The Nation Newspaper

Category: Energy

  • Fuel price reduction, no respite yet

    It is over two weeks since the Federal Government cut the price of premium motor spirit (PMS) commonly called petrol by N10 from N97 to N87 per litre, yet nothing has changed except for vehicle owners.

    The Nation’s investigation shows that transport fares for long distance commuters and those of local shuttles (township buses) have remained unchanged. Cost of goods in big shopping malls such as Shoprite, Stop & Shop, and price of consumables in open markets including the common condiments such as tomatoes and pepper still retained their prices. Products from manufacturing concerns have changed also because most of the manufacturing firms don’t depend on petrol for fuel to power their machineries. Manufacturing companies use natural gas, low pour fuel oil (LPFO) and rarely diesel.

    Therefore, the fuel price reduction doesn’t seem to have benefitted the low income owners (the masses). This development appears to confirm the opinion of many Nigerians that the reduction didn’t substantially reflect the falling price of crude. Crude oil price has fallen by over 50 per cent since December last year and the fuel price reduction was mere 11 per cent.

    The government, The Nation learnt, didn’t contact other stakeholders when taking decision on the reduction. Some of the stakeholders including the major oil marketers, said in previous fuel price changes over the years, the government usually discussed with them to determine the price before announcing it. But in the case of the current reduction, they were not contacted. They said the law gives the Minister of Petroleum Resources the power to increase or reduce the price of fuel without consulting anyone or group but the practice in the past has been that the stakeholders sit to discuss it.

    Also the reason the government didn’t want an inclusive discussion on determining the recent price reduction, was to avoid huge subsidy payment because the lower the pump price, the higher the subsidy it pays.

    Over the years, the refineries have not been working, making the government depend on importation to meet national demand for fuel. As a result of the development, the cost advantage that could have been derived from refining in-country is lacking. Coincidentally, the Naira was devalued, so when fuel is bought overseas in dollar, the cost of freight and some charges factored into it, the price per litre of petrol soars when converted into Naira. The addition of the distribution margins which constitute part of the subsidy also pushes up the cost of fuel. At the price of N87 per litre, the government still pays subsidy, it was learnt.

    The distribution margins include the fixed overhead and other running costs from the landing of the product to the point of sale to consumers (retail outlets). The distribution margins include retailers (N4.60 per litre), transporters margins (N2.99 per litre), dealers margin (N1.75 per litre), bridging fund (plus marine transport average) (N6.00 per litre) and administrative charge (N0.15 per litre), giving a total N15.49 per litre. This component of the pricing template took effect from February 2009.

    Therefore, these odds certainly will make it  impossible for the government  to appropriately reduce the pump price of fuel to reflect the percentage fall in price of crude as done by some countries including the United States and South Africa. It is no longer news that Nigeria is the only oil producing country in the Organisation of Petroleum Exporting Countries (OPEC) that imports petroleum products to meet its energy needs, and until it reverses this trend, it will be difficult for Nigerians to enjoy the benefits of crude oil price crash in the future.

    Analysts, including Dr Austin Nweze of the Pan Atlantic University, Lagos believed that the reduction was politically motivated because according to him, crude price started falling since mid last year and the reduction was only announced two weeks ago. They were of the view that the reduction may be a step toward total removal of subsidy. They said that if the price of crude rebounds to $90 and above per barrel, government may decide to hike the price substantially because it is questionable to reduce fuel price by 11 per cent when crude price fell by over 50 per cent.

    If the refineries are working efficiently, the downstream sector could be liberalised, and this will enable anyone who wants to import to do so, and this will also encourage the private sector to build refineries. This will create competition and the price of fuel will naturally crash, and filling stations will sell at different prices, he added.

  • Consumers bemoan high price of kerosene

    Consumers have expressed disappointment over the inability of the Nigerian National Petroleum Corporation (NNPC) to sell kerosene at its filling stations at the regulated price of N50 per litre, two years after it launched the Kero Correct Scheme (KCS), aimed at selling the product to consumers at a cheaper price.

    A market survey conducted in Lagos and its environs reveals the harrowing experience consumers go through even before they can buy kerosene at higher price.  In the NNPC-owned retail outlet in Idimu and Ikotun visited by The Nation, consumers were buying kerosene at N95 per litre.

    Also, retail outlets owned by the major and independent oil marketers especially in Ikeja, Mushin,  Egbeda, Idimu, Iyana-Ipaja areas of Lagos, kerosene sells for between N130 and N150 per litre. The independents also charge extra N5 per litre if they power the pumps with generators.

    A manager in one of the retail outlets of Mobil Oil, who spoke on condition of anonymity, said NNPC does not have direct control over major oil marketers, adding that there is a limit to which the National Oil Company can impose the prices of petroleum products on them.

    The source said his outlet sells kerosene at a much higher price, adding that consumers have been buying the product. Also a staff member of Owena Motels, Akure, Ondo State, who simply identified himself  as Samuel Olowokere, said the price of kerosene goes for between N120  and N130 per litre in various petrol stations in the state.

    He said the petrol station owned by independent petroleum marketers, major oil marketers and NNPC sell kerosene at higher prices.

