The Nation Newspaper

Category: Energy

  • ‘Pipeline security needs collaboration, technology’

    ‘Pipeline security needs collaboration, technology’

    The Group Managing Director of Oilserv Limited and Frazimex Limited, a pipeline and facilities repairs firm, Emeka Okwuosa, met with Nigerian reporters at the just-concluded offshore technology conference in Houston, Texas, United States. He spoke on how to prevent pipeline vandalism, survive in a low oil price regime and why product pipes in Nigeria lack integrity, among other issues. EMEKA UGWUANYI was there.

    The East-West pipeline is expected to be the solution to domestic gas challenges. Your company is one of those that won the pipeline contract. What is the status of the contract given the dwindling crude price and the government’s financial challenges?

    The East-West pipeline project also called OB3 pipeline is ongoing and we are looking at the project’s completion in 2017. The scheduled completion date is July 2017. The project has faced quite a few challenges like you will expect of any project. Projects come with plans, based on scope and as you progress with the project, you may have changes in scope depending on what you intend to achieve. We also have challenges that come with community management and security issues. We also have several other challenges, but at the end of all, we are always having reduced and recalibration of the schedule. Currently, we are looking at July 2017. In terms of how it is being affected by the current situation in oil and gas industry, it may not really affect it. This is a gas pipeline, and I know there is a plan by the government to make gas distribution come in top gear.Therefore, this means that the project has been programmed overtime and the funding is also being kept by the Nigerian National Petroleum Corporation (NNPC) and the Federal Government. So, clearly the funding is on stream and I believe by next year, we should have that pipeline fully functional to be able to increase the capacity of gas supply for domestic uses.

    What is the volume or capacity of the pipeline?

    At peak supply, we are looking at a maximum of two billion standard cubic feet of gas per day (bscf/d). Whether that capacity will be achieved or not depends on whether there will be enough gas to feed it.

    With renewed attack and vandalism of pipelines, and your 2017 completion target, what measures have you put in place to secure the new pipeline?

    Pipelines are built based on what is called ‘engineering codes,’ and these codes determine the way you scope the project, and the way you  scope the specifications of the project, and once that is done by the clients, our job is to build to those specifications. There are many ways to secure a pipeline, but the most important way to secure a pipeline is the engagement of stakeholders including the government, the community and all manner of people that have direct impact on the pipeline. There are various forms of technology like the defined optic system, but that’s not being installed in the pipeline because it wasn’t part of the original scope. But what we have to know is that anybody that is tampering with a gas pipeline is a clear saboteur because you don’t tamper with gas pipeline to steal the gas. So, the incidence of gas pipeline vandalism is typical because it is an act of sabotage.

    How do you think the government can permanently address pipeline vandalism?

    Government has to set up a system to guide  the pipeline because it is a national asset. It is a very strategic national asset because anywhere in the world, you guide your pipelines by using technology, engaging the communities around there, or putting up a proper security including military security, but you have to guide your pipelines.

    In other words, you support government’s idea to set up a separate security that will guide the pipelines and the use of drones?

    I won’t say I support it because I don’t have the details, but what I’m saying in general is that you need to do a combination of general methods and technology. You can’t restrict it to just putting police around it, because if you have a 500-km pipeline, are you going to  get soldiers or police around it? This is not feasible. It requires, again, the people around it because they are the first and primary line of defence for the pipeline. Somebody has to know that something is going to happen and report it somewhere. Drone is also part of the solution. But it has to be an integrated solution. If you put drones, they can work but what it means is that when you have detected any attempt by the drones to vandalise pipeline, you have to quickly intervene. So, you need to have an integrated system because drone cannot intervene for you.

    What do you now consider as the best method to stop pipeline vandalism?

    It depends on the pipeline, the area and the community the pipeline passes through. It depends on many things, but like I said it is a combination of all sorts of security measures and it is only when you take a specific pipeline that you can address such issues clearly and be able to put a formula for it. It is not easy to say this is the way forward. It is a combination of being able to work together with the communities, and the individuals around the areas of that pipeline. Being able also to build the pipeline following codes in a way that it will be more difficult for anybody to get in there, which means you bury the pipelines deep which is what we do.

    The other one is being able to deploy technology, which is either you put a detection system along the line or you put drones to monitor. Finally, you have to put an intervention system. An intervention system means when you have detected vandalism, what are you going to do? You need human beings to go there and take action, which means it has to be purposeful, it has to be well organised and finally you must have a legal system ready so that when you catch somebody, you prosecute that person. If after arrests  nothing happens, that encourages negative actions, but going forward. It is quite a complex scenario but it can be solved.

