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Orient Energy Review January, 2017 3


‫ﺗﺤﺖ رﻋﺎﻳﺔ ﻓﺨﺎﻣﺔ اﻟﺮﺋﻴﺲ ﻋﺒﺪ اﻟﻔﺘﺎح اﻟﺴﻴﺴﻲ رﺋﻴﺲ ﺟﻤﻬﻮرﻳﺔ ﻣﺼﺮ اﻟﻌﺮﺑﻴﺔ‬ HELD UNDER THE PATRONAGE OF HIS EXCELLENCY PRESIDENT ABDEL FATTAH EL SISI PRESIDENT OF THE ARAB REPUBLIC OF EGYPT

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NEWS

Abuja Airport Closure will have no Impact on NOG 2017

Govt announces airport maintenance works will commence after NOG Over 1,500 key players confirm attendance at conference

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he 16th annual Nigeria Oil and Gas Conference and Exhibition, NOG, taking place from February 27 – March 2, 2017 in Abuja, will not be impacted by the closure of the Nnamdi Azikiwe International Airport. Contrary to an earlier announcement that the Nnamdi Azikiwe International Airport, Abuja will be closed in February and March 2016 for repairs, the Federal Ministry of Transport (Aviation) in an advert notice to industry stakeholders, signed by Alhaji Sabiu Zakari, the Permanent Secretary, Ministry of Transportation, announced that the essential maintenance works will commence on 8th March 2017, one week after NOG 2017 would have closed. Over 1,500 government representatives and industry players have already confirmed their attendance at the 2017 NOG, including the

Federal Government of Nigeria, Federal Ministry of Power, Arco, Century Group, Delta Afrik, Exxon, Honeywell and Oando, among others.

Increasing the independents’ market share & contribution to increasing production and national reserves, Combating crude oil theft and pipeline vandalism through stakeholder collaboration,

According to the conference organisers, this key attendance proves that NOG 2017 is not to be missed. “The Nigeria Oil & Gas Conference & Exhibition is bringing together technical leaders to explore the importance of technologies in driving the Nigeria Oil and Gas Industry forward. “Issues to be addressed at the conference will cover, How will new legislation & policy develop to transform the Oil and Gas Industry, Resetting Nigeria’s Oil and Gas Industry – Reviewing global trends, Nigeria’s Gas Sector – The catalyst for economic and industrial growth, Harnessing the opportunities in Nigeria’s downstream sector and Energising the upstream sector through increased collaboration”, the CWC Group said in a statement. Others issues to be addressed, according to the statement, include:

Outlining the next phase for re-energising Nigerian Content Initiatives in today’s business environment, Increasing in-country value and capital retention through Nigerian Content implementation and Exploring/accessing finance to secure Nigerian Content growth. The NOG offers an excellent opportunity to build company’s presence within the Nigerian energy marketplace by accessing the industry’s most influential decision makers. generate valuable new sale leads and stay ahead of competitors by featuring in the largest gathering of national and international industry players in Nigeria. It provides an unparalleled platform for strategic networking, connecting you with the right people to add value to your business, the statement added.

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INDUSTRY NEWS

Nigeria: Govt Renews 17 Marginal Oil Fields Licenses

Marginal oil fields in Nigeria.

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he Federal Government has approved the renewal of licenses for 17 marginal oil fields that expired in 2015. The Ministry of Petroleum Resources, in its scorecard for 2016 and outlook for 2017, also stated that through the Department of Petroleum Resources (DPR) it has approved seven new field development plans, aimed at growing the country’s oil and gas output. Though the details of the affected marginal fields whose licenses were renewed were not given, the DPR, in the document, said the approval for the extension was secured from the Federal Government in 2016. In addition, the DPR stated that the seven new field development plans have the potential to increase the country’s oil and gas production capacity by 155,600 barrels of oil per day when fully commissioned. It also noted that it commissioned one Eremor marginal field to first oil, thereby, increasing the number of the total number of producing marginal fields to 12. The DPR further disclosed that it played a major role in enhancing the distribution of petroleum products in Nigeria, stating that it licensed additional 1,050 retail outlets across the Federation within 2016. It also stated that it facilitated an increase in national petroleum

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products storage capacity by licensing additional four depots with a combined storage capacity of 3,529 cubic metres (m3) of Premium Motor Spirit, PMS, 39,691m3 of Automotive Gasoline Oil, AGO, and 36,021m3 of Household Kerosene. In its outlook for 2017, the DPR said it will “Conduct bidding round for open blocks and conclude the previous aborted marginal fields bid round respectively to enhance entry of new players, stimulate competition and generate revenue for the Government. “Accelerate regulatory approvals for lease renewals, assignments, and relinquishments.” On its own part, the Petroleum Products Pricing Regulatory Agency (PPPRA) said it helped the federal Government to save an estimated sum of over N500 Billion as at November 2016. According to the PPPRA, the amount was saved through the introduction of the Price Modulation Mechanism and the Appropriate Pricing Framework, which is currently being deployed to other sectors of the economy. Also in the document, the Nigerian National Petroleum Corporation (NNPC) said it had commenced the export of crude oil through Warri Refining and Petrochemical Company (WRPC) as an alternative

to Trans-Forcados Pipeline (TFP) which has been frequently vandalised in recent times. The NNPC further stated that Joint Venture (JV) Cash Call funding arrears of up to December 2015 had been fully reconciled with its partners, while all the parties had agreed to a repayment plan. The NNPC disclosed that the need to cut cost forced it to streamline the Nigerian Petroleum Development Company’s (NPDC) operations by terminating the Strategic Alliance Agreements (SAAs) with Atlantic Energy on nine assets, while it successfully renegotiated the SAA with Seven Energy on three assets. In addition, the NNPC said, “The success of NNPC/Chevron JV $1.2 billion multi-year drilling package for the development of 36 offshore/ onshore oil wells has spurred further alternative funding arrangements such as Sonam-Okan integrated project (NNPC/Chevron JV). “In pushing for cost efficiency and profitability, we embarked on the renegotiation of all existing contracts and achieved between 5-30 per cent discounts consistent with prevailing low oil price regime. This activity alone translated to about $1 billion in savings for the Corporation.”


POWER

TCN: Crisis Looms between Senate, FG over $174m AfDB Loan

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TRONG indications emerged, yesterday, that there might be a face-off between the Senate and the Federal Government over plans by the latter to secure a loan to the tune of $174 million from the African Development Bank, AfDB. Part of the collateral for the said loan would be the handing over the management of Transmission Company of Nigeria, TCN, to ADB. According to a source, what could be termed a war of attrition is brewing between the Upper Chambers and the Executive arm because of plans by the Federal Government to hand over the management of TCN to AfDB. The source noted that at the end of the day and when the deal is sealed, the AfDB would second three of its staff to manage TCN for six months in the first instance, adding: “The AfDB will terminate and remove the entire management of TCN even when they are just mid way into their tenure.” The source said the upper chamber was asking: “Under what arrangement the Federal Government will cede the entire critical national asset to AfDB even when Nigerians are grappling with energy crisis?” Against this backdrop, the Senate also wants to know “whether the government can push aside a management that was legitimately instituted because the country

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wants a loan and so AfDB will grab the management of TCN, especially when it is a loan Nigeria will repay.” According to the source, the Senate was worried and eager to know whether Nigeria was not entitled to AfDB loan, adding: “The implication is that there is lack of faith between Nigeria and AfDB which the country is a major donor. The Federal Government has already made huge allocation in 2017 budget estimate. Is it now wise to hand over such funds to TCN to be managed by AfDB appointees?” The source said further that the Senate had reliably gathered that those AfDB planned to second to TCN were economists and not technical staff, adding that one of the persons the AfDB planned to second to manage TCN is a former junior staff in TCN who studied accounting. Asked if an accountant can be in charge of electrical grip and expected to perform better, the source said: “Curiously, the Federal Government is yet to determine whether to privatise TCN. The Senate is insisting that you cannot hand over TCN to AfDB without privatizing it. “The Senate is, therefore, insisting that the status quo must be maintained failing which the Senate, as an institution, will not have anything to do with handing over of national asset when it has not been privatized. We are, therefore, watching and waiting, hoping that

common sense will prevail.” TCN staff protest plot to remove Atiku Meanwhile, staff TCN, recently, staged a peaceful protest against plot to remove the company’s Managing Director, Abubakar Atiku, from office. The workers, drawn from the Nigerian Union of Electricity Employees, NUEE and Senior Staff Association of Electricity Employees, SSAEE, branch of the TCN, during the protest held at the headquarters of Ministry of Power, Abuja, described the attempt to sack the MD as rude, ill- conceived and unacceptable. Addressing newsmen during the protest, Chairman, FCT Council of NUEE, Mr Wilson Nwachukwu, said Mr. Usman Mohammed nominated to head TCN has no capacity to replace Atiku. Meanwhile, Vanguard learned that the issue in contention is the power play and seeming power tussle over who takes control of the $364 million Work Bank grants for execution of some vital projects at the TCN. According to him, “Mohammed is an accountant by profession. And this is a company that is highly technical driven. The indices of the staff position here should be about 75 percent technical and 25 per cent non technical. So, why would you now bring an accountant?” Source: VanguardNg


POWER

Kenya: Olkaria Residents Seek Stake In Geothermal Power Project

Nigerian Military to Pay Electricity Debt of N2.35 Billion This Year

Lieutenant General Tukur Yusuf Buratai, Nigeria’s Chief of Army Staff

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hile the Kenya Electricity Generating Company (KenGen) is gearing up to commission the Olkaria V geothermal power project, residents in the area are demanding 50% representation in the project’s stakeholders’ coordination committee. Over the weekend, the dwellers held a peaceful demonstration against the upcoming 140MW Olkaria V geothermal power project. Local media, The Standard, reported that the occupants are accusing KenGen of giving them a “raw deal” and as such are threatening to block the commissioning of the project by President Uhuru Kenyatta next month. Residents’ land claims Speaking to the media, area leader Maenga Kisotu said residents gave up community land for the exploration of more geothermal energy but KenGen had failed to keep their end of the agreement. “KenGen has refused to include the community in the stakeholders’ coordination committee despite the effects the power generation has on the community,” Kisotu said. According to the media, the sentiments were echoed by another leader, Mwangi Sululu, who claimed that an earlier Memorandum of Understanding between the community

and the power generating company had been ignored.“Before this project we were relocated to an area that has no water, pasture for our animals and the roads are impassable,” Sululu said.Responding to the allegations, KenGen denied the accusations, saying a stakeholders’ coordination committee was addressing all the issues raised by the pastoralists, media reported. Geothermal power In Q2 of 2016, it was reported that Japan’s deputy ambassador, Mikio Mori, confirmed that the procurement phase for the Olkaria V geothermal power project was complete and that construction is expected to commence soon. In a separate statement, the Japan International Cooperation Agency (JICA) awarded KenGen with the 2016 Presidential award for its flagship green energy project, Olkaria I Units 4 and 5. It was reported that the Olkaria I Units 4 and 5 were among eight projects and five individuals that were recognised in 2016. Source: www.esi-africa.com

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he Nigerian military will be offsetting part of its electricity debts in 2017; this year’s budget has shown. In the 2017 budget submitted to the National Assembly, the Ministry of Defence budgetary allocation shows that N2, 350,954,000 will be used to settle part of its more than N9 billion indebtedness to Power Holding Company of Nigeria (PHCN). These debts, the Nation reports were accumulated by the three armed forces over some period of years. The Ministry of Defence had on several occasions decried inadequate allocation of funds for various projects and welfare. The ministry also indicated that nationwide rehabilitation of military barracks will cost N2.2 billion in 2017 proposed budget. A breakdown of the budget shows that while N 1,225,000,000 will be spent on water facilities, N150, 000,000 will be used for rehabilitation of barracks across Nigeria. Similarly, the military’s cemetery facilities in Lagos and Kaduna are to be upgraded with N14m this year. Other projects for the ministry in 2017 include the establishment of a military industrial complex at a cost of N450 million, the purchase of “security equipment” at N500 million, and the furnishing of the offices of the minister, the permanent secretary and directors at N190 million.The ministry will also expend the sum of N726, 820,215 into settlement of bills for outstanding contractors. A breakdown of the Ministry’s N26. 4 billion 2017 budget proposals also show that N585. 9 million would go for “claim for loss/ damages on forceful closure of 269 shops at Giwa Barracks, Lagos.” Also, the sum of N2. 5 billion will be used to pay for court judgements following the forceful closure of 269 shops at Giwa Barracks, Lagos, in 2007.

