Category: Energy

This is a trying period for the global oil industry. Oil-producing countries are devising means to remain afloat and protect players in their industry, the major and independent producers alike, and Nigeria is not left out of this game plan. In an interview monitored on the CNN, the Chief Operating Officer, Oando Energy Resources, Dr. Alex Irune, praised the Federal Government’s efforts in navigating the oil and gas sector through the impact of COVID-19 pandemic, through proactive capital expenditure (capex) cuts. He also praised the government for engaging the independent producers in conversations on oil production cuts and the Nigerian National Petroleum Corporation (NNPC)-led upstream oil industry coalition in raising about $35 million, which is being distributed as palliatives to contain the pandemic, among others, EMEKA UGWUANYI reports.

 

THE petroleum industry is facing tough times with the plunge in prices of between 60 per cent and 70 per cent, OANDO Energy Resources (OER) Chief Operating Officer, Dr. Alex Irune, has said.

On how the plunge has affected Nigeria’s independents, Irune stated that  his company took a pragmatic approach to hedge some of its barrels ahead of this time, like other independent producers, but with oil price at $20 or $25, the barrels not hedged are potentially 60 to 70 per cent of their production and that’s sub-economic.

“So that gives you an idea of where we are from a bottom-line perspective. We’ve taken the right steps, we believe, encouraged by the government to take those huge decisions. The cuts have come in on the capital expenditure (capex) and on the operating expenditure (opex) sides.

We are looking aggressively at bringing those budgets down. We all had commitments at the start of the year, but the world has changed,” he said.

The reality, he noted, is that there are some casualties along the way but that what we  must do is stay optimistic. “I know for most oil producers, there are costs that as independents, we have very little control over; so, if I break down that operating cost for you, there is a 20 to 40 per cent that sits out of our control in terminalling fees, transportation fees for crude, we have very little control over that.

As independents, our human resource, our payroll, operations largely is where we look to make those cuts and of course the capital side,” he added.

On whether these measures are enough, Irune said the question is the price of oil. “We’re seeing an uptick in the price, we are seeing the decision by the Organisation of Petroleum Exporting Countries (OPEC) to cut 10 million barrels come in to realise the intention of the organisation.

They’ve taken that huge step. But, more importantly, the government is stepping in to ensure that independents, like ourselves, are engaged in conversations to ensure that process of survival, which is indeed a process for us, unknown as well, is managed jointly, to see that it takes the least amount of time to see a recovery.’’

On the upstream oil industry coalition’s $35 million intervention, the oil firms’short-to-medium term survival, the challenges being presented by low oil prices and response to the pandemic, Irune said: “We’ve seen the most impressive, in my time as a professional, showing of the private sector, stepping forward and just taking on the challenge of the COVID-19 pandemic.

The industry at large, Russia and Saudi Arabia accelerated potentially what could have been a more manageable situation at this point, but we are where we are.

We’ve made the sacrifices and taken the decisions, but what we’ve seen is the likes of the National Oil Company leading us as partners, putting in about $35 million and more into that basket.

We’ve seen a larger group of banks and other institutions come in, and for us the key is this: the effective spend and distribution of those funds through the palliative measures we have all set out to push to the most needy and the most vulnerable, because that’s really what this is about.

“COVID-19 will come and we will deal with those issues, but there will be casualties after we’ve dealt with the pandemic and a lasting solution – our company for one has taken a step to create an aggregator platform to combine donors and last mile solutions so NGOs and boots on the ground.

‘’We are encouraging people to come in and donate so we can disperse this money and get it to those that really need it. It’s been an amazing showing by the private sector. Dare I say, they have made the difference.”

Irune also highlighted the importance of some major projects that would be part of the game changers when the war against this pandemic was won.

He said the government was looking forward to accelerating some of the key industry enabling projects, such as the Escravos, Obiafu-Obrikom-Oben (OB3) and AKK pipelines.

‘’The NNPC is focused on getting these projects to a stage where when all these problems are over, we, as a country, are not only ready to be more efficient when it comes to oil and gas exploration and utilisation, but also with domestic capacity increases and we’re able to have more barrels to export, he added.

 

The power sector can only return to optimal performance after COVID-19 pandemic when stakeholders, including the Federal Government, would be able to put in place measures that would galvanise the industry. For this, improvement in investments, generation, distribution and transmission of electricity and provision of meters have to be addressed, writes AKINOLA AJIBADE.

