Sweetcrude march

Complete deregulation is solution to fuel shortages -MOMAN

P\8

Solid Minerals sector: Window for massive employment

P\17

A Vanguard Monthly Review Of The Energy Industry VOL 05

N0. 70

UPDATES MONTHLY BASKET PRICE

FEB-15 JAN-15 DEC-14 NOV-14 OCT-14 SEP-14 AUG-14 JUL-14 JUN-14 MAY-14 APR-14 MAR-14 FEB-14

53.92 44.36 59.46 75.57 85.06 95.98 100.75 105.61 107.89 105.44 104.27 104.15 105.38

Daily | Weekly | Monthly | Yearly

56.07 U$

110 108 106

MARCH, 2015

NIGERIAN REFINERIES:

Avalanche of controversies

104 102 100 98 96 94 92 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15

Eunisell Restates Commitment to Marginal Fields Development BY SEBASTINE OBASI

E

unisell Solutions, an indigenous oil and gas company has reaffirmed its resolve towards the provision of solution-based services to ensure the acceleration of oil production in marginal fields. In a chat with newsmen in Lagos, the Chief Executive Officer, Mr Dickson Okotie said that one of the major challenges in the industry was the lack of technical competence which he said Eunisell provides. “We have consistently provided lasting solutions to

CONTINUES ON PAGE 6

Refinery P\17

CBN should encourage lending to oil, gas companies -Fatona

2

Contents 3 07 11 12 14 16 17 18 20 21 23

COVER

Nigerian refineries, avalanche of controversies

OIL Eunisell restates commitment to marginal field development

FOCUS CBN should encourage lending to oil, gas companies POWER

GE install 75MW turbines in PH refinery

GAS

Nigera records 50 attacks on gas pipeline

FINANCE

Oando/ConocoPhilips deal earns FBN Capital recognition

SOLID MINERAL

Solid Minerals sector: Window for massive employment

TECHNOLOGY

How kerosene is produced

INSURANCE Oil price fall affects insurance negatively

MARITIME Firm pays N88m ransom to free Greek crew

COMMUNITY DEVELOPMENT JTF adopts new strategy on oil theft

Sweetcrude is a publication of Vanguard Media Limited

THE TEAM EDITOR Clara Nwachukwu CORRESPONDENTS Victor AHIUMA-YOUNG Godwin ORITSE Godfrey BIVBERE Jimitota ONOYUME Samuel OYANDOGHA Emma Arubi Michael Eboh Rosemary ONUOHA Sebastine OBASI Ediri EJOH HEAD, SPECIAL REPORT Ubong NELSON PAGE LAYOUT/DESIGN

Francis AYO & Johnbull OMOREGBEE

Enquiries Call: 08098051103

Printed and Published by

WEB:

Vanguard Media Limited. Vanguard Avenue, Kirikiri Canal, P.M.B. 1007, Apapa.

All correspondence: P.M.B 1007, Apapa, Lagos.

A

lthough oil price is beginning gain strength, but it is now obvious that the era of the $100/ barrel range may be gone for good. For Nigeria the be nefits of an upward or downward oil price movement have be en eroded by the sudd en devaluation of the Naira. This has inc reased the cash sq ueeze in the system and now affecting opera tions in the petroleum industry, especially the downstream sector. Sporadic queues ar e popping up here and there as oil markete rs are unable to ra ise funds to import more products to meet domestic consumpt ion, and the refin eries which the NNPC claims are now wo rking and making profi t cannot come to the rescue because ve ry little products are being produced from them. This edition is focus ed on the state of th e refineries and the need for the NNPC to come clean with what is happening with them. The fact tha t queues are resurfa cing is evidence that all is not as they seem with the refineries, even as such evidence is not good for elections. Notwithstanding the fact that alm ost every section of this edition has one thin g or another to do with refinery operations , there are still updates on developments from other sectors in Oi l, Gas, Power, Fin ance, Technology, Solid Minerals, Insura nce, Maritime, and Com munity. Our guest for Focu s is Dr. Layi Fato na, whose company, Ni ger Delta Petroleu m is also now exploring for oil in South Suda n. Enjoy!

Cover Story

3

Warri refinery

Nigerian refineries, avalanche of controversies CLARA NWACHUKWU, SEBASTINE OBASI AND MICHAEL EBOH

E

xcept urgent and immediate steps are taken, Nigeria’s quest to have sufficient refining capacity may not be achieved soon as being anticipated, because none of the fluid catalytic cracking, FCC units in all the refineries is working, investigation has shown. The FCC is one of the most important conversion processes used in petroleum refining. It is widely used to convert the highboiling, high-molecular weight hydrocarbon fractions of petroleum crude oils to more valuable gasoline (Premium Motor Spirit, PMS or petrol), olefinic gases, and other products. Refining experts insist that without the FCC unit, it is impossible for the refineries to produce white products, such as petrol, liquefied petroleum gas, LPG or cooking gas, dual purpose kerosene, also used as

domestic kerosene, and automotive gas oil or diesel. Rather the refineries will only be able to produce more of other types of low quality fuel like high or low pour fuel oil otherwise called black oil. Operations at the refineries At a time when Nigeria should fall back on domestic refining occasioned by the recent supply shortages in the market resulting from Naira devaluation, as marketers were unable to import, no succour came from the refineries. Rather, due to very low capacity uitilisation, products lifting are being rationed for marketers depending on what each of the refineries is able to produce. Operations reports exclusively obtained by Sweetcrude last week from sources in the Port Harcourt, Warri, and Kaduna refineries based on products evacuation by marketers showed that the refineries are still experiencing skeletal fuel production. At the Port Harcourt Refining Company, PHRC, made up of

two plants with combined capacity of 210,000 barrels per d a y, b p d , v e r y m i n i m a l quantities of high quality fuel were being produced, as no marketer could load above 2 trucks per day for petrol. (Trucks are generally 33,000 litres). Diesel was supplied based on orders of not less than six months ago, while there was no loading of kerosene from the refinery. From the Warri Refining and Pe t r o c h e m i c a l C o m p a n y, WRPC, a 125,000bpd plant, each marketer got a maximum of four trucks daily. Like in the PHRC, diesel was loaded based on previous orders, and kerosene had not been loaded from the refinery in the last one month. The situation is even worse in the Kaduna Refining and Petrochemical Company, KRPC, with a name plate of 110,000, the smallest of all the refineries. According to the operations’ report, there were no loading for petrol and kerosene, while before last week each marketer could only load two trucks per month but was reduced to one truck last week.

Rather, due to very low capacity uitilisation, products lifting are being rationed for marketers depending on what each of the refineries is able to produce NNPC claims But the Nigerian National Petroleum Corporation, NNPC, the operator of the refineries with combined capacity of 445,000bpd would want Nigerians to believe that capacity utilisation in the refineries have increased significantly. In fact, the NNPC claimed that the refineries were now making huge profits, with PHRC recording a net profit of about N3.2 billion or 250 per cent increase byNovember 2014,above theN11.2 billion posted in December 2013. S t r a n g e l y, t h e N N P C spokesman, Mr. OhiAlegbe,

after more than one week of written inquiry, could still not provide data on the operations or capacity uitilisationfor the refineries. In recent statements, Alegbe quoting the Managing Director of Port Harcourt Refinery, Dr. BafredEnjugu,claimed thatthe plant continues to refine more petroleum products such as petrol, diesel and kerosene. Also quoting the Managing Director of theWarri Refinery, Mr. Paul Obelley, the NNPC spokesman said “the company is running at 60 percent installed capacity of its 125, 000bpd.” Capacity utilisation CONTINUES ON PAGE 4

Cover Story

4

Nigerian refineries, avalanche of controversies

Kaduna refinery See table below:

CONTINUED FROM PAGE 3 However, a2014 Hydrocarbon Processing Plant, HPP Report also exclusively obtained by Sweetcrude, from a Ministry of Petroleum source, shows that none of the refineries operated up to 20 percent of their capacities in 2014 operating year. A breakdown of the overall performance of the plants as contained in the HPP Report identified Warri Refinery with the highest capacity utilisation of 19.23 per cent, while Port Harcourt, almost twice Warri’s size recorded only 17.1 per cent and Kaduna 11.05 per cent. Although the Report shows that in 2014 Warri received the total highest crude allocation in excess of 14.558 million barrels, it however processed only a little above 8.78million barrels, leaving an outstanding of over 5.780 million barrels. The report did not say what happened to the rest of the crude. Ironically, Port Harcourt refineries, which received above 9.317 million barrels, processed even higher quantity of more than 9.380million barrels. But the difference in crude received and processed by the Warri refinery during the period in review was not much, as it received more than 4.929 million barrels and processes above 4.438 million barrels.