    In this petroleum industry downturn, how do you cope with exploration and production activities?

    Exploration and production are part of the whole package. We started with construction, expanded it into full Engineering, Procurement and Construction (EPC). Oilserve is the first indigenous company to go into full EPC. With that, we consolidated our activities and we have been able to build capacity. We moved on into gas development, exploration and production. The whole idea is to have a balanced portfolio and be able to de-risk the business. Now oil price is low, but people will have to understand that oil price has never remained low or high. It is a cycle that has been going on for decades and for those, who deeply understand the oil industry, you have to be able to read the cycle and know when to gauge. Oil price is low, but the reality is that this is the best time to invest because you can price low. The main challenge is that you may not find the money to invest. We have gone into exploration and production to be able to gauge. Right now, exploration is more difficult because it is difficult to go out and drill and spend money on exploration with low oil price. You can still do it if you can get the services with reduced income, which is what is going on today. You can get into production asset where you optimise production, reduce your costs and be able to produce at a rate below $30 per barrel, and manage until the price goes up.

    The profit end of the sector seems to have shifted to downstream, do you intend to invest in refining of white products?

    I mentioned that we have moved into other business areas in order to de-risk our business. Do not forget that Oilserve started activities in 1995, so we have come a long way. This year will make it 21 years and you can understand that we have matured. Five years is enough for you not only to strategise, but try the strategy and be able to fine-tune it. We have done this and where we are today is that we have actually integrated and adapted to the situation. As we speak, we are undergoing a massive strategy session to reposition ourselves to be able to work and determine, which area to pay more attention to in medium term.  We also have long term strategy  there. But in long term, you have to twist from time to time to meet up with the short term and medium term results. It is a matter of planning, understanding the industry and not being a company that comes into the industry and do just trading.

    So, if you look at refining and refinery that is a different business. We do not intend to get into that. The only way we can get into the refining and refinery business would be to basically do modular refinery in other to utilise the production we may have going forward, if we do not want to evacuate the crude, but rather turn it into products and be able to use the products within the country. All these things are not required within the present predicament. But right now, we have not decided to go into refining. We must create the right value with the right strategy to go into it.

    Most operators you serve are being owed by the NNPC, how are you coping with the situation and what strategy should the industry adopt to get out of this situation?

    Everybody is affected definitely. We have an industry-wide downturn. There is low activity, low price regime, so it is affecting everybody. It is also creating a challenge for the government to be able to cope with the issues of funding, knowing that oil in particular is the major ingredient of our economy. Oil still constitutes more than 60 per cent of our foreign exchange earnings as a country. You can realise that lots of things we use in Nigeria are purchased from overseas.

    So, to fund these, you need to ensure you get enough money from the sale of crude to meet them. If you opt out from the side you know, you create a gap there, and it becomes more difficult for the government to fund its Joint Venture commitments. Don’t forget that some of these commitments are dated five to eight years ago. It is actually a problem.

    But I strongly believe the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu. He has stated severally that government is working on resolving these commitments. They are looking at alternative means of funding. They are also looking at being able to draw some funds from the Middle East, China and from other sources. The government is in a better position to decide that but I believe they know what the problem is and that they are dealing with it. But as far as it affects members of Petroleum Technology Association of Nigeria (PETAN) members and Oilserve, it is a serious problem. We all know that it is not going to be there forever because if you look at the price regime of crude oil, it appears like it has bottomed, you have upside going forward. It requires planning and decisions to get it to the $100 per barrel cap. What is important is that the oil producers that need our services are still in business. So far as they are in business, they will need our services. It is just a matter of time.

    What is the objective of your activities outside Nigeria?

    The objective is again what I called de-risking. You have to balance your portfolio, both in terms of different services and areas of operations as well as geographical spread.

    Many of your colleagues have expressed frustrations with respect to accessing Nigerian Content Fund (NCF), what really is the situation of the fund?

    The NCF is a major issue because some of us in PETAN, who fought so hard with other stakeholders to be able to set up the NCDMB based on local content act, feel some of the aims are not being achieved as of now. It may be too early to judge, but we need to make sure that some of the policy directions are looked into and correct them. We are slowly building up the fund, which of course is being taken from us. When I say us, I’m looking at service providers, and the producers. The purpose of that fund is very clear. It is for capacity building. But how the fund is being deployed today is not clear to any of us. We need to come together and look at the fund and make sure it is being deployed properly in order to build capacity. Capacity is not for one person, it is for the nation.