Like a festering sore, the deplorable state of the electricity sector has caused more harm to Nigerians.

There is a sing-song of woes in the sector. Not only are issues, such as irregular supply of electricity, estimated billings and shortage of meters, being discussed with passion, the problems have forced many Nigerians to resign to fate.

Successive administrations have tried to fix the problems in the sector to no avail. Recently, the sector recorded one of its worst performances when it generated below 2,000 megawatts (Mw), a figure, which is not enough to meet the needs of many Nigerians.

Ironically, the development coincided with the outbreak of coronavirus pandemic,  which has stalled the operation of many businesses across the world. More worrisome is that the issue has resulted in lockdown of socio-economic activities, which has impacted on the sector.

Though Nigeria as stated in President Muhammadu Buhari’s broadcast, there is partial removal of the lockdown, the development suggests that the economy is still in limbo.

While this lasted, stakeholders are hopeful that the sector would improve its operation if only it can attract more investments and rejig the operation of its three key segments – generation, distribution and transmission.

Generation

With generation of less than 5,000Mw, stakeholders believe that the country could utilise its vast resources to produce electricity that is enough to meet its growing population during the post COVID-19 era. According to the Executive Secretary, Association of Power Generation Companies (APGC), Dr Joy Ogaji, shortage of gas is the bane of the power generation sub-sector. She urged the government to improve on the provision of gas. She said by so doing, the sector would produce electricity and contribute to the economy.

She said levies, including the imposition of Value Added Tax (VAT) of 7.5 per cent by the Federal Government on gas sold to the electricity generation firms, were affecting the use of the product in the sector.  The industry, she said, should assist in reducing the volume of stranded electricity, stressing that the idea would enable the country to utilise electricity well.

The industry, she said, boasts of 1,000Mw of stranded electricity due to transmission problems. She advised the government to put in place measures to avert such occurrence in the future.

Similarly, the former Director, Centre for Energy Studies (CES), University of Port Harcourt, Prof Wunmi Iledare, said the country should make use of its abundant gas resources to improve electricity production.

He said: “Now that Nigeria is making  efforts to put an end to the spread of coronavirus, which has taken a toll on the world economies, it is going to be a good thing if the country can up its electricity generation by making more gas available to the over 23 thermal power plants nationwide.

“In the short run, the best that can be done by the Federal Government is to provide gas for electricity generation.”

He said the government and the power generation firms were trying to provide enough gas for production, urging them to intensify efforts in that area. The government, he said,  should in the long run set aside sentiments and patronage to revisit the Electricity Act and redefine market for end-users.

Distribution

Though the 11 power distribution companies (DisCos) approved by the Federal Government during the privatisation of the sector are believed not to be doing enough in  electricity supply, the Executive Director, Research and Advocacy, Association of Nigerian Electricity Distributors (ANED), Mr. Sunday Oduntan, advocated more investments in the sector.

The sector, he said, is performing well despite its meagre resources, adding that when more funds are made available to the power firms, the sector would witness rapid growth.

Oduntan urged the government to improve the transmission mechanisms in the country with a view to ensure that electricity is evenly transmitted to the consumers.

In a related development, Iledare urged the DisCos to evacuate more electricity and  purchase more power to meet the needs of their consumers.

He said: “I hope the electricity distribution firms do have some cash flows in their reserves or better put cash reserves to meet the energy needs of the consumers in a period like this in which there is lockdown of economic activities caused by the spread of coronavirus.’’

Iledare said electricity distribution firms operate with obsolete infrastructure, urging them to scale up their activities by bringing new equipment that would fast-track their operation whenever Nigeria overcomes the epidemic.

Transmission

Industry watchers have picked holes in the operation of the Transmission Company of Nigeria (TCN), claiming that the company is yet to rid itself of some obsolete equipment. Based on this, they advised the management of TCN to improve its facilities to avoid frequent collapse of transmission equipment.

On issues that militate against the growth of the sector,  the Managing Director, Power Cam Nigeria Limited, Mr Biodun Ogunleye, said the government needs to increase investments in the generation,  distribution and transmission  of electricity  in Nigeria, stressing that any attempt by the Federal Government to overhaul the operation of the sector would pave way for its growth.

