Sweetcrude november 2014

Power sector creates 4,937 new jobs P\14

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A Vanguard Monthly Review Of The Energy Industry VOL 04

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OPEC oil output slips by 120,000 bpd in October

ELECTRICITY:

So far, so frustrating

O

PEC’s oil supply in October has fallen by 120,000 barrels per day (bpd) due to lower production in Angola and Nigeria, a Reuters survey found, although recovery in Libya and growth in Iraq kept output close to September’s two-year high.

The survey also indicates Saudi Arabia and heavyweight Gulf producers are showing no sign of deliberately cutting exports to address oversupply and support prices that slipped to a four-year low below $83 a barrel this month.

NOVEMBER, 2014

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Contents 4 COVER OIL 07 10 FOCUS 12 GAS 14 FINANCE 16 POWER 19 TECHNOLOGY

Electricity: So far, so frustrating

FG to deploy e-registration to check products adulteration

Oando calls for integrated gas devt

Nigeria loses $84.9m annually to energy waste

Power sector creates 4,937 new jobs

Electricity prepaid meter

20 LABOUR 22 SOLID MINERAL 24 INSURANCE

Employers, groups demand privatisation of refineries

Price unchanged in stable steel market

Expert calls for self reliance in underwriting complex risk

26 28

MARITIME

Nigeria moves to reclaim lost transit cargoes

COMMUNITY

Bayelsa still experiencing poor power supply

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

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Enquiries Call: 08098051103

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

E

xactly 12 months ag o, the Federal Government finally took up the gauntlet to deregula te Nigeria’s electrici ty sector by inviting the private operators. It was a journey of more than 13 years, and ev e ntu a l ly th e mo no p ol y pr e vio us l y enjoyed by the defun ct PHCN was broken and 15 successor co mpanies were sold a t the cost of about $ 2.53billion to private investors. The transac tion was reputed as the biggest privatisat ion exercise in subSahara Africa. And ev erybody was happy, o r so it seemed.

But one year down t he line, the story of Nigeria’s power supply situation appear not to have changed muc h. While governmen t ta l ks a b ou t sta b il i sin g th e ma r k et, consumers cry: “ we ’re being ripped off!” investors retort, “We’re not magicians!” and ask for more time.

From our Cover do wn to Community, Power and Technology , we looked at all the i s su es t h a t ha ve tr ail ed ele ctr i ci ty privatisation, while the minister spoke about developments in the industry in ou r Focus.

In addition, we bring you developments in other sectors as well - Oil, Gas, Finance, Solid Minerals, Lab our, Insurance, and Maritime.

It’s a great read!

Cover Story

4

Large Power Generational and Turbomachinery

ELECTRICITY:

So far, so frustrating N

ovember 1, 2013, the f e d e r a l gover nment unbundled Power Holding Company of Nigeria, PHCN, which gave birth to five generating companies, GENCOs, and 10 distribution companies, DISCOs, many Nigerians heaved a sigh of relief. But SEBASTINE OBASI writes that one year after the handover, their anxiety and frustrations over electricity supply have increased even more, as the situation is far from improving.

Nigerians had thought that the long frustrating period of power outage would be a thing of the past. They looked forward to a new era when every part of the country would be seen to be having uninterrupted power supply.

Unresolved issues

This means that the long wait for uninter r upted power supply would continue, as the GENCOs and DISCOs are grappling with the numerous challenges, while government is yet to solve the problems inherent in the transmission network, the backbone of the electricity sector.

Addressing journalists at a conference last week in Lagos, the Minister of Power, Prof.

Chinedu Nebo, said that at least $1 billion will be required annually in transmission alone, in order to grow the national grid.

He said, “We have to have a stage-wise systematic development of the transmission infrastructure in Nigeria. The reason is there is no way you can get infrastructure for transmission to meet 170 million Nigerians.

It has to grow. It is not something we have to do in

one fell swoop.

“We need a minimum, I mean barest minimum of $1 billion every year in transmission alone, not even generation or distribution.

This is in order to be able to grow the national grid to where after several years most Nigerians will be connected.

But so far it is not possible.”

Nebo argued that the federal government is trying to stabilise the sector for now, which necessitated the injection of N213 billion for the generating and gas companies.

“The federal government is trying to stabilise the market by meeting the short falls accruing from privatisation.

We are remaining on a tariff regime that is not competitive enough, and a tariff regime that is not reflective enough to make sure that gas is paid for and all the power supplied are

Since the coming into being of the GENCOs and DISCOs, the country’s electricity generation has only reached a two-year high of 4,044 megawatts, MW, out of the installed generation capacity of 6,000MW paid for.

“What the government is trying to do through the Central Bank is to stabilise the market.

It is actually a loan that is given to the generation companies and the gas companies because of debts that are owed in the past. So they will now have the impetus to invest the money in expanding their facilities in a

way that Nigerians will benefit the more,” he said.

The Minister explained that the loan which has an interest rate of 10 per cent will be paid back in 10 years. As regards when the fund will be ready, he explained that it is ready.

“Oh it is ready. We want to CONTINUES ON PAGE 5

Cover Story

5

ELECTRICITY:

So far, so frustrating

Thermal Power Plant, Ughelli, Delta State

CONTINUED FROM PAGE 1

sign off. We want every one of them to sign off. Within a week or two, we should. In fact, we were hoping that we do that later part of this week. There are one or two little things like dotting the I’s and crossing the T’s, and I believe it will be done very soon,” he added.

Since the coming into being of the GENCOs and DISCOs, the country ’s electricity generation has only reached a two-year high of 4,044 megawatts, MW, out of the installed generation capacity of 6,000MW. Encumbered by challenges Why is Nigeria’s power sector still tottering after such enormous investments by successive governments?

Sweetcrude learnt that over time the sector had not been adequately funded, as most of the plants were built without taking into cognisance the issue of gas supply.

Reflecting on the challenges of Ikeja DISCO in the last one year, the Managing Director, Mr. Abiodun Ajifowobaje, told Sweetcrude that although his company is not abe to meet the expectations of Nigerians, gas supply has remained a hindrance to their operations.

He said, “What Nigerians expected after private takeover was 24-hours power supply; but that has not happened. The issue is that it will take time to correct the imbalances we inherited.

“The Federal Government is building power stations in several places, but the issue of availability of gas to power the stations is there.

“It is also just unfortunate that some “rascals” have seen vandalism of gas pipelines as their legitimate business. This is the major problem militating against power supply reliability.”

Ajifowobaje explained that Ikeja DISCO resorted to

power rationing due to inadequate supply from the national grid, which has not augured well with their customers.

He argued, “Well, in the face of inadequate allocation, we have to ration power supply to our customers. We resort to what we technically call loadshedding.

“Let me explain better; our daily maximum power demand is about 1,250MW, while what we have gotten between the day we took over and now, on the average is about 400MW. What we have to put in place is a sustainable effective load management to ensure that there is equitable power allocation to all levels of our customers.”

Also the Director General, National Power Training Institute of Nigeria, NAPTIN, Mr. Reuben Okeke, said recently that gas supply from the Nigerian Gas Company, NGC, was not sufficient to

meet the nation’s electricity supply need. NGC is a subsidiary of the Nigerian National Petroleum Corporation, NNPC. He noted that gas supply shortage was delaying the activation of 224 distribution substations built by the Federal Government to boost electricity supply.

“Though the stations are ready to help move the country from its current 4, 500MW supply level to 20,000MW in the next few years, it has been impossible to achieve this feat due to gas shortage. Shortage of gas has stalled the various projects initiated by the government to wheel electricity into the national grid,” Okeke said.

Impact on companies Gas shortage has not only hampered the operations of the GENCOs and DISCOs, it has equally taken its toll on companies operating in

N i g e r i a . Fo r ex a m p l e , Dangote Cement Plc, arguably Nigeria’s biggest cement company, said that its first-half profit reduced by 11 percent as operating costs increased on gas supply challenges resulting in use of heavy oil for its plants. “ We a p p e a l t o t h e government to do something about the problems of gas and LPFO supply,” said Edwin Devakumar, Group Managing Director, Dangote Cement.

“If we don’t have power and fuel, businesses cannot sur vive. If not resolved urgently, the situation will compound the problem of unemployment and insecurity in the country. It will impact on companies’ profitability. We have already lost about 10 per cent of our capacity and that means less cement in the market,” he said.

Sweetcrude also learnt that the cumulative cost of sales for CONTINUES ON PAGE 6

Cover Story

6

CONTINUED FROM PAGE 5

the four major cement companies: Dangote Cement, Lafarge WAPCO, CCNN, and Ashaka Cement increased by eight percent in half-year 2014 to N120.17 billion, from N111.73 billion in the 2013 corresponding period.

The gas matrix Nigeria, has gas reserves of more than 187 trillion cubic feet, most of which are flared.

According to the Ministry of Petroleum Resources, at least $3 billion in revenue is lost annually due to gas flaring.

The prospects of building more gas infrastructure such as pipelines and plants have been thwarted by government’s control of the gas pricing mechanism, which made investors less willing to be involved in the sector in the past.

However, the government appears ready to tackle the issue. Recently, The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, announced an upward review of gas price from $1.50 per million cubic feet (mcf) to $ 2 . 5 0 p e r m c f, a n d a n a d d i t i ona l $ 0 .8 0 fe e a s transport costs for new capacity. She also said that gas prices are to be reviewed periodically based on United States inflation data.

According to the Minister, it is hoped that an increase in gas supply from 750 mscf to 1,120 mscf per day will boost

Electricity pylon

ELECTRICITY:

So far, so frustrating production from its current 2,600/3,600 MW levels to 5,000MW by the end of 2014.

But the situation is still far from reaching the target.

Consumers’ plight While the DISCOs and GENCOs are grappling with their numerous challenges, electricity consumers have continued to accuse them of insensitivity to their plights.

For example, consumers allege that they are being extorted monthly through

estimated bills, exorbitant tariff and non-supply of meters, while electricity supply has not yet improved.

But their worries may not be solved in the nearest future, as the DISCOs apparently are more concerned about recouping their investments in the earliest possible time.

R e c e n t l y, t h e D e p u t y Managing Director of Ibadan Electricity Distribution Company, IBEDC, Mr. John Darlington, said that the

prepaid metering scheme was yet to kick-off for consumers under the network. This is because the company is not yet convinced that the local technology deployed for its production is foolproof.

Darlington also noted that foreigners did not invest in the DISCOs due to the complicity that trailed governmentlabour relationship. “We bought the distribution companies without doing due diligence because the union

did not allow anybody to come i n t o t h i s c o m p a n y. B u t Nigerians took the risk. That is why there is no foreign investor in any of the DISCOs today,” he added.

Embedded generation as alternative To ameliorate the daunting challenges encountered in the sector, the Chairman, Nigerian Electricity Regulatory Commission, NERC, Dr. Sam Amadi, advised state governments and corporate

bodies to invest in embedded power generation.

This is a situation where a generator is directly connected to the distribution network. It consists of smaller or modular generators that use a variety of generation technologies such as solar, wind, biomass, diesel, fuel oil, crude oil and small hydro. It is also a useful means of dedicating power to states and local governments, eligible customers and others.

Oil

7

Nigerian designs technology to boost efficiency

A

Fuel trucks

FG to deploy e-registration to check products adulteration

BY EDIRI EJOH

T

he Department of P e t r o l e u m Resources, DPR, has condemned the high rate of petroleum products adulteration, adding that the Department is set to flag-off an online registration of trucks and depots to curb this threat that has eaten deep in the oil industry.

In his presentation at the Oil Trading and Logistics 2014, African Downstream Expo in Lagos, the Director, DPR, Mr. George Osahon, blamed the incidence of adulteration of products to inadequate monitoring in their various depots or stations.

H e s a i d , “A d u l t e r a t e d petroleum product is a great challenge in the downstream for so long and the department is on a verge of resolving these issues by providing an online monitoring registration.

“The Department has come

up with the idea of registering various trucks and depot in the country with an online system that tracks and brings to our notice any form of irregularity in the petroleum product delivered to these stations or depot.”