Product output, evacuation In terms of product output and evacuation, theHPP Report shows the Warri Refinery, which received the highest crude allocation also recording the highest product output and evacuation in the five products listed in the report. The products included LPG, PMS, DPK, AGO, and fuel oil. But neither the Port Harcourt nor the K aduna Refiner y recorded any LPG output or evacuation in 2014 as shown below: NNPC data But the NNPC data differs from that of the HPP Report. The Corporation in its Monthly Pe t r o l e u m I n f o r m a t i o n , revealed that the refineries had over a period of nine months between January and September 2014 processed 2.763 million metric tonnes, MMT, of crude oil, from the 6.254 MMT made available to the refineries for processing. In a further breakdown the NNPC data revealed as follows: ► January, 652,000 MT crude received – processed 69,000 MT ► February, 903,000 MT 497,000 MT. ► March, 492,000 MT - 279,000 MT ► April, 788,000 MT - 432,000

OVERALL PERFORMANCE OF PLANTS PHRC

PHRC

PHRC

Crude Received (bbls)

9317, 753

14,558,350

4,929,210

Crude Processed (bbls)

9317, 753

14,558,350

4,929,210

Capacity Utilization (%)

17.1

19.23

11.05

MT; ► May, 985,000 MT - 560,000 MT ► June, 672,000 MT - 221,000 MT ► July, 966,000 MT - 334,000 MT ► August, 542,540 MT - 296,140 MT ► September, 253,260 MT 74,640 MT The data concluded by saying that in general, the three refineries in Kaduna, Port Harcourt, and Warri, recorded an average capacity utilisation for the nine months period of 16.7 per cent, 11.69 per cent and 25.52 per cent respectively. As with the HPP Report, the NNPC data also did not say what became of the rest of the crude for the period in review.

Furthermore, another NNPC data for a 10-year domestic refining capacity utilsationfrom 2004 to 2013, showed as follows: Kaduna Refinery achieved 26

percent, 33.8 percent, 8.34 percent, 0 percent, 19.56 percent, 22.17 percent, 20.46

CONTINUES ON PAGE 5

Cover Story

5

Modular refinery

Nigerian refineries, avalanche of controversies CONTINUED FROM PAGE 4 percent, 22.17 percent, 29.12 percent and 29.33 percent respectively. During the same period, Port Harcourt achieved 31.04 percent, 42.18 percent, 50.26 percent, 24.87 percent, 17.84 percent, 15.23 percent, 9.17 percent, 9.18 percent, 11.95 percent and 9.18 percent respectively. While Warri Refinery on the other hand achieved 9.10 percent, 54.85 percent, 3.85 percent, 0 percent, 38.52 percent, 41.34 percent, 43.36 percent, 27.99 percent, 27.88 percent and 35.99 percent respectively. Refineries’ managers speak The Group Executive Director, GED Refining and Petrochemicals, NNPC, Mr. Ian Udoh, had earlier expressed the hope that the nation’s refineries would operate optimally up to 90 per cent capacity by 2016. Udoh told Sweetcrudethat the Corporation commenced rehabilitation of refineries in October 2014, and that the operation was expected to last for 18 months. He explained that the three refineries would no longer be sold or privatised; rather, they would be fixed for maximum capacity utilisation. He said, “We are rehabilitating them, and we have started the programme of phase

rehabilitation using local resources and in-house competencies spread over a period of 18 months which started in October last year. “By the end of this year (2015) or early next year, the refineries will be in a significant better position than they are right now,” he said. Udoh, however, corroborated claims of redundancy of the refineries, stating that the refineries cannot record significant production increase until the maintenance works on them are concluded. He said, “However, it is not going to be a sudden jump in production, it would be gradual. We have ordered a lot of materials; as the materials come we install them using our local resources. "It is an ongoing process that will allow the reliability of the refineries to continue improving across the period, because most of our problems have to do with reliability of the plant. We can start all of them now, but from time to time, one of the equipment will fail, or some other faults will occur, and we have to shut down to repair.” The chief executives of the respective refineries were quoted as attributing the recent production successes claimed by the NNPC to the phased rehabilitation of the refineries, which had helped the plants in replacing some obsolete parts.

Enjugu, who oversees operations at the Port Harcourt refineries, attributed the improved fortunes of the r e f i n e r i e s t o t h e Fe d e r a l Government’s decision to supply crude to the refinery by marine transportation; the supply of power by an Independent Power Plant, IPP; and approval for a new strategy of using in-house skills. He also said the refineries had mapped out measures to harness various business opportunities available through its commercial department, and to rake in additional N182 billion annually from sales of deregulated products including LPG, AGO, and other derivatives. Obelley of the Warri Refinery said the petrochemical plant, which was down for almost 18 years, had been fixed and the carbon black plant would soon be inaugurated. As it was in the past The Nigerian refineries had degenerated over time.In the last 18 years, the refineries became comatose, as successive governments failed to bring them up to their installed capacity due to the abandonments of the required Turn Around Maintenance, TAM, as at when due. Even the much talked about Greenfield refineries have not made any headway, except for recent proposals by the Dangote

By the end of this year (2015) or early next year, the refineries will be in a significant better position than they are right now

Group to build a 650,000 barrels daily capacity refinery by 2018. According to the 2012 Report of the Petroleum Refineries Special Task force headed by Dr. Kalu Idika Kalu, former Minister of Finance in the Ibrahim Babangida’s administration, during the early 1990’s, the refineries produced enough petroleum products to satisfy the national demand and exported the excess production. In fact the refineries were so successful that for two consecutive years, 1991 and 1992, Nigeria earned US$124million and US$156million respectively from the export of petroleum products. But now, the countr y is importing almost all of its 40 million litres daily domestic PMS requirement, which is expected to be cut down by 50 per cent if

the refineries are upgraded to their full capacities. The Task Force found that all the refineries, Warri, Port Harcourt and Kaduna, had failed to meet the normal international benchmarking standards; namely 80-90 percent capacity utilisation and 90 percent on-stream time efficiency for continuous operation. As a result of under-capacity utilisation, the Nigerian refineries are rated as the worst in Africa, with only 18 percent average annual capacity utilisation in the period 20062009, according to Refineries Survey in the Oil & Gas Journal. The Task Force also noted that apart from the volume shortfalls, the refineries have consistently

CONTINUES ON PAGE 4

Cover Story

6

Nigerian refineries, avalanche of controversies

Portharcourt refinery CONTINUED FROM PAGE 5 been making lopsided products, with a skewed yield of products towards heavier fuels, at the expense of light products, especially PMS, which is in very high demand. Th e O lus e g unO ba s a nj o ’s gover nment even tried to privatise the refineries in 2007,and got as far as selling them off, with the Port Harcourt refineries going to the billionaires’ club of AlikoDangote and Femi Otedola and a host of others, until it was forced by public outcry to rescind the decision. Bluestar Oil Services Limited Consortium, a Nigerian consortium comprising Dangote Group, Zenon Oil, Transnational Corporation of Nigeria (Transcorp), and Rivers State Government emerged the preferred bidder/core investor for PHRC with a bid of $561 million (N71.808 billion) for 51 per cent of Federal Government's equity in the ailing crude oil refining company. The decision to sell off the refineries to “political cronies” was as a result of the failure of

Specifically, the Coordinator, Coalition of the South-South and South-East Youths, Mr. GodspowerIgwe, expressed disappointment that crude now has to be transported by road to the Port Harcourt refineries

GodspowerIgwe, expressed disappointment that crude now has to be transported by road to the Port Harcourt refineries. He noted, “Even though the PHRC is working at over 70 per cent installed capacity, it is just a distance of 60 kilometres to

transport crude oil from the Bonny Terminal to the place, but the use of pipelineswas terminated due to acts of vandalism, it is so sad that nothing is happening there. “As I speak, over 10 million persons benefitting from the PHRC depot operations have been suffering due to hunger and frustration since depots in Aba, Calabar, Enugu, and Port Harcourt are directly linked to it.” Also speaking, the Public Relations Officer,Ogoni and Eleme Joint Stakeholders Forum at the PHRC Depot, Mr. Sunday Saro, said, “Since 2014, crude was only supplied in March when the use of marine vessels to carry crude was commissioned. Crude was also available in April, May, once in July and November and that is all to date yet workers at the PHRC still collect salaries.” If claims by the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, about the transparency of the NNPC in terms of processes and accounting, are to be taken seriously, it is expected that the NNPC will come out clean about the true status of the refineries. But beyond the transparency of NNPC operations, industry operators insist that now is the time to completely deregulate the downstream sector of the petroleum industry, as domestic refining can never be profitable in a regulated system. This is particularly so, in the light of the current slide in the value of the Naira, which now exchanges at over N200 to $1, and has completely overrode any benefits that should accrue from the falling oil prices at the international market.

Eunisell Restates Commitment to Marginal Fields Development CONTINUED FROM PAGE 1

efforts to get private individuals to invest in refineries for which licences were issued.About18 licences were issued for private refineries in 2005. But none has yet come on stream. The licencees had thought that they could go a-hawking like their oil block counterparts when they got the licence, but got stuck with thelicences, as no foreign partner of financial institution wanted to touch them, seeing as the downstream sector is still regulated. Also, no amount of threats by government could get the

international oil companies, IOCs, who are in joint venture operations with the NNPC to obey the regulation to refine 50 per cent of their crude in country under a regulated market. Even the workers and other stakeholders are not happy with the situation in the refineries, and had over the last couple of days, staged a protest over what they referred as,“the redundancy of the refineries over the last one year.” Specifically, the Coordinator, Coalition of the South-South and S o u t h - E a s t Yo u t h s , M r.

the challenges our clients have brought before us over the years, many of which are related to technical services. Some of them are also financial, as you know the financial requirements for delivering an oil field is demanding. The good news is that we have established solid relationships with various partners and financial institutions to provide solutions to our clients based on our recommendations. The result of some of our solutions in recent times can be felt in the industry,” he said He also said that the company was poised to deliver services with the introduction of innovative products that measure, improve, control and process the flow from oil and gas wells, citing the case of Qua Ibo. According to him,“The Qua Ibo field is a clear example of what we have done recently. Apart from building a production facility in record time with the skills of highly experienced Nigerian professionals, we also financed the entire project, taking away most of the burden indigenous companies are usually faced with”.

