering is not yet achieved as a means of computing bill for electricity consumed,’’ it added.

  • Oil price to be stable into 2019 as OPEC, U.S. meet supply needs

    Oil prices are likely to be stable this year and next as increased outputs from OPEC and the United States meet growing demand led by Asia and helps to offset supply disruptions from Iran and elsewhere, a Reuters poll has shown.

    A survey of 44 economists and analysts forecast Brent crude to average $72.87 a barrel in 2018, 29 cents higher than the $72.58 projected in the previous month’s poll and above the $71.68 average so far this year.

    U.S. crude futures were seen averaging $67.32 a barrel in 2018, compared with $66.79 forecast last month and an average of $66.16 until now.

    This is the 10th consecutive month in which analysts have raised their oil price forecasts.

    “We expect prices will largely remain range-bound in the second half of 2018 and 2019. On the one hand, robust U.S. shale production and market concerns over the brewing U.S.-China trade war will help keep a lid on prices,” said Cailin Birch, an analyst at the Economist Intelligence Unit.

    “On the other hand, the recent decline in global stocks will make prices more sensitive to any geopolitical risk, which will keep prices from falling significantly below current levels.”

    The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries agreed to raise supply in a meeting last month to meet rising global demand, but the group did not specify a clear target for the output increase.

    Meanwhile, U.S. sanctions on Iran that will come into force later this year will force a decline in exports and help support prices, analysts said.

    “The disruption to Iranian barrels will weigh on oil markets in the second half of 2018 and H1 2019 as there are few spare barrels in the market that can offset a big disruption to Iranian supplies,” said Emirates NBD commodities analyst Edward Bell.

  • Four firms top in Clean Energy Innovation Challenge

    After a rigorous selection, challenging boot camp and engaging pitch competition, the Clean Energy Innovation Challenge has produced winners at the Co Creation Hub HQ held in Yaba, Lagos.

    The four early stage energy companies that emerged tops include Aspire, Hydrolite, Hydrotriciton and ZeroElectric.

    The four firms were awarded startup capital by Clean Energy Innovation. The Clean Energy Innovation Challenge aims to unearth and support renewable energy innovators in Nigeria.

    In addition to startup capital, these companies and the five other finalists will receive top class incubation support from Co Creation Hub to take their ideation phase businesses to the next level.

    Co-Creation Hub’s Director for Innovation, Femi Longe said: “With Nigeria’s increasing energy requirements to achieve its developmental goals, amid the threat of climate change, there is a need to find and support our clean energy innovators to build successful and sustainable businesses around their solutions. We are pleased to be working with All On on such a lofty agenda and look forward to supporting all the innovators to test and scale their ventures.”

    The challenge will enable All On to further its mandate of supporting innovative models to improve energy access to unserved and underserved segments of the Nigerian population.

    On the impact of the challenge, All On CEO Dr. Wiebe Boer said: “The quality of applications received and the winners selected for the Clean Energy Innovation Challenge are a demonstration of the potential that exists in the renewable energy sector in Nigeria.  With our startup capital and Co Creation Hub’s incubation expertise, we are hopeful that these companies will mature to become sustainable businesses, employers of labour and on track for exponential growth to address the access to energy challenges that exist in the country.”

    All On is an off grid energy impact investment company that works with partners to increase access to commercial energy products and services for under-served and un-served off-grid energy markets in Nigeria, with a special focus on the Niger Delta.

    Hydrotriciton, a Jos-based company, which won $10,000, developed a zero emissions electricity generator that runs on water.

    Its Chief Executive Officer (CEO), Choji Bare said: “To have won this competition will really spur our growth.  Our next step is to produce massively and launch into the market.”

    Aspire uses solar energy, battery storage and smart inverters to monitor solutions and deliver clean energy solutions to customers.

    ZeroELectric has developed a climate controlled system that cools the environment with water in areas without electricity.

    Hydrolite has developed a home lighting system powered purely by water and is designed for off-grid communities. Their torches can last up to two weeks after contact with water.

  • Nigeria’s flared gas can attract $3.5b investments

    The Department of Petroleum Resources (DPR) has said flared gas in Nigeria can attract $3.5 billion investments.