He however, frowned at the excessive charges on operators in the oil and gas industry by the Standards Organisation of Nigeria, SON. He said the DPR will discourage these irregularities and will review all of these challenges and proffer a more suitable and viable friendly industry for investors to come in.

“Well, you cannot expect a fuel station to be charged per annum of a sum of N200, 000 or thereabout, the question is, how much do they earn? And how can one pay such exorbitant amount of money.

Responding to the delay in licensing of operators, he noted that it is in the best interest of Nigerians that proper measures were taken

before issuing licenses for operations “Also, I am not happy with the delay in the licensing of operators intending to import petroleum products. For an operator to come on stream, certain requirements and certifications have to be made.

“For instance, there should be an environmental, community impact assessment, and the operator must show that you have adequate installed capacity.

You must also have a depot or sign an MoU with one depot before license would be guaranteed to such operator.

H

e revealed that a total number of 149 tank farms were registered in the country this year, up from 123 in 2013.

Also speaking, the Director General, SON, Mr. Joseph Odumodu, denied that the organisation is responsible for the smuggling of sub-standard products into the market,

disclosing that the agency is not alerted to some products that berth.

He said, “We are fully aware of the unavoidable need for standards for any given product in a country. We are partly handicapped because, we no longer operate inside the port since 2012, when the Federal Government approved eight agencies for port operations.

“The director noted that, “ we certify standards for LPG cylinders to ensure that they are safe to use and that is why, the department is making a policy on LPG management, which will soon be published and distributed for use. We also certify standards for petroleum products, LPG, and metering that come into the country,” he added.

He however called for collaboration among stakeholders in the industry to ensure that standards are imbibed in its practice, as there are standards in everything.

Nigerian, Dr. Kato Gogo Kingston has designed a world class solution-based model for efficiency of oil and gas production.

Kingston, a UK citizen, who also bagged a Doctor of Philosophy (PhD) degree from the University of East London, United Kingdom, said the model will have substantial impact on oil and gas production activities in Nigeria, and in other oil producing countries in the world.

According to him, the new solution-based model will eliminate much of the uncertainty facing oil firms and future investors that are contemplating on carrying out oil businesses in the Niger Delta.

He said, “The Nigerian government, oil firms and global economy will benefit hugely from the highly-skilled expertise of this world newest innovator.

“The research strength and outstanding model can be adopted to generate, improve, and increase productivity and services within the oil and gas business environment.”

He further stated that the model is designed as a leading-edge precision to bolster oil and gas production and completely minimises and thoroughly eliminates resistance by the host communities.

He explained that the model is capable of assisting the oil firms to overcome the complex challenges they are facing in the Niger Delta and elsewhere in the world.

He noted that the model will significantly reduce the volume of oil theft, systematically reduce oil spills resulting from pipeline sabotage; and foster a safer business and ecological environment at a very low transaction cost.

Oil

8

Shale revolution & implications for OPEC members

Shale gas facility

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nconventional gas resources (shale gas reserves) have existed for several decades, but its production had been hampered by lack of technology, environmental and social issues, and low oil prices.

But the current price of crude oil hovering around $100 per barrel in the last decade possibly triggered the quest for cheaper energy sources, thus, the invention of the ‘fracking’ technology for the exploitation of shale gas reserves.

The other plausible reason in the US is growing energy demand and the quest to cut down rising cost of energy import for the US economy. Strive for energy resources supply, selfsufficiency and pragmatic energy policies led to the advent of the ‘fracking’ technology to harness US’ unconventional resources.

What are shale gas resources & where are they found?

Shale gas is trapped natural gas within fine-grained sedimentary rocks. The gas which is more environmentfriendly is unleashed using the combination of horizontal drilling and hydraulic fracturing.

Shale gas adheres tightly to rock

formations. It is similar to natural gas produced by conventional methods.

H o w e v e r, i t s c o m m e r c i a l production was made possible by advanced extraction technology such as ‘fracking’, whereby chemicals and water are injected at very high pressure to release the gas.

According to China’s Land & Resources Ministry, China has about 25.08 trillion cubic meters (tcm) of exploitable onshore shale gas reserves, whereas the US has 13.65 tcm of technically recoverable gas from shale formations. However, as at 2013, China has the world’s largest technically recoverable shale gas reserves estimated at 31.2 tcm (1,115 trillion cubic feet, tcf), followed by the US which has about 18.6 tcm/665tcf (US Energy Information Administration, EIA). Also International Energy Agency (IEA) estimated China’s U n c o n v e n t i o n a l / To t a l Recoverable Natural Gas Reserves to be 92.3% as against US’ 50.3% affirming the huge shale deposit in China.

Although China’s shale gas reserves are almost double that of the US, its current production targets are significantly lower than the US production which

has reached about 290 billion cubic feet (bcm) in 2012. Also, energy experts have identified a number of factors that might slow down China’s shale gas development relative to the US. Some of these factors are geology, low natural gas prices, underdeveloped gas pipelines, water shortages, and a dearth of advanced technology. Shale layers in the US are simple and uniform, but China’s shale layers (like those of Europe) are heavily faulted as reported by Daiwa Securities. The implication is that China’s rock formations are deformed due to underground movements. As a result, only short horizontal sections can be drilled thereby incurring higher drilling costs.

China’s mainland shale gas is also trapped deeper underground, which further increases extraction costs.

C o n v e r s e l y, l a r g e - s c a l e operations may reduce China’s well construction costs. For example, it has been estimated that China’s Fuling shale gas field is worth about $2.5billion, and the per-well drilling cost could fall by 50% (from 100 million Yuan to 50 million Yuan).

This projected lower drilling cost is still higher than the US shale operations. Reducing

costs will be a key challenge for shale development in China, which industry experts expect will be ultimately successful given the industry’s scale and manufacturing capability. Shale gas resources could also be found in Canada, Europe, Australia, S o u t h A f r i c a , Ru s s i a , e t c .

Considering that China has the highest shale gas reserves in the world, it may be useful to examine the Chinese Government policies and Chinese oil companies’ plans regarding its production.

China & shale gas Development China is currently the world’s fastest-growing major economy with annual GDP growth rates averaging 10% in the last three decades. As a result, China is the main driver of increasing energy demand in this present decade in line with the nation’s accelerated industrialization. BP reports that China would overtake the US as the world’s largest oil consumer by 2027 and the 2013 IEA World Energy Outlook, WEO, also affirms China as the largest consumer of oil by 2030, as OECD oil use drops.

No doubt, China drives the growing dominance of Asia in global energy demand and trade;

hopefully, the advent of shale gas production technology will act as a boost to China’s domestic gas production and usage. As a result, the Chinese Government has set robust shale gas production targets at 6.5 bcm for 2015 and 60100 bcm target for 2020.

H o w e v e r, t h e r e a r e developmental challenges to overcome.

One major challenge of Chinese oil giants Petrochina & Sinopec - is how to halve drilling cost per well for shale gas production. The current drilling cost per well is about $16m, and the target is to reduce to $8m per well.

Sinopec & Petrochina’s combined output should reach or surpass the 6.5bn shale gas output target set by the government for 2015.

An interesting part of the Chinese Governmentdriven reforms is to open shale development to private sector investment. China’s Ministry of Land & Resources revealed that qualified companies for shale gas development will invest 12.8bn Yuan (2bn Dollars or 1.3bn Pounds) to explore and develop 19 shale gas areas allotted to them.

The companies comprise of 14 state-owned firms and two private companies, and are part of a larger group of 57 companies that were given rights to explore shale gas blocks in October, 2013.

The Ministry has allotted 26 shale gas blocks for exploration so far.

W i t h C h i n e s e Government’s policy to open s h a l e r e s o u r c e s development to markets, it is expected that shale gas development in China will thrive. Therefore, China seems the most promising country for shale growth outside the US, and currently accounts for 13% of world shale gas growth according to BP report.

Together, the US and China is projected to account for 81% of shale gas production by 2035.

Petrochina Petrochina, China’s largest energy producer recently tripled its shale gas development spending to 10bn Yuan ($12.55bn) in 2012 compared to 3bn Yuan spent between 2010 and 2011. According to reports

by Xinhua News Agency, Petrochina is poised to achieve an output of 2.6 bcm of natural gas by 2015 using 28 new platforms, and 11 bcm of shale gas by 2020.

Petrochina’s Changning & We i y u a n b l o c k s a r e expected to produce altogether 2 bcm, the Zhaotong block will yield 500 mcm, while projects with

CONTINUES ON PAGE 9

Oil

9

Shale gas

Shale revolution & implication for OPEC members CONTINUED FROM PAGE 8 foreign ventures will deliver another 100 mcm by 2015.

However, this merely represents about 2.3% of China’s total natural gas output of around 113 bcm in 2013.

Since 2010, Petrochina has spent about $480m on pilot shale drilling, which marks a slight departure from its primary focus on growing conventional oil & gas portfolio. As a result, Petrochina has over the past four years enhanced its knowledge of shale resources and made some technological breakthroughs, as reported by Mao Zefeng ( c o m p a n y s e c r e t a r y, Petrochina).

Petrochina is aiming for 2.6 bcm of annual shale gas production, and has spent more than 10bn Yuan ($12.55bn) in 2012 compared to 3bn Yuan spent between 2010 and 2011.

Petrochina’s Chairman was quoted as saying, “The actual spending will depend on results.

If efficiency is good, we will increase financial outlays.

Otherwise, we will stick with trial exploration”.

China Petroleum & Chemical Company (Sinopec) Sinopec is Asia’s largest refiner and has shale gas development as one of its key projects for 2014, after doubling its output forecast from a key

field in the Sinchuan area which is part of the nation’s South-West region named Fuling. The Fuling project is expected to yield 10 bcm in 2017, and has about 2.1 tcm of shale gas reserves over 4,000 square kilometers.

However, the Fuling shale gas potential is considered to be just a small proportion of the shale potential in the Sichuan basin, with shale gas resources spread over 40,000 to 50,000 square kilometers. The Fuling shale has been adjudged as the best shale discovery in China to date, and arguably one of the best outside of the US. Sinopec has set up a program for the Fuling production capacity construction at 5 bcm annually and hopes to get to 10 bcm by 2017. This new target is significant considering that Fuling is the nation’s first commercial shale gas project.

Sinopec has drilled nearly 30 pilot shale gas wells in the Fuling area of China. Earlier, Sinopec discovered a major shale gas block with a maximum daily output of 105,000 cubic meters in the South-West province of Guizhou.

China National Petroleum Corporation (CNPC) CNPC, China’s largest oil producer, has also completed its preliminary development plan

for shale gas exploration in the North-western province of Sichuan. CNPC currently has nine shale gas wells with a combined production capacity in excess of 80 million cubic meters (mcm). The company plans to put more than 110 wells in operation by mid-2015.

Exploration efforts by companies operating in the resource-rich Sichuan province would make it possible for China to meet or even surpass production targets for 2015.

Europe’s shale gas There are significant shale gas reserves in Britain, Poland, France, Ukraine, and Bulgaria.

US Oil companies have been pushing for shale gas development in these countries.

But they have been restrained by significant opposition from citizens and local legislators who worry about the environmental impacts of shale gas extraction (including earthquakes and groundwater contamination) caused by hydraulic fracturing or ‘fracking processes’.

In 2013, a number of Western energy companies jostled for corporate rights over Ukraine’s shale gas deposits. In the hope that Crimea’s onshore & offshore fields will yield significant shale energy resources, several oil companies, including

Petrochina, Repsol, Shell, and Chevron have substantially expanded their exploration of the Black Sea off the Crimean Peninsula. Ukraine officials went into negotiations with an Exxon-Mobil-led consortium to explore for hydrocarbons off Ukraine’s Western Black Sea coast. In November 2013, the Ukraine Government signed another production sharing agreement with an Eni-led consortium of investors to develop unconventional hydrocarbons in the Black sea.

According to US EIA, Ukraine has Europe’s third-largest shale gas reserves at 42 trillion cubic feet (tcf). Unlike other European countries, Ukraine offers considerable less opposition because it has been steeped in numerous gas disputes with Russia in recent years and so yearns for energy independence from Russia. The corporate struggle for Ukraine’s oil and natural gas is probably the reason behind the geopolitics pitting Russia against the West and the ethnic tensions tearing Ukraine East & West.

