The Nation Newspaper

Category: Energy

  • Implement sanctions on gas flaring, Fed Govt urged

    THE Federal Government should enforce stringent penalties against gas flaring, the Managing Director of Strides Energy and Maritime Limited,Mr. Moritz Abazie, has said.

    Abazie, who spoke to reporters in Lagos, said sanctions are not harsh that is why oil firms flare gas. He said the firms hadnot fully complied with the flares-down directive, thereby making  it difficult to contain the menace.

    He, however, noted that appreciable success had been recorded in the drive to put flaring out, insisting that penalty for defaulters should be made more stringent. “It is natural to toe the line of little resistance when you start a business. But, having done that, the consequences of gas flaring have been felt; it is obvious and everybody can see it. Government has come up to say that gas flaring has to be stopped and has set a timeline,” he said.

    Abazie explained that it requires huge capital investments to set up the infrastructure required in harnessing gas. He said though some firms have been complying with the rules, the ultimate target is zero-flaring.

    The regulatory and monitoring agencies, he said, needed to up their game,  adding that if the Department of Petroleum Resources (DPR) and the environmental agencies improve their efficiency, flaring would stop.

    On the Nigerian Content Act, Abazie observed that it has opened the floor for indigenous firms to prove to the world that they are capable of competing in the international oil and gas scene.

    Abazie said Nigerian companies that have capacity to carry out contracts efficiently were marginalised before the Nigerian content policy came on board. He said the level of implementation of the Nigerian Content Act has been quite impressive but maintained it is still work in progress. The compliance level by the International Oil Companies (IOCs) has been satisfactory, he added.

    He said: “The Nigerian Content Act has been quite effective. It has been very useful; you cannot compare the situation now for local players with what it was before this policy came on stream. The implementation has been quite good; it could be better, though. The point remains that the policy, the law, is well cut out because it was long overdue. But the good news is that it has come to stay and the IOCs are implementing it.”

    He said earlier, dredging services,which is one of our areas of core competencies, was worst hit because Nigerian companies were not given a chance, it is something that we could do. We have firms, such as former Wilbros, Westminster Dredging, Dredging International and others in the sector. These are multinational companies and they made it look , like an aenormous task that no Nigerian company could handle. But, with the Nigerian Content Act, the IOCs have been compelled to give Nigerian companies a chance.

    “We have been given a chance and we are doing it, and very well too. Oil is being produced with us providing the access in the same area they used to. Also, in pipeline construction both onshore and off-shore, mechanical installation, construction, fabrication and inauguration, Nigerian companies have shownto a great extentthat they can do these things if given the opportunity.”

  • ‘Why investors avoid gas projects’

    Huge capital outlay, inability to access funds in banks, lower yields compared to crude oil projects and the government’s decision to regulate the price of gas, made investors to shy away from investing  in gas projects, the Chief Executive officer, Frontier Oil Limited, Thomas Dada has said.

    Speaking on the sideline of the inauguration of the N90billion Uquo Gas Processing facility in Eket, Akwa Ibom State, Dada whose firm partnered Seven Energy to build the plant, said gas projects are facing some problems.

    He said returns on gas projects were lower than oil, which made many investors to opt for oil production. 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 may be two or three times of what you would spend in developing an oil project.  Revenue from gas project is one out of ten derived from oil.  Most investors do not want to invest in gas,” he explained adding that the government’s decision to regulate the prices of gas also made investors to run from the sector.

    Dada said the development made the gas projects unprofitable to investors, making 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 seller platform. If you have a project requires gas and I have gas to sell. We sit together and negotiate a price that suits both parties. With this system, 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 because they need gas. If they do not 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.

    The Chief Executive Officer, Seven Energy, Phillip Ihenacho, said investors would not invest in gas when they are able to get long-term funding. He said short-term capital cannot execute gas project, adding that many banks offer such facility.

  • Firm boosts Eko Gas with cylinders

    FIRM Chimons Gas has supplied cylinders to the Eko Gas project, as part of the company’s contribution to boost the consumption of cooking gas in Nigeria, particularly Lagos, the Executive Director, Mr.Baylon Duru has said.