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POWER

Illegal Electricity Consumers to Face N52, 000 Fine-AEDC

CBN Includes Power Firms In 60% FX Allocation

Stories by Dirisu Yakubu, Abuja, FCT

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he Abuja Electricity Distribution Company (AEDC) has said illegal connection and meter bypassing attracts a penalty of N52, 000 for three-phase meter electricity customers, just as it urges the public to cultivate electricity safety culture. The Service Manager of Dutse Business Unit, Mr. Gomina Mutalib disclosed this at a safety tour of the AEDC headquarters by staff to the Dutse service area in the Federal Capital Territory (FCT) even as he lamented the spate of illegal connections and unethical practices by non electricity staff in the area. According to him “There is a penalty attached to bypassing of meters and other criminal acts. If it is a single phase meter, then they will pay N21,

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000 reconnection fee inclusive as a penal payment while N52, 000 is paid for three-phase meter lines. The N2, 000 is for reconnection fee while the N50, 000 is the penal charge.” Gomina who decried the high level sharp practices in the area added, “The illegal electrical connection practices is so much here that have been trying to educate them on the dangers of quackery as practiced by non electricity staff.” He gave an instance where some customers were disconnected by the company during an inspection exercise because they had bypassed the installed meters, noting that until such customers come to the unit to clear their fines, they will not be reconnected to the electricity lines

Orient Energy Review January, 2017

esirous of revamping the country’s ailing power sector, the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) recently told commercial banks and other authorised dealers in the foreign exchange (FX) market to include electricity companies in its FX allocation policy, which provides that 60% of total FX inflows from all sources (interbank inclusive) should be channeled to the manufacturing sector. Briefing journalists in Abuja, at the end of the 111th meeting of the MPC, the CBN governor, Mr. Godwin Emefiele, urged operators in the power sector to take advantage of the priority FX allocation given to the real sector to enhance their operations. He said; “The 60% that has been set aside for all FX that is available to all the banks to manufacturers, we did that for a purpose because we felt that there is a need to support the manufacturing sector. “The 60% that is set aside for the manufacturers, I dare say that those in the power sector also qualify for that because they are importing plants and equipment or components for their transformers and generators.”


POWER

S.Africa: New Capacity Puts Power Export Back On the Map The OCGT load factor for the second quarter of the financial year was 0.06% and for the third quarter, 0.11%. “We expect minimal use of Eskom OCGTs to manage the system for the rest of the financial year,” Koko said. The Distribution division continues to exhibit sound technical performance and has exceeded the targeted installation for smart meters for the third quarter, with actuals of 17,561 installations versus a target of 12,000 installations.

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outh African power utility, Eskom has announced that its improved generation performance and new build programme have delivered excess capacity for the country. The power system remains stable due to Eskom’s rigorous plant maintenance, which has seen an improvement in plant availability, which has moved to 77.3% from 70.3% leading to 3,103MW being added to the national grid. The improvement in generation plant availability has re-enabled Eskom to dispatch the least cost stations ahead of the more expensive stations. According to the utility, projections for the year-end show that there will be a cost saving of ZAR238 million ($17.9 million). New power capacity to drive economic growth New capacity will fuel the growth of the South African economy, the parastatal believes. “Since the build programme started in 2005, Eskom has added 8,030MW to the national grid and over the next six years a further 9,103MW capacity will be added from the Ingula pumped storage scheme, which will be fully commissioned later this year. Medupi will be fully commissioned in 2020, and Kusile in 2022,” Eskom said in a statement. The power company currently has a surplus of 5,600MW at peak, due to improved plant performance and new additional capacity that can meet any increase in demand until 2021. Eskom Chairman Baldwin Ngubeni said: “Today’s system status update follows

on the backdrop of positive interim results for Eskom, but also follows the departure of Brian Molefe – an extraordinary leader whose legacy will be that of turning Eskom around.“Today’s system status update is a reflection of the vision, dedication and hard work of thousands of men and women at Eskom and its Interim Group Chief Executive, Matshela Koko. “Through their remarkable tenacity and capabilities, the company has turned things around to deliver solid and sustainable financial and operational performance, positively impacting the South African economy. Today, I can call on all customers to optimise on this surplus supply.” Koko said: “Surplus capacity on average every day during the peak for this financial year is the size of Matla Power Station (3,600MW), this is excluding 2,000MW operational reserve. Going forward, Eskom will continue to focus its efforts on increasing electricity demand and ensuring sustainable revenue collection.” Electrification on the high According to Koko, the utility has connected 162,104 new customers to the grid in the past nine months. He added that 150,747 of these customers are already using electricity. “We hope to electrify all households in South Africa in the next two years,” he said.Eskom noted that the decreased need for open cycle gas turbines (OCGTs) due to improved generation availability has also played a part in added capacity.

Challenges and the way forward Some of the key challenges facing the distribution industry are huge under-investment in electricity infrastructure, high energy losses as a result of inadequate revenue management systems and some utilities consistently defaulting on their negotiated payment arrangements because of systemic failures. “The effects of these shortcomings are detrimental to the economic growth of the country and addressing these challenges is key to ensuring future financial sustainability. We wish to acknowledge cooperation with Premiers and MEC’s in helping Eskom in finding lasting solutions to the Distribution challenges,”Koko said. “Since the start of the Promotion of Administrative Justice Act (PAJA) process in November 2016, Eskom has managed to collect R979 million from the municipalities. This is testament of the ability of South Africans to work together during tough times,” he said. The Transmission division has had zero major incidents in terms of system performance. There were high levels of maintenance execution with 98.8% of planned work executed. There has also been excellent line fault performance achieved year-to-date. Koko concluded: “Eskom’s power system has progressed to a position of surplus capacity, which will positively impact the SA economy. The availability of excess capacity allows Eskom to meet demand more cheaply than through the purchases of renewable energy. “As a priority, both domestic and export sales must be further increased. Eskom will continue to focus efforts on the increasing growth in demand in electricity and ensuring sustainable revenue collection.”

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COVER STORY

Tackling Nigeria’s Energy Deficit: ‘GenCos have sufficient generated power available, without the capacity to transmit and distribute to final consumers’ – Dr. Joy Ogaji

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r (Mrs) Joy Ogaji is the pioneer Executive Secretary of the Association of Power Generation Companies (APGC). APGC is a non-profit and non-political organization formed to provide a platform to discuss issues of common interest relevant to the Nigerian Electricity Generation Industry, and proffer sustainable solutions to sector challenges in the best interest of all stakeholders. APGC include all the thermal, gas, renewable sources and hydro power generating companies in Nigeria. Dr Ogaji is a legal practitioner with over 15 years of progressive managerial experience in various aspects of commercial/corporate law such as Power/ Energy, Oil and Gas, Property and Regulatory matters. Dr Ogaji practiced commercial and corporate law both in Nigeria and in England and Wales. Prior to her appointment as the Executive Secretary for APGC, she was the Head of the Regulatory and Transaction Monitoring Unit of the Presidential Taskforce on Power as well as the legal adviser. She has relevant power sector experience having worked with the various agencies through the pre and post privatization period of the power sector reform.

of its unbundling, Dr. Joy Ogaji, spoke extensively to SOLA AKINGBOYE, on notable hiccups of the sector three years down the lane, more importantly as it effects the GenCos and its preparedness to ensure steady power generation during dry season and the challenges facing the unsung energy source; the former Head of the Regulatory and Transaction Monitoring Unit of the Presi dential Taskforce on Power however demonstrated her expertise on how to monitor progress in the Nigerian energy sector. Excerpt:

Dr Ogaji holds a first degree in law (LLB) from the Rivers State University of Science and Technology, Port Harcourt; a Bachelor’s degree in Law (BL) from the Nigerian Law School; a Master degree in Environmental law (LLM) from De Montfort University, Leicester, UK. Her doctorate degree (PhD) from Warwick University, UK focused on the Viability of Applying Alternative Dispute Resolution (ADR) Processes in the oil and gas sector in Nigeria. Dr Ogaji belongs to a number of professional bodies such as the Institute of Chartered Mediators and Conciliators (Nigeria), the Law Society of England and Wales (UK), the Nigerian Bar Association (NBA) and Mediation Beyond Borders (MBB) UK. While reflecting on the gains of the Energy sector in the past three years Orient Energy Review January, 2017

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COVER STORY

It’s been three years since the Power Sector was privatised, is there any success story to justify the unbundling? Doing justice to a question of this nature will take an informative response, believing that our past most times shapes the present and the present also shape the future. Let’s take an informed look at where we are coming from. First, what was the state of the Power Sector before its reform? Power sector was virtually an integrated government-owned monopoly entity in the power value chain; growing inefficiencies, leakages, and annual capital drain from the federal budget. It has been the stories of uuncoordinated investments in generation, transmission and distribution, huge widening gaps between demand and supply as well as massive industry flight. Secondly, why privatization? The privatization programme was to allow government to transfer public assets in the power sector to private hands, for efficiency and cost-effectiveness. Through privatization of these assets, the expectation was that fresh capital would be injected by private investors, to bring new value into the assets, to increase the country’s privately-held capital base of the power sector. Is that the case at present? Privatisation was not meant to portend waving a magic wand though, but right from inception, the GENCOs were contractually obligated to ramp up electricity generation capacity by about 5,000 megawatts (MW) over a five year period. Today, the Bureau for Public Enterprises (BPE) confirms most of the GENCOs have exceeded their contractual obligations. For Instance, Ughelli Transcorp

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at takeover date had generation capacity of 160 MW and by September 2016, they are now generating 450MW. Similarly, Egbin at takeover in November 2013, averaged generation of below 300MW due to the dismal operational state of its six units. At its lowest point, only two of the six units were partially operational. Egbin is currently generating an average of 1,100-MW with gas availability; with the completion of the remaining Unit overhauls this year, Egbin will be operating at a minimum of 92% of its capacity. On the other hand the Hydros like Shiroro at takeover had 450mw with some of the units not operating optimally, they have overhauled the units and Shiroro now generates 600mw which was the installed capacity. What are the successes of this Privatisation Process? The goal of the privatization as enunciated above was to provide optimal and reliable electricity at economic cost to the society. There are many facts that have built up to the reality of the‘’ success story’ these includes: • Synergy of efforts and mission outlook now clearly stands stronger than pre-reform period • Economic and the general interests of the companies are now more assured and strengthened. • Awareness of our business and participation in the economy of the society is now far created. • Indebtedness we, (the GenCos Companies) suffer at the hands of many organs in the industry/market that we are now tackling far more vigorously. • Outlooks to recover all our monies are truly clear and strong and as we keep moving with increasing focus and true determination of business, the generating companies would progressively overcome the malady of suffering

indebtedness. What can you tell us the milestones achieved by these GenCos, of which you stand as the arrow head in the electricity value chain? We know that milestones in ventures are journeys so far, progresses made, how well projects are being executed, how successful. By the definition of milestone, the facts below will convince the public and all concerned that the journey so far has been good and promising, but has not reached the ultimate end; Privatisation was not meant to portend waving a magic wand but progressive. The goal of the Federal Government’s power sector reform is to improve efficiency, encourage private sector participation and strengthen the power sector as Nigeria’s engine for development. There have been historical challenges to the growth of the sector including prolonged FG presence at commanding heights, consistent under-investment since the early 80’s and poor management of the country’s gas resources. As outlined above, the GenCos have exceeded their expectation (see BPE for more details). Handover (Government owned) / take over (privatized entities) was a success. Transitional process was a success. That is, the first period of six months to gradually disengage PHCN Staff and Management unto the privatized and bundled staff and management was successful Efforts to vigorously pursue more reliable, more sustained stable electricity have been far higher and more gainful. Pointer to this is, generally speaking, the high level of electricity being recorded in the reform era than in the past.


