The Nation Newspaper

Category: Energy

  • Power sector reform: Can Nigeria achieve global best practices?

    The primary objective of reform is to bring about positive changes in an organisation or system. Reform unveils a systematic notion of change with different outcomes. The need for change emanates from data that suggests different business strategies in order to stay competitive. Public or private entities need some sort of change, improvement, amendment of what is corrupted or defective to improve so that they may become more efficient and more transparent.

    Reform could be a challenging process for decision makers because of its nature of thinking outside the box in order to become more creative and improve on risk taking abilities. In addition, reform is a process geared toward a positive and more profitable outcome to benefit all stakeholders.

    In the case of Nigeria, the power reform is long overdue. A successful power reform leading to change in the current “blackout series” will ensure that power is generated, transmitted and distributed efficiently for the purpose of “lifting the veil” from the eyes of Nigerians so that they can see “the light”. With the theatrics shrouding the power issues in Nigeria, many Nigerians have resigned themselves to the “indelible darkness” knowing that the so-called “cartel” will never let Nigerians enjoy power and electricity.

     

    Power sector reform

    The power sector reform law was passed in 2005. It was called the Electric Power Sector Reform (EPSR) Act and drafted to provide the necessary framework needed to begin the process of reform of the power sector in 2005 all in accordance with the existing policies of the National Electric Power Policy (NEPP). It aims to remove the operational and regulatory responsibilities of the electricity parastatal from the coffers of the Federal Government. In addition, the Act provides the necessary framework for competition and monopoly of the sector by creating a regulatory body that will license and regulate the generation, transmission and distribution and supply of electricity for the nation. The Act will also allow for the determination of appropriate tariffs. It further repeals the Electricity Act and the National Electric Power Authority Act (NEPA). The Act was divided into three main sections namely: The Power Generation sector, the Power Transmission sector, and the Power Distribution sector.

    It is worthy to note that before now, there was no national regulatory framework for power. The reform law enabled the following: Unbundling of the power sector, and decentralising of the power sector.

     

    What is to unbundle and decentralise?

    If we look at the power sector from the perspective of the defunct National Electric Power Authority (NEPA), one might agree that “unbundling and decentralising” are the actual ways to go with the power issue in Nigeria. This is what reform is supposed to do. It looks at the existing organisation or parastatal, takes it up wholly or partially, cuts it up in chunks, sub-divides or merges several or whole units into more effective and efficient units. NEPA was a bureaucratic organisation, which needed to be decentralised, its power diminished or minimised and units dislodged to create a free, independent, efficient and effective and sometimes smaller units.

    Eighteen distinct companies were carved out of these three sectors in preparation for privatisation, which currently is ongoing. The generation company (Genco) has six companies while the distribution company (Disco) has 11 companies also in different zones, such as Enugu, Lagos, Kaduna, and Ibadan, among others. The transition company has one company which is owned by the government due to security sensitivities and managed by a private company.

    Two corporations National Electricity Regulatory Commission (NERC) and Rural Electrification Agency (REA) were created. They function as autonomous units. However, the minister of power still supervises the whole power sector. The organisational structure changed for the purpose of privatisation.

     

    Why unbundle and

    decentralise the sector?

    The overarching objective of the electric power policy statement is to make sure that Nigeria boasts of an electricity supply industry (ESI) that can adequately address the demands of the citizens in the 21st Century as far as power is concerned; this requires a world- class reform process at all levels of the industry.

    The power sector reform therefore, must meet its obligation to break-up and regionalise the entire sector otherwise it has not met the challenges of reform. Breaking up and regionalising these new divisions will be more effective for distributing the power to various localities of the states and the nation at large. When the Discos receive their mandate, they must begin to strategise on how to dispense the power that has been generated to reach the remotest units of their specific zones. This single act alone if managed properly can bring about the change that Nigerians seek. This is the goal of reform to take an existing problem, study it, analyse it and carve out various meaningful solutions from the original problem while adding new and effective tested measures to make the old problem become efficient. Nigeria must take the approach of reforming several public companies in line with best practice for meeting global trends.

    The unbundling will be such that there will be a vertical unbundling of Power Holding Company of Nigeria(PHCN) whereby it will be divided into three segments: The Generation sector, Transmission sector and Distribution/Market sector. In addition, there will be a horizontal unbundling with the creation of PHCN successor companies and several transition reform entities will be created. A complete overhaul of the previous PHCN will be taken over by a complete new structure with system and market operators established and full transition steps towards a well rounded competitive market to follow.

    To introduce competition, functional segmentation of PHCN is crucial. This required: the separation of transmission and dispatch from generation; the establishment of a transmission company; the establishment of a number of competing, privately owned generation companies from existing PHCN generating facilities; the opening up of generation to new market entrants; and the establishment of a number of distribution and sales (marketing) companies, which will also be privatised.