    He spoke during the kick off of the cylinderdistribution in Oshodi/Isolo Local Government by the state government. He said the firm was contributing about 2,700 cylinders to the project, adding that so far, it has injected over 25,000 cylinders into the market.        At the moment, he noted, the government intends to distribute about 20,000 cylinders in all the local governments of the state for residents to enjoy the benefits of this clean energy source.

    “The initial distribution is about 20,000 cylinders. I would want to believe that one cylinder is for one home, so 20,000 cylinders for a pilot project is really commendable.After this there is another set of distribution that will go on.The Lagos state government is giving this out free to these beneficiaries.This is very laudable. I feel that if other states can do this, Nigeria in the next five years should be looking at attaining the one million tonnes that is being targeted.The essence is to increase our per capita consumption and be like other African countries,’’ he said.

    Duru, who is also the Deputy Chairman, Lagos Chamber of Commerce and Industry (LCCI) liquefied petroleum gas (LPG) Group, one of the the promoters of the project, praised the state government for keying into such initiative capable of improving the per capita consumption of a product which the country has in abundance.

    He said: “This Eko Gas project has been on for close to two years.You will recall that on June 11, 2013, it was kicked off in Surulere by Governor Babatunde Fashola. After that time the next phase was at Ikorodu, which was equally successful. So the essence of the scheme is to make LPG otherwise called cooking gas, fuel for the state so that we can convert from all other forms of energy for cooking into LPG which is readily available, cheap and clean,’’ he said.

    “LPG is in abundance in Nigeria but, unfortunately, we are not using it as our per capita consumption here is so small compared totherest of sub-Saharan Africa. So we are simply taking this initiative to the grassroots where people will appreciate it.The next thing we are doing is to make sure the source of refill gets closer to the people via the skid plant initiative.

    “We are putting it in all the remote areas so that people can access the product easily and equally buy the quantity their monies can afford. So that is basically what the programme is all about and, now, we are in Isolo for the distribution. In another week, we will be in another local government area and certain number of cylinders will be given out too.We appreciate all those who made this possible, the governor, his deputy,the Commissioner for Energy and Mineral Resources,Taofik Tijani and the Permanent Secretary of the ministry,Mrs. Regina Obasa and the Director-General, LCCI, who supported the LPG group in this venture.

    “We acknowledged the support of the Nigerian Liquefied Petroleum Gas Association (NLPGA),the umbrella body of all LPG groups in the country for the safety training conducted during the cylinder distribution exercise.”

  • Govt to ban gas cylinder import

    The Federal Government is planning to ban the importation of gas cylinders to encourage local production of the product, the Executive Secretary, Nigerian Content Development Monitoring Board (NCDMB), Ernest Nwapa, has said.

    He said the government through the Nigerian National Petroleum Corporation (NNPC) is promoting the use of cooking gas as an alternative to kerosene due to its cheaper, safer and cleaner attributes.  But the issue resulted in a concomitant increase in importation of gas cylinders into the country.

    Nwapa told The Nation that the government would ban importation of the product if people refused to stop the importation cylinders as directed.

    He said: “The government is advocating the use of cooking gas otherwise known as Liquefied Petroleum Gas (LPG). People are capitalising on this to flood the market with imported gas cylinders and we will put a stop to it. From the administrative point of view, we have a system in the Ministry of Petroleum Resources that ensures that things are against Nigerian content laws are stopped.”

    He said the government has outlined processes that would lead to the banning.  He said:  “A public notice to discourage the importation of gas cylinders is coming this week. Through this, importers would know the implications of engaging in the business. We are going to let them know that they are violating the local content laws and that they are responsible for some problems in the sub-sector. These are warning systems we develop to encourage attitudinal change.  Whenever we realise that people continue to import the product, we would apply sanctions.

    “Soon, Nigerians would see the impact of the policy formulated to facilitate the revival of the gas cylinders plants. The policy would bring about attitudinal change among importers of gas cylinders and importers that are amenable to change would stop the business, while the erring ones would face sanctions.”

    He said the government is promoting local content development through its policies and programmes for growth. ‘’Apart from establishing the Nigerian Content Development Monitoring Board, the government is pushing for the development of local initiatives. One of these is the decision to revive the gas cylinders manufacturing companies to discourage importation of the product,” he added.