    The President, Liquefied Petroleum Gas Association of Nigeria (LPGAN), Dapo Adesina, said the scheme was not laudable, in view of the problems in the industry. He said consumers are used to buying kerosene at a rate far above regulated prices because they use the product for domestic purposes. He     said awareness on the usage of Liquefied Petroleum Gas otherwise known as cooking gas has just started, noting that consumers use kerosene often.

    He said the issue of subsidies paid on petroleum products has generated controversy such that the government is trying to stop it.

    He said: “There is nothing concrete to say about the scheme because there are flaws in it.  The government is complaining about the subsidies it is paying importers on petroleum products, and at the same time, wants to sell kerosene at N50 per litre. There is no way NNPC can sell the product at that amount without subsidising it.  The scheme is not something Nigerians should be talking about now. It amounts to a misplaced priority for the NNPC to be talking on the issue of selling kerosene at N50 per litre. Why can’t the government discuss the issue of gas, which Nigeria has in abundance and is not paying subsidies on.”

    In his reactions, the General Manager, Group Public Affairs, NNPC, Ohi Alegbe, said it was wrong to say that consumers are not buying kerosene at a much cheaper price at the filling stations owned by NNPC.

    He said NNPC is monitoring developments in its mega stations, affiliate stations and floating stations across the country in order to ensure that consumers buy the product at N50 per litre.

    Alegbe said the corporation is using its staff and volunteers from Non-Governmental Organisations (NGOs) to coordinate activities in its stations to enable the scheme achieve its goals of making consumers buy kerosene at N50.

    He said volunteers were being brought into the project to help monitor discharge and sales of kerosene as an independent feedback system, adding that they help in promoting transparency and ensuring that the product gets to the desired end users.

    He said: “NNPC is using its retail outlets for the implementation of the scheme. The Corporation has 37 mega stations, 524 affiliate stations, and 12 floating stations.  The floating stations are in the riverine states such as Ondo, Edo, Bayelsa, Rivers, Akwa-Ibom and others. NNPC located the floating stations in the areas to enable people living the creeks to buy kerosene at a cheaper price.

    According to him, the price of kerosene has crashed to N70 per litre, adding that the price is going to fall further as the scheme gets underway.

    He said the scheme aimed at cutting several layers of middlemen who made it difficult for end users to enjoy the subsidy on the product.

     

  • ‘Discussions on Seplat’s takeover of Afren ongoing’

    Discussions on acquisition of Afren Plc by Nigeria’s leading indigenous independent, Seplat Petroleum Plc, is ongoing and no substantial agreement has been reached on the deal as talks are still in the preliminary stage, it was learnt.

    The Managing Director of Seplat Plc, Austin Avuru, told The Nation that the discussions have not gone beyond what have been said and written in the media about the transaction. He said: “We cannot talk about Afren beyond what has been talked now by both Seplat and Afren. What we have said earlier, which are true, is that we have made preliminary approaches between the two parties and there is nothing. There is no guarantee that anything will happen and seeking an extension simply means that those approaches are still on.

    Reuters had reported that Seplat Petroleum Plc had won an extension to a deadline for announcing whether it intends to make a firm offer for oil producer Afren. The report stated that Seplat confirmed that it had made a preliminary approach to take over Afren and that it faced a January 19 deadline to firm up the deal.

    “The board of the company has received the consent of the UK Takeover Panel for an extension to the deadline until 13 February 2015 to enable the parties to continue their ongoing discussions,” Afren said in a statement.

    Seplat, which lost out on the assets that Shell divested in October last year, according to the report, has been on the hunt for acquisitions in Nigeria, encouraged by falling oil prices.

    Afren has been plagued by high-level corruption in a deal with Oriental Energy that resulted in the dismissal of its founder and Chief Executive Officer, Osman Shahenshah and Chief Operating Officer, Shahid Ullah, but who were fired after receiving payments without board’s approval.

    The United Kingdom’s oil and gas explorer, which is currently on the trail of a Nigerian firm’s takeover talks, had secured $17.1 million from former CEO, Osman Shahenshah and $3 million from the COO, Shahid Ullah, in legal costs, before agreeing not to pursue the matter in court further.

    Already, Afren’s stock climbed as much as 9.9 per cent, the biggest gain since December 22, 2014, when it received an approach for a possible takeover by Nigeria’s Seplat Petroleum Development Company.

  • ‘New policy on renewable energy coming’

    ‘New policy on renewable energy coming’

    To stem gas pipeline vandalism, the Federal Government, according to Minister of Power Prof Chinedu Nebo, is working on an energy efficiency policy to diversify sources of power supply. Nebo, who spoke during a visit to The Nation, said the government was, looking at power sector challenges, such as pipeline vandalism, estimation billing and energy insecurity. To improve power supply, the government is considering diversification to solar, wind and biomass. EMEKA UGWUANYI was there.

    In view of gas pipeline vandalism, why don’t we concentrate on solar and wind energy, which are sources that cannot be vandalised, for power supply?