     

    Goals of unbundling, decentralisation

    The government aims to provide a world-class ESI that will ensure an efficient way to manage the generation, transmission, distribution and marketing of power and electricity which will be safe, clean, affordable and efficient plus will have the ability to yield profit for the nation while assuring that it is cost-effective. In addition, the ESI will be able to attract private investors not just from,but also all over the world.

    The power sector will be developed under a transparent and effective regulatory framework, which aims to develop and enhance indigenous capacity in electric power sector technology, and to participate effectively in international power sector activities in order to promote electric power development in Nigeria, meet the country’s international obligations and derive maximum benefit from international cooperation in these areas.

    It also aims to ensure that the government strips its interest in the state-owned entities and establishes the key principles of restructuring and privatisation in the electric power sector while encouraging competition to come across growing demand through the full reformation of the electricity market, and to evaluate and inform electricity laws in toeing the line with the necessity to introduce private sector operation and competition into the sector.

    For quite some time, one can agree that many things in our society both in the public and private sectors need to be fixed because they are utterly broken. One may argue that those responsible for safeguarding our prospects are unfortunately protecting their personal interests. For over the past two decades, many organisations and countries have been yearning for reforms in one or more of their operational sectors. Some have managed to acquire the needed reform to stay competitive or to rise above the norms.

    Reform calls for open-minded approach, critical thinking sphere, risk taking intuition, and desire to make a difference for all. Research has indicated that reform is an acrimonious process for the elites as they may lose grip on their wealth. On the other hand, reform brings a comprehensive change to the industry to serve ‘all’ the stakeholders and not just the elite class.

     

    Global trends

    From the 1930s to the 1970’s, the evolution of electricity in the United States was monopolised and operated on the vertical private investor owned utilities (IOU). The strategy of deregulation in the early 1970’s in the US allows for competition in the wholesale power market and eventually leading to the retail sector. The reform policy supports regulation that suppresses duplication and foster new ideas to elicit the economically desirable outcomes. Hence, reform should capsize the way we do business by introducing new paradigms to meet the needs of today’s competitive and global market.

    The US pioneers the concept of reform in almost every industry to allow creativity, competition, critical thinking, risk taking, and self-determination to meet the need of the consumers. The US’ strategy in energy deregulation was a gradual process that led to legislative action by Congress. US deregulation called for sector-by-sector beginning from the wholesale to the retail of the power supply to avoid networks duplication and inadequate use of the country’s resources. The reform process in the US not only focused on states or companies but more importantly on consumers. The consumers’ focus subsequently led to price competition. The retail price competition introduced by the state of California in 1999 quickly spilled over two- dozen states including New York, Texas, Massachusetts, Ohio and New Jersey (Das, 2010). Although the retail price competition is an achievement in the reform process, the consumer’s freedom to choose his/her energy supplier created unprecedented competitive energy market. The US roadmap in energy deregulation from the early 1970s to the mid-2000 showed significant achievements despite some limitations or setbacks in the retail energy competition.

    The US energy reform achievement has prompted several countries such as India, Mexico, Canada, and Venezuela, just to name a few, to begin making changes in their energy policies in order to cope with the challenges ahead.

    India: India has taken a particular interest in the US energy reform because it must attract investors and meet the unprecedented growing demand of its consumers. The competition in itself is geared toward bringing down price of goods and services and to provide better services to consumers.

    • Dr. Njideka Kelley and Dr. Komlan Badake are of New Generation Consulting Resource Solutions, Cresco, Pennsylvania, United States. They can be reached via njigirl@yahoo.com, www.newgenerationconsultingrs.com.

  • Alison-Madueke praises Net-Work Oil for Oredo gas project

    Alison-Madueke praises Net-Work Oil for Oredo gas project

    The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke has commended Net-Work Oil and Gas Limited, and indigenous oil service company, for the completion of the construction of the first phase of the Oredo Integrated Gas Handling Facility (IGHF).

    The facility owned by the Nigerian Petroleum Development Company (NPDC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC), is located at the Oredo oil field in oil mining lease (OML) 111 in Edo State, has begun to deliver 65 million standard cubic feet per day (scf/d) of gas for domestic use, especially the power plants under the National Integrated Power Project (NIPP).

    When the project is completed, it will have the capacity to deliver 100 mmscf/d of gas.

    The minister commended the Managing Director of Net-Work Oil and Gas, Mr Clifford Osawaru and the NPDC for exceeding the government’s expectation in the project’s delivery. The facility is a 100 per cent local content facility.