    Nwapa said a committee had been set up to implement the policy and further ensure that indigenous cylinders were used. He said the initiative, among others, would force importers of gas cylinders out of business, create jobs, and improve socio-economic activities.

    Nwapa said the oil and gas industry is setting the pace in the area of local content use, adding that the issue is  affecting the economy.

    “Today, the telecoms and power sectors are working seriously to adapt the local content practices that have worked in oil and gas industry,” he said.

  • Eland Oil to acquire Ubima field

    land Oil and Gas, an exploration and development company with a focus on Nigeria and West Africa, said its  subsidiary, Wester Ord Oil & Gas Limited, has agreed to acquire a 40 per cent interest in the Ubima Field from Allgrace Energy Limited.

    According to the firm, the most recent independent resources estimate for Ubima, as reported by AGR TRACS, is 34 million barrels (mmbbl) of oil. There is also a significant upside resource estimate of 66.9 mmbbl of oil with an extra resource estimate of 97 billion cubic feet of non-associated gas in two reservoirs.

    Ubima lies onshore in the northern part of Rivers State and has been carved out of Oil Mining Lease (OML) 17, which is held by Nigerian National Petroleum Corporation, Shell Petroleum Development Company of Nigeria Limited, Total E&P Nigeria Limited and Nigerian Agip Oil Company Limited.

    The firm has 3D seismic coverage and four wells have been drilled in the field between the 1960s and 1981 with hydrocarbons being encountered in all four wells in multiple stacked reservoirs, the report said.

    The Ubima 1 well was suspended and identified for completion and production by the previous operator, but this programme was not executed and Wester Ord is planning to re-enter this well and perform an extended production test, oil produced will then be trucked to the nearest sales point prior to the Ubima export pipeline being in place.

    The company believes that subsequently an initial four development wells can be drilled and put into production nine to 12 months from commencement of the full work programme. The full work programme is estimated to require development capital expenditure of $125 million, however, a proportion of this is anticipated to be met from early cashflows from the extended production test

    Wester Ord entered into a farm-in agreement with the farmor for a 40 per cent interest and as consideration for the assignment, will pay a signature bonus of US$7 million to the farmor and, contingent on production and receipt of ministerial consent to the transfer of the participating interest, a production bonus of US$3 million.

    Wester Ord also entered into a separate commercial agreement to fund the initial work programme. The terms of this agreement entitle Wester Ord to 88 per cent of production cash flow from Ubima until the costs have been recovered. The firm will guarantee the obligations of Wester Ord under the farm-in agreement and the signature bonus will be paid from existing cash resources. The Company is currently in discussions to increase the existing debt facilities to fund the Ubima development.

    The completion of the transfer of the 40 per cent participating interest from the farmor to Wester Ord is contingent on the approval of the Head-Farmors and the Nigerian Minister of Petroleum Resources.

    Pending receipt of Ministerial Consent to the transfer of the 40 per cent interest, Wester Ord will exercise the rights and benefits of its 40 per cent interest in Ubima via the Financial and Technical Services Agreement, which takes effect from completion.

    The Ubima Field was awarded to the Farmor by the Department of Petroleum Resources in 2011. The award also included a commitment to develop viable small scale gas utilisation projects within 30 months of commencement of production. This could include a small scale power generation project where the availability of electricity in rural areas is severely restricted. The Farmor since the award of the Ubima Field has to date not conducted any work on the Ubima Field and therefore there are currently no profits/losses attributable to Western Ords acquisition of 40 per cent of the field.

    The field is close to existing infrastructure for the delivery of crude to market and Wester Ord are currently in discussions with Shell Petroleum Development Company regarding the crude export tie in point.

    As a designated marginal field, Ubima will benefit from attractive fiscal terms available in Nigeria as part of the government indigenisation programme.

    Chief Executive Officer  (CEO) of Eland, Leslie Blair, said: “The acquisition of Ubima is a very attractive and accretive deal for Eland on very positive terms. As the Technical and Financial Partner, we will be able to lead the development and move quickly to bring these assets into early production generating strong cashflow for the benefit of all stakeholders.”