Ru s s i a ’ s s t a t e - o w n e d Gazprom, controls nearly onefifth of the world’s gas reserves, supplies more than 50% of Ukraine’s gas annually, and about 30% of Europe’s. Russia has often used this strategic position as political and

economic leverage over Kiev and Brussels.

However, this leverage came under challenge on November 5, 2013, when Chevron signed a 50-year agreement with the Ukraine Government to develop oil & gas in Western Ukraine. Chevron is expected to spend $350m at the exploratory phase of the project and the total investment could reach $10bn.

This development is expected to enable Ukraine satisfy its gas needs completely and, under a best case scenario, export energy resources by 2020. One wonders whether the Ukraine’s drive for more energy independence from Russia could have abated the present crisis had Ukraine signed up with Gazprom in place of Chevron, for the development of its energy resources. Inevitably, previous gas disputes with Gazprom would not have created a pleasant climate for this sort of joint venture and so Ukraine had to choose western oil giants for JV’s.

Some observers believe that one of Putin’s objectives for annexing Crimea was to ensure that Gazprom will control Crimean offshore energy assets, as well as ensuring the continued use of Crimea as host to Russia’s Black Sea fleet. It is expected that when the geopolitics of shale gas development in Ukraine is settled, Ukraine will add significant volumes of shale gas to the growing shale production.

Implications of shale developmet on OPEC members Until the advent of shale gas, as an unconventional natural gas resource, crude oil and natural gas have been the main global energy resources.

The main threat stems from the fact that shale gas positions as a renewable energy resource.

It would seem from the foregoing that US is the leading producer of shale gas, followed by China.

However, China has the largest shale gas reserves and has set ambitious targets for its production. Ukraine is expected to follow suit shortly, and Canada, Australia, India, South Africa, etc. Quite ominously for the Organisation of the Petroleum Exporting Countries, OPEC, the shale producer nations are the largest energy consumers.

One of the major forces in Michael Porter ’s “5-Forces that deter mine industr y competitiveness” is the ‘threat of a substitute product’. Others include existing competition among rival companies, threat of new entrants, threat of backward integration, and threat of forward integration.

Of all these, one of the most potent is the advent of an alter native or substitute product.

F

Focus

10

Govt is trying to stabilise electricity market -Nebo

M

inister of Power, Prof.

Chinedu Nebo, in a chat with journalists, assesses the challenges in the power sector after one year of privatisation. He also talked about government’s efforts to stabilize the market. Sebastine Obasi was there.

Excerpts: You said a lot of money is required to transmit power in Nigeria. Can you give us the exact amount required to transmit this power?

It is too difficult. We have to have a stage wise systematic development of the transmission infrastructure in Nigeria. The reason is there is no way you can get infrastructure for transmission to meet 170 million Nigerians. It has to grow. It is not something we have to do in one fell swoop.

We need a minimum, I mean barest minimum of $1 billion every year in transmission alone, not even generation or distribution, in order to be able to continue to grow the national grid to where after several years most Nigerians will now be connected. But so far it is not possible.

The federal government last month announced a N213 billion fund for the GENCOs and DISCOs. But these companies said they are yet to get the money.

What is happening to it?

The federal government is not giving anything. The federal government is trying to stabilise the market by meeting the short falls accruing from privatisation by remaining on a tariff regime that is not competitive enough and a tariff regime that is not cost reflective enough. This is to make sure that gas is paid for and all the power supplied are paid for.

What the government is

Chinedu Nebo trying to do through the Central Bank is to stabilise the market. It is actually a loan that is given to the generation companies, because of debts that are owed the gas companies in the past, so that they will now have the impetus to invest the money in expanding their facilities in a way that Nigerians will benefit the more.

How long will it take for

them to pay back the loan?

Ten years; and on a good interest rate of just about 10 percent.

When will the fund be ready?

Oh it is ready. We want to sign off. We want every one of them to sign off. Within a week or two, we should. In fact, we were hoping that we do that later part of this week.

There are one or two little things like dotting the I’s and crossing the T’s, and I believe

The transition electricity market is going to kick off the contractual agreement and ensure that everybody plays his or her own role in a way that is governed by contracts which are legally binding

it will be done very soon.

Early this year, Nigerians were promised that the transition electricity market, TEM, would take off soon.

The year is coming to an end, when is it going to take off?

That would be in a few weeks’ time. The transition electricity market is going to kick off the contractual agreement and ensure that everybody plays his or her own role in a way that is governed by contracts which are legally binding.

We know that it is going to help shore up investments.

We don’t want the baby to be born prematurely, that is why we are hoping. We believe that by the end of the year we would declare the transition electricity market.

Complaints of estimated bills from the DISCOs are prevalent. What is the government doing to discourage estimated billing and make available pre-paid meters?

If you notice, you can see that the international business people are very savvy and intelligent. Many of the companies here in Nigeria are doing smart and intelligent meters, and this is

what the country needs. The government is trying to breach the gap. The metering gap is too wide in Nigeria At a time it was estimated to be 2.7 million and it is even said that it is as much as 8 million that is needed in the next one or two years in order to meet the metering gap.

This is very critical, and we know it is not fair for individuals to be paying for something that is unquantifiable and immeasurable.

We want to be scientific about the metering issues and we are hoping that if any money goes to the DISCOs from this Stabilisation Fund, it has to go into metering and developing their capacity to deliver electricity to the people. Hopefully, most Nigerians would get meters because it is very critical.

Also, the Nigeria Electricity Regulation Commission, NERC, has made it mandatory, and given a time frame that every DISCO should have all their customers metered.

What is government doing about areas that are off-grid?

That is the reason I have CONTINUES ON PAGE 11

Focus

11

We are trying to solve that problem now and with the h e l p o f t h e Pe t r o l e u m Resources Minister, who has been synergising with me as the Minister of Power, a lot has been done in that area, and gas is gradually beginning to grow in supply.

It is not really bureaucracy per say, but one has to do the right thing. You have to secure the license, secure power purchase agreement, make sure that the transmission network and infrastructure can cope with what you want to generate.

So if any government is interested, we would help that government to leap flog so that we would get there because what Nigerians want is electricity.

CONTINUED FROM PAGE 10

been talking about renewable energy. When you talk of off-grid, for instance, you want to take power to the hinterland, like the SouthSouth area that is swampy; you can see the terrain difficulties and the challenges are quite enormous.

Even in the hinterland, you take all your measurements, do all your feasibility studies, order the equipment and these equipment can only be manufactured when you have ordered them; the substations and so on. At the end of the day, to do the due process, maybe six months to do the purchase, the design and everything are all going together. By the time you p l a c e t h e o r d e r, t h e manufacturer does it in 18 to 24 months.

By the time it is brought in and installed, we are talking about 24 to 36 months. These things do not happen overnight. The Presidency is taking the bull by the horn, and that is why we are seeing measurable increase in the s u p p l y o f e l e c t r i c i t y, expansion of our transmission network, and even in the distribution network before the hand over to private companies.

What we have done, and which many Nigerians hailed it when it happened, was that on the 13th of January this year, President Jonathan, personally commissioned three villages where we installed 24-hour power supply with solar PV sells.

These three communities where flagged off by Mr. President and life has grown in that area, property cost has tripled in value, businesses are being set up, and that is what electricity can do for the people. And we intend to use the same technology to bring electricity to the rural communities.

Are you satisfied with what the investors have done one year after privatising the power sector? Also, there have been speculations that NERC would increase tariff after the review, what should Nigerians be expecting?

We don’t want to see any increase in tariff until power generation and distribution increases. This is because people want electricity. For instance, we are talking of megawatts, what the ordinary Nigerians care

Govt is trying to stabilize electricity market -Nebo about is not megawatts but electricity. Yes, there would be adjustments, but if electricity stabilises and it is stabilising, and we are able to go beyond what we are doing now, which we will in the couple of months. Then we will look at the whole thing and see what cost is reflective enough.

NERC, the regulator will not allow any tariff that would be punitive on the customers.

We want a measurable tariff that will give a little bit of comfort to investors, so that they can recoup their investment, make a little bit of profit and continue to expand. But nobody is in a hurry to adjust the tariff at this moment.

Some state governments complain of the bureaucracy that is stalling their ability to generate power. How do you react to this?

It is not really bureaucracy that is stopping them from generating power. The only thing that can be deployed easily within a year or in a few months is renewable

So if any government is interested, we would help that government to leap flog so that we would get there because what Nigerians want is electricity energy, like solar.

When you start to think about gas turbine to generate electricity, you have to get your gas supply or gas sale agreement; you have to secure the gas. Is that bureaucracy? You have to make sure you have done your EIA, Environmental Impact Assessments. Is that bureaucracy?

You have to make sure that the transmission studies have been done and that the transmission lines can take whatever electricity you are trying to bring in. Is that bureaucracy? It is just that everybody wants to be

methodical.

Some of them think you can just buy turbines and start power station. If you bring them, just like we made that mistake several years ago before President Jonathan came on board; power plants were built but there were no gas for them.

W h a t a r e t h e encouragements given by government to Nigerians who can also contribute to the development and growth of power generation?

If you look at Nigeria, there are tens of thousands of communities. I am dreaming about a time when young men and women would come a n d g o t o t h e Ru r a l Electrification Agency, and say, “I want to supply solar p a n e l s t o t h e s e communities.” And since it is less than one megawatt, you don’t need licenses from NERC. They will allow you to go there, power the community, and collect the tariff yourself; it is doable. But then, people have to be entrepreneurial to be able to do such. That is part of the reasons why we are starting the NAPSAS, N a t i o n a l Po w e r S e c t o r Apprenticeship Scheme, to train young people to achieve a sustainable means of generating income for themselves in their life time, and that would be kicked off hopefully by the President in the next two weeks.

Yes, it is ver y easily possible. We are working on that framework and people are encouraged. Remember also that it is the brain. Look at Azura Power Plant, it is owned by a young Nigerian, David Ladipo. He went all out and gathered almost all the major financiers in the world to support the power plant he wants to build and the President flagged that off some weeks ago.

Anybody can do the same, but you need to use your brain. We are in a knowledgedriven economy, and only the knowledgeable can drive the economy to possess their possessions in times like this.

Gas

12

Oando calls for integrated gas development A

BUJA: The Managing Director of Oando Gas and Power, Mr. Bolaji Osusanya, recently emerged President of the Nigeria Gas Association, NGA, at the just concluded NGA West Africa Gas Strategy conference held in Abuja. In this interview with Sweetcrude, he called for integration of processes for gas development. Excerpt:

BY CHRIS OCHAYI The NGA West Africa gas conference has just ended, as a major participant, what are the issues discussed?

The issues discussed will provide a veritable platform for interfacing with government and other stakeholders on gas related matters, and also creating a platform for networking. There are four tenets of our association, so I think the first thing I will do is to further entrench that. But in line with that, there are some key initiatives that we would like the Council to look at in the next two years. One of it would be how to broaden the participation base in the association. So far, we have limited it to practitioners and the more integrated we see our market be, the more it is clear to us that we need broaden the membership of the association.

We need not only look at gas practitioners but also look at people who are in one way or another connected in the value chain. So that mobilisation of a broad spectrum membership would be a key initiative.

The second initiative would be our connectedness. We have been passive members of the International Gas Union. We have also been passive members of other regional associations that have evolved,

Oando building the Africa Gas Association. We will certainly try and look at them and there is even more push from the conference to be at the fore of creating a West African or a regional gas association. We can then have an integrated strategy and learn from ourselves given that different people in the region are doing different things.

On the African scale, you must know that apart from the Algerian and Egyptian market, there are new comers to the gas base. There are also Mozambique, Tanzania, South Africa, so I think there is clarity as to why we should encourage that connectedness with such associations.

