Category: Energy

There is hope for better power generation on the horizon as the Senate Committee on Power, at the just-concluded three-day investigative hearing on the power sector recovery plan, commended two indigenous power generation firms for meeting the privatisation performance targets set for operators in the sector, MUYIWA LUCAS writes.

 

It was a  rare commendation    from the  Red Chamber of the National Assembly. Though the Senate, on Tuesday, still blamed the hiccups in the power sector to lack of coordination among players responsible for power administration in the country, the thumbs up for two Generating Companies (GenCos) – Transcorp Power and Geregu Power, stakeholders agreed, represented hope and something to cheer in the sector.

The Senate Committee on Power, at the just-concluded three-day investigative hearing on the power sector recovery plan, submitted that only two of the six privatised GenCos- Transcorp Power and Geregu Power – met the performance targets set by the Bureau of Public Enterprises (BPE).

The Chairman of the committee, Gabriel Suswam, said: “We have listened to presentations from the government side and the operators and we have seen that there is no alignment anywhere and that is the problem.

Once there is an alignment and proper coordination, there will be sanity and progress. Out of six GenCos privatised, only two of them are performing.”

The Director-General of Bureau of Public Enterprise (BPE), Alex Okoh, noted that only Transcorp Power and Geregu Power met their respective minimum performance targets set for them in 2013, while the other four GenCos did not meet their targets for various reasons.

“Transcorp Power surpassed the five-year performance agreement target of 670 megawatts (mw) set by the BPE at the handover of Ughelli Power by achieving 680.83mw.

By 2024, it expects to generate 2,500mw by the acquisition of Brownfield Thermal Projects, the expansion of the existing TPL Plant and greenfield renewable energy projects which, all together, add up to 25 percent of the power generated within the country,” he said. Geregu Power on the other hand achieved 435mw from its 414mw at handover.

Okoh, in his presentation, revealed the key statistics of the power sector before 1999. For instance, prior to the commencement of civilian rule in 1999, it was discovered that only 17 of the 79 generation units were operational with an average daily generation nationwide of 1,750MW as at then.

He also revealed that investments made in the power sector was highest in 2001 with over $400 million, while no investment funding was provided for the sector for seven years —1989 and 1995.

Other key revelations at the hearing were that the Nigerian Electricity Supply Industry (NESI) has glaring huge challenges which made the presentation conclude that the sector is not commercially viable.

The presentation noted the challenges of GenCos to include liquidity, inadequate gas supply, weak transmission infrastructure and foreign exchange procurement.

Overall, it was noted that GenCos’ percentage increase in available capacity from privatisation was 78 percent, representing a shortfall of 22 percent below their collective targets.

Suswam urged the ceasation of the blame game pervading the sector. He said once there was an alignment and proper coordination, and assurances that GenCos could generate 13,000mw, transmission could transmit, at least 10,000mw while Distribution Companies (DisCos) could absorb the 10,000mw and proper tariff, the sector would become solvent.

“Once there’s money in the sector, other potential investors will come in. The banks will be able to also put in more money, so that the sector will begin to run on its own.

But where we are now, it will be unthinkable that government will stop providing the intervention. Once that stops, everything will collapse.

We are spending huge amount of money paying for debt that is already owed. We must begin to focus on how to address the issue of infrastructural deficits in the power sector.

Let’s spend money on metering. Let’s at least meter about 80 percent of those connected to the networks; then we would be able to collect enough money to make the sector liquid,” Suswam said.

By Muyiwa Lucas

 

Shell-funded impact investment firm, All On, has announced the completion of the first phase of a nationwide solar installations at emergency health facilities related to the COVID-19 pandemic response.

The off-grid energy impact investment company announced the COVID-19 Solar Relief Fund on March 31, to be installed via renewable energy companies Auxano, Arnergy, GVE and Lumos to provide solar power for emergency health facilities in support of the national response to the pandemic and in just two months, all installations have been deployed and in use.

“When we conceived this contribution to the national COVID-19 support initiative, our main objective was to ensure that our chosen investee companies delivered quality installations quickly and safely to help save lives,” said Dr. Wiebe Boer, All On Chief Executive Officer.

According to Boer, All On’s main objective was to facilitate collaboration with various national and private sector initiatives to make a direct contribution to Nigeria’s COVID-19 response and help curb the pandemic and save lives.

Besides, he said All On also recognised that, in addition to saving lives, firms needed support to ensure business continuity during the economic downturn.

This, he further said, made the companyon April 15, to announce a postponement of all second quarter interest payments on interest-bearing investments. This decision was taken in recognition of the continued economic impact of the COVID-19 pandemic and in line with its mandate to accelerate the growth of the off-grid energy sector in the country.