  • Energy ministers, operators for NAEC confab Thursday

    The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, and Minister of Power, Prof. Chinedu Nebo, is expected to lead a government delegation to the  yearly conference of the National Association of Energy Correspondents (NAEC) on Thursday at Eko Hotel, Victoria Island, Lagos.

    In a statement the group’s Chairman, Yusuf Yunus, said International Oil Companies (IOCs), independent producers, new owners of the privatised power assets and other stakeholders, would also be at the conference to proffer solution to pipeline vandalism, oil theft and supply of gas to power stations.

    He said Mrs Alison-Madueke would deliver the keynote address while the Group Managing Directorof theNigerian National Petroleum Corporation (NNPC), Dr. Joseph Thlama Dawha, would present the lead paper.

    He said: “The theme of this year’s conference is: “Pipeline vandalism and its socio-economic effects on the nation.”  It will have two technical sessions where operators will discuss relevant topics related to the theme.

    “The topic for the first technical session is: ‘Crude oil theft and the way out. ‘ ”

    Discussants for the first technical session include Maj.-Gen. Emmanuel Atuwe, commander, Joint Task Force, Operation Pulo Shield; Ernest Nwapa, executive secretary, Nigerian Content Development and Monitoring Board (NCDMB); Mr. Robert Clay Neff, managing director, Chevron Nigeria Limited; Mr. Wale Tinubu, the Group Chief Executive Officer, Oando Group; Mr. MutiuSunmonu, Managing Director, Shell Petroleum Development Company (SPDC);Mr. Cornelius Zegelaar, Managing Director, Addax Petroleum; Mr. Felix Amieyeofori, Managing Director/CEO, Energia Company Limited and Mr. Abdulrazak Isa, Chairman/CEO, Waltersmith Petroleum Limited.

    “The topic for the second technical session is: “Effective implementation of Gas Master Plan (GMP) for adequate power supply.”

    Discussants include Dr. David Ige, Group Executive Director (GED), Gas and Power, NNPC; Mrs. MoremiOnijala Soyinka, Deputy Director, Climate Change/Gender, Ministry of Power; Mr. Austin Avuru, MD/CEO Seplat Petroleum Development Company Plc; Dr. Sam Amadi, chairman, Nigerian Electricity Regulatory Commission (NERC).

    “Others include Dr. Frank Edozien, Special Adviser on Gas to the Minister of Power; Mr. James Olotu, Managing Director, Niger Delta Power Holding Company (NDPHC); Mr. TaofeekTijani, Commissioner for Energy, Lagos State; Dr. OladeleAmoda, Chief Executive Officer, Eko Electricity Distribution Company, and Engr. AbiodunAjifowobaje, Chief Executive Officer, Ikeja Electricity Distribution Company.

    The Chairman of the conference is Dr. LayiFatona, Managing Director, Niger Delta Petroleum Resources Limited.

  • Fed Govt opts for ships to beat vandalism, others

    Fed Govt opts for ships to beat vandalism, others

    The Federal Government may have found a solution to pipeline vandalism – but at a huge cost.

    It has started using ships to supply crude oil to  refineries to sustain uninterrupted product supply.

    Minister of Petroleum Resources Mrs. Diezani Alison-Madueke, said at the Society of Petroleum Engineers (SPE) conference and exhibition in Lagos that the ship supply would shoot up the cost of refining a barrel of crude by $7.52. represented by the Deputy Director, Department of Petroleum Resources (DPR), Mr. Emmanuel Bekee, the minister said: “It is common knowledge that the oil industry has been plagued with a plethora of challenges that have negatively impacted on our ability to meet national crude oil production target, loss of revenue to investors, environmental degradation and sometimes loss of lives, among others.

    “The most prominent among these is theft related vandalism leading to significant production deferments, theft and decline in revenue to the investors, which include the country and the international oil companies (IOCs).

    “The development though not completely new, rather metamorphosed to the current trend and scale from community agitation for resource control, pipeline sabotage to attract contracts for remediation, militant activism and theft of condensate and refined products.

    “Due to theft related vandalism, crude oil supply to our domestic refineries remain constrained thus affecting our refining uptime and volume. In order to mitigate this anomaly, the option of crude transportation by marine vessels has been deployed thereby increasing the operating cost of refining by an additional $7.52 per barrel.”