    What are the indigenous players doing to correct the anomaly?

    It is still at the early stage because, don’t forget, this law has been in place for just six years, so in terms of practice, we are still coming to deal with it and we are taking up as an organisation to address it with the NCDMB. And where that does not yield the result, we will take it up. As NCDMB reports to somebody and there is a system, we have to make sure that clearly, NCDMB manages the situation in a way that will address the original reason for which it was set up.

    But have some members of PETAN accessed this fund?

    Yes, but it is like you have $1million fund and somebody accesses one cent, that’s not access as far as I’m concerned. Not more than one or two companies have accessed the fund at a very low level, extreme low level, and that kind of fund doesn’t do a project for companies like Oilserve, so we can’t even go for it because it doesn’t make any sense to us.

    Some of the pipelines have been laid for decades now, what is your assessment of their integrity?

    It depends on the pipelines. Don’t forget when we talk of pipelines, we have crude oil pipeline, products pipeline, gas pipelines. These are owned by different entities. For crude oil pipeline, mostly owned by the international oil companies (IOCs) and the indigenous producers, the codes are very clear. We know the codes, we know the standards and they are obliged to keep to the rules. So they do the maintenance to assure integrity. Besides, you have to build it according to the codes. You also have to do the routine maintenance to keep the pipeline going and make sure you have the corrosion protection system working very well to slow down or stop corrosion from happening. That way, pipeline can last for several years. The crude oil producers more or less keep to these codes. You get to gas pipelines, they are owned by different entities. Gas pipelines are mostly owned by Nigerian Gas Company (NGC) and other entities. They are also well maintained.

  • Oil price may rise on supply outage, China demand

    Supply outages and growing demand from China are likely to push price of crude oil up in the next few months, an energy analyst has said.

    Jefferies’ Jason Gammel told CNBC the oil market had swung from oversupply to undersupply in April thanks to disruptions in production in Nigeria and Alberta, Canada, taking around two million barrels per day out of the market.

    “I think with continued demand growth over the course of this year and continued declines in non-OPEC supply that we are already seeing in places like the United States, the market actually comes into much better balance by the end of the third quarter and that’s the stage for fundamental price recovery,” he told CNBC in London.

    As global crude output fell, demand from China — a massive consumer of energy — rose in April. Its crude imports reached eight million barrels a day, up 7.6 per cent from a year earlier, according to official Chinese data

    “In the case of China, what is encouraging is that their imports are still very high, because I really think that, from a supply-and-demand standpoint, you need to have strong Chinese demand growth in order for the market to become more balanced by the end of the year,” Gammel said.

    According to a UBS commodity strategists’, Brent crude will trade at around $49 per barrel in the fourth quarter of 2016 and then rally further to average $55 through 2017.

    They added that a recovery in WTI oil prices to above $50 per barrel would incentivise renewed U.S. energy exploration and this projected increase in supply would limit price upside.

    Gammel agreed $50-plus prices would spur U.S. rigs back online, but said this increase would be insufficient to offset lower output from shale gas wells. “I think if the U.S. rig count doesn’t go above, let’s say, 500, that the U.S. production is going to continue to decline,” he added.

    Oil exploration in the U.S. is down 51. 7 percent, year-on-year, Baker Hughes reported last week in its widely eyed weekly report on North American drilling activity.

    The U.S. rotary rig count last week was down two at 404, Baker Hughes reported.That was 481 rigs down on last year and the lowest since Baker Hughes started counting rigs in 1949.

  • NNPC, SNEPCo celebrate musical talents in Lagos

    The choir of the Murtala Mohammed Airport Secondary School, Ikeja – Lagos has won the just concluded 14th edition of the all Lagos secondary schools choral competition, sponsored by the Nigerian National Petroleum Corporation (NNPC) and Shell Nigeria Exploration and Production Company (SNEPCo).

    With a brilliant rendition of Sally Albrecht’s Friends on Our Left, and William Barnes’ Linden Lea, the school’s mixed choir cruised home to victory, earning them individual prizes and musical instruments for their school. Halifield Secondary School, Maryland, came second, while Holy Child College, Obalende, emerged third.

    Special guest of honour at the event and wife of the Lagos State Governor, Mrs. Bolanle Ambode, praised the NNPC/SNEPCo initiative, noting that beyond the competition was the opportunity to groom songsters who combine their musical talent with education.