He said post COVID-19 would pose more challenges for the stakeholders, including the Nigerian Electricity Regulatory Commission (NERC), noting that the sector would record growth once investments were made in the various segments of the industry.

Also, Iledare advised TCN to beef up its workforce by ensuring that more competent people were saddled with operating transmission equipment. He said when this happened, TCN would be able to detect the transmission problems early and proffer solutions to them.

He said a competent workforce would know what to do once there are hitches in electricity transmission, noting that the same process was adopted in the oil industry where he worked as a well engineer.

Being engineers, he and his colleagues were able to detect problems during exploration and production of crude oil.

He advised the government to put in place a recapitalisation scheme that is similar to what happened in the banking sector when Prof. Chukwuma Soludo was the Governor of Central Bank of Nigeria (CBN).

By Emeka Ugwuanyi

 

Nigeria LNG Limited (NLNG) has restated its support for the fight against the Coronavirus (COVID-19) pandemic. It urged adherence to measures  to curtail the spread of the disease.

Its General Manager, External Relations & Sustainable Development, Eyono Fatayi-Williams, stated this when the company donated some items to the Rivers State government

He said NLNG contributed over $30 million to the Federal Governmen’s Oil and Gas Industry Collaborative initiative spearheaded by Nigerian National Petroleum Corporation (NNPC) to fight the virus.

To contain the spread of the virus in Rivers State and in its base, Bonny Island, he said the company has commited N1 billion in various interventions.

He said renovated a building and set-up of a 10-bed Isolation/Holding Centre at the Bonny Zonal Hospital. Also, it donated Personal Protective Equipment and five suction machines, three single air conditioners for consulting rooms, five split air conditioners for wards and 10 patient monitors.

Read Also: Buhari sympathises with Gov. Fintiri over mother’s death

 

Other items it donated to Bonny Island include one oxygen bank consisting of five bull nose cylinders, 10 drip stands, 10,000 one-fit N95 health care particulate respirator and surgical masks, 250,000 surgical masks, 50,000 nitrile gloves, 12,500 hooded coveralls with boots, 70 respirators, and  hand sanitisers.

The company official added that NLNG is  partnering the Bonny Local Government Council to protect the Island’s indigenes  and  their visitiors.

Beside, NLNG has donated equipment and materials to upgrade some facilities at the Rivers State University Teaching Hospital (RSUTH). It also donated two transport vehicles for contact tracing, five ventilators, 30 patient monitors as well as over 100,000 surgical masks.

Others include 30,000 nitrile gloves, 5,000 hooded coveralls, 8,000 respirators, 200 goggles and 200 face masks.

The company pledged to support the government by partnering the advisory team of the Ministry of Health to curtail the spread of the disease.

NLNG also donated food to its host communities as part of its palliatives.

From end of this week, the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC under the OPEC+ alliance will implement oil production cut of 9.7 million per day to stem crashing oil price. Will the output cut deal heal the global oil market malady? EMEKA UGWUANYI reports.

 

Members of the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC under the OPEC+ alliance early this month agreed to cut production by 9.7 million barrels daily  between next month and June, the biggest cut ever by the world’s oil producers. The deal was struck to stabilise the global oil market that has been badly hit by the coronavirus (COVID-19) pandemic.

The OPEC+ agreement is that the initial 9.7million barrels per day cut would last through May and June. Afterwards, the production cut would be reduced to eight million barrels per day for the rest of the year.

Beginning next January, the cuts would decrease to six million barrels per day, which would continue through April 2022, the group said.

According to industry analysts, the production cut is unlikely to solve the oil market problem. Immediately after the OPEC+ group announced the historic production reduction, prices rose marginally. After a day, the prices began to fall continuously again because the initial price rise was caused by market fundamentals but by sentiments.

To the analysts, the agreed reduction in output amounts to only about 10 per cent of the world’s normal supply of oil, far below the estimates for how much demand for oil has collapsed amid the coronavirus pandemic.

They noted that the demand crisis caused by the pandemic was huge and could only be gradually reversed by restarting global economic activities and reopening global borders for businesses.

Oil prices fell to 18-year lows in recent weeks. The drop came after Saudi Arabia and Russia abandoned years of production cuts in early March, launching a price war by flooding the market with crude.