    The implication of the increased cost in refining is that the subsidy reimbursement for refined products especially for premium motor spirit (petrol), which dropped significantly last year when compared to 2011 subsidy scam, will shoot up again. Money spent on fuel subsidy in 2011 was in excess of N2 trillion, which reduced to N1 trillion in 2013 but as things are currently, 2014 subsidy payment may be close to or more than N2 trillion.

    Mrs Alison-Madueke, however, assured that relevant government agencies and companies are collaborating with other stakeholders to find sustainable solution the problem.

    She said: “NNPC in collaboration with relevant stakeholders organised a security workshop to discuss and proffer strategy for improving the security of crude supply and evacuation of refined products to and from the refineries.

    “Far-reaching solutions and combination of strategies were adopted and are being recommended to the Federal Government. Nigeria needs to recognise and declare the pipelines as national assets. The next step is to organise and harmonise its institutions responsible for pipeline infrastructure protection, and invest appropriately in this light for effectiveness.”

  • SON seizes 5,000 obsolete, substandard cylinders

    The Standards Organisation of Nigeria (SON) has seized over 5,000 obsolete and substandard cooking gas cylinders.

    SON’s Head of Enforcement, Bede Obayi, said the organisation impounded the cylinders in line with the Federal Government’s directive to phase out old and substandard cylinders from the market and replace them with new ones.

    He said the cylinders were seized across the six geo-political zones to ensure wide coverage of the exercise, adding that the exercise would continue in 27 states and the Federal Capital Authority (FCT).

    He said the exercise began early in the year, following the government’s decision to phase out old cylinders.

    The aim is to encourage the production of cylinders locally, protect the consumers and further promote a cleaner and safer environment.

    He said the withdrawal of old cylinders would pave the way for new ones, adding that the confisticated cylinders didn’t meet International Standard Organisation (ISO) requirements.   He said they were unsafe.

    The Nation had reported that the government was planning to revive the Nigerian Cylinder Manufacturing Company and Midland Cylinder Manufacturing Company in Ibadan, Oyo State and Abeokuta, Ogun State.  It said the Federal Government had a meeting with the members of the Nigerian Liquefied Petroleum Gas Association (NLPGA) on the issue of revamping the firms.

    Obayi said the seized cylinders would be crushed and converted into other metals to discourage more people from using them.

    He said: “Over 5,000 gas cylinders were confiscated, warehoused by SON, and would be sent to the steel companies for melting and production into other metals. More cylinders are going to be seized, melted and used for production of other metals soon. The agency is on top of the game, and wouldn’t back out in the fight against the usage of bad products in the country.

    “We would pick up bad cylinders anywhere we see them because we want to get rid of them.  Globally, the usage of uncertified cylinders is dangerous.  A country that uses old cylinders is sitting on keg of gun powder. The reason is because such cylinders can leak and cause explosion.  If the usage of such cylinders is not curbed or banned in Nigeria, it would gradually destroy the country.”

    He said the agency would move from confiscating obsolete cylinders to ensuring that the marketers of such items are arrested. “Our team has been going round the country, and once we know where marketers of obsolete cylinders are, we would go there,” he added.

    Also, the President, Nigerian Liquefied Petroleum gas Association, Dayo Adesina, said the removal of obsolete cylinders is not immediate, given the complex nature of the country.

    “The withdrawal of old cylinders is not a one-off thing. It is a gradual process. This is evident by the way SON and the Department of Petroleum Resources (DPR) is going about the issue,” he added.

  • 52% of Nigerians don’t have electricity, says survey

    ABOUT 52 per cent of Nigerians do not have access to electricity, a global power management solution firm, Eaton, has said

    Its Managing Director, Africa, Electrical Sector, Mr. Shane Kilfoil, said it was important for the government to continue to increase the country’s capacity in the sector’s value chain because it’s expected that the population will increase by 153 per cent by 2050, which will put more pressure on energy demand. He noted that it is more important to put in place technologies that will help manage the outputs in prudent ways.

    Kilfoil spoke during the opening of the company’s West Africa office in Lagos.

    He said the generation targets and timelines set by the government should be met to prevent energy crisis. He said the Lagos office would serve the needs of Eaton’s customers in Nigeria as well as Western Africa.