    The Minister said since the Nigerian Content Act was signed into law in 2010, indigenous marketers, operators and service providers in the downstream sector of the oil and gas industry have developed capacity. She said: “I think the Oredo gas plant is a fantastic example of this sort of indigenous enterprise where a wholly indigenous crew has worked with the NPDC to bring a gas plant to fruition within the shortest possible time; and to make good Mr. President’s 12 month emergency gas supply plan.

    “It is wonderful for us and very satisfying for me and the Group Managing Director of NNPC to see that by the end of 2013, this plant alone will be supplying to the domestic gas market a hundred million standard cubic feet of gas per day. Already, as we speak, it has ramped up and is supplying 76 mmscf/d of gas, and I think that is quite amazing.”

    She stressed that with the commissioning, the country will be getting gas for power supply as well as liquefied petroleum gas (LPG) for domestic consumption. The spin off effect will further assist in moving the economy forward by opening up the service sector to indigenously owned companies to be able to produce a facility like the IGHF.

    The Group Managing Director of NNPC, Andrew Yakubu, said the Oredo IGHF is unique and dear to NNPC because it is the first major gas development project which is aimed at the realisation of a strategic road plan of being an integrated and oil and gas company. It is also special because it symbolises our response to the Federal Government’s gas to power initiative.

    He said: “NPDC produces an average of 130, 000 barrels per day and ranks as the fifth largest oil producer in the country. NPDC is poised to surpass its target of 250 barrels of oil equivalent per day by 2015.

    “Where we are standing today in Oredo covers a block of about 460 square kilometres consisting of three fields with an average production of 6, 000 barrels per day and with more prospects for further development. The average production from this field in the past 15 years was stagnated at less than 1,000 barrels per day. This facility also has the capacity to eliminate gas flaring in compliance with the Federal Government environmental requirements. Furthermore NNPC, NPDC are pursuing with vigour the development of more resources in order to provide gas to Pan Ocean Oil Company limited to optimise the utilisation of its Ovade Ogharefe gas plant.”

    Osawaru thanked the minister and the NNPC chief for giving the company the opportunity to prove that Nigerian companies have all it takes to excel. “I want to express my appreciation to President Goodluck Jonathan, the minister, the NNPC group managing director and the Federal Government for giving us the opportunity to showcase our capabilities. With this plant, there will be no doubt that Nigerian companies have come of age in the oil and gas sector.”

    The Managing Director of NPDC, Victor Briggs said the oil and gas reserves in the Oredo asset has increased by almost 400 per cent. “Today, NPDC has two rigs on location. One completing the Oredo South well, which is part of the 100 million scf/d of gas that will be supplied through the Pan Ocean facility. The other rig is in our offshore location in OML 119. By the end of 2013, a total of four drilling rigs, that is one offshore, two land and one swamp will be working for us. We are set to meet the target set for us to attain 250,000 barrels per day of oil production by 2015.”

  • Nigeria raises OPEC’s December output to 30.37m bpd

    Nigeria raises OPEC’s December output to 30.37m bpd

    Increased oil production from Nigeria contributed to raising the Organisation of Petroleum Exporting Countries’ (OPEC’s) December 2012 output to an average of 30.37 million barrels per day (mbpd), indicating a decline of 0.46 mbpd from 30.83 mbpd recorded in November, report has shown.

    OPEC, in its January 2013 monthly oil market report, said secondary sources revealed that total OPEC crude oil production averaged 30.37 mb/d in December showing a decline of 0.46 mb/d over the previous month.

    “Crude oil output saw an increase from Nigeria and Angola while production fell in Saudi Arabia, Iraq, and Iran,” the report said.

    According to the report, preliminary data indicates that global oil supply dropped 0.10 mb/d in December 2012 compared to the previous month. The decline in OPEC crude oil production in December impacted the global oil output which was partially offset by the increase in non-OPEC supply. The share of OPEC crude oil in global production declined slightly to 33.6 percent in December. The estimate is based on preliminary data for non-OPEC supply, estimates for OPEC natural gas liquids (NGLs) and OPEC crude production from secondary sources.

    The market report said that in 2013, non-OPEC supply is forecast to increase by 0.93 mbpd over the previous year to average 53.92 mbpd. The current supply expectation indicates an upward revision of 85,000 bpd to total non-OPEC supply, while anticipated growth was revised up by 30,000 bpd from a month earlier. The upward revision to total non-OPEC supply was due to the carry-over of some of the revisions introduced to the 2012 supply estimates, as well as to various updates to individual supply profiles. On a quarterly basis, non-OPEC supply is expected to average 53.84 mbpd, 53.61 mbpd, 53.91 mbpd and 54.49 mbpd, respectively.

