Tag: CAPEX

  • Axxela eyes $147m capex for gas infrastructure, others

    Axxela Limited, formerly Oando Gas and Power, has made a capital expenditure projection of about $147 million to develop its gas supply infrastructure in Lagos and Port Harcourt, Rivers State, as well as the development of the Ajaokuta mini liquefied natural gas in Ajaokuta, Kogi State.

    Axxela Chief Executive Officer, Bolaji Osunsanya, in an interview with The Nation, said the amount is a bulk budget for the projects,  but these will be carried out in phases and may run for the next two or three years. He also stated that the company is eyeing expansion into  regional opportunities and has secured shipping licence from the West African Gas Pipeline Authority (WAGPA), adding that arrangements have been concluded for the first gas supply to a West African country.

    Giving a breakdown of the capital expenditure, Osunsanya said the money will be spent more on maximising existing assets of the firm, adding that some of them are organic developments. He said the company wants to build the 5th and 6th phases of its Lagos franchise, Gaslink.

    ‘’The 5th & 6th Phases will cost the company about $50 million and will be used, in developing sub-segments that will connect Igando to Ikeja, while the mini LNG will cost the firm about $60 million. The Port Harcourt expansion has already cost us about $7 million and the planned expansion to Omagua and Chioba industrial clusters will cost us about $30 million, he added. These are bumper numbers that we will use to develop them but it will be in phases, he said.

    He further said: “Gaslink is our Lagos franchise and today we carry 160 customers on it selling about 65 million standard cubic feet of gas per day (mmscfd) and we plan to sell 100mmsfcd from it in the next two to three years. Therefore, we have to do more expansion and give gas to more factories.

    “We are looking at doing Phase 5 which will be from Iba Road on Festac near Lagos State University  LASU back to Ikeja; Motorways all the way to  Gbagada, which will take us to almost all parts of Lagos, so there should be no industrial part of Lagos that will not have gas supply infrastructure. So, with phases 5&6 in Lagos, we will fully maximize Gaslink.

    On the company’s plan for PortHarcourt  axis, he had this to say: ‘’We also want to grow Port Harcourt gas grid.We have extended it to Court area, the next thing is to do Omogua industrial cluster, Airport and Chioba industrial cluster and also maximise the total capacity of our compressed natural gas (CNG) plant and use the mini LNG to supplement it.”

    On change of name to Axxela, Osunsanya said: “Last year we made an announcement about new investors in Oando Gas and Power. The new investors are Helios Capital Partners, which is the bigger investor. We thought it was necessary to change the name to reflect this new shareholding. They are big African-based infrastructure fund. They have about $3 billion in assets and investments.

    “They are in Airland, ARM pensions, Vivo, and Co-partners in OVH Energy, among others. They have the necessary experience doing infrastructure business in sub-Saharan Africa. The premise of their coming into Oando Gas and Power is that they liked our history as a gas and power infrastructure business and they thought coming and putting in the necessary capital would help us achieve growth. So it is a growth model.

    “But our own way of looking at this change is to leverage the two strengths. Oando on one hand has good market access, a formidable and local content platform and more importantly, Oando gives us access to resources. Oando is a member of the Joint Venture, you can  get gas from them and they also allow us access to all their other footprints. Helios on the other hand brings a lot of capital and wealth of management experience running growth companies in Africa. We are already in the last eight or nine months seeing the benefits of this marriage.”

  • Chevron eyes $17-22b annual capex for 2017-18

    Chevron eyes $17-22b annual capex for 2017-18

    American oil giant, Chevron Corporation, has said it intends to achieve capital spending budget of between $17 billion and $22 billion yearly for 2017 and 2018.

    The oil firm’s executives at its yearly security analyst meeting in New York reiterated priorities, expressed confidence in the company’s near term outlook and emphasised an advantaged position when markets rebound. They also highlighted upcoming project completions and shale drilling efficiency.

    “We’re completing major projects that have been under construction for several years. This enables us to grow production and reduce spending at the same time, which should improve our net cash flow significantly,” said John Watson, Chevron’s chairman and chief executive officer.

