The Nation Newspaper

Category: Energy

  • ‘Local oil firms’ll account for 30% production’

    Indigenous oil companies will account for over 30 per cent of oil and gas production in Nigeria in the next five years, the Chief Executive officer, Atlantic Energy Company Limited, Kola Aluko, has said.

    Aluko, in a paper titled: Onshore Niger Delta- A changing landscape, delivered at the African Oil Week Conference in Cape Town, South Africa, said the local companies have the capacity to execute 30 per cent of the businesses in the industry.

    He said: ‘’There are hundreds of underdeveloped discoveries onshore Nigeria, and with the recent divestments of onshore assets by International Oil Companies operating in Nigeria, this would increase the opportunities and access of Nigerian indigenous oil and gas companies to eight billion barrels of crude oil and 46 trillion cubic feet of natural Gas Gross Reserves.

    “Nigerian companies, like Atlantic Energy, have pushed for increased local participation in the upstream sector. As recent as five-years ago, six to seven international oil companies were producing over 97 percent of Nigeria’s oil and gas, now Nigerian companies are producing close to 10 per cent, and I believe we can have 30 per cent ofNigeria’s oil and gas production being produced by Nigerian companies within five years. The time is now for companies like Atlantic Energy and other indigenous companies to step up to the plate.”

    Aluko said ageing infrastructure is one of the problems facing the sector, adding that it has affected the growth of the operators.

    He said the company has formed a strategic alliance with the Nigerian Petroleum Development Company (NPDC)through which it has provided funding, technical and project management assistance to (NPDC).

    He said the firm has invested over $500 million in the project, adding that the initiative has helped in strengthening the alliance with NPDC. He added that NPDC and its Joint Venture partners produce 60,000 barrel of crude oil per day.

  • $300m bio-fuel refinery coming soon

    Plans are underway to establish a bio-fuel refinery worth $300million in Nigeria, the Special Adviser on Private Sector to President Goodluck Jonathan, Prof Chris Boyejo, has said.

    Boyejo, in a statement made available to The Nation, said a Russian firm ‘’OOO Bio- Resurs and some Nigerian oil companies, are partnering on the deal.

    He said: “The scheme is designed to commence immediately with the building of a 30,000 ton bio-diesel installation plant. This will be preceded with the planting of the cash crops that would be used for the production. Research has shown that bio-fuel is environmentally-friendly and the viscosity makes engine run longer and faster.

    ‘’Bio-fuel is the in-thing in Europe, America and Asia and the plant is Euro-certified. The invention has been well tested in some European, American and Asian countries. The bio-plant will produce: diesel, petrol, aviation fuel and kerosene. The total cost of the project is cheaper and the technology is safer, stronger and set to beat any other in the whole world.”

    Boyejo said the partners were yet to disclose the area where the project will be cited in Nigeria.

    He said the first part of signing of agreement between the partners have taken place, while the final signing will take place in Krasnodar, Russia.

    “It is expected that this project will aid the process of diversifying the economy and aid the Federal Government transformation agenda. It is expected that full work will commence at the site to be named in January 2014,” he added.

  • Refinery privatisation: Senate urged to amend bill

    Refinery privatisation: Senate urged to amend bill

    To ensure that Nigerians get more consideration when the four refineries are privatised next year, experts have called for a modification of the bill on investment in the petroleum industry.

    Part 1 Section 3 of a Senate Bill 176 ensures that 50 per cent refining capacity should be domiciled in the country. The bill further states that ‘’ Nigerian personnel shall constitute a minimum of 75 per cent of the investing company in the petroleum industry in accordance with the law.

    The President, International Association of Economics Energy (IAEE), Prof Adeola Akinnisiju, said a modification of the bill is necessary in view of the proposed privatisation of Warri, Kaduna, and Port Harcourt refineries in 2014.

    Akinnisiju said when the bill is modified, Nigerians would have enough stakes when the refineries are privatised. ‘’I am okay by the content of the bill because it’s talking about local content initiatives,” he said.