    In 14 years since the programme began, many young talents have been discovered, raised and nurtured to stardom. The first lady, represented by Mrs. Jumoke Adeyemi, said: “I urge all of you children to invest your time wisely in useful and productive engagements like music.”

    The Group General Manager, National Petroleum Investments Management Services (NAPIMS), Mr. Dafe Sejebor, restated the commitment of the agency to the support of “initiatives that will positively impact the lives of Nigerians.” Represented by Mrs. Bunmi Lawson, the NAPIMS boss noted that music had the potential to help students in the development of their brain and raising their state of consciousness, among other benefits.

    In his remarks, Managing Director of SNEPCo, Mr. Bayo Ojulari, represented by the Government Relations Manager, Alan Udi, said SNEPCo was committed to preserving the dying culture of traditional folksongs, and the moral lessons that they teach. “SNEPCo views music as a crucial community builder. We are therefore committed to engaging and empowering our young people, giving them the opportunity to develop their talents in all areas.”

  • Fuel price: NUPENG seeks drivers’ compliance

    Fuel price: NUPENG seeks drivers’ compliance

    The Petroleum Tanker Drivers (PTD), an arm of the National Union of Petroleum and Natural Gas Workers (NUPENG), has warned its members against flouting the rules guiding the distribution of fuel nationwide, even as the battle for the reversal of new fuel pump price rages on.

    PTD said it was in support of the subsidy removal and the increase in fuel pump price from N86.50 per litre to N145 per litre, so it would not condone any acts of lawlessness that would lead to the disruption of the supply chain.

    The PTD’s National President Mr. Salimon Oladiti said the body was striving to ensure compliance with petrol, diesel and kerosene distribution guidelines.

    He said the association was monitoring its 12,000 members closely to ensure the effective distribution of petroleum products in the country.

    Oladiti said: “The issue of compliance to the rules guiding lifting of fuel from the depots and subsequent distribution to designated retail outlets is paramount to the body. This explains why PTD wants its members to comply with all known regulations on the issue. Failure to do this would attract punishment from the body.

    Compliance, he said, should be total, if PTD wants to achieve its goal of helping Nigeria to overcome problems in the fuel supply chain, among others.

    “The leadership of PTD has ordered its members to obey directives from NUPENG, oil marketers, depot operators (both government and private owned), and other critical stakeholders, once the directives are geared towards improving fuel supply in the country. By so doing, the body is helping the country to reduce problems in the downstream sub-sector of the nation’s oil and gas industry,” he added.

    Oladiti said the body had agreed to supply fuel to retail outlets, not minding the problems associated with the fuel price increase. He noted that PTD is subservient to the rules guiding the operation of NUPENG, and must, therefore, support NUPENG’s stand on the hike in fuel price.

    According to him, PTD is ready to support parties or groups interested in how to reduce problems associated with fuel distribution.

    The Vice Chairman, South-West, NUPENG, Mr. Tokunboh Korodo said tanker drivers would distribute fuel regularly as long as a conducive environment is in place in the country.

    He said an enabling environment is required to promote the growth of the economy, and the oil and gas sector, adding that operators in the sector cannot operate in a vacuum.

    “Tanker drivers would continue to supply fuel as long as there is a safe environment. The government has announced the new fuel price, and we have embraced it. We have planned to distribute fuel regularly irrespective of the problems that trail the rise in price of fuel,” he said.

  • ‘Way out of power crisis’

    To tackle the problem of incessant power failure, an arm of Contec Global Group, Contec Power Systems, has introduced some power products such as inverters, UPS, batteries and solar power goods into the market.

    The Managing Director, Mr. Srinivas Ppilla, said it was imperative and cost-effective for Nigerians, especially those at the grassroots, to buy the products to enjoy their lives, adding that the products are unique in the industry.

    He said: “People in Nigeria are going through a challenging situation in terms of power crisis, the difficulty in managing their power supply and energy needs for residence and corporate requirements, thus affecting the common man and the corporate  bodies by and large. The costs associated with buying diesel or petrol to power your needs is increasing day by day, and affecting the economy of the country too.

    “Not only that, the constant use of diesel generators has affected the air increasing health-related problems due to pollution. It is time to change to a highly reliable source and reduce your recurring expenses on fuel bills. The solution is to reduce the dependency on the public power supply and generators by adapting to solar power and inverters. By installing solar panels and inverters, the dependency on the generators and fluctuating power supply is reduced. Even the air we breathe in will be less polluted’’.

    “Contec Power has solutions for both large corporate and residences. It aims at providing cost-effective power back up and renewable energy solutions to Nigerians and help them to make their lives more comfortable.”