COVER STORY

Have these GenCos been performing optimally these past three years? To answer your question, I must state a few facts for better understanding. The maintenance culture which existed before takeover was inclined towards a process of carrying out maintenance after breakdowns rather than scheduled preventive maintenance. This unfortunately proved to be a costly alternative. Operational costs were as a result very high for the generation plants upon take over given the age of the plants. The existing generation assets are largely old thereby requiring high operating and maintenance costs to keep them running. The strain on these assets is compounded by the fact that there has been limited new capacity added in recent years before take over. The existing transmission ne etwork is also inadequate, fragile and not reliable. Modernization of existing plants is necessary but will require significant capital investment; some of the GenCos have taken heavy loans to overhaul their plants (Egbin, Ughelli, Geregu 1, Shiroro, Mainstream just to mention but a few.) Therefore in response to your question notwithstanding the daring challenges, yes, progressively GenCos have been in focus, gradually climbing up. They have been in positive pursuit of set goals. It is a continuum, not an end to the set objectives. We achieve and stabilize then move on; no one who aims to get to the top ever rests on his achievements but keeps moving on and on. We have, as confirmed by BPE, exceeded our business plans requirements and have expansion plans for the future, but as you are very much aware, liquidity to fund these plans is a major challenge to our businesses. For purposes of reference and to save time, we have quoted two hydro and two thermal plants just to mention but a few. What are the major technical chal-

lenges confronting your members and how do you think they can be tackled effectively? The English Dictionary defines challenge as a situation of being faced with something that needs great mental or physical effort in order for it to be done successfully and therefore tests a person’s ability. The GenCos have been under so many challenges since thtake over. These challenges are: Payment of outstanding receivables and steady payment process going forward; Non-activation of the Industry Agreements (PPA, GAS, etc); Liquidity issues (Irregular disbursement of NEMSF CBN Intervention Fund); Foreign Exchange Incursions/ Exposure; Non-Payment of Value Added Tax (VAT) even-though GENCOs pay VAT for gas purchased; Lack of transparency and visibility of market collections which has led to NBET paying about 20% of total amount invoiced by GENCO’s; Gas constraints due to vandalism and other associated issues; Grid Instability and Transmission Evacuation Problems; and GENCOs limited Involvement in Adopting Cost-Reflective MYTO Tariff. Operationally, many machines were down, which we inherited. Spares were not available. How should these Issues be tackled? Government should give a special concession to the GENCOs in sourcing for Foreign Exchange; Full payment of CBM-NEMSF, NBET, MO and all owing market participants to pay immediately all monies owed the GENCOs; A Forex stabilisation fund is created to avoid tariff hikes; Electricity market should be run as a contract based market with penalties fully enforced; Revision of the Ancillary Services Agreement rates. There will be more incentive to put turbines on ancillary services if the rates are more comparable to market tariff numbers. Currently, we have a maximum return of N2,250/MW/h

for spinning reserve services as opposed to N15,183/MWh when same energy is placed on the grid. The Generation companies have written to the various stakeholders in the value chain on how to resolve our liquidity issues, we have also called for a dialogue with them on the way forward, we are yet to hear from them on the way forward. On the challenges of the GenCos outlined above, issues highlighted are on the top burner. This does not portend that others are not equally important, but for purposes of drawing up the scale of preference, the highlighted challenges on the list above are on the top burner and we believe that solution to those will enable us progress GenCos are said to generate only about 5% of the total energy need of the country? The rule of thumb for an industrial nation is about 1MW for every thousands of the population. This puts Nigeria’s energy needs in about 180,000MW range given its population of about 180 million. The Federal Government has a target of 40,000MW by the year 2020. It is not about projecting the megawatts, we should also put other building blocks which goes with generating the megawatts such as a firm, independent and knowledgeable regulator, a default proof payment plan, firm guarantees and incentives for investors. In summary, government should provide an enabling environment and avoid interference, but rather focus on formulating the right policies and giving direction. More often than not, the GenCos have sufficient generated power available, without the capacity to transmit and distribute to the final consumers, all the effort is wasted. That is the scenario; that is the basic dilemma the industry faces. The table below illustrates the fact vividly. Regulatory agencies are justified to deal with market failures. Markets fail when the assumptions of competitiveness and the maximization of utilities are not realized. Markets fail when private ordering violates or undermines public goods and values.

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COVER STORY

Egbin at takeover in November 2013, averaged generation of below 300-MW due to the dismal operational state of its six units. At its lowest point, only two of the six units were partially operational. Egbin is currently generating an average of 1,100-MW with gas availability; with the completion of the remaining Unit overhauls this year,

How feasible are the calls for Renewable Alternatives as Alternative sources of energy and its impact on GenCos enterprise? First, injection of alternative sources of energy into the industry is quite worthwhile. To this extent, the calls are timely and welcomed. GenCos fully buy into them. We note that these calls are in two perspectives; renewable alternatives and alternatives in general. Our economy necessarily demands diversification into these two. We know that in the GenCos family, many power plants are gearing into efforts in these areas. Some have drawn up reasonable business plans to attain this. Some have gone beyond plans and are already tackling studies and designs to stand on the platform. Presently, the energies the country employs in the industry are; Water resources energy and Hydrocarbons (natural gas). For renewable alternative, the industry has ample opportunity to explore these; sun (solar), water and wind. These areas are golden and I have told you the impetus some of our companies are given too. For alternative sources generally, viable opportunities are coal (which was in use in the past anyway), biogas, liquid hydrocarbon fuels (low pour fuel oil, LPFO and high pour fuel oil, HPFO), and others. Some industry experts believe that

16 Orient Energy Review January, 2017

bailout fund for GenCos and DISCOs are a rip-off, saying they are private sector endeavor and government should stop.your take on this? Do you see the call as disastrous to the Sector? The term Bail-out portends that the market is in a terrible crisis and even the optimization of market processes may not prevent a looming collapse. At best it should be called an intervention fund. For the GenCos and GasCo, they were funds injected by the federal government through the Central Bank for power generated and as well as for gas supplied. Hence, the fund meant different things to different people. The GenCos are not asking for bailout funds, what they rather need is an enabling environment where there is sanctity of contract, adherence to the rules and less interference to enable the market run itself in a contract effective regime with firm policies from the government and a firm, experienced, independent regulator. What is your meeting point with Electricity Bulk Purchase? We have a contractual relationship with the bulk trader and what we are advocating is, Nigerian Bulk Electricity TRADING (NBET) keep to the terms of the agreement and pay us in full. We are not debt collectors; we have kept to our own part of the bargain, notwithstanding the challenges.

But your Group, the GenCos, is recently in the news, stating that it has plans to sell electricity directly to end-users. Could you please expatiate on this? The Nigeria Electricity Act 2005 makes provision for GenCos to generate and sell electricity directly to Eligible Customers. Seeing that this is Statutory, yes, we are in the process of exploring the viability of this option. There seems to be this controversy over who gets what and the blame games between the GenCos and the DisCos, which make up NESI – The Nigeria Electricity Supply Industry. As the Executive Secretary (ES) of the GenCos, what is your reaction this? You must take cognizance of the fact that these are two major players in an industry that is complex, diverse and directly sensitive to both the economy and the people of Nigeria. And for that matter, they are at two extremes; generation and distribution/ consumption. NERC through its regulations have earmarked clearly what each of the players are entitled to. The onus lies on NERC, the regulator to play its role as the impartial umpire to monitor and ensure efficiency. The issue of everyone crying wolf should be fast gone.


COVER STORY

There have been blame games being played by the various players in the sector, it does not matter whose voice is loudest. The truth is, the generation companies have been keeping to the terms of their contract, generated power which has been sold by the distribution companies, what we want is pay us our money. We do not have any contract with the DisCos yet, to ask them to pay us, rather we have a contract with NBET who is the wholesaler in this market with a guarantee to pay us 100%, if DisCos who have contract with NBET have refused or are unable to pay for electricity taken and sold, by the principle of privity of contract, we are not parties hence we cannot be debt collectors. NBET should put a firm and default-proof mechanism to make the DisCos pay or declare itself bankrupt. Do you envisage a foundational lacuna in the whole thing and what role is NERC playing in all of the issues in the power sector? Government globally, recognize the fact that the new challenges of public administration will require new agencies with wide ranging powers to solve problems that do not lend themselves easily to the traditional repertoire of powers and competencies in traditional government. Regulatory agencies are justified to deal with market failures. Markets fail when the assumptions of competitiveness and the maximization of utilities are not realized. Markets fail when private ordering violates or undermines public goods and values. Market fails when transactions based on private contracts produce negative external results that are not fully compensated by the benefits of the transactions. The reform of the Nigerian electricity industry began with the approval of the National Electric Power Policy (NEPP) by the National Council on Privatization (NCP) in 2000. The paragraph of the NEPP that articulates the nature of the independent regulator for the new electricity market states thus: “there will therefore be an independent regulatory agency for electricity in the form of a Regulatory Commission, which shall be called the Nigerian Electricity Regulatory Commission (NERC) based on the following regulatory arrangements: NERC will be an independent Federal agency and electricity regulator for grid connected services;

NERC will have decision making powers on the key aspects of technical and economic regulation (viz: tariff regulation, approval of capacity expansion plans and regulated company business plans, oversight of capacity, tendering, competition, standards, quality of service, service obligation etc); NERC will be properly established with its powers, duties, constitution etc, laid down in a new Electricity Act; This was the intendment of the government when establishing NERC, the question we should ask ourselves is, is NERC performing its role effectively? If yes, why is the market in this state? Your guess is as good as mine. The lawyers will say “Res Ipsur Loquitor” (the matter speaks for itself). We must understand that a robust and an independent regulator is a precursor to an effective electricity sector. Who is capable of Establishing Clear Rules and Regulator, and Legislative Intent – reducing as much as possible the regulatory Comprised of Experts with Integrity – Appointments should be based on merit and integrity rather than political affiliation. Ensuring Adequate Accountability – The Commission should be held to the responsibility of fulfilling its mission. Accountability also includes adherence to the highest ethical standards. Establishing High Standards of Fair, Transparent, and Efficient Processes – The regulator should establish procedures that set high standards for fair, transparent, and efficient process. Now that we are approaching the end of this year’s rainy season, what are the preparations of GenCos to overcome the challenges on the country’s electricity demand? The Hydro GenCos are very much aware that this is usually a challenge. Knowing this, our various generating companies concerned have been putting in place, measures to conserve reasonable water volumes in the dams. This has been on-going and we intend to keep improving our efforts in this regard along with time. Also, our engagement with the gas producers and related agencies are currently very high. We believe that this will ensure that our gas supply does not suffer any fatal disruption as necessary to balance the generation within this period.

trailing Dangote’s outburst, calling on Government to halt the privatization of the power sector? Fundamentally, we believe and know that there have been gains of the privatization exercise. I may however have to make two further points on this. Dangote, as an individual and being a distinguished figure in the practice of our economy has every right to air his opinion. The Constitution of the land guarantees his freedom of speech. To that extent, we must respect his views, on merit, just as we must respect the views of any other individual. That GenCos have outlined the benefits of privatisation at the beginning and in terms of generation capacity which points to the gains of the privatisation. We are not regretting investing in our country. We are patriotic citizens and we are willing to build the nation together with the government. Your Group, the GenCos, is recently in the news over its plans to sell electricity directly to end-users. Please expatiate on this? The Nigeria Electricity Act 2005 makes provision for GenCos to generate and sell electricity directly to Eligible Customers. Seeing that this is Statutory, yes, we are in the process of exploring the viability of this option. What are your final words to the society? I want to request the following from the Media; assist to enlighten the public on the GenCos and the activities of APGC. Help us to educate the public on the hindrances and challenges GenCos faced in her business; let the public be aware that the privatization is for good, though as in other endeavor, it faces its own special challenges., these we are aware of and are gradually and effectively tackling them. Finally, we suffer heavy indebtedness from many quarters. This has badly stunted our business objectives and we crave your indulgence as media practitioners to please assist us in the ways you can to see that our moneys are paid whenever due. This will help us to operate smoothly.

What is your view on the controversy Orient Energy Review January, 2017

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INTERVIEW

Egypt is Open for Business: “Foreign investors should invest more in deepwater, Exploration activities...this will become very profitable in Egypt “- Kamal That said, I currently own a company that works in total facilities management, which is a different sector. I wear many hats. My fundamental motivation is to have my country develop radically and fulfil the potential I can see. I believe the downstream oil and gas business is a particularly promising area that can contribute significantly to Egypt’s development. Working as a consultant and non-executive actually makes me very happy because I can see that this business is growing in Egypt and I am doing my part to improve the lives of Egyptians. During my term as Minister, I had prepared a plan to continue the development of the petrochemicals master plan in Egypt. We currently produce a significant amount of petrochemicals products, roughly 3.8 million tonnes per annum (p.a.). It goes without saying that petrochemicals are ubiquitous in our lives today: 85 percent of our surroundings derive from petrochemical products. While Egypt is blessed with oil and gas resources, we do not have the most abundant reserves in the world. Investing in petrochemicals is the way to extract maximum added value from what we do have.