    He however argued that no ground would be lost if the bill is modified. When this happens, refinery capacity and petroleum activities are going to be above 50 per cent and 75 per cent as contained in the bill. This implies that more Nigerians are going to have controlling shareholdings in the refineries.

    ‘’Presently, we depend on importation of petroleum products into the country. By modifying the bill and subsequently privatising the refineries, it means there would be increase in local participation in the industry. This, on condition that, a transparent process is adopted by the Bureau of Public Enterprises.’’

    According to him, power sector reforms have set the tone of what to expect in the petroleum industry. The reforms, he said, has resulted in the sales and subsequent ownership of assets of defunct Power Holding Company of Nigeria (PHCN) by Nigerians.

    ‘’We should expect a situation whereby the refineries would be own 100 per cent, once the National Assembly is able to amend the bill. Like what happened in the power sector where Nigerian companies acquired the PHCN’s assets, the same thing is expected when the refineries are privatized.’’ he added.

    Also, the Chairman, Petroleum and Gas Workers Senior Staff Association of Nigeria(PENGASSAN), Mr Ogini said the issue of amending the bill is a good one capable of encouraging local initiatives in the industry. Ogini said Nigerians will leverage on the bill to ask for more stakes when the privatization process starts.

    He cautioned the government on the issue, noting that efforts to sell the government enterprises have failed in the past.

    ‘’ What happened to British Airways? What happened to Nigerian Telecommunication Limited (NITEL) NICON Insurance and other publicly-owned enterprises that the government intended to sell? They are dead because the government failed to follow due process. So, the issue of refineries must be handle with caution to achieve success’’ he said.

  • Towards deepening gas market

    Towards deepening gas market

    The gas market has not been fully explored to optimise its economic benefits to the nation. Stakeholders in the gas sub-sector are seeking ways to increase its contributions to grow the nation’s gross domestic product (GDP), writes AKINOLA AJIBADE

    Nigeria, with 187 trillion cubic feet of proven gas reserves and an estimated 600trillion cubic feet of gas potential, has what its takes to play in the global gas market. The country’s natural gas has been designated the preferred fuel for power, and it is expected to deploy in the short term, 2.5billion cubit feet of gas to the sector by 2015. Also, Nigeria exports gas to Asia and other continents, and is expected to make the product another source of revenue generation. However, the country has battled myriads of problems associated with oil and gas production.

    From pollution associated with gas flaring, low production of Liquefied Petroleum Gas (LPG), shipment/ supply bottlenecks, to fluctuations in the prices of the product to poor consumption and the recent crisis between the Nigerian Liquefied Natural Gas (NLNG) and Nigerian Maritime Administration and Safety Agency (NIMASA), the list is endless. These have affected the industry’s growth and develoment.

    Last week, stakeholders gathered at Oriental Hotel, Lagos, for the third edition of the Nigerian Liquefied Petroleum Gas Association conference to discuss some salient issues affecting the sector. Some of the issues raised were how to deepen the market and further make operators harness the potential in it.

    According to the stakeholders, the market can be deepened by encouraging more people to use LPG otherwise known as cooking gas, autogas, and others.

    They said the country has huge gas reserves to its credit, arguing that regulatory, operational, and commercial problems must be addressed to deepen the market.

     

    Regulatory problems

    The Managing Director, Longview Gas Limited, Mr Femi Fanoiki, said overlapping of jurisdictions among agencies is one of the major problems besetting the growth of the gas sector. He said the need to separate the functions of agencies, such as the Department of Petroleum Resources (DPR), the Standards Organisation of Nigeria (SON) and the Lagos State Environmental Monitoring Agency (LASEMA), is imperative to move the sector forward.

    He said the three agencies are duplicating efforts by accessing the quality of gas used in the country. He said separating the roles of these agencies will hasten the delivery of gas to the end-users, adding that the development will also increase the patronage of the product and by extension, economic activities.