Similarly, the firm’s Investment Manager, Afolabi Akinrogunde, expressed satisfaction with the impact the social investment brings to the country and the fight against Covid-19.

“Our investee companies’ efforts include 10 rooftop solar and storage installations spread across Lagos, Oyo, Kaduna, Rivers and Enugu states as well as 95 Solar Home Systems across 24 states and the Federal Capital Territory,” he listed.

Stakeholders in the industry maintained that many off-grid energy firms recognised early on, the critical role they could play towards the national COVID-19 response by providing solar power to ensure that testing facilities were not hampered by a lack of electricity.

For instance, the Chief Executive Officer, Lumos Nigeria, Adepeju Adebajo, said: “Lumos was ready with trained staff and products on ground to install solar powered systems that allowed key workers to test and treat patients with the virus, ultimately saving lives.”

The Chief Executive Officer of the Nigeria Centre for Disease Control (NCDC), Chikwe Ihekweazu said: “We are grateful to All On for the support rendered to isolation and health care facilities via the provision of solar power, at a time when healthcare infrastructures are in critical need.”

All On was established by Shell to contribute to addressing the country’s access to energy gap through impact investing and the creation of an enabling environment for players in the off-grid sector to thrive.

Through the COVID-19 Solar Relief (CSR) Fund, it is contributing to interventions nationwide by providing green power solutions to aid in the containment and treatment of the virus, while also creating awareness of solar power for the development of the economy.

By Muyiwa Lucas

 

THE Nigerian Electricity Regulatory Commission (NERC) is set to generate a minimum of 2,000MW of electricity from renewables this year.

In a report on its website, the agency assured of guaranteed price and access to grid as well as feed-in tariff for solar, wind, biomass and small hydro.

Apart from the Power Purchase Agreement (PPA) based on plant life cycle of 20 years, electricity distribution companies (DisCos) are mandated to procure minimum of 1000MW, representing 50 per cent of the projected renewable sourced electricity.

NERC has also approved, in line with the National Policy on Renewable Energy and Energy Efficiency, three windows for grid connected renewable energy projects, such as net-metering for very small capacity (typically below 1MW), feed-in tariff for capacities up to  5MW of solar, 10MW of wind, 10MW of biomass and 30MW of small hydro.

Also, approved is competitive tender for capacities above these thresholds to be procured through Nigerian Bulk Electricity Traders (NBET).

“Pursuant to its regulatory mandates, NERC established in 2015, a feed-in tariff for renewable energy based power generation in Nigeria.

Nigeria has an abundance of various renewable energy resources of which solar, wind, biomass and small hydro power (SHP) are the most ubiquitous.

The Nigerian Electricity Regulatory Commission (NERC) is committed to stimulating investment in renewable energy generation in Nigeria” the report said.

The Executive Secretary, Renewable Energy Association of Nigeria (REAN), Lande Abudu, agreed that many Nigerians were deploying renewable energy now than before because it is clean.

“There is already more demand for renewable energy. In any case, in the metering and other issues we all have to work together because the mini-grid still has to be paid for,  one way or another. If it is stand-alone system that is another thing.

Then that means the market becomes huger for them. Stand-alone system is small. You can’t have 10-work system in the centre of Abuja,” she said.

After about two decades, the Federal Government is set to conduct a new bid round for marginal fields for indigenous firms to shore up revenue and boost local participation in the capital and technology intensive upstream sector of the oil and gas sector, writes LUCAS AJANAKU.

 

PRESIDENT  Muhammadu Buhari has approved the sale of government’s stakes in 57 oil blocks owned by oil majors.

The Department of Petroleum Resources (DPR) said it had on June 1 flagged off the sale of marginal fields in a fresh bid round.

Marginal fields are oil discoveries which have not been exploited for long, due to one or more of the following factors: very small sizes of reserves/pool to the extent of not being economically viable; and lack of infrastructure in the vicinity and profitable consumers.

Importantly, the last time that bid rounds took place for marginal fields in Nigeria was in 2002.  Factors such as politics, corruption, and alleged lack of technical competence and failure of winners in the last process to utilise the fields for oil production, have been blamed for the long delays in or suspension in the process.

DPR said the fields are located on land, swamp and shallow offshore terrains. It added that the exercise, which would be conducted electronically, would include expression of interest/registration, pre-qualification, technical and commercial bid submission and bid evaluation.

 

Guidelines

The guidelines on the oil bid round and payment by interested bidders, according to the DPR, shall attract non-refundable fees. These are application fee of N2 million per field, bid processing fee of N3million per field, data prying fee of $15,000 per field, data leasing fee of $25,000 per field, competent persons report (CPR) of $50,000 and $25,000 for fields specific report.