Osama Kamal – Chief Strategy Officer; Member of the Board of Directors, Carbon Holdings, Egypt Osama Kamal, former Minister of Petroleum and Mineral Resources for Egypt, shares his insights on the underappreciated potential of Egypt’s downstream oil and gas sector, gleaned from his 35 years of experience in the public and private sectors, while arguing strongly for Egypt’s ability to position itself as the Mediterranean energy hub by virtue of its strong infrastructure.

M

r Kamal, you have spent 35 years in the oil and gas industry, leading a number of public-sector companies in the downstream sector before being appointed Minister of Petroleum in 2012. Now you have a very busy career as an independent consultant for a number of leading Egyptian companies. What motivated you to move to the private sector in this non-executive capacity?

First and foremost, having completed my assignment and ended my government career as the Minister, I felt it was more appropriate for me to work in a non-executive capacity, particularly as I was staying in the oil and gas business. I did not want to have any potential for conflicts or interference with my colleagues.

The government has embarked on an ambitious modernization plan for Egypt’s oil and gas sector, and H.E. Prime Minister Sherif Ismail has announced an investment of USD 14.5 billion for the downstream sector specifically. Do you think this sufficiently reflects the importance of the downstream sector?

Orient Energy Review January, 2017 19


INTERVIEW

Strategically, this sort of strategy was started a long time ago. But practically, it has not been fully exercised, for the reason that people prefer to work on industries that are seen to be easier and less of a headache. As a country, we have also made a historical mistake on subsidies – we subsidized commodities instead of poor people. These commodities are consumed by the rich and poor alike, and those with more purchasing energy naturally benefit more from the subsidies. As a result, 80 percent of the subsidies accrue to 20 percent of the population, and specifically those more well-off. This is not fair. What we need in Egypt right now is not subsidies, but job opportunities. If we can give our people good jobs, they will be able to educate their children and live better lives than if we gave them low salaries and compensate by subsidizing everything else. The only way out of this corner I see is to help people obtain fair job opportunities, most particularly by promoting and developing smalland medium-sized enterprises (SMEs) – and the petrochemical industry is a sector with huge potential in this sense. It is particularly helpful because Egypt has a very strong and experienced technical workforce, but you can imagine that in a country of 92 million people, we also have a significant base of lower-skilled workers, who can be upskilled and transferred into these various petrochemical initiatives. Incidentally, you can find good examples of this in China and Japan. In Guangzhou, China, for instance, you will find lots of small shops on the streets, but these are all coor-

20 Orient Energy Review January, 2017

dinated, supervised and supported by the government. I wanted to have this structure replicated in Egypt to some extent, particularly while I was heading the Egyptian Petrochemicals Holding Company (ECHEM). For entrepreneurs, it is very comforting to feel that the government is supporting them. The intention was to have a multifunctional plan, with ECHEM acting as a shareholder and securing their feedstock, while other institutions participate in different ways. For instance, banks can finance these projects on a long-term basis, the Minister of Industry can provide centers of excellence for training, the Minister of Trade to provide experience in marketing, for instance, not just locally but regionally and internationally. The first oil and gas business started in Egypt in 1886 and the oldest refinery was built in 1910 – which is still operating now. We have very good facilities but they do need to be modernized further. I would say we also need to implement a number of other plans. For instance, we are currently focusing on producing petroleum products like benzene, kerosene and jet fuel to satisfy local needs, which means we are overlooking things like naphtha cracking, even though naphtha is a badly needed commodity all over the world. There is already a dialogue between the public and private sectors on this but there is no coordination yet, and I think the private sector is still in a ‘waitand-see’ mindset. The challenge in Egypt is that business here depends a lot on individuals. Once an individual leaves his position, his plans and strategies leave with him – perhaps this recalls Egypt’s pharaonic heritage.

In addition, after the 2011 revolution, there was a lot of instability in the country. We were trying to fight fires everywhere. Any sort of strategic planning requires more long-term stability. Speaking of long-term strategic planning, we see that the government’s ambition is to position Egypt as an Eastern Mediterranean hub. How realistic do you think this vision is? I actually wrote an article on this topic for an Arabic paper, where my argument was yes, it is realistic because of five major factors. Firstly, we have excellent infrastructure for the refining stage of the value chain. Our current refining capacity is around 35 million tonnes p.a., and we are only using 26 to 28 million tonnes right now, so we have spare capacity of around 8 million tonnes. There is also the potential to increase this to 50 million tonnes p.a. by upgrading exciting facilities. I would say each refinery in Egypt now is overstaffed by 1000 percent at the moment, and their existing facilities and utilities can support three to five additional refineries! In terms of exporting final products too. Secondly, I see that we have a very strong geographic edge in our proximity to Europe and Africa. Africa is a very good market for us, because they are importing products right now from Asia and Europe. Through the COMESA agreement, we actually have an edge over countries from those regions because it gives us concessions on taxation and custom duties.


INTERVIEW

The third factor, we have strong oil and gas networks and utilities linking the oil and gas regions of Egypt, from the Western Desert to the Red Sea area, which can be used not just for existing discoveries but new discoveries. In addition, these networks also link to our deep water fields, which also links to our neighbors like Cyprus. They are currently idle but the capacity is there. The fourth factor is Egypt’s strong manpower base. We have extremely experienced and skilled people, not just in engineering but other technical sectors and even construction. This is not something to be overlooked. The last compelling factor is the SUMED pipeline and storage facilities, which are currently being upgraded at the moment, which reflects the value this pipeline is bringing to not just Egypt but our neighbors, some of whom are investors on this project: Saudi Arabia, Kuwait, the UAE and Qatar. It is important to note that the SUMED Pipeline is not just about the 350-kilometre pipeline itself, but the extensive storage facilities that line the pipeline. In addition, we have also two LNG facilities, that can receive the discovered gases in Cyprus & Israel and re-export to the European customers. The new Trump administration is expected to herald a new era of US-Egypt ties. Given all the activity that is going on in Egypt now, who do you believe to be the best partners for Egypt?

is very sensible. As strong as our relations with the US are, imagine if we were reliant exclusively on US investment. It would put us in a disastrous situation should they decide to stop. In the oil and gas sector, we are working with 78 partners from over 30 countries. Each country brings their own set of benefits and attributes. The best technology comes from the Americans and the British. But we feel warm when we deal with the Koreans and the Chinese. We believe we can rely on the Italians, French & Russians even when things are difficult. We feel like family when we deal with our Arabian colleagues. I have lived with them all and each of them brings something different. I do not think people should be scared to invest in Egypt today. It is a very political fear. Egypt has no history of nationalization or appropriation in the oil and gas sector, in the past 130 years that we have been operating in this industry. Ultimately, it is important to recognize that Egypt is a very strategic player in the region and we are key to the dynamics of the region. For that reason, I believe we are the closest country to the US in the region, despite other factors, for instance, like the abundant energy resources that exist in the Gulf region.“Egypt has no history of nationalization or appropriation in the oil and gas sector, in the past 130 years thave been operating in this industry.”

The first oil and gas business started in Egypt in 1886 and the oldest refinery was built in 1910 – which is still operating now. We have very good facilities but they do need to be modernized further. On that note, what final message would you like to leave our readers about investing in Egypt? Firstly, in terms of big ticket investments, I would recommend foreign investors invest more in deep water, which will become very profitable in Egypt if we have more investment and exploration activity. The infrastructure already exists so this represents a great opportunity for big E&P players. On the other hand, I also fully encourage investors to come and invest in SMEs. The Suez Canal Zone is full of great investment opportunities, for instance, and the added benefit is that this area is governed by a special law, which gives investors the flexibility to invest and repatriate their profits. One of the companies on whose board I sit, Carbon Holdings, for instance, is in the process of building a huge, USD 9 billion petrochemical facility that might be the biggest in the world currently, in the Sokhna area, which will eventually produce 4 million tonnes of petrochemicals. It is most certainly a very exciting time to invest in Egypt. Culled from: http://www.energyboardroom.com

Egypt has had an open door policy to foreign investment for a number of years now, and I think this

Orient Energy Review January, 2017 21


PHOTO GALLERY

DEPARTMENT OF PETROLEUM RESOURCES’ 17TH INTERNATIONAL HSE BIENNIAL CONFERENCE ON THE OIL AND GAS INDUSTRY IN NIGERIA

Orient Energy Review January, 2017

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PHOTO GALLERY

NIGERIA LIQUIFIED PETROLEUM GAS ASSOCIATION (NLPGA) ANNUAL CONFERENCE AND EXHIBITION, JAN. 2017

24 Orient Energy Review January, 2017


WAIPEC West African International Petroleum Exhibition and Conference MX00000 - WAIPEC Posters PRINT.pdf

1

31/10/2016

10:17

WAIPEC West African International Petroleum Exhibition and Conference

21 – 23 February 2017 Eko Convention Centre, Lagos

At the Heart of West Africa's Exploration & Production Community

21 – 23 February 2017 Eko Convention Centre, Lagos

Contact the organising committee today: Paul Gilbert

pgilbert@waipec.com +44 1737 784950

PETAN Members

secretariat@petan.org 080 372 55190

At the Heart of West Africa's Exploration & Production Community

www.waipec.com

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LOCAL CONTENT

Boosting Local Content: EWT Fabricates Nine OLT Piles for Total’s $16bn Egina Project

HRH. Brigadier General (rtd) Bright Ateke Fibionumama, Anany Anabo 1 of Abuloma Kingdom; Dr .Ernest Azudialu-Obiejesi, GMD, Obijackson Group; Engr. Simbi Wabote, executive secretary, Nigerian Content Development and Monitoring Board (NCDMB); Guido D’Aloisio, MD, SAIPEM and Gabriel Oramasionwu, GCCO, Energy Works Technology (EWT) during the load-out and sail-away ceremony of OLT Bouy Mooring Piles fabricated by Energy Works Technology (EWT), a subsidiary of the Obijackson Group, for the Tupni-Egina Project, at the Nestoil Industrial Area, Abuloma, Port Harcourt on Tuesday, January 17, 2017

E

nergy Works Technology Limited, a subsidiary of the Obijackson Group, has completed the fabrication of nine Oil Loading Terminal buoy anchor mooring piles for the Egina field development by Total Upstream Nigeria Limited. The piles were inaugurated during the load-out and sail-away ceremony at Nestoil Industrial Area, Abuloma Jetty, in Port Harcourt. The Group Managing Director/ Chief Executive Officer, Obijackson, Dr. Ernest Azudialu-Obiejesi,

26 Orient Energy Review January, 2017

said, “This facility (Egina) is being operated by Total. What it means is that the offshore production in Nigeria is actually gathering momentum and the completion of this project will add 200,000 barrels per day to the country’s oil production. “The important thing is that as a company, we have been part of the fabrication to actualise this dream. What it now means is that future development will continue to grow capacity until Nigeria is able to build a complete Floating Pro-

duction, Storage and Offloading system integrated fully in Nigeria, and that is our aspiration.” The Group Chief Operating Officer/Managing Director, EWT, Mr. Gabriel Oramasionwu, said, “We have achieved a very important milestone in the oil and gas industry in Nigeria. What is most important is that we have worked 400,000 man-hours without any single person getting hurt. So, at the end of the day, we achieved the project objective and the technical goals of the job.


LOCAL CONTENT

“This is actually local content in action because every single thing that was done here was done in Nigeria by Nigerian experts with diverse experience. More than 98 per cent of the resources used here are all local content.” The Executive Secretary, Nigerian Content Development and Monitoring Board, Mr. Simbi Wabote, while speaking at the ceremony, said the OLT was the second of the four scopes subcontracted to the EWT by Saipem Contracting Nigeria Limited, which is the main contractor for the engineering, procurement, construction and installation of the umbilicals, flowlines and risers scope of the Egina main field development. He said the EWT had earlier participated in the Egina FPSO scope and fabricated 11 pressure vessels for the FPSO topside and hull compartments through a subcontract from Samsung Heavy Industries Nigeria.