    Speaking on the theme, ‘Challenges in operating in the Nigerian LPG Sector,’ Fanoiki called for a simple and flexible method of accessing the quality of gas for growth.

    Also, the Chief Executive Officer, NLNG, Babs Omotewa, said operators needed incentives in form of tax waivers to maximise the potentials in the industry. In a paper, titled: ‘Domestic Production/ Supply: NLNG’s Perspective,’ Omotewa, said incentives will help stakeholders in the gas value chain to grow their businesses and further bring more people into gas usage net. Citing Brazil, India and Senegal, he said governments in those countries have provided incentives to gas operators, adding that the development has impacted positively on the industry.

     

    Infrastructure

     

    Omotewa said the dearth of infrastructure and its attendant problems have slowed down the growth of the sector, adding that addressing these problems will help in deepening the market. He said the creation of two additional Greenfield Liquefied Natural Gas projects at Brass and Olokola will help in growing the sector, adding that the shipment of gas from its NLNG’s Bonny Plant, Rivers State to Lagos must be sustained to deepen the gas market.

    He said: “There are 10 off-takers, otherwise known as big ships that move LPG from Bonny through the high sea where they stop for smaller vessels to take the product to Lagos. There is the need to increase the off-takers and the vessels to reduce transportation problems. When this happens, there would be prompt delivery of cooking gas to the oil marketing firms for onward distribution to consumers. ‘’

    He urged the government to allow direct importation of cylinders to enable more people access gas for domestic use. The development, he said, would help in deepening the LPG market in Nigeria and increase economic activities. Omotola said the market is wide enough to accommodate more operators, advising investors to tap the opportunities.

    ‘’Few years ago, we struggled to get seven firms in the market. But now we have over 200 firms that are contributing their own quota to the growth of the industry. “There is no reason Nigeria should not be consuming LPG in excess of one million tonnes if the right infrastructure are in place. Also, NLNG has increased the supply of LPG from 150,000 to 250,000 tonnes to deepen the market, ‘’ he added.

     

    Business model

    Nigeria operates a free-market system that allows business owners charge differential prices on goods or services rendered to people. The system, Fanoiki said, had affected the distribution and sales of gas to the end-users. He said base station gas owners, retailers, oil marketing firm sell gas in response with the market forces.

    ‘’Though it is good to have a free-market system, it should not be abused by people. There should not be arbitrary increase in the price of gas or its by-products. Product pricing mechanism must be put in place to check such practices,” he said.

     

    Strong advocacy initiatives

    The President, Nigerian Liquefied Petroleum Gas Association Association (NLPGA), Dayo Adeshina said an awareness programme is needed to deepen the market. He said advocacy issues should be tailored towards meeting the needs of stakeholders, especially the consumers. He said LPG usage in Nigeria is the lowest in West Africa, in spite of the increase in supply of the product from 70,000 metric tonnes in 2007 to 150,000 metric tonnes in 2013. He said a lot needed to be done in sensitising people on the use of gas for domestic and industrial needs.

    Adeshina said the Federal Government’s decision to drive the consumption of LPG to about one million tonnes yearly by 2015 might not be realised going by the slow rate of acceptability of the product. He said 19 states suffer from desertification caused by tree cutting and other unfriendly environment activities, stressing that one of the ways of mitigating the problem is optimal utilisation of LPG.

    The Managing Director, Chimons Gas Limited,Chibuike Lawrence Achigbu, said individual initiatives must be adopted to deepen the market. He said he leveraged on his membership of LPG Trade Group of the Lagos Chamber of Commerce and Industry to organise an advocacy programmes on gas. He said the development has helped orchestrate road shows to show the importance of LPG. He said the company is lobbying the governments on how to deepen the gas market and further encourage growth.