    We cannot continue to do business as usual but do it unusual and that is why we are going solar. The wind energy is critical and important but once you measure the wind velocity and you get five metres per second, you will be able to drive many of the turbines but some of them are designed in such a way that you wouldn’t get much power if the velocity of the wind is not so high. For instance, if you have 10 metres per second you can get 10 megawatts (MW), but if that drops to five metres per second, you will not be able to get up to 3MW from the same turbine. So, it is calculation of the wind, integrating the velocity of the wind into the design. Some of these ones that come with helical wind turbines, among others, are more efficient than the regular ones and there is no reason why some parts of Nigeria will not benefit from wind energy. Jos in Plateau State and Katsina in Katsina State  hasve a lot of wind velocity. We have a wind plant in Katsina, the problem there is the kidnapping of the French national who was in charge of the project and it is over 97 per cent completed, which I hope will be commissioned very soon.  But I think that even more important than wind for Nigeria is solar because every part of Nigeria is amenable to solar power and even biomass considering the kind of waste generated in Lagos, Kano, Port Harcourt, Enugu, Kaduna and Ibadan, among others. We can aggregate these and put more power plants here and there, and feed them directly to the distribution network of the country and that is embedded generation and distributed power.

    The National Integrated Power Project (NIPP), among others, is supposed to supply substantial power to the grid, up to 15,000MW. What is happening to the project?

    When all the 10 plants under NIPP are done, it will add about 4,700MW to the national grid and not 15000MW. But the problem we have in Nigeria is, I’m sorry to say it, military rule took us back so much, because training as the art of governance is not in the military, otherwise, Nigeria’s infrastructure could have been developed much faster and better than it is today. Nigeria today is number one economy in Africa but South Africa has a population of 43 million and they generate 40,000MW while Nigeria has a population of 170 million and we have 4,500MW. So where do you start? You cannot do it overnight. If we were to generate per capita as South Africa is generating today, we should be generating 160,000MW. But I assure you, get all the General Electric (GE), Siemens and Chinese Power in this world together, put them at work and charge them for maximum delivery; they cannot deliver 160,000MW in five years.  All the power companies in the world cannot give you 160,000MW in five years but embedded generation can give reasonable generation, though not up to that level but at least the level that will give most Nigerians power. That is why we must think outside the box. NIPP project can only give us 4,700MW in total, so we need a lot more and that is why all the new independent power plants (IPPs) that are being licensed, eventually by the grace of God, will take off. Also when the NIPP was conceived, there was no concomitant development and deployment of gas infrastructure to supply gas to the plants to power the turbines and they are all gas-fired turbines.  But working with this administration’s gas master plan, we can comfortably say that essentially all the NIPP plants now have gas infrastructure. In other words, once gas is available, we can power all of them and that wasn’t the case a few years ago. In the past, there was no mention of connecting those plants to gas.

     On solar energy

     Nigeria didn’t have renewable energy policy but we have now finished our draft and have consulted inter-ministerially. We have held inter-ministerial workshops on the panel working on the renewable energy because we felt it is not just enough to set up renewable energy but also ensure energy efficiency. So the policy coming out is renewable energy and energy efficiency policy for the country. We have perfected it, and defended it before the economic management implementation team, and now it is to take it to the National Executive Council (NEC) for approval. But I noticed that when the memo was brought, we hadn’t sought for the concurrence of the Attorney-General of the Federation. So, I told them, package this to the Attorney-General of the Federation, get their concurrence and input, so that we will use their input to amend what we have, and it will be taken to the NEC, otherwise, it will be shut down the very first day you bring it to the council because they will ask where is the opinion of the Ministry of Justice and we don’t want that problem. So that policy is coming but the media can help us popularise it. I try to live by example. I don’t have a generator in my house. If you come to my house, you will see a few solar panels, just to show that these things are workable. In the day time when there is no light, the solar panels will give you light, at least for lighting points in the entire house. If you have enough room, you can make it to power refrigerators and air conditioners. We use a lot of air conditioner in Nigeria and we need a lot of power to do that. So in solar, you need a lot of area to power your house to the point of utilising solar for air conditioning and refrigeration. So, we want to make it mandatory that every new house coming up will have solar panels at least for the lighting because about 35 per cent of all of Nigeria’s consumption of electricity is lighting. If we power every home with solar and cause them to use LED (light emitting diode) bulbs, it save s 20 per cent of the energy consumption. The implication is that by not using 1000MW, you are producing 1000MW for the country and industries can use them, so that is part of the reasons we need this policy. It is being perfected and it will soon be approved but we will also expect that and I plead with you the press to help us  popularise this. If you can use solar to power your house for lighting and charge your telephones at the cost of less than “I better pas my neighbour” (the smallest generator set), why do you put petrol or diesel and you inhale the fumes, poison your lungs and that of your children, and you are paying to poison yourself whereas in solar and wind, you don’t do that.  We are also thinking of picko-hydro that can be powered by the smallest stream to generate power at least for a little community of people. These are some of the things we are working on so that we don’t depend on gas because with gas if vandals decide they can throw Nigeria into darkness, they can do it, especially with 70 per cent of all our generation coming from gas. That is why we must do coal, solar and wind where amenable and we must continue to increase hydro wherever possible and also biomass for areas we can do waste-to-power like in Lagos.