Wabote said, “The achievements of the EWT are similar to the performance of other Nigerian service companies on different scopes of the Egina deepwater project. It is heart-warming to note that Egina provided a good opportunity for Nigerian companies to demonstrate their capacity and maturity since the enactment of the Nigerian Oil and Gas Industry Content Development Act in 2010. “The board is proud of the EWT, particularly for the giant strides it has made within six years of commencing operations. Today, the company can be counted among the heavy fabrication yards in Nigeria. In July 2015, officials of the board were here to inaugurate the first 90mm stainless steel clad vessel fabricated in Nigeria for the SPDC’s Soku Field Development plan.” Wabote said the NCDMB would soon embark on the categorisation of fabrication yards and other major service companies for specific work

Multotec Lays Foundations for Local Capacity across Africa

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over almost two decades, and counts its success down to developing local capacity – including skills and infrastructure – as close to the customer as possible, to allow quick and effective response. “We prioritise skills transfer and capacity-building in our African facilities, and also train our customers’ staff in the maintenance of our equipment,” says Multotec

Other subsidiaries of the group are Nestoil Limited, Neconde Energy, Century Power Generation Limited, IMPaC Engineering Limited, Shipside Drydock Limited, Gobowen Exploration and Production Limited, Scorpio Drilling International, Hammakopp Consortium Limited, B&Q Drilling Limited and Nesthak HDD Services Limited.

CEO Thomas Holtz. “It is becoming increasingly important – both to us as suppliers and to our customers, the mines – to invest in local skill development as a key sustainability practice.”

Multotec successfully hosted a technical workshop in Ghana. (Image source: Mulotec ith over four decades of experience in developing, manufacturing, installing and maintaining processing equipment, Mutlotec Group are one of the leading groups in expertise, operating on six continents in over 50 countries Multotec, the industry-leading mineral processing solutions provider, has grown its business in Africa for

scopes in a way that would facilitate contract opportunities. “As we celebrate the EWT, I call on industry stakeholders, particularly the operating companies and the EPCI contractors to ensure that this facility is well patronised for fabrication solutions,” he said. Obijackson Group is a business conglomerate with interests in oil and gas exploration and production, pipeline construction, pressure vessel fabrication, power generation, dredging and marine logistics, aviation, among others.

Multotec has provided training in South Africa for many years now, and is continuing to promote a more formal and structured manner of training in over regions. Holtz says the focus of the training is to bridge the gap between the theory that mine staff will have learnt in tertiary studies, and the practical dayto-day mechanics of working with equipment in a plant environment. “The culture of a fly-in-fly-out consultant is expensive and generally does not empower local professionals and operators,” he says. “Where we can build local capacity to support our products, the customers appreciate that – and we’ve seen growing interest in this training over the past two to three years.” According to Multotec Africa managing director Jaco du Toit, the cradle-to-grave concept ensures compliance with the Mines ISO 14000 environmental management standards – where the group provides the equipment, technical expertise and maintenance, as well as the removal and recycling of the product at the end of its life.

Orient Energy Review January, 2017

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LOCAL CONTENT

NNPC Targets 60% Local Refining Capacity In 2017

T

he Nigerian National Petroleum Corporation (NNPC) has commenced moves to reduce products importation by boosting the capacity utilisation of the refineries to 60 per cent by the end of 2017. This was disclosed by the Group Managing Director of NNPC, Dr Maikanti Baru, during a courtesy call on him by the Board and Management of Media Trust Limited, publishers of Daily Trust Newspapers, led by its Chairman, Mallam Kabiru Yusuf. Briefing the Daily Trust delegation, Dr Baru explained that NNPC was keen on ending product importation in a few years and that a concrete plan was on ground to achieve that. “We are putting together various programmes to ensure that we achieve at least 60% local refining by the end of this year. It is the procedure or methodology that we are changing a little bit, we are focusing

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on the process licensors to come and audit our processes and they have already started auditing most of our process units in the various refineries. “We hope if we do all these systematically, we should be able to get about 60 per cent level of capacity utilization by the end of this year or at worst by the first quarter of 2018 and get to 80% by the end of 2018 so that we could locally be able to supply half of our PMS requirements. “Also, with other efforts in terms of other refineries coming in place, we should be able to quit importation in a few years,” the GMD stated. Dr Baru lauded the management of Media Trust Limited for its factual reportage of the corporation’s activities and operations. “You have remained a leading voice in the fight against unwholesome activities of crude oil theft, pipeline vandalism and sabotage of the nation’s oil and gas installations. We

will like to see this gesture continue,” he stated He urged the media to help in enlightening the public on the dangers of pipeline vandalism which he said has become a drain on the nation’s economy. On its part, Media Trust commended the NNPC for excellent performance in discharging its fiduciary responsibilities. The Chairman said the management of NNPC under Dr Baru deserved accolades for the good works it was doing for the country. “We are here as stakeholders in the media and the economy to say that we appreciate the work you are doing and to also have the opportunity to have more insight into these works and to communicate it to the public,” Malam Yusuf said. Source: Daily Trust


LOCAL CONTENT

Crude Oil Lifting: Time for Enhanced Local Participation By Dirisu Yakubu, Abuja, FCT

A

fter more than five decades of crude oil exploration and production in Nigeria by International Oil Companies, IOCs, Nigeria’s indigenous companies are yet to build sufficient technical and financial capacity to play a dominant role in the exploration and production (E&P) business. Findings by the Orient Energy Review (OER) show that only a paltry 10 per cent of Nigeria’s daily production of over two million barrels of crude oil is produced by the Nigerian independent companies, while the rest is produced by the deep pocket multinationals and other foreign players. Though the oil and gas sector is an international business, indigenous companies and National Oil Companies (NOCs) are showing increasing appetite to participate in the business that is currently dominated by the multinationals.

The consequence of this is that the country’s economy is exposed to a potential risk of collapse in the event of any international sanctions that will require the IOCs to pull out of the country or significantly reduce the volume of their investment in the oil sub-sector. Unlike Iran, which survived international sanctions as a result of the deep involvement of the country’s local capacity in the oil and gas business, Nigeria stands no chance of economic survival in the event of any diplomatic confrontation with the western countries. Though Iran lost its place at the summit as the second-largest producer among the member countries of the Organization of Petroleum Exporting Countries (OPEC) when the west ostracized her in 2012, the country’s economy did not collapse because local content involvement in E &P was able to shoulder the

shock considerably. Iran has ramped up its daily output to pre-sanction level, producing over 3.8 million barrels per day, less than a year upon the lifting of the international sanctions, with a target to hit 4.28 million barrels per day of crude oil and one million barrels of condensates per day in the next four years, according to National Iranian Oil Company. Iran, currently OPEC’s third-biggest producer, was pumping 4.085 million barrels per day prior to the imposition of the sanctions It is, therefore, imperative that with their minimal participation in the E&P sub-sector, Nigerian companies should be encouraged to deepen participation in other sub-sectors where they have built the required capacity, particularly in crude oil lifting.

Orient Energy Review January, 2017

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LOCAL CONTENT

The yearly lifting of Nigerian crude for the Nigerian National Petroleum Corporation, NNPC is an area where Nigerian downstream companies have demonstrated enough capacity to compete favorably with foreign oil traders and refineries. But instead of allowing only Nigerian companies to play in this area to compensate for their low participation in the E&P and other sub-sectors of the oil and gas industry, the NNPC has, over the years, split the contract almost in a ratio of 50:50 between Nigerian companies and foreign players. For example, in 2013, the NNPC awarded the lifting contracts worth about $40 billion to both Nigerian and foreign companies. The NNPC allocated the contracts to 28 companies, as against the 50 in 2012 term contracts. Though it broke with tradition as no contracts were given directly to foreign traders such as Glencore, Trafigura and Vitol, with only Switzerland’s Mercuria winning a contract; yet the Corporation initially made a failed attempt to exclude Nigerian companies. Before the NNPC looked in the direction of local entities in the 2013 term contracts, the Corporation had attempted to exclude local players from the contracts through stringent guidelines that could have favoured only foreign companies. In what appeared a breach of the Nigerian Content Law, the NNPC had deliberately issued 2012/2013 guidelines for crude oil lifting contracts to favour foreign contractors culminating in the intervention of the Nigerian Content Development and Monitoring Board (NCDMB) and the Presidency. Though there has been increasing local participation in the NNPC yearly contracts after that initial setback, the entire deals are supposed to be the exclusive preserve of indigenous players, given foreign dominance in other sub-sectors of the industry, especially in crude oil production. The 2014/2015 contracts were expanded to about $52 billion worth of crude oil, up from $40 billion, while 38 companies were awarded contracts to lift crude oil from June 1, 2014 to May 31, 2015. The list comprises 21 indigenous

30 Orient Energy Review January, 2017

companies; eight international oil traders; two foreign refineries; two subsidiaries of the NNPC and three countries, represented by their state-owned National Oil Companies (NOCs). According to the list, 21 indigenous companies were awarded contracts to lift a total of 630,000 barrels per day of crude oil during the one-year period, representing 57 per cent of the 1,179,000 barrels per day awarded to the 38 beneficiaries. The list also revealed that 8 international oil traders got an allocation of 240,000 barrels per day, representing 20.5per cent of the whole allocations, while two foreign refineries got 60,000 barrels per day, or 5.1per cent of the allocations. Two subsidiaries of the corporation were awarded contracts to lift 90,000 barrels per day, which translated to 7.7per cent, while three countries, represented by their NOCs also got 90,000barrels per day. A breakdown of the allocations showed that each of the 21 indigenous traders, operating in the downstream sector, got an allocation of 30,000 barrels per day. Two foreign refineries – Fujairah Refinery Limited and PTT Public Company Limited received an allocation of 30,000 bpd each; while two subsidiaries of the NNPC – Duke Oil and Calson were awarded 30,000 bpd apiece. The NNPC also entered into bilateral agreements with the Republic of Malawi; SINOPEC of China and Indian Oil Corporation Limited, with each of these entities receiving 30,000bpd. Summarily, over 60 per cent of the 2014 to 2015 annual term contracts for the lifting of Nigeria’s crude oil were awarded to local firms. In the 2016 crude oil lifting contracts, which were the first of such contracts to be awarded by the administration of President Muhammadu Buhari in December 2015, a total of 21 companies got the contracts. This administration had four months earlier revoked the term contracts awarded by the previous administration headed by Dr. Good-

luck Ebele Jonathan. Under the new contracts, indigenous Nigerian firms were awarded contracts to lift 41 per cent of total crude allocation, while major trading firms got 47 per cent of the crude oil allocation. NNPC trading affiliates were awarded 12 per cent of the total allocation, bringing the total allocation to Nigerian companies to 53 per cent. President Buhari had earlier directed the immediate cancellation of all offshore crude oil processing agreements and crude oil swap deals for refined petroleum products between the NNPC and various oil traders, in line with the recommendations of the Ahmed Joda-led Presidential Transition Committee. The government had invited fresh bids and at the expiration of the deadline for the submission of application by prospective bidders, about 278 bids were received from various indigenous and foreign firms and 21 firms had emerged winners. The companies awarded contracts to take 60,000 barrels per day of crude oil include Emirates National Oil Company (ENOC), Indian Oil Corporation, CEPSA Refinery Madrid and Sara SPA Refinery. International trading companies – Trafigura PT Limited, Mercuria Energy Trading SA and Vitol SA won the contract to lift 32,000 bpd of crude. Affiliates of international oil companies – ENI Trading and Shipping SPA, Total Oil Trading SA (TOTSA), Exxon Sale and Supply LLC and Shell Western Supply and Trading also got term allocation of 32,000 bpd each, totaling 128,000 bpd, representing about 13 per cent of total volume of crude oil on offer. Indigenous Nigerian downstream players were allocated about 405,000 bpd, representing about 41 per cent. NNPC trading companies – Carlson/ Hyson was allocated contract to lift 32,000 bpd, while Duke Oil Incorporated, the NNPC affiliate was awarded contract for 90,000 bpd, accounting for about 12 per cent of total volume.