     

    Oil firms approach

    Oando Marketing Plc has signed a memorandum of understanding (MoU) with the National Association of Microfinance Banks (NAMB) to enable low income –earners buy its gas known as Oando’s O-Gas. Through this, people can approach any of the microfinance banks and get O-Gas 3-in 1 cylinder with an initial deposit of N200. Subsequently, they will be making N200 daily payment to the bank for 30 days until they complete the payment cycle for the cylinder.

    The company’s Head of Marketing Communication, Seun Soyinka said: “ The new initiative is consistent with OMPs (Oando Master Plan) to switch millions of Nigerians from the use of biomass to clean, efficient , affordable and sustainable LPG using Oando’s 3kg O-Gas , an integrated offering that comes with a cylinder ,burner and gas. “

    Chairman NAMB, Lagos State chapter, Valentine Whensu, said: “The partnership will boost the liquidity and the confidence level in MFB, because they provide all that is needed for their customers, by giving them loan, encouraging them to save, and taking care of their health which is very important in the life of every human being.”

  • Engineering body wants local content in power sector

    The Nigerian Institution of Electrical and Electronics Engineers (NIEEE), has called on the Federal Government to extend the local content policy to the power sector to enhance sustainable development.

    Its President, Engr. Adekunle Makinde who spoke at the Institution’s 9th International Conference and Exhibition on Power and Telecommunications (ICEPT) held in Onitsha, Anambra State with “Power and Communications: Drivers of Sustainable Economic Growth,” as its theme said over the years, the power sector had suffered lack of sustainable development.

    He said the policy should also be extended to the telecommunications industry which has witnessed rapid growth since the sector was liberalised more than a decade ago.

    He said: “In spite of government’s efforts, the sectors have remained almost completely in the hands of foreign engineering firms. Local content incentives need to be stretched into these other industries in order to create an environment for the sustainable development of our economy. It is a well known fact that when any sector is in the hands of foreigners, they will work for their own interests first, whereas when such industries are controlled by Nigerians, they work for the interest of the nation.

    “We keep crying that there are no jobs for our children and yet we have foreigners trooping into the country to take up work that our people can do. But can you blame them if they are the ones bringing their funds. I must commend the investors in the power industry for seeing the process through. At least, this time around Nigerian investors took the lead unlike during the telecoms bid round, where Nigerian investors played second fiddle. At least, we are learning from the mistakes of the past.”

    According to him, sustainability is an integral part of the engineering profession. “The twin-problems of climate change and the rising population numbers bring an added importance to issues of sustainability. In particular our total reliance on oil and gas does not portend good tidings for the future generations. In diversifying the economy, private sector funding has become imperative,” he added.

    Government, he noted, has taken the lead and the private sector needs to fall in line by taking a long term view because sustainability is a long term phenomenon.

    He said: “No engineering project is sustainable at the current interest rate regime. Human resources cannot be developed overnight. Those countries we seek to compete with have a long term approach to business and that is why we are often times left with the crumbs. “Thinking long term means that we need to start with a robust educational system, churning out world class engineering graduates. It means we benchmark against the world best and forget the idea of giant of Africa syndrome.”

  • $300m bio-fuel refinery coming soon

    Plans are underway to establish a bio-fuel refinery worth $300million in Nigeria, the Special Adviser on Private Sector to President Goodluck Jonathan, Prof Chris Boyejo has said.

    Boyejo, in a statement made available to The Nation, said a Russian firm known as ‘’OOO’’ Bio- Resurs and some Nigerian oil companies are partnering together on the issue.

    He said: “The scheme is designed to commence immediately with the building of a 30,000 ton bio-diesel installation plant. This will be preceded with the planting of the cash crops that would be used for the production. Research has shown that bio-fuel is environmentally-friendly and the viscosity makes engine run longer and faster.

    ‘’ Bio-fuel is the in-thing in Europe, America and Asia and the plant is Euro-certified. The invention has been well tested in some European, American and Asian countries. The bio-plant will produce: diesel, petrol, aviation fuel and kerosene. The total cost of the project is cheaper and the technology is safer, stronger and set to beat any other in the whole world.”