    Metering inadequacy and estimation billing

    One thing about that situation is that none of these companies inherited debt, government gave them a clean slate. The debts were moved to NELMCO (Nigerian Electricity Liability Management Company). But when the tariffs were designed, they were not actually effectively cost-reflective, so there is no way the system under private governance will be able to raise enough funds to continue to stay afloat. That is part of the problem but the reason for this is losses. There are technical losses from generation to transmission, to distribution, and to supply. Some of the losses are due to faulty equipment and ageing equipment and infrastructure, and some because of non-optimisation of the route for delivery of electricity. But the most serious losses are commercial losses but we have reduced technical losses substantially. So technically, we are not losing a lot but commercially much. Many Nigerians get power and they don’t pay for it. The distribution companies (DISCOs) are not collecting enough money. They (DISCOs) may look at you, and say you look well fed, you can pay more and they slam a big bill on you. They may look at another person and say, he may not be eating a triangular meal let alone a square one, and they give him a smaller bill. At the end of the day, they come up with just amorphous averaging that has nothing to do with technical and scientific reality and that is why we must meter everybody. The meters we have are not smart meters. It is only recently  we started getting smart meters. So it was possible for them to override those meters and that is why we are moving to smart meters. That way, you can only consume as much as you can afford, if you are consuming so much, you learn to shut down your air conditioner when you go to work as well as lightings that are not being used, among others. We are moving to solve all these problems. But between November 1, 2013 and now, we found out that the commercial losses are huge. Power sector cannot guard against these losses without metering.  Less than 60 per cent of Nigerians are metered, how do you collect your money? So commercial losses are huge and unfortunately, somebody has to pay for it. And unfortunately again, it is those who are paying that are penalised to pay for those who are not paying. That is why the government said we must push the regulator – the Nigerian Electricity Regulatory Commission (NERC), to make sure that these companies, which made promises to provide meters and other things, to start doing them. But government has decided not to wait for them to start and has given them one million meters to continue from there to spread meters to the people. It is this commercial losses, which made DISCOs not  to be able to collect enough that made the Central Bank came up with a package working with the Ministers of Power and Petroleum Resources, Chairman of NERC, synergising together to provide facilities to them to smoothen the situation, stabilise the market, infuse a little more capital and allow these DISCOs to pay over a 10-year period to make sure that the market is solvent.

     Energy insecurity

     Energy security and food security are critical security system that every country must have but we have a peculiar situation. These oil and gas pipelines pass through very unfriendly terrain, so the deployment of soldiers, naval men and the Nigerian Civil Defence Corps, among others to take care of them will not solve the problem and that is all we have been doing all along. How do you secure over 100 km of pipeline in an unfriendly terrain, under water with these men, it is not possible. What we are doing which the president has bought into, is getting companies do a digital mechanism that will connect every centimetre of the pipeline and give you the latitude of having sensors that will immediately indicate the particular part of the pipeline that they are poaching. And some of those sensors can activate a shrieking noise that will  make the vandals know that somebody is watching them but these things are very expensive, but the government is working on that. The length of this pipeline and the terrains they pass through,  are  not amenable to physical protection. Another complex area is the stealing and vandalisation of transformers by young men. They cannibalise the transformer, sell them as scraps at a pittance, while the replacement of such equipment costs tens of millions of naira, besides the darkness they throw electricity consumers into. We are working on all these to make sure that Nigerians have light.

     

  • NERC, manufacturers disagree on ‘fixed charges’ removal

    NERC, manufacturers disagree on ‘fixed charges’ removal

    Talks between the Nigerian Electricity Regulatory Commission (NERC) and the Manufacturers Association of Nigeria (MAN) on the scrapping of fixed charges have reached a deadlock.

    Customers pay N750 monthly as fixed charges to the distribution companies whether or not they enjoy their services.

    The stalemate, The Nation learnt, arose from the NERC’s insistence   that consumers must continue to pay fixed charges in line with the  Multi-Year Tariff Order (MYTO). It  argued that MYTO was scientifically determined bearing in mind all the variables involved in the production and distribution of power, but the organised private sector (OPS) is saying a ‘no’ to the proposition. MAN contends that it cannot afford to continue to pay for electricity, which it hardly accessed for it operations.

    To MAN the payment of fixed charges is arbitrary and killing.

    Lagos Chamber of Commerce and Industry (LCCS) Director-General  Muda Yusuf, told The Nation that  the chamber has met with the NERC Chairman  Dr. Sam Amadi on the need to scrap  fixed charges.  He said the OPS  at conferences, workshops and seminars, among others, appealed to NERC to scrap fixed charges  but regretted that  no agreement has been reached.

    Yusuf said issues, such as the scrapping of fixed charges, assisting manufacturers to own power plants, either separately or as a group via providing effective operational framework in the industry have come up between MAN and NERC on several occasions, adding that the discussions have come to a head because neither the NERC, nor MAN and LCCI are ready to let go.

    He said manufacturers are putting in place measures  aimed at strengthening advocacy on the issue by taking the matter to the Presidency,  National Assembly, Civil Liberties Organisations (CLO) and other pressure groups that would help them in achieving their goals.

