Available fundamentals have shown that the sector will be robust in 2019. With an expected 2.5million barrels per day, there will be more power supply and more oil and gas production, writes EMEKA UGWUANYI.
The power industry has, over the years, been replete with excuses, accusations and counter-accusations. Previously, it was due to more than 16 years of neglect by successive military administrations. It shifted to lack of gas supply to thermal power plants – the major source of electricity supply.
The inadequate gas supply was attributed to pipelines’ vandalism by Niger Delta militants and low gas pricing, which made gas producers shun supply for domestic consumption.
However, these problems have been substantially resolved. Militancy and pipeline vandalism have drastically reduce; domestic gas price has improved. Besides, though privatised five years ago, the Federal Government still has 40 per cent equity shares in the distribution companies (DisCos) as well as control over them. Will there be more actions, less excuses and blame game this year?
As at the last count, available power generation was 7,000megawatts (Mw) and installed capacity was over 12,000Mw with transmission capacity of 7,000Mw and distribution capacity of 5,222Mw.
The Minister of Power, Works and Housing, Mr Babatunde Fashola, on assumption of office, introduced the incremental power policy. It is an initiative that seeks to put into use existing megawatts as against building new generation facilities.
According to the Minister, every megawatt is defined. To him, Nigeria cannot have 12,000Mw installed and be concentrating on new ones without optimising the existing ones – Egbema and Gbarain power plants are not finished. Olorunsogo, Omotosho, and Geregu are not optimising because gas is not enough. In some places there are transmission problems.
The ministry’s focus was to give gas to power stations that have transmission facilities, and transmission facilities to stations that have access to gas, but no facilities to evacuate the generated power.The policy has helped in increasing output from Egbema, Gbarain and Omoku, among other power plants. These power plants were supposed to be completed last year. There are plans to complete their rehabilitations this year to enable them contribute to the incremental power.
“We are optimising the capacities of the power plants and other facilities that we have. We are focusing on taking gas to power plants that are idle because of lack of gas.We are continuously working on how to solve gas supply problems with the Nigerian National Petroleum Corporation (NNPC), gas firms and others. The 7,000Mw we produce now doesn’t come from the sky; we are only making what was not working to work.
‘’Sometimes just by completing a transmission line, you get more power on the grid. Sometimes just by doing routine maintenance as we did in Afam IV plant, you get more power. The transformer of Afam IV plant was shut in January 2015 and nobody touched it. By repairing the transformer, we had 100Mw back on to the grid. By completing one section of Ikot-Ekpene switching station, we evacuated some stranded power from Ibom Power and Alaoji plant.
“Zungeru project will give us 700Mw, but was locked up in court for three years before we came. We have got the parties out of court. It will deliver in 2019. We signed the partial risk guaranty for Azura power plant in Edo State. Azura project is on track and will be finished in 2019. So, we have to quickly build a 14-km 330kv line so we can evacuate power produced there to the grid. We will get 10Mw wind plant in Katsina State into operation this year.
“The Mambilla power is also ongoing, but will take some time to complete.We are completing Kaduna, Kashimbilla, Guarara, Dandikowa, Katsina windmill, among others. We are also completing transmission lines, using Transmission Company of Nigeria (TCN). We are also trying to complete some rural electrification projects, using Rural Electrification Agency (REA).
“But it is instructive to note that we are dealing with human beings, the more power we produce every day, the more people that are being born that need power and more people that are getting into business that need power. So, when one takes a stock I can say we have walked our talk and fulfilled our promise. Power is an economic enabler, hence the incremental power, which will lead to stable power and to uninterrupted power. Stable power is to enable businesses to be competitive, efficient, sustain growth and produce jobs. It is for manufacturing, agriculture not just production but processing, packaging and storage, among others, which form part of the fundamental for driving economic growth. That is why this government is not just committed to power as an enabler but to infrastructure as an enabler for business, job creation and economic growth.
“On reports that work on Mambilla power has been stalled, Mambilla is not just a power project but infrastructure. It is a $5.7 billion project. I cannot recall in recent times when Nigeria dedicated such money to one project. It will take about six years to construct. During construction, it will require 18 million bags of cement, 18 million tons of aggregrates – sand, stones, among others, 42,000 tons of steel. At the moment, not less than 116 Nigerian companies have expressed interests in participating. They include shipping, insurance, logistics, transport and security companies. This is the way to create jobs. Over the six years, they will be shipping, banking and transporting, among others. That is what Mambilla signifies because it will create job opportunities. The power plant will generate 3050mw on completion and will create irrigation opportunities for agriculture in Taraba and other parts of north east.
“On the 10mw Katsina wind plant, the project delivery date slipped because of the contractor. But I can say that out of the 37 wind turbines, 15 are operational; remaining 22. It was changes to pricing requested by the contractor that made us terminate it. The contractor was using local people to do the work. So, the contract has been re-awarded to a local contractor to complete it. The wind plant is already producing 2mw from which Kano DisCo benefits. We will complete the project this year and also run over 37km of line to connect Musa Yar’ Adua University in Katsina.