    Boyejo who said the partners are yet to disclose the area where the project will be cited in Nigeria. He said the first part of signing of agreement between the partners have taken place, while the final signing will take place in Krasnodar, Russia.

    “It is expected that this project will aid the process of diversifying the Nigerian economy and aid the Federal Government transformation agenda. It is expected that full work will commence at the site to be named in January 2014,” he added.

  • Arco Petroleum records 1.4b profit

    Arco Petroleum Engineering Company Plc has posted N1.44 billion Profit After Tax in 2013, as against the N304.83 billion recorded in 2012. This represents an increase of 374.2 per cent. Its Chairman, Chief Joseph Akpieyi, made this known during the company‘s annual general meeting in Lagos.

    He said revenue grew from N3.045billion in 2012 to N5.253 billion in 3013, indicating 72.5 per cent growth when compared with the previous year.

    He said: “The performance was as a result of the fact that the company leveraged on the opportunities in the operating environment, while managing the challenges. As part of our plans to make Arco succeed, we engaged Pricewaterhouse Coopers (PwC) to carry out an Enterprise Transformation Project (ETP) for the company.

    “The project involved review and validation of Arco’s current strategy, as well as designing and constructing new operating procedures and manuals that will support the strategy. The strategy includes providing new corporate structure, succession plans, redefinition of internal business framework, information technology infrastructure, among others.

    “In recognition of our tremendous growth in the last few years, we have reviewed our risk management and internal control framework especially in light of where we intend to be in the next five years. The risk management framework was part of the deliverables from organisational transformation project. It was in that respect that Arco engaged the services of Mrs Florence Obumneke Oji formerly of Akintola Williams Deloitte, as the Group Head of Internal Audit.”

    Also, the company’s Group Managing Director, Alfred Okoigun said another unit of the company, Arco Marine and Oilfield Services, is going to deliver two 70-passenger vessels to Total Exploration and Production Nigeria before the end of the year. He said the two vessels will be christened Arco FCB 4 and Arco FCB 5.

    Okoigun said company wants to move from its current state as trading units to a group status, adding that shareholders have given the board approval to proceed with the plans.

  • ‘PIB will affect gas venture agreement’

    The Chairman, Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry, Mr Mark Ward, has said if the Petroleum Industry Bill (PIB) is passed into law in its present form, it will affect the Joint Venture Gas Agreement between the Nigerian National Petroleum Corporation (NNPC) and the international oil companies (IOCs).

    Delivering a paper titled: ‘’Fiscal provision and challenges to investment in the petroleum industry,’’ at a power summit in Lagos, Ward said the PIB will not benefit the foreign oil companies that are parties to the agreement.

    He said PIB would encourage local participation in oil and gas, as well as affect the stake holdings of multinational oil companies in the project.

    He said: ‘’Studies have shown that PIB will affect the involvement of oil majors in Nigeria’s oil and gas industry. PIB will make Joint Venture Agreement on Gas fiscally uncompetitive. The reason is because PIB will increase participation in the gas sector, thereby affecting the foreign oil companies. The cost of gas project is higher than the regulated gas prices in Nigeria.’’

    He said crude production would drop by 800,000 barrels per day by 2022, unless the government took steps to resolve issues such as oil theft and pipeline vandalisation.

    He argued that Nigeria will have one of the harshest fiscal regimes when the PIB is passed because there would be less foreign participation in the oil industry.