    Yusuf said: “In advocacy, one needs to explore all the available options to achieve the desired results. What matters most is the end, not the means to the end.  From all indications, the two parties involved in the issue are not ready to shift ground.  While NERC is not willing to change the  regulatory frameworks by removing fixed charges, MAN and other relevant bodies are not ready to stop agitating for things that would benefit them.

    ‘’MAN has agreed to use any opportunities at its disposal to press home its demand. If MAN and other relevant institutions have complained severally to NERC on the issue of scrapping fixed charges without getting the desired results, we (MAN and LCCI) will sustain our advocacy by meeting agencies that by law, are stronger in outlook.’’

    He urged the Federal Government to reduce the price of diesel, the same way it reduced the price of Premium Motor Spirit(PMS)-petrol,  from N97 per litre to N87 to enable manufacturers contribute to the growth of the economy, stressing that there is the need for Petroleum Product Pricing Regulatory Agency (PPPRA)) to reduce the price of diesel since real sector operators use the product to fuel their generators.

    ‘’ Given the fact that the country is experiencing poor power supply, occasioned by the perennial gas problems in the sector, the manufacturing industry has no choice than to resort to the production of alternative energy sources. We spend billions of naira on diesel in a year, aside the fact that many of the firms have their own independent power plants,’’ he said.

    Also, MAN’s Director-General, Remi Ogunmefun, said the body has begun a preliminary discussion on the increase in tariff of commercial users of electricity by NERC on January 1, this year to enable it take a position on the issue. He said the body’s concern is on the tariff for commercial users of energy, and not the planned increase in tariff for individuals by June this year.

    Ogunmefun said the issue of tariff increase is of great importance to the manufacturers because it forms a major part of their production cost.

    The Chairman, Infrastructure Committee, MAN, Reginald Odiah said manufacturers are aware of the problems which poor electricity supply posed to the sector and the economy, and have taken precautionary methods to safeguard their investments.

    He said companies have resolved to build their own power plants to prevent production hitches and stay afloat of the competition. Odiah said the cost of electricity differs from one company to another, arguing that many operators have either wound up operation or relocated to neighbouring countries, such as Ghana and Cote de’ Ivoire where they hope to enjoy a comparative advantage.

    Odiah said power supply has not improved, a year after the government sold the assets of the Power holding Company of Nigeria (PHCN) to 15 private investors

    ‘’Problems, such as huge tariff, poor electricity supply, among others, made companies to build their own power plants. Plants have been built to take care of companies in the Ogun-Lagos axis to improve production of goods and further help in growing the economy,’’ he said.

    Meanwhile, NERC has said it was not ready to cancel fixed charges. Its boss, Amadi said the agency was committed to the provision of enabling environment for power generation companies (GENCOs), distribution companies (DISCOs) and other operators within the electricity value chain.

    Nebo, at a stakeholders forum in Lagos last year, said it would not be doing operators good if it removes fixed charges.

  • Egbin Power owners spend N50b to fix turbine

    •Firm eyes 2,670MW by 2017

    Egbin Power Generation Company, owners of Sahara Group and its technical partner, Korea Electric Power Company (KEPCO) Nigeria Limited, have invested over N50 billion on one of the steam turbines (ST), which got damaged about 10 years ago.

    Minister of Power Prof Chinedu Nebo, broke the news on the company’s premises in Ijede near  Ikorodu, Lagos at the weekend.

    He spoke at the turbine’s inauguration and synchronisation, which was rescheduled for President Goodluck Jonathan to attend.The President was  supposed to perform the inauguration but he couldn’t make it.

    Egbin Power plant has six steam turbines and each generates 220 megawatts (MW), giving combined generation of 1320MW. The sixth unit (ST 06) broke down 10 years ago, and remained unrepaired until now.

    Nebo said: “The management of Egbin Power Generation Company invested over N50 billion working with their technical experts and others to make sure that what we are here to celebrate today is not just taken for granted. Power is at the core of all the industrial revolution in the world.

    “Nearly 10 years, the sixth unit of this power plant has been moribund and ever since it got bad, the government for eight to nine years could not provide the resources to revamp it. This unit is supposed to deliver 220 MW to keep the power plant’s shareholding as the giant Nigerian and African power project. Because the government has a lot of other issues to care for, it didn’t find the resources. What we celebrate today is one of the rich harvests of privatisation exercise, which resulted in the handing over of the this power plant to those who can only run it more efficiently with better reliability and to the capacity level instead of hovering around 85 per cent reliability and 50 per cent capacity delivery.’’

    Egbin Power’s Chief Executive Officer, Mike Uzoigwe, said: “The rehabilitated Unit ST-06 brings an additional 220MW to the national grid and would also boost power supply to the Lagos metropolis, thereby improving socio-economic activities in the region. The rehabilitation of Unit ST 06 will bring the plant back to its installed capacity of 1,320MW.”

    ST-06 was first inaugurated in November 1987, but suffered a boiler explosion during operation in 2006 due to some water tube phenomenon. With the unit now generating at full stream, Egbin is in the final stages of a bilateral agreement to supply the 220MW to Ikeja Electricity Distribution Plc now (Ikeja Electric) and Eko Distribution Company, a development that is set to yield about 16 per cent additional power supply to Lagos, the nation’s commercial nerve centre, the company said.