The third initiative would be actually creating value for members. It is getting more ex p e n s i v e t o b e l o n g t o voluntary association. We are under great pressure to show value. So people come to our meetings because of what they derive and the only way we can do that is to make sure there are dividends for their participation. And what do I mean by dividends. They must be richer in terms of their

On the African scale, you must know that apart from the Algerian and Egyptian market, there are new comers to the gas base. There are also Mozambique, Tanzania, South Africa, so I think there is clarity as to why we should encourage that connectedness with such associations knowledge base; they must be better in terms of networking; and they must be better in terms of ability to support their opportunities whether it is by lobbying, by connecting them to studies. We must be seen to be adding value in one way or another so that we can sustain their membership. So those are the three keys over and beyond the tenets that we already have.

There was much focus on

West Africa during your conference. Specifically what are the challenges that you have identified and what solutions have you proffered?

The conference has proffered several solutions on the regional side of the business.

We had very interesting conversation in the morning that centred on the idleness of the existing infrastructure, the discovery in other states and the need to create flexibility within that infrastructure.

I think today we learnt interestingly that we are now even to begin to consider revising flows on the West African Gas Pipelines. So today, we have gas in the region and we have an infrastructure that is flexible enough to take that gas to markets that need them.

Today, we even heard that there is a plan to expand and extend the infrastructure beyond the three countries that it covers. So there are things to do, to build the pipeline and extend it from Tokoradi in Ghana further west. Or to take it further north to Burkina Faso, something we never contemplated before.

So I am pleased that the change that happened in the last few years is beginning to gain momentum and sooner than later the whole region would be covered. I worry for our country because I don’t think we have put the agenda on the fast track that it deserves. But I guess that is something that we would like to do as an association to fast CONTINUES ON PAGE 13

Gas

13

Oando building

Oando calls for integrated gas development CONTINUED FROM PAGE 12

track the good steps that are already being taken to get us quickly to close the gap and pro-act the future because we already have a clear scenario of what that future is.

It is a future that demands about 7trillion cubic feet, tcf, of gas from us domestically and several other volumes for the region. So we know what that future is. So I think the issue now is how to get ourselves going knowing that there are no short-cuts in our industry.

Looking at the Nigerian market, power generation has dropped to 3,100 megawatts, M W, a n d t h e 4 , 0 0 0 M W capacity is not sustainable due to gas shortages. As the NGA President, which is a major stakeholder in the gas market, how can Nigeria overcome this problem of gas shortage?

I don’t even think we need to say anything new from what

we have said before. And I think we have the assurance and if you go by what the Group Executive Director, GED, Gas and Power, Nigerian National Petroleum Corporation, NNPC, Dr. David Ige said, we already have the assurance that in a short term that those power plants that are stranded would be supplied. The lesson is the need to be integrated in our developments. Those power plants have no business being built without gas being provided in the first place. So I believe the lesson is that we will be more integrated.

Having said that, we have to focus on the future. We know what the power short fall is; we know how much more we need to provide for. We know that gas is the future and that gas will be relevant fuel in the energy race going forward. So the future is now, we have to start planning how to accelerate that development to

meet what we already forecast.

That is why I am saying as President, NGA will really mobilise members and other stakeholders to start to do what they need to do today. And we will do it in an integrated manner this time.

If you are incentivising price, sensitise everybody. If you are putting in a new regulation, put a new regulation that at least considers everybody and in that way we all move along.

As a key player in the industry, even if we are able to produce enough gas for domestic use, do you think that Nigeria has the infrastructure to transmit the product to various destinations of need?

The shortage is clear and the challenges are well documented. The straight answer to your question is, no.

We d o n ’ t h a v e e n o u g h infrastructure today to carry the gas to the markets they are

needed. Like I said to you, there is no point having molecules that you cannot transport. Just as there is no point having infrastructure without molecules. So it has to be an integrated development and different people must play their role in different parts. I work for a company that is good on the processing and transport side of things. But we are not going to move an inch if we don’t see the molecules.

And I know that the molecules providers too will not move an inch if they don’t know that we have a plan to put in place the infrastructure. What we have to do as an industry and as practitioners is to start to further integrate. We have a unique opportunity because today in our group, we have an E & P site. So we can connect the dots from our E & P reserves and resources, all the way to the market.

We need, as an association, to be encouraged more to do that

and where people are not that integrated, we need to find the formulae for them to work in that integrated nature. So there is really no need why the marginal field people and the mid-stream companies like ourselves should not have a common forum to talk and create business opportunities that we can see full chain. So that is it. I must say there are things we can as practitioners influence in our respective organisations. But the best we can do as an association is to create the platform for that discussion to happen. You know we have members in different parts and sometimes the aspirations of members are not exactly the same.

We have IOC members, independent members, midstream members, downstream, we have LPG’s members. So don’t always imagine that our aspirations are the same but we create a platform where people can at least discuss and express themselves.

Finance

Nigeria loses $84.9m annually to energy waste

Energy in use

BY EDIRI EJOH

T

he National Programme Coordinator on E n e r g y Efficiency Programme of the United Nation Development Programme, UNDP, Mr. Etiosa Uyigie, has said that Nigeria’s non-compliance to international best practice on the efficient use of electricity is costing the country about $84.9m annually.

This was revealed at the delegation of German Industry and Commerce in Nigeria, tagged: “Energy efficiency” in Lagos last week.

Speaking on the theme: Promoting energy efficiency best practices for National Development and E n v i r o n m e n t a l Sustainability, Uyigie noted

that developed countries like the United Kingdom, France, Sweden, and a host of others, may consume less electricity compared with Nigeria.

He attributed this to their conformity to international best practice by using energy efficient appliances and making sure the appliances were switched off when not in use.

According to him, “it is not uncommon to see electric bulbs and other appliances on during the day, this is unacceptable because they waste energy and emits greenhouses gas into the atmosphere, a phenomenon that is against environmental sustainability which we are preaching.”

He urged Nigerians to go for energy efficient appliances and inculcate the culture of putting off their electrical appliances when

not in use.

He argued that the culture of imbibing international best practice in the efficient use of energy in Nigeria has not been given enough awareness, and promised that UNDP will ensure that Nigerians are sensitised through seminars, television programmes, training, and other means.

H

owever, he argued that “energy efficiency does not mean not using energy but conserving this energy. When energy is conserved, it is generated; therefore energy efficiency is a form of energy generation.

“So if Nigerians will develop the culture of using energyefficient appliances and putting off the appliances when not in use, the problem of power would have been

reduced to a great length,” he added.

Also speaking, The Head, Unity Energy Efficiency, NESP, Dr Charles Diara, noted that energy efficiency is an important and very topical issue to ignore.

According to him, to create more awareness on energy efficiency and build human capacity, NESP is partnering with other associations in the country like; MAN, SON, N AC C I M A , S M E DA N , NAPTIN, and others in the industry.

Continuing, Diara, called on government to make favourable policies on energy efficiency and urged Nigerians to tap into the National Energy Efficiency Action Plan, NEEAP, a joint v e n t u r e w i t h E C O WA S member-nations to improve energy efficiency process in the country.

14 British gas prices fall on Russia deal

B

ritish wholesale gas prices for the rest of this year fell yesterday after Ukraine and Russia signed a deal that will see Moscow resume gas supplies to Kiev this winter, while warm UK weather and high storage levels added to the bearish tone.

Russia is Europe’s biggest supplier of gas and provides around a third of the continent’s needs, pumping roughly half of that via Ukraine. Some of this reaches Britain from continental European storage sites.

Failure to reach an agreement would have raised fears of disruptions to European gas supply via Ukraine this winter, but prices of wholesale natural gas had already been declining on Thursday afternoon in anticipation of a deal.

The UK gas contract for delivery in November was trading at 52.20 pence per therm at 0915 GMT on Friday, down 1.5 percent from the previous settlement. It earlier touched 52.00 pence, its lowest since the contract began trading.

The December contract was at 54.60 pence per therm, down 1.7 percent, having touched its lowest ever level of 54.40 pence in earlier trade.

However, traders said the falls were not that substantial. “Everyone was expecting this (deal) to happen so it’s not going to have a massive impact on prices, although the near months have come off a bit,” one gas trader said.

“There are no real bullish indicators out there. The long-term forecast for November and December is warm; storage is very high right across the continent,” he added.

Finance

15

Exxon/Chevron

Exxon, Chevron post higher earnings despite low oil prices

Auditor refuses to sign off Brazil Petrobras' Q3 results

B

F

alling oil prices hardly seem to be bothering the two biggest U.S. oil companies, but things could get tougher in the coming months.

Exxon and Chevron leaned on strong performances from their refining operations to increase profits in the third quarter despite plummeting global oil prices.

“These companies can hold up in weaker markets,” said Brian Youngberg, an analyst at Edward The global price of oil fell 18 per cent from the beginning of the quarter to the end, and it cost both companies.

Revenue slipped at Exxon by four per cent and at Chevron by eight per cent.

But low oil and natural gas prices make for low raw material costs – and higher profit – for refining and chemical operations, which turn oil and gas into fuels and chemicals. Profit at Exxon’s refining and chemicals operations rose 38 per cent

compared with a year earlier, and Chevron’s profit from its so-called downstream operations more than tripled.

Those results helped Exxon’s overall earning rise three per cent in the quarter to $8.07-billion (U.S.).

Chevron’s earnings rose 13 per cent to $5.59-billion.

The trend lately has been for integrated oil and gas companies, which own production, refining and distribution assets, to spin off their refining operations into different companies in an effort to better appeal to investors. ConocoPhillips, Marathon and Hess have all exited refining in recent years.

Exxon CEO, Rex Tillerson, defended his strategy of remaining integrated Friday.

He said in a statement that the company’s strong results “demonstrated the strength of our integrated business model.” Integration, he said, “gives us competitive advantages in scale, efficiency, technical and

commercial capabilities, regardless of market fluctuations.”

Exxon and Chevron joined rival Royal Dutch Shell in posting rising earnings for the quarter. But other major oil international oil companies, such as BP, ConocoPhillips and Total, saw earnings fall in the third quarter on lower oil prices.

All may suffer in the fourth quarter, however. The slide in oil prices accelerated in e a r l y O c t o b e r, a t t h e beginning of the quarter, and reached lows not seen in four years. If prices remain low or continue to fall it could create declines too large for better refining results to cover.

That “ will be a little more of a challenge,” Youngberg said.

Also, a reason oil prices have fallen so far is that demand for fuels is weakening around the world, which could limit output and profit gains at refining operations.

But Exxon, unlike nearly every other major oil company, says lower global oil prices will not change its plans to invest in new projects. And it suggested on a call with investors that the drop in oil prices might be a good time to use its cash to buy undervalued assets.

“We continue to invest through the cyclical nature of our business,” said Jeff Woodbury, Exxon’s vicepresident of investor relations. “We’re a long-term business.”

Exxon said it was on track to increase oil and gas production to the equivalent of four million barrels of oil per day by the end of the year as it works to reverse years of sliding output. Exxon’s oil and gas production fell 4.7 per cent in the third quarter from the same period a year ago. Its production of the equivalent of 3.83 million barrels of oil per day in the quarter was the company’s lowest since the third quarter of 2009.

razil's Petrobras failed to get its third-quarter earnings approved by PriceWaterhouseCoopers as the auditing firm demanded wider investigation into a corruption scandal plaguing the state-run oil company, newspaper O Estado de S.Paulo said on Saturday.

Directors of Petroleo Brasileiro SA, as the oil firm is formally known, halted a Friday board meeting before making any decisions and rescheduled it for Tuesday, a source told Reuters without providing details. A possible fuel price increase was expected to be discussed on Friday.

Estado reported that Petrobras' board, which is presided by Finance Minister Guido Mantega, spent the meeting discussing how to handle PwC's demands for more investigation into an alleged corruption scheme uncovered by Brazil's federal police.

PriceWaterhouseCoopers, which has been auditing Petrobras' financial statements since 2012, refused to sign off on the firm's third-quarter earnings and threatened to take the case to U.S. authorities, Estado said.

Power Michael EBOH

T

he impact of the reform in Nigeria’s power sector is yet to be felt, as the electricity sector generated 4,937 new jobs in six months, between January and June 2014, the National Bureau of Statistics, NBS, has disclosed.