    Also, the firm’s Head of Service, Mr Anil Pawar said: ‘’Contec Power is a differentor in power back solutions industry by offering high quality products backed by 24/7 after-sales services’’, lasts longer and if well-maintained, could last 25 years. Besides, he said the firm offers free site inspectors and one year warranty on its products.

  • Benin DisCo new billing system ready

    Benin DisCo new billing system ready

    To provide better billing information, the Benin Electricity Distribution Company (BEDC) has completed the migration of customers to a new platform – Electricity Billing Management System (EBMS).

    The company in a document, made available to The Nation, said  it began the use of the new system for customers in Edo “effective March 2016.”

    “In order to provide better billing information to customers, BEDC has commenced migration to a new billing system named Electricity Billing Management System (EBMS). Effective March 2016, the new billing format commenced for all Maximum Demand (MD) customers and all other categories of customers in Edo. Customers in Delta, Ondo and Ekiti will be moved to the new billing format as from April 2016,” the company said.

    Sensitising the customers on the new billing system, the firm said reading of customers’ meter was expected to be done monthly or at least once in three months. But whenever a reading is not done in any month, an adjustment will be used with the subsequent reading, it added.

    Also, where a customer’s meter is found to be obsolete or incorrect, the meter reading will be suspended and direct/estimated billing will be utilised prior to the replacement of the meter. Such suspension will be notified to the customer via a letter.

    “All customers under the estimated billing will have their estimation done based on Nigerian Electricity Regulatory Commission’s (NERC) approved cluster billing average methodology. Where bypass is noticed during meter reading and/or billing period, the read information may be suspended and customer billed appropriately on direct/estimation using NERC cluster billing methodology,” it said.

    The programmes of the company including its billing system had earlier received accolades from customers including civil society activist, Reverend Olu Martins.

    Martins had at a forum in Benin explained to residents of communities in Egor area of Benin, Edo State, that the reason they are experiencing power outages arising from inadequate supply, was that BEDC is facing challenges due to inability of generating companies (GenCos) to generate more electricity for domestic and industrial needs.

    Martins, who spoke during a town hall meeting held in Ugbowo, said there was a great challenge of power generation in Nigeria with less than 5,000 megawatts (mw) to a population of 170 million, stressing that the current energy output of 1,500mw was a reflection of the perennial energy crisis that was yet to be addressed.

  • ‘Fuel subsidy removal good for Nigerians’

    ‘Fuel subsidy removal good for Nigerians’

    Nigerians are coming to terms with the realities of the times. For the first time, fuel subsidy removal and the attendant price increase got widespread backing from all stakeholders, including labour and civil society groups. Aside a little resistance from the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC), the support could have been total. This is a step in the right direction,if the nation is to attain its aspiration of becoming an industrial giant and member of the league of developed nations. EMEKA UGWUANYI reports.

    After over a decade of advocacy for the deregulation of the downstream sector of the petroleum industry, and removal of all forms of fuel subsidy by the Federal Government, Nigerians at last have accepted that the continued support of fuel subsidy is a mere postponement of the evil day.

    This understanding made last week’s subsidy removal seamless, even in the face of the anticipated consequences and hardship the citizenry knew they would go through in the short-term. But because the fact speaks for itself, the factors adduced by the government for removing the subsidy were faultless. The real sector operators, and their counterparts in the oil and gas industry, including the labour groups – Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) – as well as the majority of the public, gave their unreserved support to the decision.

    Subsidy over the years had encouraged corruption in the downstream operation and some unscrupulous marketers took undue advantage of the gaps in the subsidy programme to immensely rip-off the government and nation. There were all manners of sharp practices – diversion of subsidised imported fuel to neighbouring countries where pump prices are higher, and round-tripping of cargoes, which made government pay double shipments.

    When the pump price of petrol was N86.50 per litre, Nigeria’s fuel was the fourth cheapest in the world after Saudi Arabia ($0.23) per litre, Algeria ($0.30), and Malaysia ($0.44). Even at N145 per litre, which is ($0.73), Nigeria’s fuel is still cheaper than those of its neighbours. For instance, Ghana sells $0.92 per litre, Cameroon ($1.11), Chad ($0.79), Togo ($0.83) and Niger ($0.93), which made diversion a booming and lucrative business. Although Nigeria’s fuel is still cheaper compared to its neighbours, the disparity has been bridged considerably.