Oil

7

Oil field

Eunisell restates commitment to marginal field development By Sebastine Obasi

E

u n i s e l l Solutions, an indigenous oil a n d g a s company has reaffirmed its resolve towards the provision of solutionbased services to ensure the acceleration of oil production in marginal fields. In a chat with newsmen in Lagos, the Chief Executive Officer, Mr Dickson Okotie, said that one of the major challenges in the industry was the lack of technical competence which he said Eunisell provides. “We have consistently provided lasting solutions to the challenges our clients have brought before us over the years, many of which are related to technical services. Some of them are also financial, as you know the financial requirements for delivering an oil field is demanding. The good news is that we have established

solid relationships with various partners and financial institutions to provide solutions to our clients based on our recommendations. The result of some of our solutions in recent times can be felt in the industry,” he said He also said that the company was poised to deliver services with the introduction of innovative products that measure, improve, control and process the flow from oil and gas wells, citing the case of Qua Ibo. According to him, “The Qua Ibo field is a clear example of what we have done recently. Apart from building a production facility in record time with the skills o f h i g h l y ex p e r i e n c e d Nigerian professionals, we also financed the entire project, taking away most of the burden indigenous companies are usually faced with”. “Eunisell Solutions is one

of the few indigenous companies in the industry with good technical

competence required in building a processing facility and one of the foremost

Nigerian companies with the capability to deliver Hydraulic Flying Leads Service.”

Anukam becomes new NESREA boss

A

buja - President Goodluck Ebele Jonathan, has approved the appointment of Dr. Lawrence Chidi Anukam, as the new Director General/Chief Executive Officer, DG/CEO, of the National Environmental Standards and Regulations E n f o r c e m e n t A g e n c y, NESREA. The letter, signed by the Secretary to the Government of the Federation, Mr. Anyim Pius Anyim, said the appointment, which became effective from February 17, 2015, is for a term of four years as stipulated in the NESREA Establishment Act 2007. Anukam assumed the post of the Acting Director-General of

BY FUNMI OLASUPO NESREA last December, after he took over from Dr. (Mrs.) Ngeri Benebo, whose tenure expired on the 18th of December, 2014. Until his appointment, Anukam was formerly the Director, Planning and Policy Analysis in NESREA. He holds a Bachelor of Science, B.Sc. Degree in Chemistry from the University of Lagos and a Masters Degree in Environmental Pollution Control from the University of Leeds, England. He also has a Doctor of Philosophy Degree (PhD.) in Applied Geography (Natural Resources Management) from the Wilfrid Laurier University, Wa t e r l o o , C a n a d a , a n d a Certificate in Strategic

Management of Regulatory and Enforcement Agencies from Harvard University, Cambridge, Massachusetts, USA. Before joining NESREA, Anukam was the Head of the Department of Programme D e v e l o p m e n t a n d Implementation at the National Office of the New Pa r t n e r s h i p f o r Af r i c a ’ s Development, NEPAD, in the Presidency. And before that, he was the Special Assistant to the Senior Adviser to the President on NEPAD and the Head of NEPAD Nigeria. He was deeply involved in the development, promotion, domestication and operationalisation of the implementation of NEPAD programmes in Nigeria.

Oil

8

Complete deregulation is solution to fuel shortages -MOMAN

T

he Executive Secretary, Major Oil Marketers Association of Nigeria, MOMAN, Mr. Obafemi Olawore, last week intimated journalists about efforts between government and oil marketers to avert fuel supply shortages. Clara Nwachukwu was there. Excerpts:

Preamble You will recall that last year the government through the Minister of Finance paid us about N345b, which were mainly for 2013 and part of 2014. However, we still have some outstanding of 2014 and some early part of this year the total of invoices saved is about N164billion on subsidy and on foreign exchange and interest combined the total is around N100billion now. However the good news is that the Minister met us yesterday (last week Monday) and she actually promised, and gave us schedule of payment between now and the end of March, which to a very large extent was agreeable to our principals. This means that we believe the Minister and we will only have cause not to do so if at the end of March nothing happens. We believe her and so the product situation that was actually going to go down will have to pick up. This means that we need to assure ourselves that even if we notice any tightness anywhere, for the sake of yesterday ’s meeting it is a temporally tightness and therefore there will be product. So today, we are not going to be using the word scarcity at all, that shouldn’t be the word for today’s discussion at all. But in all we are going to play our own part.

Q&A The last time we were here, you said marketers had made a request for an increase in margin, and that the minister had set up committee on the issue. What is happening in this regard? The committee has not concluded its work. Remember for a committee to do a very thorough job, they need to do a lot of collating of data and there are a lot of things to consider even though we are hard hit, we still believe that we need to do a very comprehensive job. So the committee is working, and we hope that pretty soon, we will be able to conclude our job and submit to the authority that set up the committee. If I’m not mistaken, you did also say that government will reimburse the marketers for the difference in the shortfall between the old pump price to original pump price and the new one. Is this different factored into the outstanding amount you just quoted to us? No. Honestly I don’t have the figures for that and what it is, is that you know when the price was dropped, we already had stock, which means that what we would have sold at N97 and we are told to sell at N87/litre. There was going to be some loss but the government has taken that one up, and I believe that PPPRA has not concluded the job because I

Mr Obafemi

don’t have any update on that, but what is gratifying is that we would be reimbursed. Looking at diesel, if you check the PPPRA pricing template, they recommended N114/litre, but marketers are selling at between N140 and N145, why so much gap despite the fall in crude oil price? The unfortunate situation we find ourselves in, was and is that as the crude price was dropping, as the international price of diesel was dropping, we devalued the naira. But for PMS, let me tell you something interesting here, before devaluation the exchange rate for bringing in product was N171.36 to $1 and at that price the landing price was N90.67/litre. There was a time the exchange rate went to N188 and N188 was for interbank rate, N171 was the Central Bank rate which they gave us. But when it went to N188 the landing cost of PMS, for example, rose from that N90.67 to N98.36. And as at today, when the exchange rate has come to N199 you know that there is no window again, all windows have been closed. When R-DAS and all the DAS were removed the landing cost rose to N103.45, so you see that the main factor here is the exchange rate. If it moves to N215 the landing cost of PMS will move to N110.84. Once the exchange rate starts

Honestly I don’t have the figures for that and what it is, is that you know when the price was dropped, we already had stock, which means that what we would have sold at N97 and we are told to sell at N87/litre moving especially the way it moved by N10, N20 or N30, it will swallow all the advantages we would have derived from the fall in international oil prices. If we had retained the exchange rate at N171 the story would have been different. I am sure that if you looked at PPPRA website of yesterday and applying N199, you won’t get them recommending N110. Though I have not checked but we can check before we leave here today. The exchange rate plays a very important part in the whole calculation. What stops you from collaborating on domestic refining project so that all these costs associated with fuel importation will be drastically

reduced and Nigerians will continue to feel your impact in a more positive way? With due respect to those experts they have completely forgotten that there is one vital step that needs to be taken and that step is that you don’t cap any product and expect a business man to go in there. Once you put it at N97 then what they are saying is that “no matter your production cost N97 is sacrosanct, don’t go beyond it because if you do, you are in trouble.” For diesel, when the exchange rate was N171.36, the landing cost for diesel was N89.77. When the rate went to N188 to $1 the landing cost went to N96.86. At

CONTINUES ON PAGE 9

Oil

9

Fuel facility

Complete deregulation is solution to fuel shortages -MOMAN CONTINUED FROM PAGE 8 N199, the landing cost is about N100. Note that with this landing cost you have not added other charges like distributive margins, you have not added transportation both local and international, there are some costs, taxes we bear on the road when we are going. So, if you add all this to it, there is no way you can sell the product at what PPPRA has indicated on the template. Even if the market is deregulated the PPPRA will also continue to recommend price, if there is an outstanding and actual subsidy is sustained, it simply means that government is also going to offset the differential Again, what I believe is that you are the expert here and what you are neglecting to do is, the fact that you are assuming that the money that would have been paid as reimbursement comes to us, is not our money but a cost that we have incurred by borrowing money from the banks and the money is taken upfront by the banks. When we get the SDN from the

government, we collect and give to the banks. They deduct their money before anything else. That is why we are crying if there is any delay. This is because the banks have the money they gave us and if you delayed they will collect their interest. So you can take whatever days to collect their money they will be collecting there interest, they are calculating immediately government pays you, you indicate to the bank, and the SDN goes to that bank and the bank takes the money, and most of the time we don’t have any change left at all. So, it isn’t that we are collecting the money, and the money is kept by us, but it is money borrowed from the banks to do business at a loss of N97. And then you are reimbursed and that reimbursement is paid through you to the banks and the banks collect their own upfront, so you do not have anything left for you to do that kind of business. But the setup is not that easy and not a straight forward thing; you need some conducive conditions to be able to go into it. Basically, the bottom line is there must be that deliberate

catch and in this case is complete deregulation. Once you deregulate, these refineries will be popping up. So we need the National Assembly to pass the Petroleum Industry Bill, PIB, we believe the PIB will go a long way in pushing this. And if you want to do a PIB that is faultless before it is passed, then we are thinking that we are not human beings, why do you have the word amendment? In the America constitution they have amendment, they have had so many amendments, so it is better to pass it and as we go ahead, if there is any need to amend, we’ll do the amendment that will provide a fertile ground for investors to go into refineries. Will the schedule of the payment cover all the debt? Hopefully! That is why I said earlier we are happy and therefore believe the minister, and we want to believe her and we want to believe that she stays with the schedule. So the threats from the banks are they as a result of these debts? Yes. Most companies have reached their limit so they can’t

For diesel, when the exchange rate was N171.36, the landing cost for diesel was N89.77. When the rate went to N188 to $1 the landing cost went to N96.86. At N199, the landing cost is about N100 get any support from banks. If it’s so bad, why are you still in business when you are faced with these looming challenges? Economics tells me that the moment you are able to cover your fixed cost it is better to remain in business. Ultimately, what is the lasting policy to ensure a permanent solution to these challenges? The solutions are for a complete deregulation not partial deregulation but complete deregulation. I also need to add that deregulation

should not be that you can do anything you like. There must be a framework of deregulation. That is why I prefer what the NCC is doing in the telecom industry. Instead of what our own regulators are doing. Deregulation should be empowered, and should be bold; it should be able to call people to order. There must be a framework or platform for this to work. I don’t know if they actually got the money back or not.