“We are also encouraging private investors to go into generation and have factored coal into the energy mix. We are expecting coal power from a private investor who has coal mining licence and power generation licence. What is remaining is power purchase agreement. But coal power takes longer time to deliver than thermal power that uses gas. It takes longer time because it requires constant mining of coal, accessibility to water for cooling, conveyor belts to take the coal from the mines to the plant and boiler rooms, among others. Let me also say that there is zero import duty for solar parts that are brought in and assembled in the country, but if you bring fully assembled system, you pay a five per cent duty because you have taken the jobs away.”
Challenges
To Niger Delta Power Holding Company (NDPHC) Managing Director Mr. Chiedu Ugbo, power generation capacity has risen. So also has population and demand for electricity supply. Merging these has not been easy. But Nigeria’s power distribution system has been enhanced with hundreds of injection sub-stations, 11KV lines and 33KV lines added. Work is also in progress in many transmission and distribution projects. The massive construction of these power projects by the NDPHC has prevented the collapse of electricity supply in Nigeria. Although a 100 per cent supply is yet to be attained, supply is being stabilised while work on incremental power supply is ongoing. Achieving stable electricity supply from almost nothing is not a day’s work. It takes time and huge efforts, especially where economic sabotage of gas pipelines persist and transmission lines are being vandalised. When most of the National Integrated Power Projects (NIPP) are completed and are operational, power supply to Nigerians is expected to be better and drive the economy of Nigeria,’’ he added.
“One recurring snag with power supply in Nigeria is in the distribution chain. Despite the targeted increase in generation, if there is no efficient distribution to the end users in their homes and businesses, there will still be disappointment with all the efforts made. There has been huge improvement in gas supply to the built thermal power plants, adequate power is being generated and despite some challenges, the transmission network has improved. The most nagging point is power distribution. Power Distribution companies should take more than what the transmission gives out. This is to allow reduction of redundancies at the various levels and reduce losses while transmitting power from one location to another. The farther you travel with power, the more the quality and the efficiency of the power is reduced. Another problem with the distribution network has been poor town and urban planning which has made it difficult to regulate power distribution and downstream activities, thus overloading the grid.
“Some challenges that the NIPP has had to grapple with include security and community issues; right-of-way challenges for distribution equipment and transmission lines; port clearing coordination hitches and contractor performance-related problems. Even though the three tiers of government own the NIPP, equipment imported for the power projects are often delayed or seized at the ports by the Nigeria Customs Service (NCS) because of non-payment of import tariffs thereby stalling the execution of some power projects. Sadly, some of the equipment at the ports were at one time auctioned by the port authorities after demurrage charges had accrued on them. It took the intervention of an alarmed Senate to recover some of the equipment sold off under questionable circumstance.
“To fast-track the attainment of stable electricity for Nigerians, the Federal Government should seriously consider waving duties on equipment for power projects. It needs to seriously educate contractors on their patriotic duty to deliver and on time. There is need for a special para-military unit to ruthlessly tackle the activities of vandals, and address the kidnap of the employees of the contractors. Host communities also need to be educated on the recurring problem of right-of-way for the routes for the 330kv and 132kv transmission lines of the NIPP. Once when NDPHC diverted the transmission line to the Ihovonbor station in Edo State at a considerable cost because of the presence of a shrine, a new shrine emerged overnight on the new route and the villagers went on demanding a huge amount to relocate it. These kind of things can be best handed with proper enlightenment of the responsibilities of civic duties. Also, operatives of para-military agencies, especially men of the National Security and Civil Defence Corps (NSCDC), should be adequately motivated and mobilised to protect power installations from vandals across the country. An existing asset protection mechanism for the safety of power generation/distribution equipment like pipelines and plants must be established with technologically advanced means applied.
With reasonable improvement in generation through incremental power, substantial reduction in militants attacks, improvement in gas supply, expectations are that Nigerians will have more stable power supply in 2019. There is also need to address the issues highlighted by the NDPHC chief.
Oil and gas industry
The direction of oil price will, to a very large extent, determine how the oil and gas industry will come out in 2019. Oil price had, after rising above $80 per barrel, fell to less than $52 per barrel before rising again to $56 per barrel. Oil price at $50 per barrel is still profitable but because the cost of production per barrel in Nigeria is one of the highest in the world and the fact that windfalls from previous high oil prices were not well managed and invested, periods of low oil prices are difficult ones for the country.
In most oil producing nations, when oil prices are low, they embark on aggressive exploration to find more oil because cost of carrying out such activities, including labour, is cheap but that is not applicable here. Therefore, there should be increased exploration to find more oil. This can only be achieved by creating investment-friendly environment and incentives to attract investors. The Federal Government, according to industry players, needs to make provision in 2019 budget and subsequent years for offshore and onshore exploration to encourage new discoveries.