    Watson reiterated the importance of dividend growth and maintaining a strong balance sheet in the company’s financial priorities, noting the company’s record of 28 consecutive years of dividend increases, and plans to limit debt increases beyond 2016.

    “Industry conditions are tough right now, with low oil and natural gas prices. We believe markets will improve, and we’ll be well positioned when they do. We have an excellent upstream and downstream portfolio, and we are driving operating and administrative efficiencies across the company,” he added.

    The Executive Vice President, Upstream, Jay Johnson, highlighted key plans. “We’re focused on safe, reliable operations and effective project start-ups and ramp-ups. At Gorgon, we’re producing LNG and the first cargo is expected to ship next week. With an advantaged position in the Permian and a deep portfolio of operating assets, we’re transitioning our spending to more short-cycle, higher-return activity that utilises existing infrastructure. We have a portfolio of assets that should allow production growth through the end of the decade, even at moderate prices,” he said

  • Nine percent Capex

    Reports that the Federal Government has reduced capital expenditure (capex) to about nine percent of the N4.357trillion 2015 budget should depress not only economic experts but anyone with a little understanding of budgeting, vis-à-vis its implications for the economy. The revised budget submitted to the National Assembly indicates that capex for the current year is now pegged at N387 billion ($2billion) or exactly 8.9 percent of the entire budget.

    Against the 23.7 percent projected for capex last year, this year’s capex budget outlay is a significant drop. Indeed, it is now only slightly more than half of the N634billion that the Minister of Finance and Coordinating Minister for the Economy, Dr Ngozi Okonjo-Iweala, proposed for capex and related items in her budget presentation last month.

    This drastic reduction would no doubt have profound effects on the badly needed investment in infrastructure. Although it was necessitated by the collapse in the price of crude oil, Nigeria’s mainstay, it remains to be seen if this is the best way to handle the shortfall in the country’s revenue.

    Budgets generally consist of two parts: recurrent and capital expenditure. Recurrent expenditure has to do with wages and salaries as well as statutory transfers, debt service and purchase of goods and services. Capital expenditure, on the other hand, has to do with investments in schools, bridges, hospitals, etc. It is therefore no gainsaying the fact that it is recurrent expenditure that keeps government going even though its benefits to the larger economy is neither long-lasting nor comprehensive.

    Civil servants it is that profit mainly from recurrent expenditure. Capital expenditure however has long-lasting impact and it is the one that touches many people directly because it has effects on quality of living. When, for instance, government constructs roads and bridges, they may not put money into people’s pockets directly but they help facilitate movement which ultimately saves the cost of doing business. Their multiplier effects are enormous.

    This is why it should worry us that successive governments in the country, even since the return to civil rule in 1999, have devoted more resources to recurrent expenditure at the expense of capital expenditure. With the reported commitment of only about nine percent of this year’s budget to capital expenditure, it means the chunk of 91 percent would go to making civil servants happy because they are the ones that benefit most from recurrent expenditure. In a country with an acute deficit of infrastructure –  roads, good schools, power, etc., this is not something to celebrate.

    Unfortunately, most governments in the country cannot reverse the trend because of possible political backlash. Of course, our public functionaries too cannot justify the stupendous money they cream off the system by way of allowances and other emoluments. So, asking civil servants to downsize becomes a moral issue. It becomes particularly knotty in a crucial election year like the one we are in, when governments fear treading on workers’ toes.

    This problem has lingered because successive governments failed to plan. It is a challenge that they could have been reducing gradually over the years if the political will had been there. By not addressing it, we are merely postponing the doomsday because it ultimately would continue to haunt the country. The reason why we have been having so little development is because we have been committing so little to it.

    A situation where the government is the largest employer of labour is not good for any country. That is why government must invest heavily in infrastructure in order to stimulate economic activities, especially by the private sector. Power supply is key here.