Giving a breakdown of jobs generated by sector, the NBS, in its 1st and 2nd Quarter 2014 Job Creation Survey Report, stated that the power sector, which it described as electricity, gas steam, and air conditioning supply sector generated 12 new jobs. This represents 0.02 per cent of the total of 76,018 jobs created in the country in Q1 2014.

The report further revealed that the sector accounted for 4,925 new jobs, about 6.25 per cent of a total of 78,755 new jobs created in the second quarter of 2014.

However, additional data from the report revealed that the delay in the passage of the Petroleum Industry Bill, PIB, has started to take its toll on the Nigerian economy. The oil and gas sector, which the NBS classified as Crude Petroleum and Natural Gas sub-sector under the Mining and Quarrying sector, did not record any new jobs in both Q1 and Q2 2014.

In general, the NBS said, “In the first quarter of 2014, a total of 240,871 jobs were created, which increased by 18,482 jobs or 7.67 per cent in the second quarter, to reach a total of 259,353 jobs created.

“The total number of jobs created in the first half of 2014 was therefore 500,224.

Relative to the first half of 2013, this was a decrease by 151,851 jobs or 30.36 per cent.”

The NBS further stated that in the first quarter, the informal sector had the highest new jobs with 158,894 jobs or 65.97 per cent of the total, while the formal sector was second highest with 76,018 or 31.56 per cent of the total and public institutions took the least share of the total with 2.47 per cent, equivalent to 5,959 jobs.

In the second quarter, the NBS stated that formal jobs represented 78,755 jobs or 31.56 per cent of the total, informal represented 175,786 jobs or 65.97 per cent of the total and public institutions

16

Power sector creates 4,937 new jobs …No new jobs in oil sector

Electricity workers represented 4,812 jobs or 1.86 per cent of the total.

Continuing, the NBS said, “In the second quarter, annual growth in jobs created was greatest in the informal sector, increasing by 63,219 jobs, or 56.16 per cent from the corresponding quarter of 2013.

“Fo r m a l j o b c r e a t i o n showed slightly negative growth of 1,657 jobs or 2.06 per cent, yet public institutions showed a significant decline of 23,263 jobs or 82.86 per cent, meaning that by second quarter, it represented just 1.86 per cent of total jobs created; a decline in its share of 0.62 per cent points.

“Yet, the share of informal jobs expanded by 1.81 per

The total number of jobs created in the first half of 2014 was therefore 500,224.

Relative to the first half of 2013, this was a decrease by 151,851 jobs or 30.36 per cent

cent points to constitute 67.78 per cent of the total, whilst the portion of formal jobs declined by 1.19 per cent points to 30.37 per cent of the total.

“The sector with the highest quarterly growth was

the informal sector, which grew by 10.63 per cent, generating an additional 16,892 jobs in quarter two.

Formal job creation also expanded on a quarterly basis, increasing by 2,737 jobs or 3.60 per cent to 78,018

jobs in the second quarter, whilst job creation in public institutions declined by 1,147 jobs or 19.25 per cent.”

The NBS Job Creation Survey Report for the first, second, third and fourth quarters of 2013, had revealed that despite accounting for about 70 per cent of Nigeria’s revenue, the oil and gas sector was the least employer of labour in Nigeria in 2013.

According to the report, out of the 10.97 million employed in 2013, the oil and gas sector, which it described as the crude petroleum and natural gas sector accounted for 582 jobs, representing 0.01 per cent of the total.

Power

17

Power transformer

Michael EBOH

U

nless the Fe d e r a l Government entrenches competition in the Nigerian power sector, the goals and targets envisaged for the sector would not be achieved, said Prof. Adeola Adenikiju, Head, Centre for Petroleum, Energy Economics and Law, University of Ibadan.

In his presentation at the Wo r l d s t a g e N a t i o n a l Electricity Power Conference in Lagos, Adenikiju also bemoaned the exploitation of electricity consumers in Nigeria, saying that Nigeria has one of the highest tariffs in the World.

According to him, competition is very important in the power sector and the role of the electricity regulator is very crucial.

To promote competition, he stated that the Nigerian Electricity Regulator y Commission, NERC, must be ahead of the curve in terms of capacity and regulatory instrument.

He further listed the challenges bedeviling the sector to include: absence of

‘There’s no growth without competition’ institutional and regulatory capabilities; challenges of transparency and independence of the various organisations established to oversee the new Electricity Supply Industry, ESI, that will emerge in post privatisation.

Others, according to him, are: inadequate gas infrastructure, the issue of liquidity across the value chain, transmission in infrastructure and economic losses, due to the fact that revenue is still less than cost, as a result of illegal connections and nonpayment of tariffs when due.

Adenikiju, who was represented by Dr Joseph Omojolaibi, disclosed that Nigeria cannot develop faster than her electricity

development, saying that the power sector is a binding constraint on our development.

According to him, achieving the goals in the transformation agenda, will never happen until electricity supply in rural and urban areas, cities and villages, North and South and every part of this great country has access to a more reliable, affordable and quality electricity supply.

“It is only then that the latent potential and greatness of this blessed country will be truly unshackled for greatness,” he explained.

On the way forward, he said, “We need to promote a more balanced electricity generation mix in order to

improve energy security. The overwhelming reliance on gas-thermal from a relatively volatile part of the country easily put the whole supply chain in jeopardy and at the mercy of vandals.

“We must promote other sources of generating electricity, even if they are more expensive – renewables, coal, and others.”

Continuing, Adenikiju advocated, regular discussion with stakeholders to ensure transparency and accountability, saying there should be sufficient incentives to attract players along the value chain.

He called for the creation and development of the local financial markets for longterm loans, stating that short-

term loans are not suitable for such investment, as these will dampen the sector.

Speaking in the same vein, Mr. Aderemi Bello, President, Lagos Chamber Of Commerce & Industry, said, “Clearly the structure of funds in the Nigerian financial system cannot support long term infrastructure projects such as power projects. The tenure of funds is very short, in most cases less than one year.

“The cost of funds is also very high, generally over 20 per cent. It is difficult to fund infrastructure investment with this kind of fund.”

Power

18

NESP powers 5 states with €24.5m Electric bulb

Favour NNABUGWU

T

he Nigerian Energy Support Programme, N E S P, h a s commenced its intervention in five states in the countr y as part of activities to boost rural electrification with €24.5million According to the Programme, the beneficiary states were selected by the Programme Steering Committee on the basis of objective selection criteria, and include, Ogun, Cross River, Niger, Plateau, and Sokoto.

NESP is being implemented by the Deutsche Gesellshaft fuer Internationale Zusammenarbeit, GIZ, a German Agency for International Cooperation, but co-funded by the European Union, EU and the German Government.

Deputy Head of Programme, Ms. Anke Maria Mueller, said the states are being supported to produce electrification plans and develop a data management system without giving further details on the financial implication for each state.

According to her, “The electrification of off-grid villages, social facilities and small businesses will

demonstrate how renewable energy can contribute to providing electricity access to rural areas.”

She however noted that the total intervention fund is not only meant for rural electrification but includes some other intervention projects such as energy efficient and capacity proogramme.

According to her, “The total budget of the programme is €24.5million. However, there is no clearly allocated figure for our state interventions.

The €24.5million will not only be allocated to the rural electrification intervention, but also to three other interventions (large scale renewable energies, energy efficiency and capacity development).”

She further explained that the intervention in rural electrification in each state will vary slightly, and there might also be differences in the allocation of resources to each.

“NESP has four units covering different aspects of the power sector. Unit 3 aims at further developing capacities, processes and framework conditions for Rural Electrification and Sustainable Energy Access.

More specifically, it aims at, “Improving the policy and institutional framework for Rural Electrification at the federal level; supporting five states in drawing up rural electrification plans for a coordinated large scale rollout of off-grid electrification projects; and Implementing

In rural areas this number increases to over 75 per cent. At the same time, neither industry nor households are sufficiently aware of the importance of using energy efficiently. In order to address the challenges in the electricity sector, the Nigerian government has initiated various reforms

10 pilot projects in the selected states demonstrating renewable energy based electrification solution.

“One of the first milestones of its cooperation with the states is to co-agree on lines of cooperation and formalize them in a Memorandum of Understanding. So far, NESP has signed three MoUs with Ogun, Cross River and Niger.

“NESP will formalise its collaboration with Plateau and Sokoto before the end of 2014. The signing ceremonies are high level events which gather His Excellency the Governor and high level representatives from NESP.” Mueller further noted that Nigeria is the biggest hydropower producer with the largest oil reserves in the Economic Community of We s t A f r i c a n S t a t e s , ECOWAS, adding that the country also offered great potential for renewable energy.

She however bemoaned that Nigeria’s electricity sector is unable to meet the increasing demand for electricity. “Currently, only half of the installed capacity of 8,900 megawatts is available on the national power grid, and around 60 per cent of the population has no access to electricity.

“In rural areas this number

increases to over 75 per cent. At the same time, neither industry nor households are sufficiently aware of the importance of using energy efficiently. In order to address the challenges in the electricity sector, the Nigerian government has initiated various reforms.”

For the private sector to play a more active role, Mueller said there needs to further harmonisation a c r o s s t h e institutional landscape and between the current political, regulatory and legal frameworks.

She added that it is also necessary to build technical and administrative capacities so that the measures introduced by the federal government and the federal states can be properly planned and implemented.

Technology

19

Jimlaw2004@gmail.com

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r e p a i d electricity is a great solution f o r m a n y residents.

Increasingly residents are getting tired of paying excess electricity bills.

By using prepayment, customers pay for their electricity upfront, before they use it. The benefit of this is that you don’t have any surprise bills at the end of the month and can budget for your electricity accordingly.

For utilities, the greatest benefit is being paid for the electricity upfront. By improving revenue collection, utility’s are able to expand the electricity service to new consumers, upgrade their existing network and generally improve the service offered to all users.

An added benefit for both parties is that through the use of prepayment, electricity consumption is reduced, sometimes by over 20%, as users become more aware of the cost to keep non-essential appliances running.

Prepayment is not a quick, short term solution. It is a strategic and fundamental change to the business of electricity, which reaps huge returns when implemented correctly Pre-paid electricity understands and embraces new technologies which continue to ensure that customers always enjoy the greatest convenience. An example is the ability to purchase your electricity through your cell phone or the internet.

What is a prepaid meter?

A prepaid meter works similar as a prepaid top-up phone (“pay as you go”). You load money/units on your prepaid meter; this will allow you to use electricity to value of your units loaded.

How does it work?

• A prepaid meter is installed in the consumers premises • The consumer purchases a token (a voucher for electricity) from the utility and enters this into their meter • The electricity supply is activated when the meter is loaded with credit • As the consumer uses electricity, the credit in the meter decreases • When the credit gets low, the consumer simply

Electricity Prepaid Meter

pur chases a new token and receives more electricity • Should the consumer not purchase a new token, the electricity supply is suspended until a new token is put into the meter How to find my prepaid meter number Each prepaid meter has got a unique ID, the length of this ID changes from meter supplier to supplier. The typical length is 11 or 7 digits but in rare cases it can be 4, 5, 6, 8 and 10. This number can be located on your meter typically above or beneath a barcode. This meter number must be supplied when buying prepaid electricity.

Why do energy suppliers install prepayment meters?

Prepayment energy meters

are usually installed into homes to help energy consumers manage their debt and their budget more effectively.

Some landlords also like to have them installed in their rental properties, to try and cut the risk of their tenants running into debt.

How can I take a meter reading on a prepayment meter?

To get a meter reading from your prepayment meter, you will usually have to press a button on the meter (sometimes it’s blue).

This will change the display from showing the remaining credit to showing the actual reading. From there on, it’s just like taking a normal meter reading.

What are the pros and cons

of prepayment meters?

When it comes to prepaymen t meters, t h e disadvantages g e n e r a l l y outweigh the advantages.