    The reports also noted that global fiscal uncertainties still persist. It said: “For the past weeks, the outcome of negotiations in the US to avoid the ‘fiscal cliff’ – a term that describes the automatic spending cuts and tax increases set to take place at the beginning of 2013 – has been a major uncertainty hanging over the United States economy. Despite recent data showing an improvement in the country’s economy, the lack of clarity about the outcome of these talks over the past months led to a deceleration in business spending and investments at the end of the year, as well as a decline in consumer confidence.”

    On world oil demand, the report said: “World economic turbulence has affected oil demand in the past few years. Nevertheless, its effect on this year’s oil demand is not expected to be as sharp as last year, but instead considerably milder. As in the previous year, oil demand will grow in 2013, but not without some degree of uncertainty. The US economy is seen to achieve 2.0 percent growth, leading to more stable oil consumption.

    “The Euro-zone was able to somewhat contain its unknown fate of uncertainty. The spill-over effect on other economies will certainly be felt, especially in China. Given the positive momentum in some Organisation of Economic Cooperation and Development (OECD) economies, China’s exports and investments are picking up and showing better results. The OECD region will consume less oil than last year; however, the decline will be reduced by almost a half.

    “The non-OECD region will consume about one million barrels per day more than last year. It is worth noting that some parts of the non-OECD region will experience less economic prosperity than anticipated. Their demand will grow, but at a slightly slower pace than last year. The transportation and industrial sectors will consume most of the oil this year, and most of the growth will be related to both industries.”

  • ‘NNPC has no business asking for loan’

    ‘NNPC has no business asking for loan’

    The proposed $1.5 billion loan by the Nigerian National Petroleum Corporation (NNPC) from some local and international creditors has been receiving criticisms from Nigerians who query the rationale behind the loan.

    The Managing Director, Degeconek Nigeria Limited (DNL), a hydrocarbon assets development company, Biodun Adesanya, said it is hard to understand what could have informed the decision of the corporation to go borrowing despite the huge earnings from oil and gas.

    He said there was no reason for NNPC to go cap in hand to foreign lenders, requesting for subvention to meet its debt obligations.

    He said: “There is enough reason to believe that NNPC can’t go bankrupt for it to seek for loan from international creditors. First and foremost, oil price is currently attractive enough for oil producing countries such as Nigeria to rake in huge revenues from oil sales.

    From these revenues, any incurred expenditure can be met. So if this is so, how on earth would anybody want us to believe that NNPC is borrowing owing to its inability to meet its debt obligations? This is absolutely untenable and incredible.”

    Besides, he said, there are enough activities arising from the Joint Ventures (JVs) and Production Sharing Contracts (PSCs) operations to make the corporation buoyant to fulfil any of its financial requirements and demands.

    The petroleum geologist, said what NNPC realises from its JVs and PSCs operations are sufficient enough to help perform its statutory responsibilities as a national oil company and wondered why it could seek for funds in this circumstance.

    “We must understand the fact that NNPC as a corporation generates revenue from its joint operations with international oil companies. If we add what comes from its JVs and PSCs, there is no denying the fact that it has no reason not to stay afloat and meet whatever financial challenge that confronts it,” he said.

    Despite all these favourable conditions, Adesanya said it may not be out of place to assume that lack of a culture of accountability and transparency by the corporation may have been responsible for its current state of financial status to warrant such loan.

    But the House of Representatives in response to public criticisms of the move, has called for explanation from NNPC on why it is seeking for a facility after it had earlier claimed it was not insolvent. It therefore, instructed its committee on public account to wade in and scrutinise the corporation’s books to uncover the malfeasance perpetrated over time which may have made the corporation cash strapped.

  • Need to keep pipeline vandals at bay

    Need to keep pipeline vandals at bay

    Just when we thought the nightmare was over, the country is back to square one. And if we look at the mirror, the picture says it all – the problem is us. Sure we are the architects of our own misfortune. Where else on earth do you see man inflicting pain on himself but in Nigeria? Man’s inhumanity to man!

    As last year petered out, there was pipeline inferno at Ije-Ododo in the Ojo area of Lagos. Preceding that was an explosion in Arepo, Ogun State which culminated in the gruesome murder of four officials of the Nigeria National Petroleum Corporation (NNPC). To the uninformed; those events were part of the Nigerian circus. People always steal oil, vandalise pipelines, even burn themselves to death and the show continues.

    The NNPC did not see it that way, nor did motorists. NNPC Group Managing Director (GMD) Andrew Yakubu saw a crisis coming. Efforts were made to fix the damaged pipelines. At the same time, the vandals were bent on frustrating any such attempts.