    Moreover, the time to stop paying lip service to diversification of our economy is now. It is worth it if that is the only lesson we can learn from the current downturn in our fortune due to dwindling crude prices.

  • Legislative perspectives on technology convergence

    Oftentimes, human nature bestows on us the instinctive and sprawling capacity and capability to vacillate between extreme options of bad and good demeanour under varying circumstances, but the reality of modern society requires and demands that caution, restraint, modesty, monitoring supervision and reward system are needed and compelling – to establish peace, guarantee orderliness, encourage civility, imbibe fellowship, pursue egalitarianism and promote justice for the smooth, modest, organized and unfettered cohabitation and coexistence of humans everywhere.

    Thus, to all intents and purposes, various forms of governance are devised and put in place for the proper management of society to enhance peaceful coexistence, equitable distribution of resources and opportunities, engender smooth interaction within and across borders and foster unity and harmony amongst the people. The basic irreducible minimum required for the smooth running of society is the establishment of the “rule of law” to guarantee peace, order and good governance. Such an arrangement manifests in the “legislation” of virtually every sphere of human endeavour. These legislations manifest as a body of laws, rules, regulations, acts, bills, statutes, enactments and ordinances – all of which form the barometers to drive all the various sectors of society – social, economic and political.

    Please observe that all such legislations derive their potency, legitimacy, authority, inspiration and strength from the constitution of the country that ideally and ab initio represents the will, yearnings, aspirations, inspiration and resolve of the hoi polloi. Whilst giving verve to the citizenry and support to all established institutions, the essence of legislation therefore, is to observe, monitor and regulate not only the behaviour of the people as they interact – to avoid skirmishes or breaches of the rule of law, it is also designed to ensure and manage overall best practices in governance, commerce and business – thereby stimulating progress and fostering growth and sustainable development in its full ramifications. This stance and gift of legislation is even more so relevant when the popular and well-acknowledged sanctuary that could underwrite and give succour to the yearnings and aspirations of the people, is the government of the people by the people for the people – this arrangement happens to be the government of the day, here. In fact, political pundits relish and extol democracy as the best form of government currently known to man – the world over.

    In the end, every sector of society relies on legislation to operate or function well and be part of world order that is the harbinger of international best practices in all perspectives. Technology and its evolving convergence are surely part of this legislative wholesomeness.

    The foregoing is to acknowledge and underscore the incontrovertible importance of legislation as the live wire of a nation more so a developing one as Nigeria. Its impact on the concomitant services generated by the development and deployment of technology – distinct or convergent, is invaluable, as the purpose of technology itself, is to bring about welfare, security, comfort and fulfilment to the citizenry – culminating in growth and sustainable development for the country, at large.

    In the quest for comfortable, luxurious, safe and secured living especially, since the outset of industrial revolution, man has constantly and irrepressibly toiled in the cumulus waters of research, dynamic innovations and creativity to discover, develop and deploy technology – the scientific knowledge behind machinery and equipment that are meaningful and useful to humanity in time and space. The continual efforts of researchers – in the ambience of an ever-increasing demand for cognate services at the marketplace, have brought about gargantuan and meaningful developments in various fields across the globe – thus, enhancing growth and sustainable development for the socio-economic and political advancement of society. Incidentally, Information and Communication Technology (ICT) has been at the frontiers and over time, at the front burner of development – steering and managing every sector of human endeavour. Today’s ICTs are the drivers of the current global connectivity that has turned the world into a converged global village. Indeed, this growth vehicle (ICT) has turned around small and big economies and still enhancing the fortunes and prosperity of its developers and those that imbibe the culture which Information and Communications Technology (ICT) revolution brought in its trail.