    The transformation at the nation’s largest generation plant began after its acquisition by Sahara Power working through a some Special Purpose Vehicles (SPV) in collaboration with its technical partners, Korea Electric Corporation (KEPCO).

    The Sahara Power/KEPCO partnership has given birth in Egbin to innovativeness, professionalism, human capital development and continuing investment in new technology, it added.

    Uzoigwe said the company considered the rehabilitation of ST Unit 6 to be a major breakthrough, noting that huge resources were deployed in achieving an overhaul of the unit. He noted that in spite of the fact that the electricity market in Nigeria is not yet bankable, Egbin has in collaboration with KEPCO continued to achieve laudable feats for the benefit of this country.

    He added that KEPCO had begun the overhaul of unit ST-04 to ensure it operates in compliance with globally acclaimed standards.

    KEPCO’s chief, Mr. Gyoo Yeom, said the unfolding plan for Egbin was aimed at replicating the success KEPCO is renowned for in the global power sector. He said: “We are eyeing further expansion of the plant as the new management continues to embark on achieving its vision of attaining 2, 670 MW by 2017 and total capacity of over 10,000MW in the next decade, if the demand permits.”

  • Schneider chief calls for more investment in power sector

    The Country President of Schneider Electric, Walid Sheta, has said Nigeria needs massive investment in the power, especially in transmission and generation value chain despite the sector’s privatisation.

    Sheta, who spoke to reporters at the company’s headquarters in Lagos, hailed the sector’s privatisation, but added that it is inadequate considering the population and the level of power generation. The power generation, he said, is only enough for a city and not the country.

    “Therefore, if the expected stable power generation that will drive the economy will be attained, the transmission needs to be reinforced strongly because it is a backbone of the country,” he said.

    He added: “With a lot of investments, it took 10 years for some countries to achieve this. There is also need for massive investment in generation, three gigawatts (3000MW) should be for a city, therefore, Nigeria’s generation ordinarily should be for a city. Nigeria should build 10 power plants of 2000 megawatts (MW) each for the distribution companies to see what to distribute. The grid and generation should be upgraded, this will bring Nigeria to where it is supposed to be just like China and Brazil.”

    Sheta said Schneider, with its expertise, is committed to helping Nigeria achieve its power aspirations. He said: “Energy issue in Nigeria is important and Schneider has the solution. We want to bring Schneider to another level of awareness, and making Africans leaders of the company in Africa.

    “We have re-injected capital in Schneider Electric Nigeria. We have increased our asset base in the country in December and our presence in Nigeria is also being increased. We are committed to this biggest economy in Africa without any doubt. My main focus is to take Schneider Electric Nigeria to greater heights. We are proud to have 96 per cent of our team including the management team as Nigerians.

    “We are very proud to ensure that part of the leadership of Africa is Africans. It is a key element of our strategy. We are making our African colleagues rotate in and outside the zone, before they return to assume leadership positions in their home countries, which is an important part of our strategy. It is important to mention that people are key in our organisation. I believe that the difference between organisations is the quality of service and the quality of the people who are interacting with the customers.

    “We are known in the world as an excellent provider of energy systems, especially from the utility angle, including the distribution and generation companies. Our access to renewable energy programmes, such as the one Durumi in Bayelsa and 10 villages in Ogun State, and Edo State, among others.”

     

  • Why NNPC should hands off refineries, by oil chiefs

    Why NNPC should hands off refineries, by oil chiefs

    Should the Federal Government through the Nigerian National Petroleum Corporation (NNPC) continue to run the refineries and allied critical infrastructure? No, say stakeholders at a symposium titled: Nigeria’s energy revolution-A-glimpse at the future,” held in honour of a former NNPC  Group Managing Director Chief Festus Marinho in Lagos. They argued that  the infrastructure be handed over to the private sector to manage,  reports EMEKA UGWUANYI.

    It was a day of frank talks. They said it as it is. It was all about what they saw  regarding what  the Federal Government through the Nigerian National Petroleum Corporation (NNPC) has reduced the oil company to. They spoke as key stakeholders whose  interest is  to see the NNPC create optimal value from hydrocarbon exploitation for the country’s good.

    The event was a symposium held in honour of Chief Festus Remilekun Ayodele Marinho, the first and only two-time Managing Director of the NNPC (1977-80 and 1984-85) at the Muson Centre last weekend in Lagos. Many of the  attendees were former top management of NNPC, former Ministers of Petroleum Resources and a host of industry top shots.

    There was a lineup of former Group Managing Directors including Chiefs Jackson Gaius-Obaseki, Chambers Oyibo, Lawrence Amu and Funsho Kupolokun, among others. The chairman on the occasion was a former Minister of Petroleum Resources and now the Amayanabo of Nembe Kingdom, Dr. Edmund Daukoru; the keynote address was delivered by former Minister of Petroleum Mr. Odein Ajumogobia.

    The panel of discussants included Babajide Soyode, former General Manager, Warri and Kaduna Refineries, and currently Chairman, Petrodata Management Services, Mr. Ibrahim Waziri, former Group Executive Director, Corporate Services, NNPC and now Chairman, Transmission Company of Nigeria, Prof Pat Utomi, Mr. Babs Omotowa, NLNG Managing Director, Mr. Austin Avuru, Chief Executive Officer of Seplat Petroleum and Bunmi Obembe, Executive Director, Oil and Gas Commercial, Total Exploration and Production, Nigeria.