    It did not take long to notice fuel lines. Repair works meant consumers had to undergo stress. Kudos to the NNPC, Yuletide of 2012 was not as torturous as it was in 2011 when the Federal Government increased the pump price of Premium Motor Spirit (PMS) from N65 per litre to N140. Although some greedy marketers adjusted their metres slightly, there was enough fuel to celebrate and calm the polity.

    About this time last year, fuel scarcity and price hike almost led to our own version of the Arab Spring. And just when we started singing Hosanna, trouble came up again from Arepo, the sleepy town that houses the largest Journalists’ Estate in Africa.

    The filling stations became chaotic again because thieves went wild again. The NNPC could also have gone mad. What can make a sane mind go mad more than having to spend time and money doing the same thing all over again? The job of the NNPC GMD now entails visiting damaged pipelines every now and then instead of managing other more pressing oil matters.

    The vandals have brought more pains to Nigerians. It’s instructive that the NNPC went to work immediately to repair the pipelines. If the flow had not been stopped, Arepo would still be burning. If the NNPC had continued to pump fuel, nobody would be in Arepo. If not for the immediate intervention of the NNPC, Lagosians would have been suffering by now.

    It is sad that money that should be used for other things is being pumped into pipelines repairs because thieves continue to vandalise our common asset. As repair works progress, the economy suffers, man-hours are wasted in search of fuel, commuters are forced to pay more and food prices also go up.

    We may always try to blame the NNPC for all our oil woes. At this time, I think we should tell ourselves the truth. The job of the NNPC is not just about burst pipelines. And we should also not restrict their intervention to fire brigade approach. I am sure with the Petroleum Intervention Bill (PIB), oil business will eventually turn out to be good business.

    •Aburime is a Lagos- based accountant.

  • ‘Non-passage of PIB, oil theft killing petroleum industry’

    ‘Non-passage of PIB, oil theft killing petroleum industry’

    Stakeholders in the oil and gas industry foresee grave uncertainty in the sector. They say the non-passage of the Petroleum Industry Bill (PIB), oil theft and vandalism of pipelines and other facilities, are gradually killing the industry, that urgent measures need to be taken to move the sector forward. EMEKA UGWUANYI, Assistant Editor (Energy) reports.

     

    The direction of the oil and gas sector this year remains a conjecture. Despite assurances from the government that Nigerians should expect a better year, stakeholders think otherwise. They said the non-passage of the Petroleum Industry Bill (PIB) is detrimental to growth of the petroleum industry.

     

    Upstream

    The immediate past President of the Nigerian Association of Petroleum Explorationists (NAPE), Dr. Mayowa Afe, expressed disappointment that the government has been unable to draw a pathfinder for sustainable growth of the oil and gas industry. He said the non-passage of the Petroleum Industry Bill (PIB) is killing the industry and makes Nigeria a laughing stock outside this shore.

    For the industry to witness a change this year, he said: “The ongoing ridiculous grammar about the Petroleum Industry Bill must stop. The Executive, Legislature, Judiciary and other stakeholders must find a way to end this unnecessary debate and tussle over PIB.

    “In my view, the PIB is being politicised. This unpatriotic approach to a very important national issue is not giving our country a good image outside the shores of this country.

    “Investors are moving their investments out of this country while potential investors are diverting to other countries. Oil companies are moving to other neighbouring countries – Ghana, Angola, Mozambique and even the war-torn Somalia, among others because of the uncertainty surrounding the future of Nigeria’s oil and gas industry.

    “I must tell you that the oil companies in Nigeria currently are just sustaining production in-country to use the money made from here (Nigeria) to invest in oil and gas blocks they acquired outside Nigeria.

    “We want to see activities in Nigeria’s oil and gas industry increased, more exploratory and development wells come on board. Kidnapping in the industry must end even if it entails engaging more youths in the Niger Delta region on sustainable basis. Crude theft, vandalism of oil facilities and unreliable regulations must end.”

    On investment, Afe said the way the industry is going, investors may at a point lose interest in Nigeria completely. Major oil companies in Nigeria are divesting their assets and reinvesting proceeds from such divested assets in other countries.

    He said: “Investors will be hesitant to put down their money in any investment and any country if there are no dependable regulations and platforms to ensure the safety of the environment and their investments.

    “The 10 per cent for oil producing communities in the Niger Delta as provided in the PIB makes sense. Certainly, it will tremendously help to achieve security aspirations of the industry and give the expected safe investment environment.

    “If the PIB is not passed as soon as possible this year, it will be a killer for Nigeria’s oil and gas industry,” he added.

    A petroleum lawyer and solicitor who practises in the United Kingdom and Nigeria, Ms. Efuru Nwapa-Obua, said for the industry to move away from where it is, some anomalies must be addressed.