    It is also for this reason that some analysts urge the government to remove all forms of bridging provision for fuel to any part of the country to discourage diversion. According to them, as long as any form of subsidy exists, Nigeria will continue to subsidise neighbouring countries whose pump prices are higher because marketers will continue to divert products. They noted that in the United States, gasoline (petrol) is cheapest in Texas because it produces and refines oil. Similarly, products will be cheaper in oil producing and refining states of Nigeria, and in case of importation, fuel will be cheaper at areas closest to the ports.

    They noted that if a marketer takes a truck from Lagos to Jigawa, Maiduguri or Enugu State, after factoring in the cost of bridging, it would make no sense to divert it, but with the current bridging cost of about N18 per litre, diversion will still be lucrative.

     Why government stopped subsidy

    According to data from the Ministry of Petroleum Resources and its arms, despite the huge imports, which cost the country N16.4billion monthly, petrol prices remained high as marketers disregarded compliance with the Petroleum Products Pricing Regulatory Agency (PPPRA) ceiling price of N86.50k per litre. The document said pricing trend in the past one year demonstrates that citizens in areas other than Lagos and Abuja have consistently paid 20-50 per cent more for fuel purchased at the pumps, adding that survey by National Bureau of Statistics (NBS) indicates that apart from the Federal capital and Lagos, citizens continue to pay for fuel at an average price of N150 per litre.

    The survey established that subsidy benefits only a few urban- metropolitan and few higher income groups, as opposed to the larger citizenry. Expectedly, market trend indicates that the pump price of N86.50 per litre for petrol does not assure marketers of over-recovery if crude oil price continues to trade above $40 per barrel, which makes the price template unrealistic in view of market realities.

    It said: “Currently, 80 per cent of the downstream operators are still unable to carry out their business due to unavailability of foreign exchange (forex) at the prescribed Central Bank of Nigeria’s (CBN) rate. PPPRA’s pricing template, as approved, only recognises prevailing CBN interbank rate which averages N197 to a dollar in this year’s first and second quarter import allocations.  Investigations revealed that the alternative source of forex available to marketers is the autonomous market rate, which averages N285 to a dollar in 2016.

    “Therefore, to explain the prevailing high prices in certain states, marketers who source forex independently of CBN in order to carry on participation in premium motor spirit (PMS) supply will continue to sell at prices that enable them achieve full cost recovery. As such, the false assumption that the current ceiling price adequately covers cost needs to be addressed by providing marketers, an alternative to the primary forex market (CBN). The consequence of disregarding this solution will lead to the unsustainable development of NNPC maintaining the role of sole supplier to the detriment of federation revenues.

    “For a Corporation known to be inefficient and unprofitable, NNPC maintains 100 per cent responsibility for fuel importation at subsidised pricing using crude oil as a means of exchange. Estimated loss to NNPC is approximately N12.5billion per month. To sustain supply, NNPC extended its crude source for products importation from outside the traditional refinery requirement of 445 barrels per day for petroleum products imports, to the use of federation cargoes further reducing the ability of the government to earn forex,” petroleum ministry sources said.

    Besides, at an import bill of $600million per month for PMS, CBN’s liquidity to support the importation of PMS is challenged in the face of dwindling crude oil for exports. The limited crude oil output caused by renewed vandalism and sabotage of oil infrastructure in the Niger Delta leading to loss of 420,000 barrels per day, and increased participation of NNPC in products supply continue to imply limited ability to earn forex for the federation and potential crippling of the economy. The solution is immediate reduction of this crude to products control by NNPC in order to free up crude for federation revenue. Also the movement of marketers to the autonomous forex market will make available approximately $600 million of forex via CBN to be used in other sectors of the economy.

    At the last count, the government was subsidising a litre of petrol with N13.79, partly why some states fail in their fiscal responsibilities. Besides the fact that subsidy was growing as crude price goes up and there was no provision for subsidy payment in the 2016 budget, the only way out is to end subsidy.

    The sourcing of forex from the primary market (CBN) was responsible for the unavailability of forex marketers and their inability to open letter of credit, a situation that compelled them to stop product importation, thereby imposing over 90 per cent supply on NNPC since October 2015 as against the past where NNPC supplied 48 per cent of the national requirement. But with the dwindling revenues for the government on account of low oil price, NNPC does not have the resources for and is not designed to meet this increase in supply, the situation resulted in the over 60 days fuel scarcity witnessed before subsidy removal.