Advantages of prepayment meters include: • helping customers to manage their debt and energy usage; •preventing large, unexpected bills, Disadvantages of prepayment meters include: • above average costs for your electricity; • the best energy deals on the market aren’t available to prepayment meter customers; • they can be inconvenient because you have to go out to ‘top up’ keys and smartcards; • if you can’t reach a shop to top up your meter your energy can be switched off; • older meters need to have their prices updated manually after price rises or falls, which can take months. This means you could be left paying old rates and owing a lump sum

or paying too much.

If you’ve moved to a new home which has a prepayment meter, it’s vital that you register with the energy company as the new account holder. If you don’t, you could end up paying the wrong rates as the previous occupier could be in debt to the energy supplier.

Once you’ve registered as the new owner it’s a good idea to compare prices to make sure that you’re on the cheapest possible prepayment meter.

Different types of prepayment meters There are two main types of prepayment meters: key meters and smart card meters. A key meter uses a special electronic key with your tariff information on it.

A smart card meanwhile sends your latest information through to your supplier when topped up.

Regardless of what type of prepayment meter you have you should make sure you know how to top it up. In case of an emergency, or when you’re working from home, the last thing you want is your electricity to go out.

Make a list of the nearest shops and other outlets as well as their opening times.

You should also look out for holiday periods and top your card up with a bit extra before bank holidays and other holiday periods when topping up could be difficult.

Most prepayment meters have an emergency credit budget you can use, like an overdraft, but it is limited.

If you lose your prepayment meter key or smart card don’t worry. You can simply contact your supplier to get a new one sent out, but in the meantime your supplier should be able to authorise a temporary card from your nearest PayPoint or PayZone. If this isn’t possible you might have to have an emergency callout which will involve a charge. When you move into a property with a prepayment meter you should contact your supplier and clarify exactly what happens if you can’t find your card or token.

Labour Victor AHIUMA-YOUNG

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RIVATE sector employers have called on the F e d e r a l Government to begin the process of privatising the nation’s four refineries, and to resume national debate on the removal of fuel subsidy in the face of shrinking oil prices.

Both the Nigeria Employers Consultative Association, NECA, and Shop and Distributive Trade Employers Association of Nigeria, S&DTEAN, at separate p r o g r a m m e s , ex p r e s s e d concern over the importation of petroleum products.

The Director General of NECA, Mr. SegunOshinowo, at an interactive session with journalists, advised that the same courage and determination with which the government tackled theprivatisationof the electricity sector should be extended to the refineries.

This, he said, will save national resources that are being expended on the Turn Around Maintenance, TAM, of the refineries for which the nation is not deriving the appropriate benefits.

He contended that government could not continue to play politics with the privatisation of the nation’s refineries, arguing that the refineries would perform at optimal capacity if handed over to private investors to manage.

According to him, the role of government in an economy should be that of a regulator or an enabler and not an operator. He insisted that the private sector should be empowered and encouraged to create jobs, in order to check the rising unemployment rate in the country.

Oshinowo said, “Time has come for government to hand over the operations of the nation’s refineries to private investors. A lot of money is going into subsidising petroleum products, and turn around maintenance of the refineries. For how long will this continue? The price of cr ude oil has been on downward slide which means that government subsidy on fuel should be reducing. This is the period for government to raise its hands because if this trend should continue, it

20

Employers, groups demand privatisation of refineries

Oil refinery

will get to a level where there will not be subsidy again.”

Continuing, he called on government to explain in details the contingency plans it has put in place to avert any economic shocks that may arise from the fall in price of crude oil in the international market.

He insisted that government must let Nigerians know its level of preparedness in order to ensure that the country does not go back to another era of austerity.

He said the call became necessary given that Nigerian economy is extremely susceptible to changes in price of oil in the international market.

“Let government explain in details the contingency plan it has put in place to cushion the effect of any shock arising from the decline in price of crude oil at the international

market. We want to know the preparedness of government in ensuring that we will not go back to another era of austerity.”

Oshinowo condemned the overbearing attitude of some government regulatory agencies, which he accused of indulging in practices that stifle businesses.

He cited the case of the Consumer Protection Council, CPC, which compelled private investors to bear the costs of its operations, a development he described as an aberration in any economy.

He therefore warned that NECA will soon commence the process of naming and shaming the agencies that are engaging in such acts, insisting that the federal government must fund its agencies.

“Why should protecting

consumers be at the expense of private enterprise? CPC had been demanding manufacturers to re-register products already registered and certified by the National Agency for Food Drugs Administration and Control, NAFDAC, which amounts to duplication of functions.

While NECA was not against protecting consumers, the cost of doing so must not be shifted to private enterprises which are already overburdened by taxes and other levies paid to the government. The Federal Government must fund its agencies,” Oshinowo added.

On its part, S&DTEAN P r e s i d e n t , M r. Vi c t o r Eburajolo, at its Annual General Meeting, AGM, in Lagos, said, “all through the year, it was a great concern that as an oil producing nation, Nigeria continued to

incur bills running into billions of naira on the importation of petroleum products. This persistent development denied the economy of the much needed foreign exchange and the tremendous multiplier effects which domestic refining of petroleum products would have offered the economy.

“Even though government preached the philosophy of open market and privatisation, it lacked the political will to drive the privatisation of the nation’s refineries to a logical conclusion. The power sector ’s privatisation exercise did hit the home run in 2013. This is not to say ‘uhuru’ as the sector is still grappling with the problem of operational stability and need to deliver on the expectations of quality power supply to the public.”

Labour

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Workers laud PPMC repositioning Victor AHIUMA-YOUNG

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ORKERS of the Pipelines a n d Product Marketing Company Limited, PPMC, have commended t he Prince Haruna Momoh-led, m a n a g e m e n t f o r repositioning the company, which is aimed at ensuring steady supply of petroleum products to the market.

Speaking under the platform of PPMC Workers’ Forum, PWF, the workers noted that the repositioning improved on processes and systems in a bid to increase efficiency and maximise cost.

A statement from the Forum called on all stakeholders to give the management all the needed support to move PPMC, a subsidiary of the Nigerian National Petroleum Corporation, NNPC, to the next level.

According to PWF, “the downstream oil and gas sector is a major driver of the economy of this nation. It is the lifeline of the domestic economy, which deals with the supply and distribution chain of petroleum products in the country. It is therefore a vital part of the socioeconomic activity of our nation. That is why it is very sensitive and any challenge facing the sector is felt by all and sundry. The subsidiary is often misunderstood and is always being bashed, even when the heat is not supposed to be turned on it.

“But in recent times, the PPMC has evolved. A lot of work has been done to reposition its activities towards ensuring steady supply of petroleum products to the nooks and crannies of the nation. It has continued to improve on processes and systems as a means to increase efficiency and maximise cost. In retrospect, the PPMC was set up principally to provide excellent customer services by transporting crude oil to the refineries and transporting petroleum products to the existing markets efficiently and future markets efficiently and at low cost through a safe and well maintained network of pipelines and depots.

“Under the leadership of Prince Haruna Momoh, the

Copper declines after Freeport workers cancel strike

C

Nigerian worker scenario has changed through a total overhaul and transformation of the distribution chain. The era of queues at filling stations has been completely eradicated.

The idea of panic buying during festive periods has also become h i s t o r y, b e c a u s e o f abundance of petroleum products.

The statement added, “the PPMC as at now also operates fleet of marine vessels for movement of products along the coastal waters from Port Harcourt and Warri to Lagos, and from Port Harcourt to Calabar.

The major achievements so far recorded at ensuring products supply under this administration is the interventionist programme which include upgrade of its

infrastructure.

“So far, the Port Harcourt product line had been rehabilitated and the WarriBenin product line that was abandoned for over a decade has been revived. The Aba depot that had hitherto been moribund for over ten years has come on stream and recommissioned. Petroleum products are now received in Benin and Aba depots. The Aba-Enugu product pipeline is also receiving attention. As at now petroleum products are been pumped to Kano, Suleja, Jos, Minna, Gusau in the North. “ I n t h e S o u t h -We s t , Mosimi, Ejigbo, Atlas Cove, and Ore are receiving petroleum products. The organisation, despite the challenges posed by vandalism has also been able

So far, the Port Harcourt product line had been rehabilitated and the WarriBenin product line that was abandoned for over a decade has been revived

to achieve 80 percent flow of products because of measures put in place.

PPMC under Prince Momoh has consolidated on the rehabilitation of pipelines by opening up the Kaduna-JosGombe exist.

“In the area of tackling vandalism of pipelines, Momoh and his team have been able to curtail their activities by responding quick to repairs and installation of CCTV’s in 22 strategic locations around the c o u n t r y, i n c l u d i n g t h e Calabar jetty and depot.

“In 2012 alone, it recorded 774 vandalised points within three months, from AugustOctober, 2012, from Atlas Cove to Ilorin depot, from Atlas Cove to Mosimi depot, it recorded over 180 breakpoints. Despite these challenges, the PPMC had sustained petroleum products supply across the country through shared determination and increased level of activities.

Continuing, PWF explained that to stem these tides, “the PPMC built extension platforms over swamps so that security forces can have easy access to the right of w a y. I t h a s a l s o b u i l t watchtowers and Police Posts along the Pipelines right of ways.

opper futures declined for the second straight day as workers called off a strike at FreeportMcMoRan Inc.’s site in Indonesia, the world’s second-largest mine for the metal.

Employees had planned to stop work at Grasberg for one month starting November 6 over safety issues, helping push copper prices to a fiveweek high on Oct. 29 as supply concerns mounted.

Prices also fell as the dollar rose to the highest since 2010 against a basket of currencies, cutting the appeal of raw materials as alternative investments.

“People are relieved that there will be no strike, so we are seeing some weakness in prices,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “Also, the dollar strength is working against commodities.”

Copper futures for December delivery slipped 0.5 percent to settle at $3.047 a pound on the Comex in New York, the first back-to-back decline since Oct. 16. Yesterday, prices dropped 1.4 percent.

On the LME, copper lost 0.7 percent to $6,695 a metric ton ($3.04 a pound).

BHP Billiton Ltd.’s Escondida in Chile is the biggest copper mine by capacity, according to the International Copper Study Group.

Aluminum, nickel, lead and zinc rose on the LME, while tin fell.

Solid Mineral

22

Steel pipes

Price unchanged in stable steel market

T

he Chinese domestic iron o r e concentrate price was unchanged over the week in an overall stable domestic s t e e l m a r ke t , i n d u s t r y sources said.

Platts’ assessment of the domestic price of 66% Fe iron ore concentrate delivered to steel mills in Tangshan city in north China’s Hebei province static at Yuan 750760/dry mt ($122-124/dmt) as of October 31 on cash terms and including 17% value-added tax.

Iron ore mining operations in Hebei were reported to have been notified of production halts starting November for the AsiaPacific Economic Cooperation Summit in Beijing on November 5-11 , market sources confirmed.

But the impact on either steel prices or iron ore prices is expected to be minima lperiod of production disruption will not put much pressure on supplies or prices,” a procurement official from a Hebei-based steel mill said.

China steel market sources

expected prices of both imported and domestic iron ore to stay stable until closer to December when domestic iron ore miners and traders with iron ore inventories at ports will be prompted to increase sales. This is so as to have abundant cash flow on hand for the repayment of three-month or six-month short bank financing for daily operations.

“China’s financial year follows the calendar, and closer to the year end, many companies will need to look at their balance sheets and to make those due payments to

their banks in time,” an iron ore miner in east China’s Shandong province said.

Meanwhile, those pressure are not apparent and iron ore inventories at the Chinese ports has been declining slowly and steadily.

By last Friday, iron ore stocks at 44 Chinese ports in China went down another 850,000 mt on the week to 107.05 million mt, data from the Dalian Commodity Exchange showed.

Zinc up 0.2% on short-covering, spot demand

Z

inc futures edged up by 0.18 per cent to Rs 141.55 per kg at the end of Friday after speculators covered-up their short positions amidst rising demand in domestic spot markets.

At the Multi Commodity Exchange, zinc for delivery in November moved up by 25 paise, or 0.18%, to Rs 141.30 per kg in a business turnover of 69 lots.

The metal for delivery this month rose by 15 paise, or 0.11 per cent, to trade at Rs 141.75 per kg with a business turnover of 157 lots.