    She said: “The Industry lacks effective regulatory institutions and is bogged down by gross corruption, mismanagement, poor governance and inefficiency. The fuel subsidy scam in which trillions of dollars were fraudulently paid out to marketers who falsified records with the active connivance of government officials and regulators is a case in point. The scale of the fraud is as mind-boggling as it is audacious and could have only happened in an industry with very weak, or no regulation.

    “Absence of international best practices, transparency, openness, good governance and corporate social responsibility, should be addressed. Inability of the sector to provide the nation with petroleum products is a situation that is disgraceful and unacceptable. Under capacity utilisation of refineries which are producing well below installed capacity must be addressed.”

     

    Downstream

    There are concerns as the country continues to depend on imported fuel. The future of the downstream sector remains unpredictable. According to the stakeholders, because the NNPC is the only company importing products, particularly premium motor spirit (PMS), it is also expected that the downstream would be stable this year considering the stability in supply and distribution recorded last year. Apart from occurrences such as vandalisation of pipelines and strikes by marketers, or oil workers such as the petroleum tanker drivers, the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, said the Ministry would ensure that there would be adequate supply and efficient distribution of petroleum products this year.

    The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Andy Yakubu also said the corporation is revamping all dysfunctional fuel depots across the country to actualise the aspiration of stamping out fuel scarcity completely and permanently from the country.

  • NIPCO moves to check sharp practices in filling stations

    To ensure that customers get value for their money for purchases at the retail outlets, the management of NIPCO has created a unit in the company that will oversee activities at its filling station across the country.

    Managing Director of the company,Mr Venkataraman Venkatapathy, who spoke with reporters, said the essence of the unit is ensure that no sharp practice is carried out in any of its filling stations.

    He said: “A department was set up in October last year to monitor activities at the stations, ensure that calibrations are properly done and right pump price and right practices always maintained.”

    Venkatapathy, who spoke on other activities of the company slated for this year, confirmed that it has not been easy for the downstream sector of the petroleum industry especially last year.

    He said: “Since the past two years, the industry has been undergoing challenges. Last year was particularly a difficult year because the industry is going through transformation and I must say that the government meant good and doesn’t have any negative intention.”

    He noted that NIPCO had been stable and stronger because it applies world best practices in its operations.

    He highlighted some of the projects the company plans to accomplish this year to include expansion of its compressed natural gas (CNG) for fuel programme. The first CNG programme approval given to the company is Benin but it has got approval to extend the programme beyond Benin.

    Venkatapathy, however, noted that the areas that should benefit from the expansion is still being kept secret and would be made known to the public in two months.

    He also said the company would increase its retail outlets this year as well as its liquefied petroleum gas (LPG) retail outlets. He said company plans to increase its LPG retail outlets from six to 20 this year, adding that it has the largest LPG retail outlets in Abuja.

    The company is also setting up LPG plants in Yola and Abeokuta and looking at setting up one in the east but the eastern plant arrangement hasn’t be concluded, the NIPCO boss said.

    NIPCO has been in the forefront of campaign for increased consumption of LPG (cooking gas) in Nigeria. Venkatapathy had at a summit held in Abuja, said his company supported the meetings and summits as part of its conscious initiative of deepening the LPG market through a well-articulated policy for the benefit of stakeholders.

     

  • PIB: Why host community fund was created

    PIB: Why host community fund was created

    The Petroleum Host Communities Fund (PHCF), contained in the draft Petroleum Industry Bill (PIB), which prescribes 10 per cent of the net profit of upstream oil companies to be paid into the fund, has drawn the ire of the North. What is PHCF and why was it provided for in the PIB? EMEKA UGWUANYI examines the provision.

     

    To say that the Petroleum Host Communities Fund (PHCF) has been controversial lately is an understatement. The controversy peaked when stakeholders felt the PIB may be stalled following the stand of the North on it. The North insists that the way the PIB is structured won’t benefit them and would use their majority strength in the legislative chamber to stop the bill. Although the bill has scaled the second reading, it is still has a long way to go to become an Act.

     

    What is PHCF

    Petroleum Host Communities Fund is contained in section 116 of the PIB. The bill in section 117 states that the fund shall be utilised for the development of the economic and social infrastructure of the communities within the petroleum producing communities.

    In section 118(1), it further states that “each upstream petroleum company shall remit, on a monthly basis, 10 per cent of the net profit as follows (a) for profit derived from petroleum operations in onshore areas and in the offshore shallow water areas, all of such remittance directly into the PHC Fund; (b) for profit derived from upstream petroleum operations in deepwater areas, all of the remittance directly into the Fund for the benefit of the petroleum producing littoral states.

    Sub-section (2) states that ‘net profit’ means the adjusted profit less royalty, allowable deductions and allowances, less Nigerian Hydrocarbon Tax less Companies Income Tax.