    They  asked for substantial or complete handover of the management and control of the petroleum industry to the private sector. They noted that the industry is lagging behind and not meeting expectations of stakeholders and the populace because of the stranglehold of the government.

    Ajumogobia set the stone for the day by decrying the dwindling fortunes in the oil and gas industry caused by pipeline vandalism, oil theft militancy, lack of maintenance of critical infrastructure resulting in decay and inoperability of the refineries.Others are inability of the NNPC to meet its cash call obligation and funding of other projects, poor policy formulation and implementation and inability to properly manage the oil revenue to care for the rainy day.

    He said:“The dwindling fortunes of the industry have been affected by several unrelated factors. Despite news of continuing pipeline vandalism such as the most recent breach of the important trans Forcados line, the amnesty substantially reduced the disruptions to industry facilities and enabled production to go back to previous peaks of approximately 2.5 million barrels per day.

    “Yet in 2013, a new and frightening phenomenon emerged. It was revealed by our Finance Minister that Nigeria was losing up to 400,000 barrels per day to crude oil theft. This damaging phenomenon is completely inexplicable, especially in the light of the vehement denials of collusion and assurances of our security agencies of their resolve to stop oil theft. Though apparently reduced from that incredible level, the current estimates of approximately 150,000 barrels per day are an indication of most disturbing malaise.

    “The lack of investment based on the Joint Venture (JV) structure in particular and the inability of NNPC constrained by budget limitations to always meet its financial obligations to the JV, for replacement of ageing and dilapidated assets, especially pipelines and depots many of which have long passed their ‘shelf life’, is another risk factor that will continue to affect the efficiency and well-being of the industry by substantially increasing operating costs, and environmental pollution. Sadly, focus of the regulators of the industry seems focused almost exclusively on the ‘S’ part of HSE (Health, Safety and Environment).

    “Thirdly, petroleum policy is not always or entirely coherent due in part to the frequent change of important officials. Since NNPC was created 38 years ago, we have had 16 GMDs (Group Managing Directors). In 30 years from 1977 to 2007, there were nine – an average of one every three years. Thereafter, appointments to that office became even more frequent. As a minister, I encountered four GMDs of NNPC in a space of 32 months between July 2007 and March 2010. There have been three others since 2010. That is seven GMDs of our national oil corporation in as many years, with the incumbent being the fifth since 2010. The Directorate of Petroleum Resources has had a similarly high personnel turnover – six DPR directors (though one was in an acting capacity) in seven years. This certainly is not a recipe for coherent policy making implementation.

    “Clearly the already dwindling fortunes of the Nigerian oil and gas industry have been considerably worsened by plummeting oil prices. But the fall in the oil prices is really no surprise. Also the rapid devaluation of the Naira can be attributed to lower oil prices which have wiped out billions of Naira in market capitalisation Nigeria’s fledgling indigenous oil and gas companies and with it probably a good percentage of value of our recently rebased economy. Of course the US dollar has also strengthened against world currencies. What are the prospects for recovery?”

    Ibrahim Waziri in his speech regretted not allowing the late President Yar’ Adua to privatise the refineries when he sought his opinion on the issue. He said he believed  that NNPC would change and have the capacity to turn around the refineries but he was wrong as the state of the refineries have worsened.

    Seplat Petroleum chief, Austin Avuru, said the NNPC and the government have failed in management of oil revenues for the good of the economy and the populace. He was of the view that NNPC should hands off business and focus on policy making and regulation.

    He said: “In 1971-72 when Nigeria joined the Organisation of Petroleum Exporting Countries (OPEC) and the Chief Marinho was busy with his colleagues constructing the industry before becoming the NNPC Managing Director in 1977, his colleagues in Kuwait, Norway, Saudi Arabia were also constructing their industries. Indigenous participation was one of what OPEC charter demands, that member countries should develop the industry with indigenous capacity.

    “The intention then was that indigenous participation will take over NNPC. Over that period of time, NNPC’s contemporaries like Saudi Aramco and others have developed strong partnership with the international oil companies (IOCs) to run their industry efficiently.

    “During same period of time, our refineries showed signs of inefficiency. In June 1992, Prof Aminu was relieved of his duty because queues started occurring in petrol stations. In those 23 years, things have moved only downwards to a point now where we don’t remember if our refineries are working at all.

    “In the upstream sector, two critical factors account for soaring cost. Remember that in the 1980s, normal cost for crude was just about $4 per barrel. Today, cost has gone up. If you are efficient, it will cost you about $16 per barrel. Otherwise, it may cost you up to $18-$30 per barrel.

    “Critical factors account for this. They are security issues in the Niger Delta and also the bottlenecks in the NNPC: project delay, delay in approval and $5billion of cash calls in arrears that have not been paid to the point now where you ask the question: Is NNPC really adding value to the industry today?

    “When you look at the totality of their involvement in the industry today, downstream that has been dead, the mid-stream has been clogged until now that the private sector is trying to revive it and the upstream where cost has spiralled and characterised by project delay, can we say today that the NNPC is a net destroyer of value in the industry.