    According to a document from the DPR sighted by The Nation, the flared gas is 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 also worth $350 million carbon credit.

    The document 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.

    According to the report, 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.

    The document further showed that the country has about 139 gas flare locations spread across the Niger Delta both in onshore and offshore oil fields. It further noted that flared gas constitutes about 11 per cent of the total gas produced in the country.

    Frontier Oil Limited Chief Executive Officer, Dada Thomas, said: “Some 48 per cent is associated gas (AG) and 52 per cent non-associated gas (NAG) with 42 per cent located offshore and 58 per cent onshore distributed over a large geographical area and largely in small pockets of less than 1Tcf. Thus harnessing Nigeria’s gas resources is neither easy nor cheap.

    “About 73 per cent of our gas reserves are controlled under Joint Venture (JV) contracts, largely by International Oil Companies (IOCs), 12 per cent under Production Sharing Contracts (PSCs) and 15 per cent under sole risk contracts by indigenous companies including two per cent by marginal field operators.

    “The distribution of control of gas resources is considered by many as a major impediment to accelerated development of the domestic gas (Domgas) market.”

    According to Thomas, the domestic gas market has grown over the years but still only 13 per cent or 1.01 billion cubic feet (Bcf) of total gas production of 7.5Bcf per day is consumed locally while 43 per cent is exported via liquefied natural gas (LNG) and West African Gas Pipeline, 34 per cent used for gas injection and 10 per cent flared.

    According to the DPR, the Federal 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.

    The report said: “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 as well as ensure positive impact to communities in the Niger Delta.’’

  • Why Nigeria may not have stable power supply in five years, by ANED

    Nigeria may not have stable power supply in the next five years except the challenges confronting the sector are addressed, Association of Nigerian Electricity Distributors (ANED)  Research and Advocacy Executive Director, Mr. Sunday Oduntan, has said.

    He stated this during an interaction with reporters in Lagos.

    According to Oduntan, there are challenges inhibiting power sector’s efficiency. They include liquidity gap of N1.3 trillion, lack of improved generation due to mismatch in electricity pricing, lack of investment in transmission and distribution networks and the rising energy theft.

    “Except these challenges are addressed, we may not have stable power supply in the next five years,” he said.

    Oduntan said the illiquidity in the sector should be prioritised because the sector could not afford to collapse. “If the power sector collapses, many banks will collapse because in 2013 during privatisation, only one electricity distribution company (DisCo) obtained foreign loan, others took loans from local banks in dollars. Privatisation was based on 30 per cent equity and 70 per cent loan, he added.

    “The model was borrowed from New Delhi, India and it is working. If it is successful in India, why is it not working in Nigeria,’’ he added.

    Oduntan decried the prevalent non-reflective tariff and called on the government to prevail on the military, Ministries, Departments and Agencies (MDAs) to pay for energy consumed.

    According to him, MDAs owe about N72 billion and the military has refused to pay since last August, when the Minister of Power, Works and Housing, Babatunde Fashola said the Federal Government would settle all legacy debts by MDAs. Afterwards, nothing has been paid by the military.

    “It is important to also state that the mismatch in electricity pricing has resulted into inability of the Discos to settle their obligations to the Nigerian Bulk Electricity Traders (NBET).

    “What we get from NBET is usually higher than what the Discos charge to consumers because we don’t have control over tariff. Government determines what we charge power consumers.

    “Until we have a review of electricity tariff which ought to have been taken place every six months, there can’t be cost-reflective tariff and without cost reflective tariff, Discos can’t settle their debts to NBET.”

    On the controversies surrounding eligible customers’ policy, Oduntan argued that tariffs for industrial consumers were structured to be subsidised.

    “The eligible customer policy will take the industrial customers off the DisCos’ network and this will affect the revenue of the DisCos.

    “If the policy will take away the industrial customers from the Discos’ network, then, there must be a review of the tariff to guarantee liquidity in the sector,’’ he said.

    He noted that Nigeria’s power sector is bleeding and would not recover so soon as a result of undue political interference and  wilful action against the agreements signed with investors in the sector.

    ‘’Nigerians are yet to witness the requisite dividends of the privatisation of the sector five years after because the government   has not met all of its obligations that were pre-conditions to power distributors’ ability to implement the requirements of their performance agreements,’’ he added.