    As ICT presents an indomitable and inescapable footprint and launching pad for the development of all socio-economic and political sectors, it is therefore the chosen technology on which platform we could examine technology convergence and its interplay with legislation and regulation at the marketplace. Given its sprawling impact on technology development, economic and commercial influence coupled with its widespread use across the globe, the telecoms technology as epitomized by the mobile cellular phone technology especially the GSM

    extraction, is leading the way and direction in the ICT family. The shrinking and ongoing convergence of the erstwhile distinct sectors of telecoms, computing and broadcasting or multimedia, in the face of flourishing broadband technology (fixed and mobile) is the case at issue. It is no longer flummoxing to observe that with a single piece of mobile device you could talk (voice), send text messages (data), browse the Internet (data), watch football matches or drama (video), discuss on live television and radio (media streaming), do online shopping (data), engage in mobile banking (data) or mobile music (voice), enjoy location-based services (data) like personalized weather service or real-time traffic data and also have the benefit of other information services like stocks or horoscope etc. Indeed, the list is virtually endless.

    THE CONVERGENCE ISSUE

    Technology convergence is the fusion of erstwhile distinct or separate technologies and indeed, technical entities to achieve a desired synergy of functionalities, management and more diverse and bespoke services. Thus, heterogeneous or separate technologies, systems and networks are continually brought together and implemented using common protocols to enhance uniformity, seamlessness and interoperability – thereby, providing a wider range of diverse services whilst, achieving savings in capital (CAPEX) and operational costs (OPEX) for the network and service providers. A very glaring and incontrovertible front-burner case at issue, is the Information Communication Technology (ICT) in which networks merge, markets merge, services merge and users even merge – all, eliciting a total convergence in the evolutionary ICT domain. Indeed, the convergence between fixed and mobile networks and services often referred to as Fixed and Mobile Convergence (FMC) in the ambience of robust broadband technology that is rapidly diffusing and closing the hitherto, distinct boundaries of Telecoms, Computing and Broadcasting or multimedia sectors, has brought about a number of policy, legislative and regulatory issues.

    LEGISLATION AND REGULATION

    The aftermath of globalization of the recent past culminated in the deregulation of the entire marketplace albeit, in varying degrees and also laden with geocentric hue across the globe. Whilst deregulation encourages and promotes competition thereby allowing markets forces to determine pricing regimes and other market processes and procedures, the need to protect consumers from unwholesome and unbridled practices of some industry practitioners – for instance, incumbent or dominant operators, however, has become exceedingly necessary and imminent.

    To all intents and purposes, legislation gives the regulation of ICT – both in its distinct forms and divergent character, the empowerment and teeth with which to bite and reprimand any erring network or service provider who contravenes any provision of the licence conditions in the course of providing services, irrespective of location – within and across borders. Essentially, such sanctions and penalties that regulators impose for market abuse as a post-licence oversight responsibility, range from monetary fines – a percentage of company’s turnover, modification of licence and additional licence obligation, to outright licence revocation.

    The policy, legislative and regulatory challenges that are thrown up at the instance of ICT convergence are mainly on licensing with its attendant reverberations. Ab initio, specific services or a generic group of services were deserving of separate licences but with convergence, a service provider can now deliver multiple services (converged) to a customer with a single subscriber number on which one bill is raised, and the customer is also served from a single integrated network rather than two distinct (fixed and mobile) terminals. Incidentally, such a flexible service provisioning that obliges a consolidation of different services in a generic categorization or the unification of all services under a single licence or concession referred to as a “Unified Licence” also promises a reduction in operational costs and complexity.

    This convergence posturing that is being adopted worldwide, as opposed to the traditional service-specific orientation, is based on the principles of technology and service neutrality.

    There is also the so-called licence-exempt case that is a total departure from the erstwhile licensing procedures. Here, most administrative and traditional formalities are jettisoned giving way to ordinary registration or even simple notification to the regulator of the intent to offering services.

    Although a wider range of services have been brought into the fold through these over-simplified and flexible reforms, policy-makers and legislators alike are still mulling over the reverberations these reforms are gradually seeping into the industry and marketplace. However, this challenge does not detract anything from the recognition the reforms are giving the rights and obligations of network and service providers. Other important areas of interest where consideration is essential include, spectrum assignment and use, interconnection and numbering scheme.

    •Bello, A former Managing Director of NITEL presented this paper at West Africa Convergence Conference in Lagos