CONTINUES ON PAGE 10

Oil

10

Fuel station

Complete deregulation is solution to fuel shortages -MOMAN CONTINUED FROM PAGE 9 There was a time I read that N C C f i n e d t h e telecommunication operators some huge amount of money for breaching some rules, and that should be it. There should be complete deregulation then the regulators should be empowered to carry out their functions. In which case, it would be devoid of government interference, let this people do their work very well, because when you have this interference, we would have a situation where if marketer ‘A’ is sanctioned by a regulator then he would now go to the government and then it is reversed. No. It should be such that the applied sanctions, they stand by that and let the company at fault, comply and pay the price for it. Because there will always be fall in price, or rise in price you know what happens anytime you have a solution, be prepared for the problem that is coming up. But if you relax, and you do not forget the fact that you just came out of one serious problem and then you forget that something happened, the problem will come up again. Finally, I want to let you know that we are ready to go into refining but the first thing is complete deregulation. There are some strong argument that suggest at this point we might have full deregulation on stream, like what happened in 2013, if you allow sentiments to always come into play in business transaction

there will always be a problem. One day, I said to myself that if PIB is becoming a very difficult thing to crack, while don’t we take the downstream. So let us take the downstream, and do whatever the PIB is suggesting at the downstream and we move ahead. It may not look tidy, but must it stay forever because some people disagree. At some point, we must move ahead, a decision must be taken, those that are not happy are at that particular point, let them go ahead come along and then state their grievances. Let the authorities look at their grievances as we move ahead and move on. You previously said you were being owed N250billion, how come the additional N14billion? The amount is not static and the figures cannot be static. If nothing is done and we meet again next month, it would have increased. But if something is done about it and we meet next month it will decrease, and that is what we are saying. …Is it because of the exchange rate? Apart from the exchange rate, we have not submitted for February. In fact, for January not everybody has submitted. If people who have not submitted for January do so this week, and you come to me next week, the figure will move from N264 billion plus X. Against the backdrop of this, the emphasis is not actually on what they owe us alone. What

was written by the media indicated that it could lead to scarcity. My own appeal is that we should not create a situation where the public will now be reading the figure to give them the impression that there could be scarcity and induce panic. I am appealing that government has met with us and given us a timetable of payment, which we agreed and therefore we are going to bring in products. The 2015 budget proposal for subsidy, and from what you are owed, it appears we are going to overshoot the budget even in this first quarter. What is the outlook and is this realistic? Let me say that, when I read the figure I was surprised. As at the time the budget came in, they owed close to N250billion, which means there is nothing for this year. If there were owing 250billion for last year and they now budgeted for N250billion this year, it means they only made provision for last year, and the assumption is they were not going to provide subsidy for this year. That is my assumption. We want you to give us an estimate of what the stock level is in order for scarcity not to loom? The stock was getting low, but because of the meeting we had yesterday, this has started picking up again. All we want is that let each party keep to its agreement. You don’t seem confident with the agreement?

The minister and the governor of CBN are talking in the issue of foreign exchange. This is part of the whole thing that gives us confidence that we should continue to bring in products I am confident. What are you saying about the new foreign exchange regime because at the end of the day it is going to key into all? Did you table it before the minister, if so, what did she say? The minister and the governor of CBN are talking in the issue of foreign exchange. This is part of the whole thing that gives us confidence that we should continue to bring in products. But is the N87/litre sustainable? The answer is no, it is not sustainable. The higher the exchange rate, the higher the subsidy, which means the more unsustainable the N87 becomes. At N97 we were paying subsidy and at N87 we are paying also. Both figures are not realistic and they could be sustainable in as much as you have the money to pay the subsidy that arises from them, otherwise we would go back to complete deregulation. Remember that at the time the government came down to N87,

if they had not come down and left it at N97, we would have been paying back to government, because as at that time there was an over-recovery. But because they dropped it by N10, we immediately went back to subsidy regime. For me, they would have stayed there, but government always tries to satisfy the masses. There are speculations that government would not pay the bank interest charges, what is your take on this? Government is going to pay. The reason is this, when the statement was made, we did an advertorial and we said government cannot say they won’t pay because if we had an agreement of payment of 45 days and you don’t pay me within that stipulated agreement time frame, and the banks are charging me interest, it is not my fault. We have the PSF guideline and we have an agreement we signed for 45days, so government will pay.

F Niger Delta is said to have achieved half a trillion cubic feet of gas since inception. What would you say about the federal government’s gas to power project, taking into cognizance the government stance that lack of gas supply is an impediment to regular power supply? What can Niger Delta do to leverage on this opportunity? The most important thing for us is that we have managed to commercialise and monetise all our gas resources. Therefore to tap into our reserves, if a credible buyer approaches us today, we can actually talk of a business and opportunities of supply. In our own case, I can say that we have the most available ready to supply gas resources coming out of Ogbele, as long as the end user is within a reasonable proximal location to us. In other words, somebody in Warri who wants to buy gas from Niger Delta that will be a tall order. But for anybody who wants to take gas from our immediate catchment area, there is opportunity for us to talk and reach a deal. That is a competitive advantage that we offer today as a Nigerian medium gas company. Licenses were given to private refineries some years back but none of them has come on stream. What lessons do you think can be learnt by other emerging oil and gas companies, in terms of refinery development? For those of them like us, they need patience. They cannot invest in gas today and realise all their investments in two or five years, as you could otherwise do if you are producing oil. Gas is long term and long term reward. If you see what is happening in the state of Nigeria, mind you this time last year, people were buying gas at a dollar and government has set the tone. Today, you are supposed to be paying $2.50 for gas. Something can only happen. As demand increases, as suppliers come in, there will be new opportunities and there is only one direction that gas prices can go. They will only go up. For companies like us, there is plenty of space to invest in gas and realize your investment over time. But you have to be patient. You said that Niger Delta Exploration is already in South Sudan. Are you not mindful of the war situation there? Why is everybody talking about what is going on in South Sudan. There is nothing going on in the South. What is going on Iraq? What is going on in Syria? As far as I am concerned, the requisite peace you get in South Sudan is equivalent to what you get anywhere in the world. While there, they also asked me about Boko Haram in Maiduguri. That

Focus

11

CBN should encourage lending to oil, gas companies - Fatona

regulators and the practitioners, but that is not visibly happening. The Central Bank of Nigeria has directed banks to rein in on loans to oil and gas companies. With this clamp down on your exposures, how are you going to fund your capital projects? There should be a rethink by the CBN on this issue. Viable lending by banks to oil and gas companies should rather be encouraged. You said there have been no host community-induced interruptions in the operations of your company, Niger Delta. How did you achieve that? We have a Host Community Development Trust Fund, where we pledged five percent of our net profit every year to the host communities. We have been doing yearly in the last nine years; that is the covenant. It made host communities stakeholders and protectors of the company’s facilities. The fund is managed by NDPR Community Development Trust with the active participation of the Host Community’s Advisory Committee, CAC. It enshrines the doctrine of zero interruption, maximum benefit, strengthens local governance and establishes a framework for transferring visible development to the host communities. It is a modest initiative to ensure that development is anchored on the people. The cumulative cash funding to the trust is $7.127 million. What is the state of OML 54? OML 54 was owned by Chevron. It has been relinquished and reverted back to the federal government. The Ogbele field in OML 54 was awarded to our company.

L

ayi Fatona is the Managing Director of Niger Delta Exploration and Production Plc, Nigeria’s foremost indigenous and independent operator of small to medium sized fields. He was the guest speaker at the Lagos oil club, where he enunciated the operations of the company in the last 10 years. He spoke to Sweetcrude on the sidelines as reported by Sebastine Obasi. Excerpts: is thousands of kilometers away from Niger Delta. The perception of security and safety is in the mind of the beholder. As far as I am concerned, South Sudan offers the tranquility and peace any investor is looking for. I don’t have any regret that we are investing in South Sudan. Indeed, I am pleased that we could take the opportunity when it manifested. For a company like Niger

Delta, if we are going to continue to grow as a company, we have to look for new opportunities at affordable cost. I think stepping out of Nigeria to places like South Sudan, offered us such opportunities where we can grow the company at very minimal cost and still do very serious things that we can do in Nigeria but that can take us quite substantial time to realise.