    He said the event represented another milestone in Eaton’s expansion and investment in key locations across Africa, adding that the company specialises in helping customers manage their electrical, hydraulic and mechanical power more reliably, efficiently, safely and sustainably, employs over 103,000 people worldwide and serves customers in 175 countries. In Africa, the company focuses on the creation of customised solutions to meet customers’ specific power management needs.

    He said: “The achievement and use of innovative technologies is critical in increasing energy efficiency in Africa. Africa’s energy challenges lie not in building more and larger power generation plants but instead in investment in advanced power management technologies to enable businesses do more with less energy in an increasingly resource constrained world.”

    He noted that Eaton was committed to bringing the best of global technologies to Africa and Nigeria; committed to providing employment for competent Nigerians, working across the various sectors to help grow the economy.

    The Regional Sales Manager, West Africa, Charles Iyo, said the emergence of Nigeria as an economic power house is dependent on developing innovative technologies to solve the country’s toughest power management challenges.

    He said: “The power reform agenda of the Federal Government is aimed at a complete restructuring from vertically integrated monopoly industry to privatised competitive electricity market. The reform will enable Nigeria to overcome its huge deficit in the supply of electricity and Eaton is well positioned to support businesses with customised end-to-end solutions for their oil and gas plants, utility requirements and renewable energy management needs.”

    As part of its growth agenda, Eaton would hold an Eaton Technology Day next month at Eko Hotel in Lagos, adding that the forum would provide a platform for Eaton to showcase its solutions in key segments to industry leaders.

    He said the Tech Day is expected to attract policy and decision makers, partners, customers and stakeholders in the oil and gas, power management industry from Nigeria and from the broader West African region.

  • Nebo, others advocate renewable energy in Africa

    Minister of Power, Prof Chinedu Nebo and his Tanzania counterpart, Sospeter Muhongo have called for the implementation of the policy on renewable energy in Africa.

    Speaking during the United States-Africa Leaders Summit in New York, the ministers said the continent’s future depended on renewable energy because of it is cheaper to access than hydro and gas method of energy.

    The ministers, who joined their colleagues from other countries to deliberate on electricity problems facing the continent, said renewable energy was the way to tackle energy challenges in Africa. According to them, the continent has been battling power problems for long and, therefore, needed to find lasting solutions to it.

    Nebo said: “Africa is hugely in darkness. Whatever we can do to get Africa from a place of darkness to a place of light … I think we should encourage that to happen. Renewable energy is one options we think can solve the problem.. I think Africa should be allowed to develop its coal potential. This is very critical. There are so many areas in Africa that will help to generate power for the over 60 per cent of Africans that have no access to energy at all,” said Nigeria’s Nebo.

    Mohongo urged the continent to explore opportunities in solar, coal, biomass and other sources of renewable energy.

    “We, in Africa, should not be in the discussion of whether we should use coal or not. In my country of Tanzania, we are going to use our natural resources because we have reserves which go beyond five billion tons,”

    “If some people have taken a position where we say no coal, no nuclear, no hydro, then we’re really not serious,” he said. Big hydropower, in particular, demands new acceptance, he said, arguing that the multilateral donor agency has learned lessons from past disastrous projects and is much better-equipped to work with indigenous communities and others affected by new dams. We, in Africa, we should not be in the discussion of whether we should use coal or not. In my country of Tanzania, we are going to use our natural resources because we have reserves which go beyond 5 billion tons,” Muhongo said.

    He said his country was on the verge of becoming a middle-income nation and aims to grow its gross domestic product about nine per cent yearly. To do that, coal reserves and Tanzania’s 50.5 trillion geologic feet of natural gas are critical.

    Also, the Chief Executive Officer,  Mara Group, Ashish Thakkar, said: “We need 20 times more power than we have today, and by the time we get there, we’re going to need 30 times the amount of power we need today.”

    Thakkar said African gas production is expected to double in the next two decades, adding that the continent needs $400 billion in that time to provide power to the full half of the population that is without it.

    “I think Africa should be allowed to develop its coal potential. This is very critical. There are so many areas in Africa that will help to generate power for the over 60 percent of Africans that have no access to energy at all,” said Nebo.