LOCAL CONTENT

For the 2017/2018 term contracts, 39 winners comprising 18 Nigerian companies, 11 international traders, five foreign refineries, three National Oil Companies (NOCs), and two NNPC trading arms were successful. The list of 224 bidders dropped from the 278 that applied for the contracts in 2015, because the NNPC said it had introduced some new criteria that had to be met by bidders. The contract will run for one year effective January 1, 2017 for twelve consecutive circles of crude oil allocation. All the contracts are for 32,000 barrels per day except for Duke Oil Limited, the oil trading arm of NNPC, which has 90,000 barrels per day. Apart from the 16 Nigerian companies, and two NNPC subsidiaries, the international refineries that made the list include Indian refiner, Hindustan Energy, Varo Energy, Sonara Refinery, Bharat Petroleum and Cepa. Trafigura, ENOC Trading, BP Trading, Total Trading, UCL Petro Energy, Moco Trading, Levene Energy, Glencore, Litasco Supply and Trading and Heritage Oil are the 11 international traders

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that were selected. Meanwhile, the Chief Executive Officer, Safeway Projects Consult, an oil and gas finance consulting firm, Mr. Samu Akaeze argues that indigenous companies are finding it difficult to compete with their foreign counterparts owing to the former’s inability to access offshore finance. According crude oil lifting is a big business only financially capable companies are given are given a pride of place, noting that while local content must be encouraged at all levels of the oil and gas value chain; finance is a key factor to consider in contract approval. “Nigerian companies are finding it difficult to outbid their foreign counterparts for the big jobs and this is because those jobs require huge financial outlay. They need to employ the services of financial experts to assist them in sourcing funds offshore. The earlier they do this, the better,” Akaeze told this magazine on telephone. Like Akaeze, Leonard Ngegu, Plant Manager, City Oil and Gas Limited, Benin City wants only qualified local firms to be considered for oil crude lifting, stressing that while the Nigerian

Local Content and Development Act is gradually leaving indelible imprints in the sector, efforts should be made to guide against poor execution of contracts owing to incompetence. He further added that some clever heads of local oil firms may take advantage of local content to outsmart government in procuring contracts they are least qualified to handle. “Local content implementation has to be gradual. I once said it is a marathon, not a sprint. So, let’s be careful and diligent so that we do not end up regretting our actions and inactions. My advice is that firms given the nod to lift crude must be financially capable and technically competent,” Ngegu noted. Although the oil and gas industry is a global business, but competent Nigerian companies that submit bids should be used to substitute foreign companies to deepen local participation in the industry, boost employment generation and curb capital flight for the benefit of the Nigerian economy, provided they are armed with the requisite capacity.

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LOCAL CONTENT

Local Content Gains as Omni Helicopters Nigeria Debuts

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he plight of unemployed pilots in the country is set for an upswing as Omni Helicopters Nigeria launches into the offshore market with local content development plan. Omni Helicopters Nigeria, which emerged from a strategic joint venture between Omni Helicopters International (OHI) and Omni Blu Aviation Limited, brings to the aviation sector technical expertise, access to aircraft and improved safety, leveraging on the available manpower. Courtesy of the local content development agenda, more unemployed pilots will be further trained in advanced helicopter operations and engaged for the new offshore operations. Managing Director of Omni Blu, Capt. Sunny Adegbuyi, at the signing of partnership with Omni Helicopters International, said the joint venture was crafted to meet the more demanding oil and gas producers’ standards in offshore aviation as well as local content requirements in Nigeria. The strategic alliance, Adegbuyi said, will help requalify Nigerian offshore aviation by accessing resources that will lead to the introduction of new aircraft technologies and safety systems, in turn boosting investment, training and formation. He said: “This will benefit the broader Nigerian aviation sector and impact the overall economy by elevating local capabilities and promoting increased employment, professional development and sustainable competition.” Adegbuyi added that at a time when aviation companies are divesting and pulling out of the industry, OHI has demonstrated its faith and confidence in the aviation policy of the present administration. “We are delighted to partner with one of the world’s best helicop-

32 Orient Energy Review January, 2017

ter operators at a critical time for Nigerian offshore aviation. We aim to meet the rising demands of this market with a unique balance of operational strengths and local content. “We have known the founders of OHI for two decades and hold them in high esteem. OHI’s achievements in Brazil, the world’s fastest-growing offshore aviation market, are testament to the capabilities of our partner,” he said. Founder of OHI, Capt. Rui Almeida, lauded the partnership with Omni Blu, as part of the efforts at developing a safe and reliable offshore aviation market in Nigeria. Almeida noted that the current situation in Nigeria is similar to the environment OHI found itself in Brazil in 2006, when tightening regulations and substantially upgraded demands from oil and gas clients offered opportunities to new entrants. “We succeeded by transferring know-how, granting access to assets and empowering local excellence. We are familiar with Nigeria, having operated there in the past, and understand the standards of oil and gas clients, having serviced many of these clients in Brazil already. “We share the ethos and ambitions of our valued partner Omni-Blu, and are confident that this alliance

will truly make a difference to the Nigerian offshore aviation market,” Almeida said. Via the venture, Omni Helicopters Nigeria is to benefit from the fleet of 183 helicopters on the radar of OHI, with 10 already set to be deployed for use in the Nigerian market. Chief Financier of the venture, Bolaji Odunsi, assured that the partnership is here to stay, adding that both organisations have been relating in the last four years to develop a sound business plan for the Omni Helicopters Nigeria. Omni Blu is a leading independent provider of business aviation and cargo/passenger air transportation services in Nigeria. The company operates a fleet of fixed wing and rotorcraft units serving customers in onshore and offshore Nigeria, and is engaged in oil spill management and flight calibration services. OHI is a Portugal-based investor in helicopter services, owning a modern fleet of helicopters and a number of shareholding participations in locally licensed helicopter operators. The company’s largest investment is OTA, Brazil’s leading offshore aviation services provider with c. 50 medium-equivalent helicopters in contract and an estimated share of 40 per cent of that market.


EXPLORATION/DRILLING/ PRODUCTION

Seplat Produces New Crude Export Grade from OMLs 4, 38 and 41

By Dirisu Yakubu with Agency Reports

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eplat Petroleum has released a new crude grade from the OMLs 4, 38 and 41 fields in Delta State as Nigeria struggles to quell the impact of militant attacks on one of its key crude oil blends. This new grade called Forcados Light, replaces the regular export grade, Forcados Blend and is being shipped through a terminal at the 125,000 bpd Warri refinery. Seplat has confirmed that the new crude is being sent from the four fields via a 100,000 bpd pipeline to available storage tanks at

the Warri refinery and sold to its off taker, Mercuria, at the plant’s jetty. The company had said last year that its intention was to have another export route available for the future and is aiming for exports of 30,000 bpd on a longer-term basis. The popular export grade, Forcados Blend, one of Nigeria’s top export crudes which are usually loaded via the Shell-operated Forcados terminal in the Niger Delta, was shut down due to February and November attacks which led to the declaration

of force majeure on deliveries. Exports of this grade resumed temporarily at the end of September and in October up until an attack in early-November on the Trans-Forcados Pipeline stopped supplies again. Nigeria’s oil output dropped to a near 30-year low of about 1.4 million bpd in May from 2.2 million bpd earlier in the year as attacks on oil facilities in the Niger Delta increased due to militancy in the region.

Malabu Oil Deal: Nigerian Government wins back OPL 245

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he Federal government of Nigeria has gained back ownership of OPL 245 nineteen years after it was awarded to Malabu Oil & Gas, under the General Sani Abacha government. According to reports monitored by this medium, the Economic and Financial Crimes Commission (EFCC) got a court order authorizing the return of the oil block to the federal government pending the conclusion of investigations. It would be recall that OPL 245 became the subject of investigation in at least five countries in 2011, after Shell and Italian oil

major, Eni, paid about $1.1billion into the government account in London to take control of the oil block.More than 70% of the funds were then transferred controversially into Malabu accounts controlled by Dan Etete, who was the petroleum minister from 1995 to 1998. Etete afterwards transferred over half of what he got into accounts of fake companies allegedly controlled by one Aliyu Abubakar, who was believed to have acted as a front for politically exposed persons as well as former President Goodluck Jonathan and his attorney general, Mohammed Adoke, as well as Shell and Eni

staff. The EFCC in December filed charges against Etete, Abubakar, and Adoke and a week after, Italian prosecutors also filed charges against Shell, Eni, officials, and Etete for their roles in the scandal. OPL 245 is considered the largest oil block in Africa with over 9 billion barrels of crude. The block is located in Niger Delta and is thought to be very prospective. Two oil and gas discoveries; Etan and Zabazaba, have been made on this block.

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ALTERNATIVE ENERGY

Osinbajo Flags off 20,000 Solar Powered Lighting Systems

*Acting President, Prof. Yemi Osinbajo (second left), Managing Director, Niger Delta Power Holding Company, Mr. Chiedu Ugbo (L), CEO, Azuri Technologies, Simon Bransfield-Garth (second right) and Chairman, Gwagwalada Area Council, Mustapher Adamu during the official launch of NDPHC solar home systems at Muna, Gwagwalada Area Council, Abuja,

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cting President, Prof. Yemi Osinbajo, recently flagged off the distribution of 20,000 solar powered lighting systems for rural communities. Performing the flag-off at Wuna village, a rural community in Gwagwalada, a suburb of the Federal Capital Territory, Abuja, Osinbajo said it had become necessary to provide alternative power sources that would be off the national grip to power the rural communities in the country, noting that it was not possible to connect

every village and community to the national grip. He said the realization of the project was sequel to an idea he shared with President Muhammadu Buhari in 2015 on how to better the lots of the rural dwellers. “In September 2015, President Buhari spoke to me about what we could do to accelerate the electrification in the rural areas. We had in mind different projects that we could do to bring electricity to many of our rural communities and villages.

He was particularly concerned as we spoke about farming and also education in the rural areas. Renewable energy, especially solar power, seemed to be the one that will be cost effective and that we could deploy very quickly all over the country. Once we took that decision, we came across Azuri. We expect that this will be replicated all over Nigeria,� he said.

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ALTERNATIVE ENERGY

Solar In Line to Dethrone Coal as the Cheapest Energy Source on Earth By Chester Dirisu Yusuf

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olar power is now cheaper than coal in some parts of the world. In less than a decade, it’s likely to be the lowest-cost option available almost everywhere. In 2016, countries from Chile to the United Arab Emirates broke records with deals to generate solar power for less than 3 cents a kilowatt-hour, half the average global cost of coal power. Now, Saudi Arabia, Jordan and Mexico are planning auctions and tenders for this year, aiming to drop prices even further. Companies such as Italy’s Enel SpA and Dublin’s Mainstream Renewable Power, which gained experienced in Europe, now seek new markets abroad as subsidies dry up at home. Since 2009, solar prices have been down 62 percent, with every part of the supply chain trimming costs. That has help cut risk premiums on bank loans, and pushed manufacturing capacity to record levels. By 2025, solar is expected to be cheaper than using coal on average globally, according to Bloomberg New Energy Finance. “These are game-changing numbers, and it’s becoming normal in more and more markets,” said Adnan Amin, International Renewable Energy Agency’s Director General, an Abu Dhabi-based intergovernmental group. “Every time you double capacity, you reduce the price,” he stressed. The average 1 megawatt-plus ground mounted solar system will cost 73 cents a watt by 2025 compared with $1.14 now, a 36 percent drop, said Jenny Chase, head of solar analysis for New Energy Finance.

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Solar panel installation The solar supply chain is experiencing “a Wal-Mart effect” from higher volumes and lower margins, according to Sami Khoreibi, founder and chief executive officer of Enviromena Power Systems, an Abu Dhabi-based developer. The speed at which the price of solar will drop below coal varies from country to country. Countries that import coal or tax polluters with a carbon price, such as Europe and Brazil, will see a crossover in the 2020s, or earlier while countries with large domestic coal reserves such as India and China will probably take longer. Coal Industry Kicks Coal industry officials point out that cost comparisons involving renewables don’t take into account the need to maintain backup supplies that can work in the event of solar and wind failures. When those other expenses are included, coal looks more economical, even around 2035, said Benjamin Sporton, chief

Orient Energy Review January, 2017

executive officer of the World Coal Association. “All advanced economies demand full-time electricity,” Sporton said. “Wind and solar can only generate part-time, intermittent electricity. While some renewable technologies have achieved significant cost reductions in recent years, it’s important to look at total system costs.” Sunbelt countries are leading the way in cutting costs, though there’s more to it than just the weather. The use of auctions to award power-purchase contracts is forcing energy companies to compete with each other to lower costs. An August auction in Chile yielded a contract for 2.91 cents a kilowatt-hour. In September, a United Arab Emirates auction grabbed headlines with a bid of 2.42 cents a kilowatt-hour. Developers have been emboldened to submit lower bids by expectations that the cost of the technology will continue to fall.