Layi Fatona

What do you think can be done to revitalise exploration and production activities given the fact that there have been no new investments for some time now? Better investing environment, and the passage of the PIB. It is often said that a bad PIB is better than no PIB at all. We are all hungry for the PIB to be passed, the industry deserves it. The Petroleum Act is old and needs to be revised, and whichever way it is revised, there needs to be a mutual discussion between the

What is the nature of your partnership with the Nigeria LNG Ltd., and how has it impacted on the operations of NDPR? We are the first company to take flared gas as well as associated and non-associated gas to NLNG. We completed building the100 mmscf/d Ogbele Gas Plant & commenced plant/production testing such that by November 2012, we achieved the first gas delivery into NLNG Bonny Plant. As at February 23rd, 2015, NDPR has delivered 19.024 Bcf of gas from Ogbele to NLNG. It is a strategic partnership between us and NLNG off-taking. This is a company that only restricts its off-take gas to its owner companies, NNPC, Total, Shell and Agip. Here we are a very small, unknown company joining the pack, which again is a privilege for us. To build the plant to a technical level acceptable to NLNG is quite a demanding task, but we have succeeded.

Power

12

By Michael Eboh

General Electric gas turbines putting out 75 MW

GE installs 75MW turbines in PH refinery

N

igeria’s crude oil refining capacity is set to rise in the coming days, as General Electric, GE, disclosed that it has completed the supply and installation of three 25megawatt, MW, aero-derivative mobile gas turbines, with a combined capacity of 75MW, to the Port Harcourt refinery. The turbines, a trailermounted, TM2500+ power plants, were supplied through Genesis Electricity Limited with the aim of ensuring uninterrupted power supply at the refinery. According to a statement by GE, the installation of the mobile gas turbines will ensure that the Port Harcourt refinery, Nigeria’s largest crude oil refinery, has the power it needs to overcome grid outages and return to full refining capacity. “Before now, outages have

reduced the refinery’s output to 30 per cent of its total maximum capacity of 210,000 barrels per day. To help address these issues, GE signed a 20-year power purchase agreement with the Nigerian National Petroleum Corporation, NNPC, in November 2013 for the installation of GE’s TM2500+ units at the refinery ” the company said. GE further said the TM2500+ gas turbines will provide both the base load and backup power to support refinery operations, adding that the agreement also includes the future modernisation of Nigeria’s other two refineries. Commenting on the development, President and Chief Executive Officer, GE Nigeria, Dr Lazarus Angbazo, said the company is in the process of training Nigerian engineers to operate and manage the refinery ’s

TM2500+ units. According to him, GE also has an in-country service and maintenance workshop to service the units, adding that apart from reflecting GE’s long term commitment to Nigeria, these efforts are in line with local content requirements in Nigeria. He further said that the GE TM2500+ gas turbine is capable of providing ISO-rated 31MW of fast and reliable on-site generating capacity. He said, “The system can be used to provide utilities with a base load bridge to support permanent power installations; backup power to support natural disaster relief efforts; or for plant shutdowns or equipment maintenance. The fuel-flexible system can use either natural gas or liquid-distillate. “GE acted as a catalyst for the project, taking it to financial closure by working with all

GE acted as a catalyst for the project, taking it to financial closure by working with all stakeholders and partners to structure the project’s equity. This is the first-ever non-recourse project financing for power plants in Nigeria

stakeholders and partners to structure the project’s equity. This is the first-ever nonrecourse project financing for power plants in Nigeria.” Also speaking, Chief Executive Officer, GE, Mr. AkinwoleOmoboriowo, said, “We are excited to work with GE to deploy their proven TM2500+ gas turbine technology and help Nigeria successfully return the Port Harcourt refinery to full service as quickly as possible. “This project was not only important in getting the refinery

back into full operation, but also to support Nigeria’s long-term economic interests by achieving optimum refining capacity.” Similarly, GE’s Distributed Power Leader for sub-Sahara Africa, Mr. George Njenga, said, “Our TM2500+ technology’s high-power density and compact footprint make it the perfect solution to address Port Harcourt Refining Company’s fast ramp-up, on-site power requirements while also ensuring the refinery’s longterm viability.”

Focus

13

NLNG Sponsors 57 Nigerian Trainees in South Korea BY EDIRI EJOH

F

ifty-seven y o u n g Nigerians, sponsored by N i g e r i a Liquefied Natural Gas, NLNG, the country ’s liquefied natural gas exporter, have left for the East Asian nation of South Korea towards mastering a shipbuilding, repair and construction course. Their training comes as one of the important elements of NLNG’s contract to procure six new ships from worldrenowned shipbuilders, Hyundai Heavy Industries (HHI) and Samsung Heavy Industries (SHI) at the cost of US$1.6billion. NLNG is procuring the ships, as part of efforts to expand its shipping

s u b s i d i a r y, B o n n y G a s Transport (BGT) fleet and thus position the exporter as a choice supplier of liquefied natural gas, considered the cleanest fossil fuel by energy industry experts. NLNG had included a package of local content elements in the contract agreement with HHI and SHI, for the benefit of Nigerians, local companies and the country’s broader maritime sector. Local companies like Berger Paints Plc, Nexans, Kabelmetal, Metec West Africa and Pa i n t s a n d C o a t i n g s Manufacturers Nigeria (PCMN) were said to have already reaped revenues amounting to over $10million from exports of their products to South Korea for use in building the six NLNG ships,

the first of which is due for delivery in 2016. Also included in the local content package is the drive by the company for investment in a ship repair and dry docking facility in the

Fate of Iran’s gas export to Pakistan uncertain

W

hile the deadline for Pakistan to build a pipeline for the import of gas from Iran is over and the Islamabad government should pay a heavy penalty for the delay in implementation of the project, due to the silence of official news sources the fate of the pipeline is not clear yet. At a time that Pakistani officials have stated a new agreement has been reached between the two countries for the export of gas, Iran’s Oil Ministry in a statement has denied the report. The Iranian Oil Ministry stressed that negotiations have been held between highranking officials of Iran and Pakistan for the

gas deal but no new agreement has been reached in this regard yet. “New agreements on Iran-Pakistan gas pipeline are not true,” shana.ir quoted Iran’s Oil Ministry as saying. Recently news sources have reported that Iran has proposed a revised agreement to Pakistan according to which Islamabad should consider a third party for its payments to Iran. According to a contract signed between Iran and Pakistan in 2008 Iran’s gas was planned to be exported to Pakistan by December 2014.

Gas

14

Coal mining gas facility

Nembe community rejects Agip Christmas gift The people of Nembe in the Nembe local government area of Bayelsa State have rebuffed the presents of a goat and 10 bags of rice offered to them by the management of the Nigerian Agip Oil Company (NOAC). Agip had made the donation as a Christmas gift. But the community’s oil and gas committee headed by Mr. Nengi James spurned the offer on behalf of the elders and other members of Nembe. Several members of the community said they were angry that the oil firm would offer such paltry donations to the

people of Nembe whose traditional ruler, Edmund Dakoru, once served as Nigeria’s Minister of Power. In a statement issued on Sunday, the chairman of the Nembe oil and gas committee, Mr. Nengi James, described the gift as “a corporate embarrassment to the traditional institution and the good people of Nembe Kingdom.” James recalled a meeting with the oil firm’s General Manager when he visited King Edmund Dakoru alongside his management team where issues of corporate social responsibilities were addressed.

Power

15

Thermal Power Plant, Ughelli, Delta State

BY MICHAEL EBOH

According to the NBS, the decline was a result of both a fall in the value of exports and imports in the third quarter relative to the second quarter; as exports declined by N202.7 billion or 4.3 per cent to N4.479.5 trillion, while imports declined by N157 billion or 7.9 per cent to N1.820 trillion

N

i g e r i a imported N736 billion worth of Premium Motor Spirit, also known as fuel, in nine month — between January and September 2014 — data from the National Bureau of Statistics, NBS, has revealed. This, according to the NBS, in its Foreign Trade Statistics for the first, second and third quarters, was in spite of the fact that the country exported crude oil valued at N9.433 trillion in the

same period. Specifically, motor spirit import, as the NBS called it, was N192.5 billion in the first quarter of 2014, representing 12.5 per cent of total imports for the period, while N315.7 billion worth of motor spirit was imported in the second quarter, representing 16 per cent of total imports. In the third quarter of 2014, Nigeria imported N227.8 billion motor spirits, representing 12.5 per cent of the country’s total imports.

Solid Mineral

16

Power: There is no going back to Egypt, FG declares …Promises rapid development of sector

Shiroro dam

CHRIS OCHAYI

N

otwithstan ding the hiccups t h a t characteriz ed its early take-off, the Federal Government said it has resolved not to give up the zeal and commitment to facilitate steady electricity supply to Nigerians in the post-privatisation era of the power sector. The government having seen through the power sector, an incredible inflow of foreign direct investments coming into Nigeria, further determined “There is no going back to Egypt on the quest to deliver power to the

consuming public.” Minister of Power, Professor Chinedu Nebo, savouring the success recorded from the power sector privatisation, told journalists during an interactive session in Abuja, that the country has crossed the Rubicon with regard to the privatization exercise. According to Nebo, “We have crossed the Rubicon with regard to delivery of power to our people, and there is no going back on that. It is very challenging because of so many other difficulties that I might touch on one or two of them.” He said, “Many people on the streets, in their homes, in the villages, even in the cities, have no idea the

implications of privatization. But there are things that need to be told over and over and over again for our people to begin to understand these things. “There are teething problems because the power sector had been neglected for decades; it has been ignored for decades. A situation w h e r e n o t o n l y infrastructural decay but a seeming systematic degradation of the work force; because for 16 years plus, before the coming of President Jonathan, not even a single engineer was hired by NEPA or PHCN. “No technologists, no professional technicians in various areas were hired.