    “All of these have been happening at a time when  Chief Marinho’s colleagues were efficient in managing their industries, so today, Norway which has a GDP of $512billion has a Sovereign Wealth Fund (SWF) of $893billion; Qatar with GDP of $203billion has SWF of $256billion and Saudi Arabia with GDP $748billion has SWF of $762billion.

    “Why I have given these figures is because these same countries have managed their economies better. They saved for the rainy day and today they can play the game while Nigeria is watching. Which means Kuwait and Saudi Arabia can afford to derive zero revenue from crude oil production over the next three years and survive because of their SWF.

    “That’s why they are playing with the US to see who blinks first. We are watching helplessly with the SWF of $500million only (half a billion dollars). So if this oil price subsists for the next nine months, be sure we will go back to 1998 when salary cannot be paid, teachers will be out of school because schools will close.

    “So where do we go from here?

    “We should try and look inwards and accept the truth. Government and its agencies must withdraw from the industry. They must restrict themselves to proper revenue collection but for management of the revenue for the interest of the current and future generations, they should handover to the private sector including the operation of the industry. Fortunately, the sector is now being led by indigenous players.”

    Avuru stated that the prediction to have one million barrels per day refining capacity will be achieved by the indigenous sector, noting that Dangote is starting with 500,000 barrels per day refinery. He said that when the NNPC has the courage to sell the refineries, those that will buy them will expand the capacity and will probably have the one million barrels per day production all led by the private sector by 2020.

    “If we are refining half of our production, we are best able to absorb the next shock from low oil prices when the next cycle comes. It’s always  in cycle and we will soon get out of this one,” he added.

    Prof Utomi stated that he had proposed a special utilisation fund where oil proceeds in excess of $40 per barrel should go. Such fund, according to him, should be accessed in times of recession or slump in crude oil price. He also advocated for NNPC’s focus on policy making as against participating actively oil business. He said that Qatar currently is utilising its gas resource optimally while Nigeria with its abundant gas is not doing anything internally with it. He also drew attention to the frequent change of NNPC’s group managing directors, noting that the trend is not healthy for the growth of the industry. He jokingly begged the NNPC officials at the event that if he hears the appointment of another GMD in the next few months, he would relocate to Equatorial Guinea.

    The former Group Managing Directors corroborated what the speakers said, adding that the NNPC chiefs only take directives from the government and don’t take decisions and actions on their own. They also condemned the non-passage of the Petroleum Industry Bill (PIB) after 13 years of being in the National Assembly.

  • FMC Technologies secures Chevron’s $268m contract

    FMC Technologies, Inc. has clinched the contract for provision of subsea systems for Chevron’s Agbami phase 3 project.

    The company said it received an order from Star Deep Water Petroleum Limited (a Chevron company), operator of the Agbami field, to provide subsea equipment for operations in the Agbami field, offshore Nigeria.

    The Agbami field is located 70 nautical miles (113 km) off the coast of the central Niger Delta region, at a water depth of approximately 4,800 feet (1,463 m). The parties in the Agbami field include Famfa Oil Limited, Star Deep Water Petroleum Limited, Petróleo Brasileiro Nigeria Limited (Petrobras), Statoil Nigeria Limited (Statoil), and Nigerian National Petroleum Corporation (NNPC).

    “FMC Technologies has supported the Agbami field development for several years,” said Tore Halvorsen, FMC Technologies’ Senior Vice President, Subsea Technologies. “This subsea equipment will provide additional production and help extend the life of this deepwater development,” he added.

  • Lack of capital, others hinder gas investments’

    Why are investors shying away from gas project? It is because of lackof sufficient capital,  inability to access loans, lower yields compared to crude oil projects, and government’s decision to regulate the prices of gas, says Chief Executive officer, Seven Energy Limited, Philip Iheanacho.

    In an interview with The Nation,   Iheanacho said the investors’ problems  have affected investment in that segment of the petroleum industry. He said returns from gas are lower than oil’s, adding that this issue made many investors to opt for oil production activities.

    He said: “Funding of a gas project is a major challenge. The reason is that the project is not bankable. The project is not as profitable as oil. To develop a gas project, you need to spend between two and three times of what you would spend in developing an oil project.  Revenue from gas project is one out of 10 derived from oil.  Most investors do not want to invest in gas.”

    According to him, government’s decision to regulate the price of gas made investors to run from the sector, adding that the development made gas projects unprofitable to investors, compelling them to move to sectors where they would get better profit.

    “As long as gas prices are still regulated by the government, most people would not invest in gas. The best thing to do is to have a willing buyer and willing seller platform. If you have a project that you would make a lot of money from, and I have gas to sell, we sit together and negotiate for a price that suits both parties. With a price driven by market forces, I assure you there would be enough gas to use in Nigeria.  I think the stimulus would come from the companies that bought power generation companies because they need gas.  If they do not come to pay realistic gas prices, they would not get it. There should be a willing buyer and seller arrangement such that banks would be able to put their money into the project,” he added.

    Iheanacho said many banks offer short term facilities as against long term financing required by gas projects to achieve the desired results.