    Subsection (5) states “where an act of vandalism, sabotage or other civil unrest occurs that causes damage to any petroleum facility within a host community, the cost of the repair of such facility shall be paid from the PHC fund entitlement, unless it is established that no member of the community is responsible.

     

    Experts’ views

    Ms Efuru Nwapa-Obua, a Petroleum Law and Policy solicitor, who examined the issues with the PHCF, said the provision is laudable if well implemented as it would radically transform the oil producing communities, which have been yearning for development.

    She said: “This key and novel provision effectively confers the status of equity stake holders on the oil producing states. If implemented it will radically transform the oil producing communities in terms of infrastructural, social and economic development, create employment, check youth restiveness and lead to overall sustainable development.

    “It also places a responsibility on the oil producing communities to protect the facilities in their areas and introduces a sanction in the event of vandalism and destruction of property. This system of reward and punishment will no doubt check the wanton and reckless acts of vandalism in the oil producing communities given that no community will want to lose its benefits.

    A top official of the Nigerian National Petroleum Corporation (NNPC) who spoke in confidence, said the fund will effectively address job creation and security of oil facilities in the oil producing communities. The official noted that the idea of the fund was initiated by late President Musa Yar’Adua.

    The official said: “The oil community fund – is a fund that was initiated during the time of late President Yar’Adua. The intention is good and we strongly felt we should carry it over, in the sense that we strongly believe it would create more jobs. More jobs in the sense that the host community will become part of the stakeholders in the oil and gas industry and their core responsibility will be to ensure the security of infrastructure and facilities in their areas. And in the event of any vandalism of the infrastructure, the benefit they will get will not be given to them.

    “We are not saying that the cost of what we give to them versus the cost of infrastructure damaged is equal, but it would serve as a deterrent and ensure that act of vandalism is not done within the neighbourhood and then the community doesn’t have the benefit.

    “What it would do for us is that it would move the JTF back to the barracks to enable them do their core function. Assuming we have 200 JTF members within the Niger Delta, it would create at least 200 jobs for the community by the time they (JTF) members go back to the barracks.

    “The PHCF would create jobs for the communities to continue to secure these facilities, they wouldn’t sit down in their houses, they would have to get people to do this security jobs to ensure that they spend part of their money to be able to get more money.

    “It will significantly help in mitigating the current environmental degradation in the Niger Delta. In addition, new frontiers will not have to go through the pains in the Niger Delta as their predecessors because from day one, the host community is part of the oil and gas industry.

    “Under the current Petroleum Act, regulation is being done by the Minister without any consultation. But in the current PIB, for you to do a regulation, you need to do a public entry either it is a private document that is contributed for a change or a Ministerial document that shows you want to make a change. That document will be debated in a public forum and based on the outcome of that, the regulation will be enforced. This is one area the power of the minister is significantly reduced compared to what we have in the Petroleum Act.”

  • Industrialist seeks clarity in BoI/UNDP financing scheme

    The Bank of Industry (BoI)/United Nations Development Programme’s (UNDP’s) structural financing programme for renewable energy development could be more productive if it is transparently administered, Prince Timothy Okedele, has said.

    Okedele, the country representative, Coomi Trade Sarl of Italy, a waste-to-power firm, disclosed this at a trade fair organised by Small and Medium Scale Enterprise Development Association of Nigeria (SMEDAN) in Enugu.

    He said as commendable as the initiative is, the process of picking beneficiaries of the $30,000 credit facility still leaves much to be desired.

    He said: “I am at loss on the methodology or approach adopted by the facilitators of the scheme in arriving at the outcome for selecting the beneficiaries from the 10 states chosen for the pilot scheme.

    “One is certainly not sure if the criteria set for selecting the winner was faithfully followed. In fact, there are reasons to believe that the process for awarding the $30,000 may have been manipulated to favour some beneficiaries who got what they didn’t deserve.”

    Besides, he said the time lag between the conclusion and implementation of a pilot scheme and the commencement of next one is unnecessarily too long, urging the facilitators to consider bridging the delay if the scheme is to be effective.

    “Since the pilot scheme took off close to a year ago it is surprising that nothing has been heard again on when the scheme would continue. As a matter of fact, I must say that the delay is rather unwarranted. If the scheme is to produce result for which it was established, we must ensure that more beneficiaries are encouraged to be part of the laudable programme without having to wait for this long,” he said.

    He commended the aggressive approach adopted by the Small and Medium Scale Enterprises Development Association of Nigeria (SMEDAN) in its development programme,andenjoined organisers of the scheme to emulate SMEDAN’s approach by stepping up actions to benefit more entrepreneurs.