How would you run a power sector in a situation like that,

“We have also seen through the power sector, an incredible inflow of foreign direct investments coming into Nigeria. In Africa of course, Nigeria is number one destination for foreign direct investments. We are now Africa’s largest economy and this is without the level of electricity we need. Think about it. The Minister said the transformation of the telecommunications sector will soon be felt in the power sector. “Fifteen years ago, there were 150,000 telephones lines in Nigeria. Government privatized and I could remember those days because I was already a university professor. I could remember those days. What happened? “To get a line, you had to pay for the line; you will pay the visible and the invisible payment, you understand what I am talking about. And very often the invisible one is more than the visible one, the

There are teething problems because the power sector had been neglected for decades; it has been ignored for decades. A situation where not only infrastructural decay but a seeming systematic

where the workers are aging and dying and retiring and nobody is being trained to replace them? It was very unfortunate.

un-receipted one is more than the receipted one. “Then any time that line goes bad, it takes you one day to lodge your complain, it

Solid Mineral

17

Gabriel EWEPU

O

ver the y e a r s , unemploym ent has been a serious challenge to Nigeria’s economic development as its teeming youth population adjudged to be one of the most vibrant and promising in Africa and the world, had remained unproductive. The avalanche of graduates from the nation’s tertiary institutions, and informal sector has become worrisome. They have turned out to be available instruments of crime and have engaged themselves with one form of questionable livelihood or another for survival. It has become imperative to point out the amazing window created in the nation’s solid minerals sector to solve the daunting challenge of youth unemployment. According to the National Bureau of Statistics, the solid minerals sector can very easily be the largest employment sector of the economy, since deposits abound in virtually every state of the federation. The report indicated that the sector has the potential to create unprecedented increase in employment of Nigerians, particularly in the rural areas where the minerals are found. The multiplier benefits to the citizenry are enormous. It further stressed that the sector has the potential to be transformed through technology transfer from the activities of operators and consequently increasing employment opportunities in the various mining sites. Global developments Countries like South Africa in 2009, had its mining sector contributing for about 9 percent of Gross Domestic Product, GDP, and had an employment of over 500,000 people. The United States of America, USA, alone provides over 670,000 direct jobs in its mining sector. Coming to Australia, about 320,000 direct jobs was created in the mining sector. While in Canada over 200, 000 people had employment in the mining sector. South Africa, as one of the major players in the global mining

Solid minerals

Solid Minerals sector: Window for massive employment Countries like South Africa in 2009, had its mining sector contributing for about 9 percent of Gross Domestic Product, GDP, and had an employment of over 500,000 people industry, created half a million indirect jobs in addition to direct jobs. Tweaking economic mix In this regard, the Nigerian Senate had extensive deliberation on the sector as a major solution to unemployment and wealth creation in the nation’s economy. According to the Upper Chamber, over-dependence on dwindling oil resources in the country has led to unprecedented level of p ove rt y, s oa ri ng

unemployment indices, deepening gap between the rich and poor, rising crime, and unabated corruption pervading the length and breadth of all socio-economic strata. In his assertion, Senator Ahmed Lawal, said it has become a reality in the current free-fall in global oil prices, which indicates that the nation’s oil sector alone cannot create jobs for the teeming population and rather, job creation could be achieved in the solid

minerals sector. On his part, Senator Ayogu Eze, said it was high time government harnessed the huge employment opportunities in the solid minerals sector, even as he acknowledged the fact that the revenue generated through the sale of solid minerals was more reliable than petroleum products. Eze also charged the National Assembly to move swiftly to use its constitutional position to bring about revolution in the sector. In view of this, government should create the enabling environment in improving the Nigerian mining industry that would help curb the growing level of unemployment, reduce poverty, expand the industry, attract more players for robust competition, wealth creation, and reliable source of revenue generation. Wi t h s u c h h u g e

employment potential, experts insist that it is imperative to also implement the Nigerian Local Content Law, as the starting point for facilitating job creation in the solid minerals sector, as being currently implemented in the oil and gas sector. This will aid statutory framework for Nigerian players in the sector to harvest the technological, industrial and economic intangible capital assets being generated by activities that will further develop the local economy. In essence, this will go a long way to increase indigenous participation in the solid minerals, as well as in the transfer of technology and skills to Nigerians. The informal section of the sector should also be empowered and developed because of the huge number of artisanal miners engaged in this category.

Technology

18

Jimlaw2004@gmail.com

Jim Rex-LAWSON MOSES

K

erosene is an oil distillate commonly used as a fuel or solvent. It is a thin, clear liquid consisting of a mixture of hydrocarbons that boil between 302°F and 527°F (150°C and 275°C). While kerosene can be extracted from coal, oil shale, and wood, it is primarily derived from refined petroleum. Before electric lights became popular, kerosene was widely used in oil lamps and was one of the most important refinery products. Today kerosene is primarily used as heating oil, as fuel in jet engines, and as a solvent for insecticide sprays. History Petroleum byproducts have been used since ancient times as adhesives and water proofing agents. Over 2,000 years ago, Arabian scientists explored ways to distill petroleum into individual components that could be used for specialized purposes. As new uses were discovered, demand for petroleum increased. Kerosene was discovered in 1853 by Abraham Gesner. A British physician, Gesner developed a process to extract the inflammable liquid from asphalt , a waxy petroleum mixture. The term kerosene is, in fact, derived from the Greek word for wax. Sometimes spelled kerosine or kerosiene, it is also called coal oil because of its asphalt origins. Kerosene was an important commodity in the days before electric lighting and it was the first material to be chemically extracted on a large commercial scale. Mass refinement of kerosene and other petroleum products actually began in 1859 when oil was discovered in the United States. An entire industry evolved to develop oil drilling and purification techniques. Kerosene continued to be the most important refinery product throughout the late 1890s and early 1900s. It was surpassed by gasoline in the 1920s with the increasing popularity of the internal combustion engine. Other uses were found for kerosene

How Kerosene is produced

Kerosene after the demise of oil lamps, and today it is primarily used in residential heating and as a fuel additive. In the late 1990s, annual production of kerosene had grown to approximately 1 billion gal (3.8 billion 1) in the United States alone. Raw Materials Kerosene is extracted from a mixture of petroleum chemicals found deep within the earth. This mixture consists of oil, rocks, water, and other contaminants in subter ranean reser voirs made of porous layers of sandstone and carbonate rock. The oil itself is derived from decayed organisms that were buried along with the sediments of early geological eras. Over tens of millions of years, this organic residue was converted to petroleum by a pair of complex chemical processes known as diagenesis and catagensis. Diagenesis, which occurs

below 122°F (50°C), involves both microbial activity and chemical reactions such as dehydration, condensation, c y c l i z a t i o n , a n d polymerization. Catagenesis occurs between 122°F and 392°F (50°C and 200°C) and involves thermocatalytic cracking, decarboxylation, a n d h y d r o g e n disproportionation. The combination of these complex reactions creates the hydrocarbon mixture known as petroleum. The Manufacturing Process Crude oil recovery The first step in the manufacture of kerosene is to collect the crude oil. Most oil

deposits that reside just below the earth’s surface. A second process, Rotar y Drilling, is used to reach oil reservoirs that are much deeper underground. This process requires sinking a drill pipe with a rotating steel bit into the ground. This rotary drill spins rapidly to pulverize earth and rock. The third drilling process is Off Shore Drilling and it uses a large ocean borne platform to lower a shaft to the ocean floor. When any of these drilling processes break into an underground reservoir, a geyser erupts as dissolved hydrocarbon gases push the crude oil to the surface. These

supplies are buried deep beneath the earth and there are three primary types of drilling operations used to bring it to the surface. One m e t h o d , C a b l e -To o l e d Drilling, involves using a jackhammer chisel to dislodge rock and dirt to create a tunnel to reach oil

gases will force about 20% of the oil out of the well. Water is then pumped into the well to flush more of the oil out. This flushing process will recover about 50% of the buried oil. By adding a surfactant to the water even more oil can be recovered. However, even with the most rigorous

flushing it is still impossible to remove 100% of the oil trapped underground. The cr ude oil recovered is pumped into large storage tanks and transported to a refining site. After the oil is collected, gross contaminants such as gases, water, and dirt are removed. Desalting is one cleansing operation that can be performed both in the oilfield and at the refinery site. After the oil has been washed, the water is separated from the oil. The properties of the crude oil are evaluated to deter mine which petroleum products can best be extracted from it. The key properties of interest i n c l u d e d e n s i t y, s u l f u r content, and other physical properties of the oil related to its carbon chain distribution. Since crude oil is a combination of many different hydrocarbon CONTINUES ON PAGE 19

Technology CONTINUED FROM PAGE 18

materials that are miscible in one another, it must be separated into its components before it can be turned into kerosene. Separation Distillation is one type of separation process that involves heating the crude oil to separate its components. In this process the stream of oil is pumped into the bottom of a distillation column where it is heated. The lighter hydrocarbon components in the mixture rise to the top of the column and most of the high boiling-point fractions are left at the bottom. At the top of the column, these lighter vapors reach the condenser which cools them and returns them to a liquid state. The columns used to separate lighter oils are proportionally tall and thin (up to 116 ft [35 m] tall) because they only require atmospheric pressure. Tall distillation columns can more efficiently separate hydrocarbon mixtures because they allow more time for the high boiling compounds to condense before they reach the top of the column. To separate some of the heavier fractions of oil, distillations columns must be operated at approximately one tenth of atmospheric pressure (75 mm Hg). These vacuum columns are structured to be very wide and short to help control pressure fluctuations. They can be over 40 ft (12 m) in diameter. The condensed liquid fractions can be collected separately. The fraction that is collected between 302°F and 482°F (150°C and 250°C) is kerosene. By comparison, gasoline is distilled between 86°F and 410°F (30°C and 210°C). By recycling the distilled kerosene through the column multiple times its purity can be increased. This recycling process is known as refluxing. Purification Once the oil has been distilled into its fractions, further processing in a series of chemical reactors is necessary to create kerosene. Catalytic reforming, akylkation, catalytic c r a c k i n g , a n d hydroprocessing are four of the major processing techniques used in the conversion of kerosene. These reactions are used to control the carbon chain

19

How Kerosene is produced

dictates that it must be handled as a hazardous substance. Quality Control The distillation and extraction processes are not completely efficient and some processing steps may have to be repeated to maximize the kerosene production. For example, some of the unconverted hydrocarbons may by separated by further distillation and recycled for another pass into the converter. By recycling the petroleum waste through the reaction sequence several times, the quality of kerosene production can be optimized.