  • SNEPCo donates four science labs to Kwara school

    Shell Nigeria Exploration and Production Company Limited (SNEPCO) has donated four ultramodern science laboratories to Eruku Secondary Commercial School in Ekiti Local Government Area of Kwara State.

    This is the latest effort by the Shell deep-offshore company to spread its social investments across the country and boost the study of science subjects among secondary school pupils.

    “The importance of science education cannot be over-emphasised particularly in this age of rapid technology advancement. Government alone cannot do it which is why SNEPCo, its government and co-venture partners have continued to intervene in this critical area of youth development just as much as we do in the health sector,” said Managing Director of SNEPCo, Bayo Ojulari, at a ceremony in the school to handover the multimillion naira laboratories to the school management.

    Represented by SNEPCo’s General Manager, Deepwater Exploration, Adedayo Adewuyi, Ojulari charged the students to take maximum learning advantage offered by the well-equipped laboratories to develop their potential in Science, Technology, Engineering and Mathematics.

    Deputy Manager, Community Development, National Petroleum Investment Management Services (NAPIMS), Mrs Jolayemi Kolapo, said the company was pleased to support SNEPCo’s focus on education across the country as a proof-point of the government’s commitment to people development in its partnership with oil and gas companies in the country.

    Kolapo, represented by the company’s Group General Manager, Roland Ewubare, said: “We believe that our investments should not just be in the bolts and nuts but also in the people. Assisting the government to provide quality Education delivery is a crucial aspect of our investment and that is why NAPIMS is pleased to partner with SNEPCo on the delivery of this project. We, therefore, encourage the school to make judicious use of the laboratories for the intended purpose. It is only by so doing that the huge investment made in putting this project in place would be justified.”

    State Commissioner for Education and Human Capital Development, Bilikisu Oniyangi, described the labs as world-class standard and charged parents and teachers to ‘’deliberately encourage youths to have inquisitive minds that can help in carrying out research for solving modern day challenges that pose a threat to humanity’’.

    Oniyangi, represented by Director, Human Capital Development in the ministry, Mrs. Comfort Abioye, described SNEPCo’s intervention as timely, noting: ‘’The project supports the policy thrust of the state governor on the improvement of quality teaching and learning of science subjects aimed at facilitating development in technology and human development.’’

  • Inter-agency collaboration will deepen R&D, says OGTAN

    OIL and Gas Trainers Association of Nigeria (OGTAN)

    President, Dr. Afe Mayowa, has said inter-agency collaboration would advance research and development (R&D) in universities.

    Mayowa, who spoke to The Nation on telephone called, said there was the need to put more efforts for a synergy between universities and the industry.

    According to him, there is nothing wrong if some PhD candidates are selected as a research team to work on a project in the university, which can be sponsored by a multinational corporation, such as Chevron.

    “This is the kind of collaboration we really want to see, but as of today, we are not seeing much of that”, he stated.

    Mayowa, who is Chief Executive Officer, Danvic Petroleum International Corporation, said in the developed countries, companies invest in departments that have personnel, doctoral students that would devote their time in carrying out specific research that could help the oil and gas industry.

    ‘’This is because the companies are in business to make money while the universities are in the process of adding knowledge. So, the companies help the students who want to go into research and add to the knowledge which they will also benefit from.

    “This is because if you improve technology, a lot of things will be easy for the oil company. There is a lot of benefits in inter agency collaboration. This is to forestall duplication of efforts,” he said.

    Mayowa called for the government’s support to ensure there is enabling environment for every operation to be useful. He said: “Chevron cannot collaborate with say the University of Ibadan if the environment for Chevron to do their business is not there.”

    He suggested some tax concession to companies sponsoring researches in universities.’’There should be some form of tax holiday. It encourages a company to do more because it knows it will get some of the things it does tax-free. An enabling environment is key and the government should be able to provide it,’’ he said.

    He said as part of efforts to contribute to the industry, the group  organised a summit attended by stakeholders from across the industry.

    OGTAN, he said, also issued a communiqué, which was given to government, ministry of education and stakeholders. The company had also created technical business meetings that would enable people to express themselves, he added.