The coronavirus, meanwhile, dealt a devastating blow to energy demand, pushing prices even lower. Besides, the OPEC+ production cut doesn’t after oil producers outside the group such as United States.

Also global oil storage is rapidly filling up, exceeding 70 per cent and approaching operating max,” Steve Puckett, executive chairman of TRI-ZEN International, an energy consultancy, told CNBC.

The agreement was not contingent on nations outside of OPEC+ curbing production, which some analysts had suggested might be a stipulation for Saudi Arabia and Russia to scale back production. The group did, however, call on other major producers to cut production in a further bid to prop up prices.

Read Also: OPEC reassures commitment to global economic stability

 

Analysts at Goldman Sachs called the deal “historic yet insufficient,” adding that the voluntary cuts were “still too little and too late to avoid breaching storage capacity.

Ultimately, this simply reflects that no voluntary cuts could be large enough” to offset the loss in demand, which they pegged at 19 million barrels per day on average this month and May.

Senior market analyst for Asia Pacific at Oanda,Jeffrey Halley, called the agreement “underwhelming,’ noting that non-OPEC+ oil producers, including the United States, Canada and Norway, have not committed on paper to “actual cuts to production.”

“The OPEC+ deal, although well-meaning in intent, wholeheartedly fails to address the supply/demand basis confronting the world. It can at best only put a floor under oil prices at their March lows,” Halley added.

All the crude grades except Brent trade below $20 per barrel. According to Bloomberg, Brent for June settlement fell to as low as $15.98 a barrel, the lowest since June 1999, before closing $1.04 higher at $20.37 per barrel.

The Dated Brent benchmark, a global reference for almost two-thirds of the world’s physical flows, had plunged to $13.24 a barrel last week, the lowest since 1999, according to price reporting service S&P Global Platts.

“With the price so low, key European and African crude streams including Urals and Bonny Light will sell under $10, as they trade at a discount to the marker,” it added.

Currently, oil firms across the world have begun to cut expenditures. While some firms have started to cut their workforce, others have warned about job losses and yet others have begun filing for bankruptcy. Rig count is also substantially reducing with a good number stacked.

By Emeka Ugwuanyi

To provide stable electricity to COVID-19 isolation centres, the Rural Electrification Agency (REA) has handed over four solar hybrid mini-grid plants to the Federal Capital Territory (FCT), Lagos and Ogun states.

According to its Managing Director/Chief Executive Officer, Ahmad Salihijo Ahmad, the donation was part of the agency’s support to the fight against COVID-19.

The donation was in line with the intervention and palliative measures of President Muhammadu Buhari, and the Minister of Power’s directives on the role of REA in complementing the Federal Government’s efforts on Covid-19, he said.

The REA chief also noted that the agency had outlined measures towards containing Covid-19 by providing emergency electrification of COVID-19 health centres across the country, collaboration with development partners on accelerating disbursement to qualifying developers as well as engaging the Central Bank of Nigeria (CBN), through the Federal Ministry of Power, towards inclusion of energy firms under the Covid-19 intervention programme of the bank.

Ahmad reiterated REA’s support in containing COVID-19 and commitment to the electrification of unserved and underserved areas across the country.

He said: “The REA being the implementing agency of the Federal Government for the electrification of unserved and underserved areas across the country, hereby provides and handover this 53.1KWp solar hybrid mini-grid at the University of Abuja Teaching Hospital Covid-19 Isolation Centre. This project is one of initial four solar hybrid mini grids implemented by the REA at COVID-19 health facilities. The other three are 25KWp solar mini grid at the Nigeria Centre for Disease Control (NCDC) Public Health Laboratory in Lagos, 20KWp solar hybrid mini grid at 128 Bed Ikenne Isolation Centre and 10KWp solar Mini hybrid mini grid at 100 Bed Iberekodo Isolation Centre in Ogun State. Implementing these projects will provide clean, safe and reliable electricity to enable our health workers thrive towards the fight against this Covid-19 disease.”

The representative of NCDC, a Deputy Director, Mrs Babatunde Olajumoke, said: “We applaud this generous gesture by the Rural Electrification Agency of providing these solar hybrid mini grids to Covid-19 isolation centres and the public health laboratory in Lagos State. This will truly help our health workers in containing the spread of Covid-19 in the country.”

The recipients of the solar mini-grids and representatives of the health facilities thanked the Federal Government and the REA for the gesture.