ALTERNATIVE ENERGY

AfDB to lead African Renewable Energy Initiative (AREI)

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he board of directors of the African Development Bank has just approved the suggestion from its directorate to make it the administrator and manager of resources of the African Renewable Energy Initiative. Launched at the Cop21 last year in Paris, France, the initiative aims to valorize the abundant resources of Africa in terms of renewable energy,

Solar panels thus helping achieve the country’s development goals. At its launch, the initiative was backed by development partners who promised to mobilize at least $10 billion to support it. The AREI will be led by the board of directors, technical committee, an independent execution unit, and an administrator. By taking this

position, AfDB commits to establish a Free Access Trust Fund through which various competent actors taking part into the initiative will access funds mobilized for the the initiative. In this framework, France and Germany have already injected €6 million and €2 million, respectively in AREI.

Nigerian Gov’t Working with China on Local Production of Solar Cells In-Country

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he Minister of Science and Technology, Dr Ogbonnaya Onu, while visiting NASENI Solar Energy Ltd., revealed that the Federal Government was working to intensify efforts to increase power generation through solar energy, VON reports. Onu said the ministry would facilitate access to the 85 per cent offer from China for the approval of the

15 per cent counterpart funding to guarantee local production of Solar Cells in Nigeria. “This will facilitate advanced research, drastically reduce the cost of solar power installation and increase clean energy local content in the power sector,” he said. Onu promised that the ministry would make a strong case for the patronage of NASENI Solar Energy Ltd. Earlier, Prof. Sani Haruna, the

Executive Vice Chairman, National Agency for Science and Engineering Infrastructure (NASENI), said the objective of setting up the company was to inject local content in the power sector. The objective also includes developing and demonstrating local capacity; creating business; generating revenue and building capacity in renewable energy generally.

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GHANA REPORT

Would Ghana’s New Government Pursue Oil Contracts Review? By Gilbert Boyefio Accra, Ghana

Nana Akufo- Addo, Ghana’s President

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rior to coming to power, Ghana’s new government, whiles in opposition has expressed grave concerns about some of the contracts that its predecessors entered into describing them as not being in the interest of Ghana. This has set many industry watchers wondering whether upon assumption of office, the new government led by Nana Addo Dankwa Akuffo-Addo is going to attempt to abrogate or seek the review of some of the oil and gas contracts signed by its predecessors, which they are not in favor of. Some of the contracts that the New Patriotic Party (NPP) has expressed their discontent with include the Karpower, Ameri, the Atuabo Free Port project, among others. However, according to Yen Sapark, a training consultant, now that the NPP is in power they might see things differently from the time they were in opposition. “The new government while an outsider may have seen things differently from when they eventually took

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Orient Energy Review January, 2017

over. After being presented with the practical facts in the handing over notes and given the circumstances under which certain decisions were taken may change their previous stand and decisions,” he noted. He said given this circumstance it is very difficult to say which contracts is likely to be reviewed and which will not. But quickly admitted that in contract management there are extraneous clauses and there are others that you cannot do anything about. “What I do know is that it is likely there is going to be a review of some of the contracts signed by the outgone government. The new government will have to study these contracts and see what window of opportunity it can take advantage of to ameliorate certain things. But I do believe that in every contract there is a marginal and a window of opportunity to do review”. Confidently sticking his neck out, Nuertey Adzeman, Executive Secretary of the Ghana Oil and Gas Service Providers Association

(GOGSPA), categorically stated that the Karpower and Ameri deals will be reviewed. He however was of the opinions that the Atuabo Freeport project passed through the full rigors of the parliament approval system and might not be touched by the new government. “I don’t see the government reviewing the Atuabo Freeport project. This project has gone to parliament and has been approved. Atuabo is a project that intends to turn Ghana into a hub of the oil and gas industry in West Africa. This I believe ties in with the new president’s vision to make the western region a hub for the industry,” he added. Fiscal discipline According to Mr. Sapark, who is also the former head of training at the Enterprise Development Centre (EDC), the aim of these entire contract reviews are expected to achieve fiscal disciple and value for money. He noted there will be pressure on the new government to institute austerity measures to ensure fiscal discipline. “Ghana gained US$3. 3billion revenue from oil since production started. But as at 2015 due to the oil slump the Minister of Finance had to be forced to go back and revised government budget estimates. If there is fiscal disciple government revenue for the incoming budget has to be reduced. Government will be shifting attention from infrastructural development to be looking at economic issues. There is going to be cut of waste,” he observed.


GHANA REPORT

Moving away from the contracts, another major change that is likely to happen in the Ghanaian oil and gas industry is the relocation of certain key institutions and regulatory bodies for the industry from Accra to the Western Region. President Nana Addo Dankwa Akufo-Addo during his campaign for the presidency promised the chiefs and people of the Western Region of his intentions to relocate the GNPC to the Western Region. Upon his electoral success he reiterated this promise and intention giving it more bite. People in the western region feel that they are not benefitting from the oil find in their locality. The NPP government has as its strategic initiative to appease or bring about a sort of decentralization to see how the oil money can trickle down to the region. This decision has received missed reaction from industry watchers. Some agreed that it is a decision long overdue, while others think it is only a populace decision. “The decision to relocate the GNPC to Takoradi is a good move. It is for the same reason I support-

ed the Atuabo Free Port. In all the oil producing countries, take US for example, almost everything is in Houston. In the UK you will not find any of the oil and gas companies in London, you will find them in Scotland, Aberdeen. Accra is currently too choked. Everything is sited in Accra. If the GNPC should go to the Western Region, it will force all the major players like Tullow and Kosmos to also move to the region. You need to open up the place. This decision is what is done in other jurisdiction and we are learning from best practices elsewhere. If we have taken such a decision long time ago, Takoradi will not be like what it is now,” Mr. Adzeman argued. Though Mr. Sapark agreed in principle to the need to open up the economy of the Western Region, he was of the opinion that this decision should not be taken for political reasons. “From my personal professional perspective, it is a plus to move the GNPC to the Western Region. However, if the GNPC is being moved there solely as a response to the cry of resource nationalism, should there be an oil find in Tamale are we going to move the GNPC again to Tamale? These are crucial issues that need to be addressed. ‘If the new government still wants to implement this policy, it could still move certain strategic offices of the GNPC to the Western Region. These should be the departments that have direct deals with the offshore activity. Example is the geology department and seismic departments. But the admin-

istrative office can still remain in Accra,” Mr. Sapark pointed out. For him, another institution that needs a fully functional and well-resourced office in the Western Region is the Petroleum Commission. According to him, one of the major headaches of the local players in the region is that one needs to be registered with the Petroleum Commission before dealing with the oil companies, yet you need to travel all the way to Accra to be registered. Change of Institutional Heads The smooth change in government in Ghana is a very positive thing and can boost investor confidence in the country’s oil and gas industry. Ghana’s oil and gas sector (upstream) is mainly run by foreign investors with the locals mostly providing services to the industry. The new government has its own policy and direction. It is obvious that all the heads of the various institutions, agencies and ministries that regulate and manage the sector are going to be change. “We are going to have a new minister, and this is going to trickle down to everybody who was politically brought in to come and serve mother Ghana. 95% of all these people will be removed. Already there are names of people being appointed by the president to GNPC, TOR, NPA and Ghana Gas.

Nuertey Adzeman, Executive Secretary, Ghana Oil and Gas Service Providers Association (GOGSPA)

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GHANA REPORT

I am very confidence and positive that the team being put together by the president will be able to champion the cause and policies of the new government. This government is noted for providing the platform for businesses to grow. They do not crowd us out of business,”Mr. Adzeman noted. Industrializing Ghana through linkages Mr. Sapark noted that the oil revenue can be used to implement the one district one factory policy by the new government to create more linkages between the oil and gas sector and other sectors of the economy thereby creating more employment and wealth. This is one way of meeting the huge expectation placed on the oil revenue. “From what I have read about the one district one factory policy, it is a five years comprehensive program called the accelerated industry development plan to be executed starting this year. The plan also included the development of large scale anchored industries that will serve as growth poles. This is very important. So now instead of only the oil people now have other industries to look up to in terms of employment and development acceleration,” he explained. For the Ghanaian economy government is looking at issues of iron and steel, petrochemical, integrated aluminum, salt, vehicle assembly and the manufacture of equipment and machine parts. If all these things as captured in the new government’s district industrialization program are really implemented to the letter, there will be a relief of pressure on the

oil revenue expectation. Local Content The LI 2204 that is the Local Content and Local Participation Regulation, provides for indigenous Ghanaians participation in the industry but it has not been given the necessary bite in terms of implementation and therefore if you look at the figures of Ghanaians that a participating in the industry it is not impressive at all. A lot of the Ghanaian enterprises have been disadvantage one way or the other. Even though the law is there, the window of opportunity has not been open wide enough. It is still narrow and left for a lot of the companies to compete and squeeze themselves through. That window of opportunity can be widened through the strict enforcement of the regulation. “The Petroleum Commission needs to be well resourced with the requisite personnel because the oil companies are beginning to “swallow” the level of supervisionthe Petroleum Commission is able to do. And if the Commission is not able to be on the ground and sitting in Accra to do periodic visits to the region due to budgetary and human resource constraints, then the IOCs will always outsmart them. These are companies that have been globally operating in the industry for years and have all the expertise and knowledge to outsmart the country. So we need to resource the Commission to play close attention and monitor the implementation of the Local Content and Local Participation law,” he said. To him, it is not enough standing

on the rooftop and shouting that the local content law promotes local participation, the practical issues on the ground should determine so. He therefore advocated for the new government to take a second look at the implementation or enforcement of this important law that can boost Ghanaian enterprises. Transparency “I also envisage the new government passing the Right To Information Bill. The RTI can improve access to information in the oil and gas industry. The international oil and gas companies are in partnership and they have association. If you could remember it took a lot of efforts to get the Local Content and Local Participation Law passed because the IOCs initially opposed it. They used their embassies to lobby behind the scenes. Players in the industry are usually secretive with information. Hardly do we hear about these IOCs advertising about procurement opportunities. This information is supposed to be in the open but unfortunately is not,” he added.

Mr. Yen Sapark

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GHANA REPORT

Seaweld Engineering to Build Vessels in Ghana By Gilbert Boyefio, Accra, Ghana

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lans are far advanced for Seaweld Engineering Company Limited, a local oil and gas company that provides a comprehensive range of services and solutions for the Oil and Gas industry, to start constructing vessels in Ghana. The construction of the vessels are to be done completely in Ghana; right from design to using made in Ghana steel, goods and services for its completion. Seaweld Engineering Limited is an Upstream Oil and Gas Service Company with the vision of becoming the leading service company with an impeccable record of excellence and efficiency. Their goal is to provide excellent services to offshore, onshore and near shore drilling contractors in Ghana, Africa and the world. In an exclusive interview with Orient Energy Review, Alfred Adagbedu, Chief Executive Officer of Seaweld Engineering Company Limited, disclosed that Seaweld has the manpower, the capacity and all it takes to construct a vessel. Seaweld has vast knowledge and expertise in the fabrication sector of the oil and gas industry. The company is one of the Ghanaian companies that participated in providing fabrication services to the construction of the FPSO Prof Attah Mills for the TEN project. The FPSO’s module support stools, which attach modules to the deck of the vessel, were fabricated in Takoradi and Tema by Seaweld Engineering Ltd and Orsam Ltd. According to Mr. Adegbedu, “Our experience is not only limited to what we have done in Ghana but also elsewhere in other countries. We want to put all these experience and expertise together to

undertake this project”. He indicated that the company wants to start with the construction of smaller vessels first. He pointed out that attempt by Seaweld to partner the Maritime Dock Workers in the past to do similar project was not successful. “So basically we want to start by ourselves and if the players in the industry find out that we are doing it and they want to partner us, so be it. But we want to start with the construction of the type of ferries that is used on the volta lake. Hitherto, Ghana has been buying these ferries from outside. But now we want to start building them in Ghana”. On whether Seaweld has plans to construct a FPSO, Mr. Adegbedu noted that due to the capital intensive nature of such a project, it has to be a government driven agenda, noting that, “If government agrees that it can be done and brings all stakeholders on board, it becomes a real feasible thing. So building an FPSO in Ghana is a possibility but must be a goal and agenda by government”. The vessels building initiative is just one of the numerous business ideas that the company want to rollout this year. “Our plan for 2017 is to create more employment. Basically we want to feed the population and the way to feed the population is creating employments and wealth. Apart from that, being an oil and gas service provider, we want to see the industry grow for the new fields that are going to be developed in Ghana. We also want to be the biggest service provider company in Ghana. We want to do more training

not just for Ghana but the entire African Community”, he pointed out. Seaweld is an intermediary member of Trace International, which greatly signifies their commitment to transparency in International Commercial transactions. Price of crude oil Mr. Adegbedu was confident that the oil price is going to be stable in 2017 to enable them embark on this ambitious project. It has been projected that oil prices are likely to continue to hover around $50 to $60 per barrel and if this trend continues, it will be very go news for players in the oil and gas industry who had to cut projects and lay off workers due to the fall in oil price in early 2015 to 2016. However, Mr. Adegbedu pointed out that it is too early to be over confident of higher oil price now, pointing out that, “At Seaweld we are cutting our cloth according to the size. We are currently cutting our prices and margins down to survive in the industry. Voltaian basin Seaweld is keeping a close eye on the voltaian basin. To do an exploration of that nature takes expertise and therefore local expertise is very important. The company has already started running courses in partnership with the Regional Maritime University to training local labour so that come 2018 when exploration activities are expected to commence at the Votlta Basin they will have the men to fully take part.