  • PTDF, experts disagree on refineries’ privatisation

    Operators have said sustainable development is required to move the oil and gas industry forward. They spoke at the Sustainability Conference organised by a Non-Government Organisation, Corporate Social Responsibility (CSR-in –Action), in Lagos. The Manager, Public and Government Affairs, Chevron Nigeria, Deji Hastrup said the growth recorded in the industry must be sustained to achieve economic growth. hE said: “In Nigeria, there is a gap between resource availability and the realisation of its potential. We need to recognise that there is no country that can develop without energy.” An official of the Shell Petroleum Development Company, Dr Uwem Ite, said: “Sustainable development is not about one group, but about partnerships amongst different stakeholders.” The Chairman, Petroleum Technology Association of Nigeria (PETAN), Emeka Ene, said: “The importance of building trust with indigenous communities cannot be overemphasised.” The President, Movement for the Survival of Ogoni People (MOSOP) Legborsi Saro Pyagbara, said: “The monies spent by oil companies do not translate to impact on the ground. Communities must be elevated to the status of equal partners in sustainability discussions.”

  • Electricity market now to take off in March

    Electricity market now to take off in March

    TO ensure that it serves its purpose, the take-off of the Transitional Electricity Market (TEM) has been shifted from January to March next year.

    The postponement, the Nigerian Bank Electricity Trading (NBET), which will over see TEM, said was to ensure that certain things were put in place.

    These include the coming on stream of the generation companies (GENCOs and distribution companies (DISCOs).

    TEM is where energy was sold and bought based on agreements among stakeholders. In the market, NBET will purchases electricity from the GENCOs/Independent Power Projects (IPPs) through Power Purchase Agreements (PPAs) and sell to the DISCOs through Vesting Contracts (VCs).

    The market allows DISCOs and GENCOs to enter into agreement on how to buy electricity without going through NBET.

    The country is set to operate an interim market rule which will be preceded by TEM, after a declaration from the Minister of Power, Prof Chinedu Nebo.

    NBET’s Head, Power Procurement and Power Contracts,Yesufu Alonge told The Nation that stakeholders are to register with the market operator for easy administration, meet their contract obligations and pay administrative charges to the service providers as when due, among others.

    Longe said the arrangement would help in providing efficient, transparent and non-discriminatory services to the participants needed to sustain the growth of the market.

    He said: ‘’At present, the market is in the pre-transitional stage, progressing towards the TEM. This can only be achieved after the required conditions have been met and the Minister of Power has been advised by the Nigerian Electricity Regulatory Commission (NERC) to declare its commencement. With TEM in place in 2014, a platform where energy will be sold and bought would have been created for the sector’s growth.’’

    He said NBET was required to perform its roles as the buyer and seller of electricity to foster growth, adding that parties involved in the purchase and sale of electricity are required to meet their own obligations.

    “NBET is obliged to make payment to the power generation companies after buying electricity from them. Also, the power distribution companies must meet their own obligations of providing power to the consumers. It is not a one-way thing. Each of the parties is compelled to fulfill its own side of the transaction, ‘’ he said.

    According to him, NBET has been capitalised with N50 billion to meet its operational needs. The money, Longe said, would be deployed in meeting NBET’s obligations whenever there is a delay in payment from the DISCOs.

    Also, the Chairman, Presidential Task Force on Power, Becks Dagogo Jack, said the desire of stakeholders is to have a virile electricity market.

    Jack said NERC is coming with an interim market rules, adding that operators would test and adjust them to ensure perfection when operational. The government, Jack said, is committed to providing a strong and enduring power sector reforms for growth.

    The Secretary of NERC, Mrs Ada Ozemenan, explained at the StageWorld Power Conference in Lagos, that NERC, GENCOs, DISCOs and other operators have discussed about the responsibilities that would come with the operations of the Transitional Electricity Market in 2014, saying the responsibilities are enormous, but they would help in determining the direction which the sector is taking in the next few years.

    According to her, the issue of providing efficient electricity market is of huge importance to NERC, NBET and the Ministry of Power.

    The Federal Government had in 2005 initiated reforms of the power sector. However, it was not until 2010 when the government came out with a blueprint on the reforms. This has resulted in the privitisation of the sector, unbundling of the Power Holding Company of Nigeria(PHCN), the opening of bids for investors, the selection of companies that won the bids, and the handing over of PHCN’s assets to the investors.