    Renewed insurgency and pipeline vandalism in the Niger Delta didn’t help matters as it drastically reduced national crude oil production to 1.65 million barrels per day from 2.2 million barrels per day planned in the 2016 budget, further reducing income to the Federation Account. “In the absence of available forex lines or crude volumes to continue massive importation of PMS, it is clear that unless immediate action is taken to liberalise the petroleum supply and distribution, the queues will persist, diversion will worsen and the current prices will spiral out of control.

    “Subsidy removal will free out private marketers and any Nigerian entity willing to supply PMS to source for their Forex exchange and import PMS to ensure availability of products in all locations of the country.  All products will be sold within the recommended PPPRA price band to be reviewed periodically and PPPRA and DPR will be further empowered to ensure level playing ground, strict compliance with market rules by all stakeholders and consumers,” the document said.

    Last year, N1 trillion was spent on subsidy and between April and last week when government announced the removal, N16.5billion has been spent. With the removal of subsidy, these funds will be directed to other sectors, and proceeds from the 445,000bpd will be judiciously used.

    There will also be adequate availability of fuel across the country as hoarding, smuggling and diversion  will  be drastically reduced or eliminated. Investors will be encouraged to come and invest in building of refineries and retail outlets. Estimated $2 to $3 billion investments are expected in the refineries and retails this year with the removal of subsidy.The exercise will create about  200,000 new jobs and prevent potential loss of about 400,000 jobs in existing investments.

    It will enable government to provide funds for the construction of social and infrastructural facilities such as power generation, security, education, and healthcare, among others needed in the country.

    Organised private sector’s position

    The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said government’s decision to liberalise the petroleum downstream sector was inevitable given the acute resource constraint that the country is currently facing. “The overregulation of the sector and the subsidy regime had put enormous pressure on government finances and on our foreign reserves. It was evident that the policy choice was not sustainable. The review is in the long term interest of the economy and the people.”

    Yusuf said petroleum subsidy management has been characterised by serious transparency issues for several decades. According to him, there are two components of the subsidy phenomenon. The first is the actual subsidy, which is the differential between the pump price and the landing and other costs of fuel. The second, which is  more disturbing, is the blatant corruption inherent in the fuel subsidy regime.

    “For several years, the Nigerian economy suffered severe bleeding from this phenomenon; with subsidy payments in the one trillion naira threshold, and even more. In an economy with huge deficit in economic and social infrastructure, it was simply scandalous. It is in the overall interest of the economy and citizens for it to be discontinued.

    “One of the positive spin-offs, will be the free up of resources for investment in critical infrastructure such as power, roads, the rail systems, health sector, education sector, among others,” he added.

    The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) said it was pertinent to note that deregulation with the influence of government in pricing is not good for the economy. NACCIMA in a statement signed by its National President, Chief Bassey Edem, said: “We therefore, counsel that government should allow market forces to determine price instead of fixing a ceiling of N145 per litre. Accordingly, we counsel that the DPR and PPPRA be restructured and merged into one regulatory body for better monitoring and efficient service provision.”

  • We lost N697.9m to fuel supply, by marketers

    About N697.9 million has been lost by marketers because the Pipelines Products and Marketing Company (PPMC) has not supplied them fuel in the past three months.

    The marketers, under the aegis of the Independent Marketers Association of Nigeria (IPMAN), said the loss was the difference  between the price they bought products and the recommended price.

    The marketers, at the peak of the fuel scarcity, said they bought fuel at N120 per litre, against the pump price of N86.50 per litre.

    They said they incurred a loss of N33.50 on a litre amounting to  N697.9 million.

    On behalf of the marketers, the Managing Director, Ogbos Petroleum Limited, Mr Chigozie Nwozuzu, said marketers have  paid N2.5 billion into the Single Treasury Account(TSA) for the purchase of 20.8 million litres between February and April 2016, adding that they were yet to be supplied  fuel by the PPMC.

    The marketers who have not  been supplied fuel, he said, are about 300, adding that many of them have sacked their workers to survive.

    He said: “Independent marketers, though not all, have not been able to get fuel, after making payments for the product. Marketers have lost N33.50 each on a litre of fuel and N697.9 million on the aggregate. The loss came from the disparity between N120 marketers paid per litre and the pump price of N86.50 per litre.  Marketers have paid N2.5 billion into the Treasury Single Account, in line with the Federal Government’s directive that marketers must pay into that account to buy petroleum products.‘’

    According to Ogbos, the failure of the PPMC to supply them fuel made his outlets in Mbala Isuochi in Abia State and many others in the state, not to have fuel.

    He said about 7,000 tickets were given to marketers as evidence of payment for fuel by the PPMC, adding that they were yet to get fuel.