The distilling process of kerosene

distribution by adding or removing carbon atoms from the hydrocarbon backbone. These reaction processes involve transferring the crude oil fraction into a separate vessel where it is chemically converted to kerosene. Once the kerosene has been reacted, additional extraction is required to remove secondary contaminants that can affect the oil’s burning properties. Aromatic compounds, which are carbon ring structures such as benzene, are one class of contaminant that must be removed. Most extraction processes are conducted in large towers that maximize the contact time between the kerosene and the extraction solvent. Solvents are chosen based on the solubility of the impurities. In other words, the chemical impurities are more soluble in the solvent than they are the kerosene. Therefore, as the kerosene flows through the tower, the impurities will tend to be drawn into the solvent phase. Once the contaminants have been pulled out of the kerosene, the solvent is removed leaving the kerosene in a more purified state. The following extraction techniques are used to purify kerosene. The Udex extraction process became popular in

the United States during the 1970s. It uses a class of chemicals known as glycols as solvents. Both diethylene glycol and tetraethylene glycol are used because they have a high affinity for aromatic compounds. The Sulfolane process was created by the Shell company in 1962 and is still used in many extraction units 40 years later. The solvent used in this process is called sulfolane, and it is a strong polar compound that is more efficient than the glycol systems used in the Udex process. It has a greater heat capacity and greater chemical stability. This process uses a piece of equipment known as a rotating disk contractor to help purify the kerosene. The Lurgi Arosolvan Process uses N-methyl-2pyrrolidinone mixed with water or glycol which increases of selectivity of the solvent for contaminants. This process involves a multiple stage extracting towers up to 20 ft (6 m) in diameter and 116 ft (35 m) high. The dimethyl sulfoxide process involves two separate extraction steps that increase the selectivity of the solvent for the aromatic contaminants. This allows extraction of these contaminants at lower temperatures. In addition, chemicals used in this

process are non-toxic and relatively inexpensive. It uses a specialized column, known as a Kuhni column, that is up to 10 ft (3 m) in diameter. The Union Carbide process uses the solvent tetraethylene glycol and adds a second extraction step. It is somewhat more cumbersome than other glycol processes. The Formex process uses Nformyl morpholine and a small percentage of water as the solvent and is flexible enough to extract aromatics from a variety of hydrocarbon materials. The Redox process (Recycle Extract Dual Extraction) is used for kerosene destined for use in diesel fuel. It improves the octane number of fuels by selectively removing aromatic contaminants. The l o w a r o m a t i c ke r o s e n e produced by this process is in high demand for aviation fuel and other military uses. Final processing After extraction is complete, the refined kerosene is stored in tanks for shipping. It is delivered by tank trucks to facilities where the kerosene is packaged for commercial use. Industrial kerosene is stored in large metal tanks, but it may be packaged in small quantities for commercial use. Metal containers may be used because kerosene is not a gas and does not require pressurized storage vessels. However, its flammability

By products/Waste Some portion of the remaining petroleum fractions that can not be converted to kerosene may be used in other applications such as lubricating oil. In addition, some of the c o n t a m i n a n t s ex t r a c t e d during the purification process can be used commercially. These include certain aromatic compounds such as paraffin. The Future The future of kerosene depends on the discovery of new applications as well as the development of new methods of production. New uses include increasing military demand for high grade kerosene to replace much of its diesel fuel with JP-8, which is a kerosene based jet fuel. The diesel fuel industry is also exploring a new process that involves adding kerosene to low sulfur diesel fuel to prevent it from gelling in cold weather. Commercial aviation may benefit by reducing the risk of jet fuel explosion by creating a new low-misting kerosene. In the residential sector, new and improved kerosene heaters that provide better protection from fire are anticipated to increase demand. As demand for kerosene and its byproducts increases, new methods of refining and extracting kerosene will become even more important. One new method, developed by ExxonMobil, is a low-cost way to extract high purity normal paraffin from kerosene. This process uses ammonia that very efficiently absorbs the contaminants. This method uses vapor phase fixed-bed adsorption technology and yields a high level of paraffin that is greater than 90% pure.

Insurance Rosemary ONUOHA

T

he drop in the price of crude could adversely affect the insurance industry, given the fact that insurance thrives when the economy is robust, experts have said. President of the Nigerian Council of Registered Insurance Brokers, NCRIB, Mr. Ayodapo Shoderu, who made the assertion, noted that at the level of the common man, the devalued naira will reduce the disposable income of Nigerians, further precluding them to care less about undertaking insurance. Shoderu said, “It is most distressing that the price of the nation’s crude has dropped by about 40 per cent from the initial projected cost of $140 per barrel to about $62 per barrel. The implication of this is that there is a great pressure on the Naira as many foreign investors will feel unsafe in our equity market making many of them to divest and take out their monies. “Similarly, our foreign reserve has continued to go down given the fact that oil is the main revenue earner for government as the nation runs a mono product economy. The only option that is open to the CBN in order to salvage the situation is to embark on devaluation of the naira as already being done. My take is that the entire situation will also adversely affect the insurance industry, given the fact that insurance thrives when the economy is robust. At the corporate level, there is the likelihood of a bulls run on the already fragile equities of quoted insurance companies, affecting their solvency. Also, at the level of the common man, the devalued naira will reduce the disposable income of Nigerians, further precluding them to care less about undertaking insurance.” Shoderu stated. According to him, the present challenge should make national policy makers to be more ingenious in managing the precarious economic state, while the onus is also on practitioners to be more prudent and more resourceful in running their

Oil price fall affects insurance negatively – Shoderu

From left: President of the Nigerian Council of Registered Insurance Brokers, NCRIB, Mr Ayodapo Shoderu; Commissioner for Insurance, Mr Fola Daniel; President, Chartered Insurance Institute of Nigeria, CIIN, Mr Bola Temowo; and a Past President of NCRIB, Mr Feyisayo Soyewo, during a courtesy visit by Daniel to NCRIB at Insurance Brokers House, Lagos.

The present challenge should make national policy makers to be more ingenious in managing the precarious economic state, while the onus is also on practitioners to be more prudent and more resourceful in running their businesses

businesses. While advising the political class, Shoderu said that the time has come for Nigeria to break the façade of mono economy and develop other latent mineral resources that the nation presently has in abundance. He said, “We must also continually put in place strategies to promote the nation’s industrial sector so

as to transform our nation from consumption-based to production-based nation. Meanwhile, in view of the forth coming general elections, Shoderu said that Nigerians must ensure that all went well. He said, “All over the world, elections or politics are a great determinant of national economic and political advancement. Whatever

happens at the realm of polity affects all other facets of national economy, of which the insurance industry is a critical component. This is why we must do all within our means as practitioners to ensure we have a robust polity.” Shoderu therefore counselled politicians to always embrace insurance, during or after electioneering periods, adding that recent cases of attacks within the political circles have undoubtedly left them without any other option than insurance in mitigating loss of lives and properties. “It is a known fact that electioneering period is characterized by high level exposure to diverse human and material risks and this could be mitigated if the political class factor in insurance into their plans and expenditures,” Shoderu said.

20 Intense competition drives reinsurance mergers —A.M. Best

I

n its latest briefing on the global reinsurance market, rating agency A.M. Best warns that reinsurers risk having M&A decisions made for them, as the intensely competitive reinsurance market drives strategies making mergers increasingly likely. The wave of mergers and acquisitions in the global reinsurance industry is just beginning, A.M. Best believes, as the desire to effect a deal “ reflects reinsurance companies’ desire for scale to maintain relevance amid challenging market conditions.” However size alone is not always the answer A.M. Best says, reflecting the opinion that relevance is about more than just scale alone. Scale is no substitute for “overall discipline, conscientious and proactive risk m a n a g e m e n t , underwriting, and focus on emerging risks that could impact the company ’s financial strength,” A.M. Best explains. Underwriting discipline and the ability to anticipate potential market risks enables reinsurers to remain prosperous and to keep ahead of market conditions, the rating agency notes. This means that those getting embroiled in potentially challenging mergers need to ensure they do not get distracted by the process and overhead M&A can bring. Best highlights the thought that it may be better for reinsurers that are challenged by market competition to decide their own futures, rather than having the competitive market drive their strategic decisionmaking for them.