Interested bidders are expected to pay a total of $115,000 in statutory fees and another N5 million in local currency.

At the official exchange rate of $360/$1, the 57 oil fields on offer gives N2,364,800,000 including the N5 million payment.

The agency added that all application fees and processing fees are expected to be paid into the Treasury Single Account (TSA) while Signature Bonuses are expected to be paid into the Federation Account.

Also, fees for data leasing, data prying, CPR and Field Specific Report should be paid into the National Data Repository (NDR) account for repayment.

According to the approved guidelines, applicants must show evidence of technical and managerial capability and must also demonstrate the ability to fully meet the objective of undertaking expeditious and efficient development of a marginal field.

The flag-off of the 2020 marginal bid round comes amidst the country’s poor financial situation which has made the implementation of the 2020 a Herculean task for the Buhari government with capital and recurrent expenditures already slashed.

The commencement of the  oil bid round is coming 18 years after the first one was conducted in 2002.

 

Oil price crash problem

The country has been grappling with drop in oil prices  due to  a fall in global fuel demand caused by the lockdown measures aimed at containing COVID-19.

It was estimated that the delay in licensing rounds may have denied the country of revenue in form of signature bonuses of about N350 billion ($972.22 million) this year, from N939 billion originally expected, officials had said on web call.

The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mele Kyari, said the times were rather inauspicious for foreign investors into the oil industry.  “Where you require foreign investment … this is not a good time,” he had said of a potential licensing rounds, arguing that “the appetite would be very very low.”

He expressed optimism that marginal fields were less impacted by low oil prices because they would most likely be taken up by local producers and would require less capital to develop.

Nigeria, a member of the Organisation of Petroleum Exporting Countries (OPEC), has been hard hit by dipping oil prices which will, ultimately, hinder its ability to deliver on budget promises.

This realisation is not lost on the government as Finance and Budget Minister Zainab Ahmed hinted that  some upstream oil and gas projects would be delivered “much later than originally planned” due to scaled back government investments because the country was having trouble selling some of its oil cargoes, and would also have to cut production to below what it was originally expected in the budget. The country is a party to OPEC and OPEC+ agreement to trim output to help balance the global market.

She said projected oil and gas revenue would inevitably drop by over 80 per cent this year.

Past lessons

The group said the government’s objectives of conducting previous bids have always been to increase oil revenue, raise proven oil reserves to about 40 billion barrels, and boost oil production to about three million barrels per day (bpd). These objectives are, however, hardly met for obvious reasons.

Aside inability to collect more than $750 million in signature bonuses from the various bid rounds, of the 175 marginal oil field licences issued between 2000 and 2007, only one has been developed into commercial production.

The group said rather than growing, daily oil production capacity has consistently dipped, from about 2.3 million bpd in 2014 to 1.6 million b pd as at last year.

They said previous bid rounds showed a sharp decline in expression of interest from serious investors, local and foreign, with only 57 per cent of the oil blocks on offer in the 2005 exercise receiving at least one bid.

By 2007, they said the figure dipped further to 40 per cent, with many of the serious investors expressing concerns about the law regulating operations in the oil industry.

Court  intervenes

The Federal High Court sitting in Lagos has restrained the Federal Government from selling or accepting bids for eight of the marginal oil fields pending determination of a suit challenging their status.

Justice Chukwujekwu Aneke granted the order of interim injunction against the Minister of State for Petroleum, his ministry and Engr Auwalu Sarki following a May 20 ex parte application filed by 10 oil firms.

The firms and ‘their’ marginal oil fields are Independent Energy Ltd – Ofa OML 30; Associated Oil and Gas Ltd/ Dansaki Petroleum Unlimited – Tom Shot Bank OML 14; Bayelsa Oil Company Ltd – Atala MFOG-2C and Bicta Energy and Management System Ltd – Ogedeh OML 90 MFOG-2D.

Others are Del Sigma Petroleum Ltd – Ke OML 90 MFOG-2E; Goland Petroleum Ltd -Oriri OML 88 MFOG-2F; Sahara Energy Ltd/African Oil and Gas Ltd – Tsekelewu OML 40 MFOG-2G and Sogenal Ltd Akepo – OML 90 MFOG-2H.

The judge restrained the respondents from advertising a bidding process for the field(s) which were awarded to the applicants, or selling them.

The judge further granted an interim injunction authorising the applicants “to continue to manage, operate, control, explore… the marginal fields pending the hearing and determination of the substantive suit.”

He adjourned till June 29 for mention.