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LOGISTICS/ MARITIME

Nigeria Takes Delivery of Gas Carriers

Curry Supply Releases Newly Designed Water Trucks

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igeria has taken delivery of gas carriers that were bought from the Hyundai Mipo Dockyard in Ulsan, South Korea. This was confirmed by the Group General Manager Group Public Affairs Division of NNPC, NduUghamaduin a statement. According to Ughamadu, the takeover would ensure stability in the supply of liquefied petroleum gas, also known as domestic cooking gas. The vessels had a combined capacity of 38,000 cubic meters with the names “MT Africa Gas” and “MT Sahara Gas”. Ughamadu said during a brief naming ceremony to inaugurate the vessels on Tuesday, the Group Managing Director of NNPC, Dr Maikanti Baru, expressed gratitude to all the partners who helped to actualize the ship acquisition vision of the parent companies and the management of WAGL. “I am particularly delighted that the venture we started a few years ago has achieved this enviable milestone today as we take delivery of these vessels,”Baru was quoted as saying.‎ The statement also quoted Hyundai Mipo Dockyard (HMD) President and Chief Executive Officer, YS Han, as saying the naming ceremony was the first at HMD this year, with its new customer, WAGL. Han thanked the managements of NNPC, Sahara Energy and WAGL for their cooperation and support throughout the period of construction of the vessels and prayed that the vessels would perform their intended services successfully and bring good fortune to WAGL and their parent companies,” Ughamadu said.‎

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C

urry Supply, one of America’s largest Manufacturers and dealers of Commercial and logistics vehicles has recently undergone a series of updates as a result of continuous improvement and FEA testing, the company says in a statement released to Orient Energy Review. These changes in design are based on a platform of constantly exceeding customer’s expectations and delivering premium products at competitive prices. Curry Supply is committed to provide the best in class durability and design for customers. Significant improvements have been made to the Water Trucks and also Curry Supply’s Water Truck Tank Kits. Water Truck Tank Kits have been enhanced for

easier and streamlined installation on job sites. As an ISO 9001 Certified company, Curry Supply is committed to excellence and continuous improvement within all processes to create value for the customer Curry Supply Company is a third generation family-owned business that was established in 1932. Over the past 84 years, Curry Supply has grown into one of America’s largest manufacturers and dealers of commercial service vehicles including on- and off-road water trucks, mechanics trucks, on- and off-road fuel/lube trucks, vacuum trucks, winch trucks, dump trucks, crash attenuator trucks, and lube skids. Curry Supply delivers internationally, with sales and service provided throughout the United States.


LOGISTICS/ MARITIME

Multimodal W/Africa Prepare Nigeria’s Transport/Logistics Sector for Economic Growth

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igeria’s leading transport and logistics experts will gather for the historic maiden edition of Multimodal West Africa 2017 (MMWA) this March in Lagos to rob minds on how to grow the sectors. Most of the industry stakeholders are excited about the Exhibition as they believe it will adequately reposition the Transportation and Logistics sector, which used to be noted for its huge contribution to the nation’s economy but has struggled to retain its position as a result of economic downturn. As part of the commitment by Clarion Event West Africa, the organisers of the event, to deliver value and reinforce the essence of the exhibition as one with capacity to foster economic development especially at such a crucial time in the country; MMWA will run concurrently with the very successful Nigeria Manufacturing Equipment Expo (NME) and the Nigerian Raw Material Expo (NIRAM) at the Landmark Expo Centre. The Exhibition which has the Nigeria Ports Authority as Event Patron will also witness strategic discourse sessions which will be delivered by key industry experts. These include Hassan Bello, Esq, The Executive Secretary, Nigerian Shippers Council who will speak on “Integrating Port Capacity with Inland Access”; Hajia Aisha Ali Ibrahim, FCILT,FNIS, Port Manager, Nigerian Ports Authority who will discuss, “Woman in Logistics

and Transport” and Mr. Alban Igwe, FCILT, Deputy National President, Chartered Institute of Logistics and Transportation will talk on “Towards a Global logistics hub in West Africa.

He reiterated the need for synergy in the activities of the port & terminal operators, shipping lines, freight forwarders and other stakeholders, which he believes can be achieved during the 3-day event.

Other speakers are Mr. Gabriel Aghunor, General Manager, Gadol Nigeria, who will talk about “Dealing with Large Container Vessels”; Mr. Olumide Adesoun and Mr. Suleiman Ibrahim of PWC will both discuss “The Challenges and Opportunities of African Ports” Others are Mr. Francis Ehiguese, FCILT, Member, Governing Council, Chartered Institute of Logistics & Transport who speaks on “Building Capacity for Transport Network Integration”; Mr. Babatunde Omolabi, Warehouse Manager, Guinness Nigeria will be speaking on, “Warehouse Management and Best Practices” while Dr. Obiora E. Madu, Chief Facilitator/CEO, Multimix Academy, Nigeria will address the topic, “The importance of Data, Logistics and Competitiveness”.

Dele Alimi, Managing Director, Clarion Events West Africa revealed that the Multimodal West Africa Exhibition and Conference has been designed and targeted to engage all major stakeholders in the industry from across all the sub-sectors and the value chain under one roof with a view to helping review the sector and proffer lasting solution to the various challenges in the sector. According to him, Clarion Events is providing a platform for players in both public and private sectors to exchange notes and ideas and design solutions that will be mutually beneficial and help move the sector forward and ultimately impact positively in Nigeria’s quest for sustainable transport and logistics sector.

Speaking on the Exhibition, Captain Samuel Olarewaju, (FICS), Chairman, Nigeria Chapter of the Institute of Chartered Shipbrokers advised all stakeholders/participants to make the best of the huge opportunities Multimodal West Africa presents; as it is capable of improving transport and logistics business’ contribution to the sub-region’s economic development.

Orient Energy Review January, 2017

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ENERGY FINANCING

BoI Targets Solar Energy Providers with N1bn Fund

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he Bank of Industry, BoI, has launched a N1 billion intervention fund targeted at Micro, Small and Medium Enterprises, MSMEs, across the country to enable them to provide solar energy as alternative source of power, especially for small businesses.

Explaining the basis for the new fund, BoI’s acting Managing Director, Mr. Waheed Olagunju, said solar energy like other renewable energy sources provide healthy and sustainable alternative to the use of harmful fossil fuels, and would afford beneficiaries long-term cost saving advantages, especially in the absence of reliable power supply. He added: “It was estimated that in 2015, manufacturers spent as much as N3.5 trillion to generate alternative power due to the challenges in the supply of public electricity. “MSMEs play a major role as the engine through which most countries in the world thrive.

“Their growth and development are crucial to the level of industrialization, modernisation, income per capita, equitable distribution of income, welfare and quality of life enjoyed by the citizenry. “Consequently, the performance of the MSME sub-sector is closely associated with the development of a nation. “In Nigeria, the growth of this sector has been hampered over the years by a combination of factors, one of which is access to reliable electricity. “For Nigeria to, therefore, achieve sustainable and inclusive development, there is an urgent need to substantially increase the supply of modern and affordable energy services from sources that are affordable, accessible and environmentally friendly”.

Nigeria: Gov’t Accesses $67m World Bank Loan to Develop Hydro Power Dam

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he Chairman, Senate Committee on Water Resources, Sen. Ubale Shittu, on Sunday said the Federal Government has accessed a $67m World Bank loan

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to rehabilitate Hadejia Valley Dam to boost electricity generation in Jigawa State. Shittu told reporters in Dutse that $60m would be used to rehabilitate and expand the dam by 1,000 hectares. He said that the remaining $7m dollars would be spent on dredging of the river from Tiga Dam in Kano State to Koli in Kirikasama Local Government Area of Jigawa. According to him, the contract for the project would be awarded next month while work is expected to commence by the end of first quarter. Shittu, representing Jigawa NorthEast, said that the project would boost irrigation, water supply and fish farming in the area, when com-

pleted. The Senator also told reporters that President Muhammadu Buhari’s administration inherited N88 billion liabilities from ongoing dam projects across the country. He said that the liabilities were indicated in the audit report of the Ministry of Water Resources made available to his committee. He said that the projects, at various stages of completion, were awarded by previous administrations. According to him, 25 per cent of such ongoing projects had been injected into 2017 budget presented to the National Assembly. The Chairman emphasized the present administration’s commitment to the development of dams across the country to boost agriculture.


ENERGY FINANCING

General Electric to Invest In 3 Nigerian Refineries

Dr. Baru

Jeff Immelt

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he Federal Government’s plans to boost local refining of petroleum products brightened yesterday as General Electric (GE), a United States-based multinational company has proposed to invest and revamp the ailing Port Harcourt, Warri and Kaduna refineries.

GE, in a presentation to NNPC GMD, Dr. Maikanti Baru and his team stated that the company’s teams of partners, including its consortium involving the Engineering, Procurement and Construction (EPC) partners, off-takers, traders and some financiers would be engaged in the initiative. GE, which Headquarters is in Boston, Massachusetts, is worth 493 billion dollars in asset and its business focus areas include oil and gas, power, water supply, aviation, healthcare, transportation and capital. ‘’We were involved in the tenders that started around last year which was subsequently withdrawn but our commitment to bringing the refineries on-stream is still very deep and we are very serious about it. We propose that work commences either with the Warri or Port Harcourt Refinery as a pilot, as we set a target to improve the refinery capacity before the end of 2017,’’ the Company stated in its presentation. GE’s desire to partner with NNPC on the rehabilitation of the three refineries came on the heels of a similar proposal by the Italian company, Eni, to establish cooperation with NNPC for the Rehabilitation and enhancement of Port Harcourt Refinery as contained in the company’s release in Rome recently. Leading a high powered delegation to the NNPC Towers, Jeff Immelt, GE Global Chairman and Chief Executive Officer, said as part of the offering, GE and NNPC have

identified some major national power projects in the country and are currently developing the scope of intervention in the projects which have a potential combined capacity of about 4.4 gigawatts. GE further pledged its readiness to work with the NNPC to make production in the Off-shore fields profitable for the benefit of both companies and other stakeholders, expressing the hope to consolidate on its existing working relationship with the Corporation to expand the prevailing power business and help NNPC achieve its vision of becoming the leading power company in Nigeria. Welcoming the GE team to the NNPC Headquarters in Abuja, Group Managing Director of the Corporation, Dr. Maikanti Baru expressed delight in the interest GE had to intervene in some vital operational areas of the Corporation. Dr Baru noted that GE’s offer of a package that includes projects financing would greatly improve collaboration and initiate the power projects rapidly. The NNPC GMD also welcomed GE’s offer for support to boost the nation’s offshore production and raise crude oil reserve ratio replacement, urging the company to also tap into the opportunities on offer in medical supplies as the NNPC moves to commercial the services of its 52 hospitals and clinics spread across the country in the years ahead.

Orient Energy Review January, 2017

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Orient energy review January 2017