Maritime

21

Militants with their captive

Firm pays N88m ransom to free Greek crew A

T l e a s t $400,000 ( a b o u t N88million), w a s reportedly paid as ransom to secure the release of three seafarers kidnapped from the Greek VLCC Kalamos, off Nigeria’s coast on February 3. The seafarers, two Greeks and a Pakistani, were taken hostage three weeks ago off the coast of Nigeria in a bloody attack on the Greek oil tanker. Aeolos Management, owner of the Maltese-flagged

The seafarers, two Greeks and a Pakistani, were taken hostage three weeks ago off the coast of Nigeria in a bloody attack on the Greek oil tanker VLCC Kalamos, said in a statement recently that pending medical examinations, the three men would be flown home to

recover from their “traumatic experience.” The firm said that no details would be released on how the three men were freed since

“this might encourage further attacks and hostage taking” off the coast of the oil-rich West African country. It expressed “great sadness” over the death of the vessel’s chief officer in the February 3 attack in the Gulf of Guinea, which experts said is the new epicentre of piracy in Africa. The ship was anchored and awaiting cargo from Qua Iboe, an oil terminal in Nigeria’s south eastern region operated by US oil giant, ExxonMobil, for shipment to China, when it

was boarded by the pirates. Between January and September last y e a r, t h e a r e a recorded 33 incidents of piracy and armed robbery, according to the International Maritime Bureau, IMB. It said the pirates operating off the coast of Nigeria, Togo and Benin are heavily armed and violent, and often hold crews hostage for several days.

Maritime

22

‘FG should sell 60% of refineries’

A

F o r m e r Commissioner f o r Fi n a n c e and Economic Development in Bayelsa State, Dr. Silva Opuala-Charles in this inter view with Godfr ey Bivbere, speaks on recent s o c i o - e c o n o m i c developments in the country. Excerpts: Every year three batches of Youth Corp members pass out, and we have problems from the turn out as the rate of unemployment is alarming. How best do you think the government can address this? I think the key thing (which China did and which India is doing) is industrialisation. Massive labour intensive industrialisation is the way to t a ke o u t t h i s l e v e l o f unemployment we have in this country. What China did after it opened up its economy to the world in 1978 was to attract the Industrialised West, most of the Wester n companies moved to China because they found out that labour was cheap in China. China was very clear on its strategy; they wanted to create a convergent effect to see where they could begin to have technology transfer. T h e y w o r ke d w i t h t h e western companies and ensured that the companies coming in had a Joint Venture, JV. Most of the foreign companies that went to China had a JV with the Chinese counterparts. This enabled China to quickly learn their technologies and quickly replicate them. The effect has been massive, as China has successfully transferred the western technologies to theirs. America also lost over 4 million jobs to China between 1998 and 2000 as a result of the JV system China utilised. The best thing to do is to get most of the companies coming to Nigeria to form a JV with us. We have many Chinese companies but we are just bringing them to come and work here. We should not settle with just bringing Chinese companies to come here, the model that should work is to form a JV with them or do 50-50

Silva Opuala-Charles

agreements and also ensure there are job guarantees. They should agree with the Nigerian government to reach something to close the infrastructural gap and unemployment in the country. The level of infrastructure gap is massive. If we look at housing alone, we are talking of about N5trillion to be able

IT; even those who are not educated are using Facebook and other social platforms. Wi t h t h i s y o u w i l l b e surprised at the multiplication of jobs that will occur. Over the last 15 years China has grown using this model. China is currently on $11trillion and in terms GDP consumption China is bigger than America today.

The essence of privatisation is that when you privatise you also have to maintain national goals, such as providing jobs and keeping the unemployment ratio very low

to meet the infrastructure demand on housing. If we ensure that we have JVs with these foreign nations that come into Nigeria, we can achieve massive job creation and also technological transfer. Nigerians are very smart as you can see everybody active in Information Technology,

Another thing I think must happen is functional privatisation. This is different from privatisation that just transfers our resources to few people without guaranteeing jobs. We cannot begin to operate on the western style of policies because their policy will tell you that one cap fits it all. Where they

believe that privatisation means the transfer of government holdings to private individuals. These private individuals become obsessed with making absolute profits and they kick out everybody and keep only a few people, but that is not the essence. The essence of privatisation is that when you privatise you also have to maintain national goals, such as providing jobs a n d ke e p i n g t h e unemployment ratio very low. We must ensure that our privatisation achieves the major goal, which is to create jobs rather than create unemployment and inequality. If we don’t keep our eyes on the jobs when we privatise, the privatized companies will belong to some few persons who we refer to as the cartels and they can make all the money and the level of inequality would keep rising. I believe that to ensure that the privatisation works the government should not sell everything. For instance, if they want to privatise a refinery they can sell about 60 per cent of its holdings and ensure that they keep the other 40 per cent to ensure the creation of a certain number of jobs. Job creation must be part of the privatisation

process because at the end of the day most of these companies borrow money from banks and equity firms abroad. These foreign firms sometimes determine the terms and make the companies slaves with their terms, but the government through its fiscal strategy must ensure that the job agenda must be very clear to any company that is privatised. It must be functional privatisation that should have the common wealth of the people at heart. We should not behave like the IMF and the World Bank, where they think that the way to structure the economy is to create austerity but we have moved beyond that. China, Brazil and India are doing something completely different. Today, with one of the biggest companies in the world, SINOPEC, the Chinese government only sold about 30 per cent and this is one of the biggest companies in the world. China has more than 20 of the top 100 companies in the world and most of these companies China kept the major part and sold the others to the private sector to ensure that the job agenda is key. This privatisation idea is great but it must be well managed by the government so it does not create more inequality and more unemployment. These two effects must be checked. The solutions are very clear but the government have has to come up with the policies to address these issues and there will be a reversal of this unemployment scourge. How is the economy faring with the oil price fall? The economy is doing well, the problem is that the oil price is coming down and that is bad because we have a m o n o l i t h i c e c o n o m y. Agriculture is doing well but it can do much more to contribute to our economy than what it is doing now. So we can do the JVs with foreign companies. For instance, instead of importing rice from Thailand we can invite their businessmen to come and open the rice business here, take 40 per cent shares and open rice farms in Nigeria. If we can do this we would see our economy develop rapidly.

23 Ex-militant urges synergy between communities, companies Gabriel EWEPU

A

Oil theft

Samuel OYADONGHA

D

isturbed by t h e unrelenting activities of crude oil thieves and pipeline vandals in the Niger Delta, the Joint Task Force, JTF, code-named, “Operation Pulo Shield,” has adopted the carrot and stick approach to fight the menace. The JTF is saddled with the responsibility of ridding the region of these economic saboteurs bleeding the nation economy. The Joint Task Force had over the years embarked on sustained military campaigns against illegal bunkerers and operators of illegal crude oil distilling camps, destroying many camps and their working tools with several persons arrested. But the special security force is still battling to capture crude oil thieves in the troubled region, many of whom after their arrest and hand over to the prosecuting agencies, still find their ways

JTF adopts new strategy on oil theft back to the creek to continue with the illicit business. This disturbing trend, Sweetcrude learnt, may have informed the change of strategy by the JTF under the leadership of Major General, Emmanuel Atewe. The security outfit is currently on sensitisation tour of the local communities educating the rural folks on the inherent dangers they are exposed to by shielding the oil thieves desecrating their environment and exposing them to health risks. While the oil barons are smiling to the banks, the locals are faced with environmental despoliation and their means of livelihood

destroyed. The JTF last week took its fight against oil theft amongst oil communities to the Brass Island in Bayelsa, where Atewe led officers and men to address youths, women and members of the community on the ills of crude oil theft. The General had earlier paid a courtesy visit on the traditional ruler of Twon Brass, King Alfred DieteSpiff, who noted that acts of oil theft and vandalism were perpetrated by strangers to the community. He therefore pledged the cooperation of the community with the JTF to fish out the vandals in the area.

Modular refineries Speaking at the Twon Brass Town Hall, Atewe said that the JTF has recommended the legalisation of modular refineries in the Niger Delta to provide gainful employment to the teeming youths. He explained that under the plan, the operators of the artisanal refinery would procure crude legally and refine for local use in an environmentally sustainable manner. The Commander noted that oil theft deprives the government of revenue and distorts the ecosystem and exposed the environment to toxic materials that negatively affect the health of the residents. He also said that the JTF believed in persuasion to get the people see the need to refrain from stealing crude.

B U J A FOLLOWING hostilities between some host communities and oil companies in the Niger Delta region, an exmilitant, Mr. Tam Odogwu, has called for synergy between the parties to fasttrack development and operations in the area. Odogwu, who made the call at Ughelli, Delta State, frowned at the unpleasant relationship between oil companies and host communities due to the non-implementation of the M e m o r a n d a o f Understanding, MoUs, signed. He said: “It bothers some of us who have been agitating for better welfare and development for our people, especially the host communities where the oil companies carry out their operations. “We have seen the management of these companies failing to i m p l e m e n t t h e M e m o r a n d a o f Understanding, MoUs, signed between them and the host communities, therefore creating tension. “I want to urge these oil companies to see themselves as part of the communities they generate millions of Dollars from. It is also imperative for them to form a synergy with their host communities, because, it will give the community a sense of belonging as partners in progress.” Odogwu also called on host communities in the Niger Delta not to be saboteurs to the efforts of government in developing the area. “The government of President Goodluck Jonathan, has made serious commitment to the development of the long neglected people of the Niger Delta.