According to marketmen, apart from improved demand in the spot markets, covering-up of short positions by speculators on the last day of October, supported the upside in zinc futures.

Solid Mineral

23

Metal scraps

N

ickel led m o s t industrial m e t a l s h i g h e r after the Bank of Japan unexpectedly increased monetary stimulus and before an official gauge of Chinese manufacturing.

The BOJ said it will increase holdings of government bonds by 80 trillion yen ($722 billion). A manufacturing purchasing managers’ index reading for October in China, the biggest metals user, will be 51.2 compared with 51.1 in September, according to a Bloomberg News survey before the data tomorrow. A number above 50 signals expansion.

China and Japan were the

Nickel leads industrial metals higher on Japan stimulus top importers of copper ore and concentrates in 2013, according to data from the International Copper Study Group.

“The BOJ’s announcement has surprised the market and improved market sentiment,” said Kazuhiko Saito, an analyst at Fujitomi Co., a commodities broker in Tokyo.

Nickel for delivery in three

months on the London Metal Exchange rose as much as 1.3 percent to $15,974 a metric ton and traded at $15,970 by 3:15 p.m. in Tokyo. The metal climbed for a fourth day and gained 6.4 percent this week, heading for the first weekly advance in eight and the biggest since May. Copper in London rose 0.6

percent to $6,778 a ton, poised for the first monthly increase since July. The metal was supported by speculation that planned strikes at mines in Indonesia and Peru may disrupt supplies, said ChaeUnSoo, a metals trader at Korea Exchange Bank Futures Co. Possible strikes at the Grasberg mine in Indonesia

and the Antamina mine in Peru may disrupt 3.1 percent of world copper production, according to Bloomberg Intelligence.

In New York, copper for December delivery advanced 0.8 percent to $3.0875 a pound, while the January contract in Shanghai was up 0.5 percent at 47,760 yuan ($7,817) a ton.

On the LME, all metals climbed except tin, which was unchanged.

Insurance

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Accident scene

Expert calls for self reliance in underwriting complex risks Rosemary ONUOHA

M

a n a g i n g Director/Chief Executive Officer of Financial Institutions Training Centre, FITC, Dr. Lucy Newman, has charged Nigerian insurers to be self-reliant in-terms of technical expertise, especially in underwriting large and complex risks like oil and gas.

Lucy said that setting up the right str ucture, hiring, training and retaining the right employees are critical success factors.

She said that except the right employees are recruited, trained and empowered, the company can only expect minor incremental progress where leap-frogging is possible.

S h e s a i d , “ We n e e d organisations with defined roles based on required competencies and then place people with high degree of capacity to deliver on those roles. Insurance products/risks have their peculiarities that call for the specialised skills of insurance practitioners. An insurer must have detailed and varied knowledge of the business and lives of insurance consumers, to be able to design an appropriate policy cover.

“Where this knowledge is absent and the unique skills are unavailable, the quality of insurance policies would not only be substandard, but also it will endanger the virility of the insurance company and the financial inclusion strategy itself.

“To create and deliver value to its stakeholders while still meeting the objectives of financial inclusion, insurance companies need to develop ingenious solutions to the emerging financial inclusion challenges.

“The insurance market is dynamic and constantly changing at times of crisis.

Its operation relies on an adequate supply of financial and human capital. Of the two ‘capitals’, the industry seems to be in a better shape in financial capital management and still needs to develop its human capital.

This implies that supply of talented workers with a passion for risk management and insurance should be a critical issue for the insurance industry,” she said.

Newman said that in a rapidly evolving industry such as the insurance industry, responsiveness to customer needs is a crucial test of the insurance company’s survival; hence the legacy of sub-optimal expertise restraining the development of the local insurance industry should quickly be a thing of the past.

According to her, success of the financial inclusion strategy will require Nigerian insurers to be at the forefront, backed by a healthy mix of experts and specialists in their own field, who can stand as pillars supporting the organisations, adding that the key to corporate prosperity and the success of the financial inclusion strategy for the insurance industry is the placement of

high premium on the human capital.

“We need to have clarity and objectivity in our recruitment processes, as well as scientifically deriving development processes that are aligned to performance measurement and management process. When we have the applicable corporate cultures, work tools and good policies, our people will remain, happy and very productive. This is where human capital alignment is imperative. Management of insurance companies need to ensure that their Human Capital strategy aligns with the required industry need. If we are to achieve the goals of financial inclusion for the insurance industry, then we will have to build our capacities for market intelligence, product innovation, selling skills and problem solving,” she said.

Insurance

25

N

oble Corp Plc’s stock had its ‘outperfor m’ rating restated by equities research analysts at Credit Suisse, a financial services and insurance company, in a research note issued to investors.

Noble Corporation is an offshore drilling contractor for the oil and gas industry.

The Company performs contract drilling services with its fleet of 79 mobile offshore drilling units and one floating production storage and offloading unit.

They currently have a $30.00 target price on the stock, down from their previous target price of $32.32. Credit Suisse’s price objective points to a potential upside of 43.40% from the company’s current price.

Noble Corp plc (NYSE:NE) traded up 1.90 per cent, hitting $20.92. The stock had a trading volume of 5,858,367 shares. Noble Corp Plc has a one year low of $17.93 and a one year high of $35.542. The stock’s 50day moving average is $21.67 and its 200-day moving average is $26.09.

The company has a market cap of $5.430 billion and a price-to-earnings ratio of 6.69.

Noble Corp plc last posted its quarterly earnings results on Wednesday, October 29th.

The company reported $0.57 EPS for the quarter, beating the Thomson Reuters consensus estimate of $0.53 by $0.04. The company had revenue of $828.80 million for the quarter, compared to the consensus estimate of $820.10 million. During the same quarter in the prior year, the company posted $0.85 earnings per share.

The company’s quarterly revenue was up 29.4% on a year- over-year basis.

Analysts expect that Noble Corp plc will post $2.98 EPS for the current fiscal year.

The company also recently declared a quarterly dividend, which is scheduled for Thursday, November 13th. Investors of record on Monday, November 3rd will be given a dividend of $0.375 per share. This represents a $1.50 dividend on an annualized basis and a yield of 7.17 per cent. The exdividend date of this d i v i d e n d i s T h u r s d a y, October 30th.

Other equities research analysts have also recently issued reports about the

Drilling services

Credit Suisse reiterates outperform rating for Noble Corp stock. Analysts at Morgan Stanley reiterated an “equal weight” rating on shares of Noble Corp plc in a research note on Wednesday.

They now have a $24.00 price target on the stock, up previously from $22.50.

Separately, analysts at ISI Group initiated coverage on shares of Noble Corp plc in a research note on Wednesday, October 15th.

They set a “buy” rating on the stock. Finally, analysts at

ING Group downgraded shares of Noble Corp plc to a “hold” rating in a research note. One analyst has rated the stock with a sell rating, twelve have given a hold rating and eight have given a buy rating to the company’s stock.

The stock currently has a consensus rating of “Hold” and a consensus price target of $33.64.

Noble Corp plc last posted its quarterly earnings results on Wednesday, October 29th. The company reported $0.57 EPS for the quarter, beating the Thomson Reuters consensus estimate of $0.53 by $0.04

Maritime

26

Cargo ship

Nigeria moves to reclaim lost transit cargoes I

n a bid to reclaim its lost transit cargo, Nigeria has commenced moves to woo back importers in landlocked countries that have abandoned Nigerian ports for other ports of neighbouring countries.

In an exclusive chat with Sweetcrude, the Executive Secretary of the Nigerian Shippers’ Council, NSC, Mr. Hassan Bello, said that Nigeria wants to reclaim over three million tonnes of transit cargoes that is lost to landlocked countries annually.

Hassan said that if

government is able to reclaim the lost transit cargoes, it will improve government’s revenue profile, and create more jobs for other auxiliary industry.

He disclosed that the Federal Government through the Council has been meeting with the Nigerien authorities on ways to bring back transit cargoes to Nigeria.

The council boss said the factors that made Nigeria to lose the transit cargoes to countries like Ghana, Togo, and Benin Republic are being addressed, and the cost of the category of cargo was also being negotiated with some

of these landlocked countries.

He also disclosed that the Council took some shipping firms and terminal operators to Niger, to meet with both the Nigerien authorities and maritime stakeholders with a view to opening trade relations with the landlocked country.

“We also brought the Nigeriens to Nigeria to see how efficient our port system is, we took them to Warri, Calabar, and Lagos.

“We are targeting the three million tonnes of cargoes that go to other ports of neighbouring countries, and once we are able to get Niger’s transit cargoes, we

will go to Chad,” Hassan added.

Some of the factors that led to the loss of transit cargoes according to Mr. Lucky Amiwero, a logistics expert, are high port charges, congestion and cumbersome cargo clearing process.

Speaking to Sweetcrude on the development, Amiwero, President of National Council of Managing Directors of Licensed Customs Agents, said the port in Ghana has dedicated terminal through which these cargoes are loaded on trucks without delay.

He said Nigeria had not only lost the movement of

transit cargoes to Ghana, but was also on the verge of losing trans-shipment to the same country as bigger vessels prefer to go to Ghana due to its deeper draft.

He noted that the bureaucratic procedure in the goods clearing process in Nigeria, coupled with the issue of extortion, had made importers of these land locked countries to look at Ghana as better option.

He said the reason for the loss of the movement of such goods, which was another source of revenue generation was because of the way the Nigerian government detached itself from the running of the ports.

Maritime

27

Pirates target oil tankers in Asia route as attacks climb

Russia to ship gas to Ukraine after debt deal

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Oil tanker

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ijackings of small oil tankers by a r m e d gangs are increasing in Southeast Asia, home to the shortest seatrade route between the Middle East and China, even as pirate attacks globally fell for a third year.

Five of the six vessels seized worldwide in the third quarter were in Southeast Asia, said the International Maritime Bureau and International Chamber of Commerce. There’s been 178 global piracy incidents so far this year, down from 352 in 2011, they said in an e-mailed report.

Gangs of thieves armed with knives and guns are making Southeast Asian waters increasingly dangerous for small tankers carrying fuels such as gasoil or marine diesel, according to the report. The region

includes the Malacca Strait connecting the Indian Ocean with the South China Sea and the Pacific that’s been described by the U.S. Energy Information Administration as one of the world’s “most strategic choke points.”

“It’s encouraging to see the huge decrease in maritime piracy and armed robbery over the last few years,” said Pottengal Mukundan, the Kuala Lumpur-based director of the IMB. “However, there has been a worrying new rise in attacks against small coastal tankers in Southeast Asia. We advise small tankers in particular to remain vigilant in these waters.”

Pirates killed three crew, kidnapped five and took 369 seafarers hostage globally in the first nine months of this year, according to the report.

A total of 17 vessels were hijacked, 124 were boarded and 10 fired upon.

In Somalia, where armed

guards and naval patrols have helped deter and repel attacks on a trade lane linking Europe to Asia, 40 hostages are still being held for ransom, according to the report.

“Some of those crew members have been held captive there for more than four years now, with fading hopes of immediate release,” Mukundan said.

Indonesia recorded 72 incidents in the first three quarters, including 67 armed robberies and five hijackings.

Southeast Asia’s waters are becoming more dangerous, said the captain of a Vietnamese tanker released by pirates earlier this month following a six-day regional hunt. The Sunrise 689 returned from Singapore after losing part of its diesel cargo to pirates who said they were Indonesian.

It’s encouraging to see the huge decrease in maritime piracy and armed robbery over the last few years,” said Pottengal Mukundan, the Kuala Lumpurbased director of the IMB

USSIA will resume shipping natural gas to Ukraine after it pays off its first debt installment for past supplies of gas next week, officials said.

Alexei Miller, chief of Russia’s state-controlled Gazprom natural gas giant, made the statement hours after Russia, Ukraine and the European Union thrashed out a US$4.6 billion deal that will guarantee Russian gas supplies to Ukraine and further on to the EU. The deal eased fears that Europe will end up shivering this winter like it did in 2009, when a spat over Ukraine’s gas bill prompted Russia to cut off energy supplies to Europe for nearly two weeks.