    He said: “I would like them to take a cue from SMEDAN so that the initiative can cut across board. SMEDAN, for instance, has been going round across the country organising trade fairs for entrepreneurs to exhibit and display their products and services. Just recently it held one in Enugu, which was well-attended by entrepreneurs. These fairs are like platforms for these entrepreneurs to show visitors including individuals and government agencies what they are capable to offer them.Besides, SMEDAN also provides financial support for small businesses in need of lifelines to boost their existence.”

    Okedele, also the Chief Executive Officer, Prince Adesoke International Limited, said the renewal energy programme is worth supporting with investment from the government and private sector if the country is to solve the acute electricity problem in the country.

    He said: “One of the reasons for calling for an aggressive approach to the structural financing of the renewable energy programme is the need for us to find a lasting solution to the erratic generation and supply of electricity in this country.Renewable energy as we all know has the capacity of complementing and helping out the conventional source of electricity generation, which is currently in dire strait. Therefore, the only way this can be possible, is to provide more funds for innovative technological solutions in renewable energy.”

     

  • Pan Ocean, bank seal gas funding deal

    Pan Ocean Oil Corporation Nigeria Limited has reached an agreement with Skye Bank Plc to fund the Ovade-Ogharefe Gas Processing Plant located in oil mining lease (OML) 98.

    Pan Ocean, according to a statement, is the operator of the Nigerian National Petroleum Corporation (NNPC)/ Pan Ocean Joint Venture, owners of the OML 98 asset located in Ovade-Ogharefe Delta State, Nigeria.

    The company holds 40 per cent interest in the OML 98 while the NNPC holds 60 per cent. Skye Bank is financing the 40 per cent equity of Pan Ocean under the Joint Venture.

    The plant processes liquefied petroleum gas (LPG), Propane and other similar products. The project boosts government’s efforts to ensure zero routine flaring in exploitation of oil.

    The construction of Ovade-Ogharefe Gas Processing Plant started in 2007 and was designed as a carbon emission reduction project with the capacity of delivering 200 million standard cubic feet per day (mmscf/d) of dry gas to the domestic gas market especially for power generation and industrial development.

    The gas plant, according to the statement, is reputed as the largest in West Africa. It earns carbon credits for its operations under the Clean Development Mechanism (CDM) of the Kyoto Protocol where its operations were reported and established.

    Pan Ocean had initiated a CDM certification for its gas utilisation project as part of its contributions to improving Nigeria’s image as a green-oriented country in line with the United Nation’s Kyoto protocol.

    With the CDM, reductions in greenhouse gas emission from projects in developing countries are registered and monitored under the United Nations Framework Convention on Climate change (UNFCC) and sold to developed countries that have limits for their emissions.

    It is in view of the highly capital intensive nature of the oil and gas sector that Skye Bank, according to the statement, chose to provide finance to support Pan Ocean in the realisation of the project.

    Speaking on the development, the Executive Director, Corporate and Investment Banking, Skye Bank Plc, Mr Timothy Oguntayo, said the funding to Pan Ocean was another demonstration of the active supports of the bank towards actualising the Federal Government’s local capacity and content development in the oil and gas industry.

    He noted that the gas plant would not only benefit all stakeholders but also improve Nigeria’s environment rating. According to him, among other things, the plant would ensure zero routine flaring in all areas of its operation due to the adopted modularised plant concept, which makes the plant expandable for additional gas finds in the concession area.

    He said Skye Bank’s partnership with Pan Ocean Oil Corporation Nigeria Limited has been credited with the company’s success in processing gas, which could have been flared. But rather than flare the gas from its operation, Pan Ocean processes for meaning utlilisation and in compliance with the carbon credit scheme of the United Nations Framework Convention on Climate Change (UNFCC), which the company qualified for in February 2009.

    Some of the hindrances to the development of the oil and gas industry in Nigeria include high capital requirement, dearth of critical trading infrastructure and inadequate manpower, he added.

    Oguntayo reiterated that despite the challenges associated with oil and gas finances, Skye Bank would continue to support indigeneous investors who have defied the odds by making substantial investments in the subsector in order to raise the Nigerian flag high.

    Known for its very tough and stringent entry requirements, which are difficult for the indigenous investors to meet, the oil and gas industry has been dominated by foreign corporations, which control at least 60 per cent of the industry occupying senior management positions, while highly skilled technical managers are expatriates.

    The Nigerian Content Act is addressing the anomaly, but finance has been major impediment to the quick realisation of the gains of the Act.

    Pan Ocean is the first oil and gas exploration and Production Company to sign the Gas Sales Aggregation Agreement (GSAA) with the Power Holding Company of Nigeria (PHCN) and Egbin Power Station two years ago and the agreement is for a period of 10 years.