    The Managing Director, FAGON Oil and Gas Limited, Mr Adubuola Victor, said the marketers had suffered social and economic losses to fuel scarcity, stressing that some died while waiting for fuel at Apapa, Lagos.

    His outlets in Akure, Ondo State and others in the Southwest region, he said, do not have fuel. He urged the Federal Government to wade into the matter, with a view to helping marketers get the product.

    An official of PPMC, who wished not to be mentioned, said the agency was investigating the matter.

    ‘’We cannot speak on the issue of non-supply of fuel to marketers by the PPMC. We are investigating the matter; and, at the appropriate time, we would make our findings known to the public.’’ he said.

    IPMAN National President Mr Chinedu Okoronkwo said the body was working to find solutions to the issue.

    He said IPMAN would,  by the end of the week, have resolved the problem between its members and the PPMC.

  • OTC 2016 attendance, exhibition dip over oil price slump

    OTC 2016 attendance, exhibition dip over oil price slump

    • As NNPC cuts turnout by over 50%

    The global oil price plunge had a negative impact on this year’s Offshore Technology Conference (OTC) attendance and exhibition.

    More than 68,000 from 120 countries attended against last year’s 94,700 attendees from 130 countries, while 2,500 companies participated in the exhibition against 2,682 in 2015.

    The Nation also learnt that due to the dwindling revenue because of fall in oil prices, representations of the Nigerian National Petroleum Corporation (NNPC) and the oil ministry, at the conference, were slashed by over 50 per cent.

    However, there were the usual exchange of ideas and presentation of papers on how to advance scientific and technical knowledge for safe, environmentally friendly operation and sustainable development of offshore oil and gas resources.

    The OTC Chairman, Mr. Joe Fowler, lamented the current industry reality, which is in its second year.  He however, stated that nearly 300 were new exhibitors, and international companies made up 51 per cent of the exhibitors. “As it has since 1969, the world came to OTC to make critical decisions, share ideas and develop business partnerships to meet global energy demands.

    “The commitment from OTC’s volunteers and staff ensured, regardless of the price of oil per barrel, that OTC upheld its unwavering commitment to delivering attendees unparalleled information on new technologies and global developments. Also, revenue from OTC directly benefits the member programmes of its 13 nonprofit sponsoring organizations.”

    OTC 2016 featured 11 panel sessions,24 executive keynote presentations at luncheons and breakfasts, and more than 325 technical paper presentations. Speakers including international and national oil companies; federal and regional government officials; and academic, presented their views on a wide variety of topics, including future industry directions, operational integrity and risk management.

    The industry downturn also affected Nigerian companies that had set up exhibition stands to attract Foreign Direct Investment (FDI) into the country. Besides, unlike last year, the Nigerian pavilion had few exhibitors.

    Kachikwu who was represented by NNPC’s Group Executive Director, Gas and Power, Mr. Saidu Muhammad while opening the Nigerian pavilion said: “There is need for us to look inwards and see how we can optimise cost to reduce the cost of production per barrel so that we can remain afloat.

    “You cannot reduce cost of production if you do not have Nigerian expertise in development of procurement materials.”

    The Chairman of the Petroleum Technology Association of Nigeria (PETAN), Bank Anthony Okoroafor stated that the association in partnership with the NNPC was considering measures to certify the competencies of companies that execute projects in the country’s petroleum industry. He also called for the deployment of about $600 million that has accrued to the Nigerian Content Fund (NCF) for upgrade of the industry’s in-country capacity.

  • Eko DisCo begins power rationing in VI, Ikoyi, others

    Eko Electricity Distribution Company has begun power rationing in Lekki, Ikoyi, Victoria Island (VI) and some parts of Ajah,  the firm has said.

    The General Manager, Corporate Communications, Idemudia Godwin Sule, said the rationing started last week and would last one month.

    The rationing is to enable the Transmission Company of Nigeria (TCN) upgrade both Line 1 and Line 2 of Ajah-Alagbon transmission line from 132kv to 330kv.

    He said: “During the upgrade operation, which will last between three and four weeks, the Lekki transmission injection sub-station from which most of the areas to be affected by the power rationing are fed, would be completely shut down.

    “But to ensure that the areas are not completely out of supply for the duration of the upgrade operation, alternative power supply arrangement would be made through back-feeding operation to the areas from Alagbon transmission injection sub-station via Ijora.”

    While appealing to customers to show understanding and bear with the situation during the period of the  exercise, Idemudia stated that all efforts would be made to ensure equitable distribution of available power to all customers.