The leaders of Germany, France, Russia and Ukraine hailed the deal in a conference call, as an “important step toward ensuring uninterrupted gas transit to Europe,” the Kremlin said.

Moscow cut off gas supplies to Ukraine in June over unpaid debts, a move that followed the ouster of Ukraine’s Russia-friendly leader and the Kremlin’s annexation of Crimea in March.

Talks dragged on for five months amid fighting in eastern Ukraine between pro-Russian insurgents and government troops. But the looming onset of winter — a fierce, freezing season in Ukraine — had given the talks increasing urgency.

Miller said that Gazprom expects to get the first Ukrainian tranche of US$1.45 billion before the end of the week. Under the deal, Ukraine has pledged to pay the rest of its US$3.1 billion gas debt before the year’s end and also to pay in advance for Russian gas supplies through March.

Ukraine will pay US$378 per 1,000 cubic meters of Russian gas until the year’s end, and the price is expected to fall slightly in the first quarter of next year.

Ukrainian Foreign Minister Pavlo Klimkin said Ukraine aims to buy 4 billion cubic meters of gas from Russia over the next two months.

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Reading with candle light

Samuel OYADONGHA

T

he expectation was that like w i t h t h e t e l e c o m s s e c t o r, t h e privatisation of the troubled power sector previously under the monopoly of the Power Holding Company of Nigeria, PHCN, would bring about improved electricity supply.

But the reverse has been the case in the power sector, which is still struggling to find its bearing, a development that has made the country a huge dumping ground for generator manufacturers.

The situation appears to be worse in the predominantly riverine Bayelsa State, which was connected to the national grid in 2006, but a large percentage of its communities, mostly in the hinterlands are yet to be connected to the grid.

But for the recent upgrading of the hitherto haphazard distribution network in Yenagoa, the state capital, which was put in place when the latter was a rustic settlement in the old Rivers State, most parts of the

Bayelsa still experiencing poor power supply town could have been plunged in darkness.

Some business outfits in the state capital including the financial institutions run on 24 hours generators due to unreliable electricity supply and outrageous billings by the Port Harcourt Electricity Distribution Company, PHEDC. Most of the once thriving small scale businesses in town that could not meet the attendant high cost of maintaining generating plants, have closed shops due to the parlous state of the sector.

The state independent power plant, the Imiringi Gas Turbine which was once the state sole source of electricity supply and which could have complemented the national grid has been down and undergoing repairs.

In spite of the epileptic electricity supply to residents, the recent hike in billing by the PHEDC has further compounded the woes of the people.

Residents of Yenagoa are charged based on estimated billings as against the standard practice in other parts of the country where meters are installed at residential buildings and business outlets to ascertain energy consumed.

Mr. Ebebi Walson, light committee member at the Azikoro suburb, decried the poor light situation, noting that in spite of the hike in tariff, electricity supply remains unstable. He lamented that each time they questioned the PHEDC, all they say is that the situation will improve. Also a resident, Emily Jones, suggested the need for every consumer to

be provided with private meters so as to know the exact energy consumed.

However, a staff of the PHEDC, Yenagoa District, told Sweetcrude that as a distribution company, they are only concerned with distribution of power to consumers.

“Our greatest challenge is the Light Committee we inherited from the defunct PHCN. Our major problem is the (light committee) unwillingness to pay bills.

They collect the money, but they don’t remit to us. This informed the reason why we are now dealing with consumers individually in the s t a t e c a p i t a l . We a r e improving but we are yet to get there.

“Outside the state capital, in some villages in Gbarain area, the people refused to pay their bills thinking that

the source of the light is from the LNG. When we went to disconnect them, they beat up our men, threatening them never to come back. The beating up of our workers is not limited to that area alone, in parts of the state capital, our men have been beaten and molested severally and that is we why we have men of the Nigerian Security and Civil Defence Corps, NSCDC permanently stationed in our office.”

He further said, “We get power supply from the Transmission Company of Nigeria, owned by the Federal Government; they sell power to us and give us the bill every month. Supply is available, presently we are giving more than twelve hours power supply to Yenagoa and environs every day. We will continue to pursue supply increase, whether the people pay or not but we will cut-off those who refuse to pay. The supply too depends on the availability of gas at the transmission end.”

Community

29

Chevron commissions N530m estate in Kula

… Says GMoU promotes peace in N’ Delta Jimitota ONOYUME

P

O R T H A R C O U RT: Chevron has described the G l o b a l M e m o r a n d u m o f Understanding, GMoU, engagement model it introduced in 2005 as a way to create robust economies in the Niger Delta region.

The General Manager, Policy, Government and Public Affairs, PGPA, Mr Deji Haastrup, made the observation during the commissioning of an estate

worth N530 million built by Kula Regional Development Committee, KRDC in Kula.

The project was executed under the GMoU with the NNPC/Chevron Joint venture to promote development in the region.

According to him, the company has recorded several successes under the GMOU arrangement, stressing that with support communities could drive their development pace.

“The successes recorded in the implementation of the GMOU in Kula and in other cluster communities

bordering the company ’s operations in the Niger Delta region have shown that with adequate support the communities can drive their development process.”

He said the oil giant was working towards introducing what he termed the GMoU+ which would focus on growing local business and creating community empowerment, adding that communities should continue to promote peace for growth and development to thrive.

“GMoU+ is with focus on business development and

economic empowerment; third party partnership and collaboration; delivery on the Millennium Development Goals, MDGs; Operational Excellence and Human Rights,” he said.

In their separate speeches, the Chairman of the Kula Regional Development Council, Mr Stanley Benibo, and Chief Charles Opurum, who represented the Rivers State Gover nment also lauded the GMoU model, saying that it has made communities to be actively involved in their development process.

Total commissions 500 KVA transformer in Umuebulu Jimitota ONOYUME

P

ORT HARCOURT: Total has donated a 5 0 0 K VA transformer in Umuebulu community, Etche Local Government Area of Rivers state.

Speaking during a ceremony to hand over the transformer, the Project General Manager, OML 58 upgrade, Mr Kayode Akiode, said it is part of the company ’s effort to support development of the area.

Akiode, who spoke through Manager Community Affairs Services of the firm, Mr Okechukwu Obara, said the transfor mer is a proceed from the Etche Cluster 4 northern operation pipeline.

Others who spoke at the brief ceremony were the c o m p a n y ’ s M a n a g e r, Community projects, Mr Marcel Ugwu, and the Chair man, Umuebulu Community Development Committee, CDC, Mr Victor Okere, who thanked the oil giant for the donation.

Housing estate

Community

30

Jimitota ONOYUME

P

O R T H A R C O U R T: Executive S e c r e t a r y, N i g e r i a n Content Development and Monitoring Board, NCDMB, Mr Ernest Nwapa, has charged indigenous oil and gas companies to grow local technology for the sector.

Speaking in Port Harcourt during the inauguration of the rotating machines maintenance workshop by Benkline Nigeria Limited, Nwapa reminded key stakeholders in the oil and gas sector in the country that Nigeria is a big market for indigenous technological development.

“We are challenging the indigenous producer to begin to partner and patronise local service companies so that the market will expand. The market in Nigeria is big on its own but we often fail to realise that. Nigeria is often seen as salvation location by other African countries.

Nigeria is expected to lead and be a place they can come for support. If we do not take that opportunity, then we are failing in our responsibility. If we can do services here, Ghana, Equatorial Guinea and more will come here. If we have a consolidated economy, this will be where everybody will like to come,” he said.

Assuring that the federal government will continue to support investment in local technology Nwapa advised that those behind them should make sure they meet international standards. He further commended Benkilne for its effort in growing local technology for the sector.

“Benkline is a trail blazer and by your capacity to attract this caliber of Original Equipment Manufacturers, you have moved a few steps ahead of the Board’s plans.

We are operating a system where we want OEMs to adopt Nigerian companies and work with them and you are doing this voluntarily.

Several pumps from the Nigerian oil and gas industry had been moved out of the country for repairs in the past, but if we have a few companies like Benkline, there will be a reverse migration of technology into the country,” he noted.

Continuing, he said about $5billion worth of investment had gone into the local economy from effort to grow indigenous technology in the

Nwapa calls for investment in local technology

Locally made equipment

This government is going to support every investment that is made here. If you tally the total value of where we have visited to commission facilities in the last four years

sector, stressing that the government will always support move to develop indigenous technology.

“This government is going to support every investment that is made here. If you tally the total value of where we have visited to commission facilities in the last four years, you will have $5billion worth of investments in this economy, just by insisting these things are done in our e c o n o m y. S o y o u c a n imagine where we would be

in the next five years.

“Our commitment is that any investment that is made in Nigeria, we would wrestle anybody to the ground to make sure that work is put in there. If you want to continue in this business, you must do it the way it is done or even better than in other jurisdictions. That is the only guarantee that will make you have a sustainable business,” he advised.

Meanwhile, Nwapa has n o t e d t h a t t h e

implementation of the Nigerian Content Act has attracted a new crop of Nigerian investors who are no longer satisfied playing second fiddle to the ex p a t r i a t e s , b u t r a t h e r determined to commit huge resources in owning hi-tech assets and facilities.

The Executive Secretary also said that many Nigerians were no longer interested in acting as agents for foreign partners, but “ were investing alongside their partners, learning how to manage the business and operate complex equipment, repair and even do research and development.”

Nwapa noted that the newly developed confidence of the Nigerian investors validate the wisdom of President Goodluck Ebele Jonathan in signing the Nigerian Content Bill into law in 2010. So also the commitment of the M i n i s t e r o f Pe t r o l e u m Resources, Mrs. Diezani Alison-Madueke in s u p p o r t i n g i t s

implementation in a structured and sustainable manner.

According to him, “We are happy that the industry has come to accept this as a way of life and we no longer have to push and pull in all directions. What is going on today is a continuous collaboration between the government and the industry, between Nigerian companies and Original Equipment Manufacturers (OEMs).”

He dispelled the notion that the Board was forcing OEMs to set up in Nigeria, stressing that the local oil and gas industry provided sufficient business and market to justify investments in-country.

He maintained that many locations overseas where services were hitherto performed for Nigeria’s petroleum industry before the Act were now smaller and less equipped than most facilities being set up by Nigerians since the law came into force.

Community

31

Environmental Studies

Jimitota ONOYUME

P

O R T H A R C O U R T: Vice Chancellor o f t h e University of Port Harcourt, Prof. Joseph Ajienka, has called for collaboration between the University and the National Environmental Standards a n d Re g u l a t i o n s E n f o r c e m e n t A g e n c y, NESREA, to strengthen environment studies in the institution.

The Vice chancellor who made the appeal when the Director General of the agency, Dr Ngeri Benebo, paid him a courtesy visit in his office, said the industry could help the university shape it’s curricula on environment studies.

He added that it could also nominate its staff to take some courses in these environment related institutions in the university.

“We want the industry to

UniPort, NESREA to collaborate on environment studies advice on our curricula, nominate people to teach in our programmes, supervise projects with us. These are the things we are looking at,” he said.

Benebo, had earlier said the agency will not hesitate to assist the university develop institutions for training students in environment related matters and advised the institution to come to the agency for accreditation.

Meanwhile, Benebo in a lecture on: “Environmental Protection and sustainable development in Nigeria: the role of tertiary institutions,” said academic institutions have to be more involved in

Tertiary institutions have capacity to give quick responses to different societal problems, including those relating to the environment environment studies because of its relevance.

She said, “tertiary institutions have capacity to give quick responses to different societal problems, including those relating to the environment. Beyond teaching and learning on

environmental issues, there is an emerging consensus that tertiary institutions can also model sustainable practices. Such education contributes strongly to sustainable practices. Such education contributes strongly to sustainable

development by training and expanding young minds in researching solutions to the environmental challenges.”

“Tertiary institutions are unique and have their traditions and culture. They are familiar with their own traditions and culture. They are familiar with their surroundings. They can use their repository of knowledge and expertise to address various societal problems.

The tertiary institutions can help protect the environment and achieve sustainable development through the implementation of various programmes under the umbrella of education for sustainable development.”