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Confusion, uncertainty dogs Nigeria’s energy industry

By Hector IGBIKIOWUBO
THE confusion and uncertainty which characterised the Nigerian energy industry in 2009 appears to have dogged it into year 2010, especially in the face of the plethora of unresolved issues including the Petroleum Industry Bill (PIB) before the national assembly, the debate and anticipation around deregulation of the downstream petroleum sub-sector and epileptic power supply despite government’s much talked about plans to generate 6000 Megawatts (MW) of electricity by December 2009.

Fuel Scarcity
Fuel Scarcity

Sweet crude gathered that the absence of President Umaru Musa Yar’Adua may have contributed in no small measure in compounding the seeming confusion which has characterised the industry as it affects policy formulation, implementation and supervision, projects initiation and supervision and providing leadership.

Indications are that until the leadership of the ministries charged with superintending the energy industry, including the ministry of petroleum resources and the ministry of power shows a clear cut direction devoid of intrigues, the energy industry may not make meaningful progress anytime soon.

PIB doubtful:
The Senate had assured it would pass the PIB before the close of 2009. However, at the time of filing this report, barely two days to the close of last year, checks with the national assembly revealed that, not only was the senate on recess, the Bill had not been passed and chances it will be passed anytime soon remains remote.

When contacted, Senator Lee Maeba, the Senate Committee Chairman in charge of Petroleum (upstream) noted that the Senate was on recess and that senators couldn’t possibly be considering passage of any Bill from the confines of their respective homes.

Checks with the House of Representatives also revealed that neither had the Bill been passed nor were there plans to pass it without considerable amendments anytime soon.

When contacted also, Mr. Tam Brisibe, Chairman of the House committee on petroleum (upstream) concurred with Sweet crude’s observation that the industry appears to be in a state of flux, adding that it was fair to assume that the Bill wouldn’t even be passed by January, 2010.

He explained that the national assembly would resume on the 12th of January, 2010 and that even after resumption, members would be preoccupied with the 2010 appropriation bill. “The PIB is still at committee stage. Following the public hearing, we are still busy collating submissions which were made,” he disclosed.

Further checks indicate that even if the Bill had been passed by the national assembly without considerable amendments to submissions by the executive branch of government, Mr. President who is statutorily required to sign it into law had been unavoidably absent for over one month.
Multinationals look elsewhere:

While the provisions contained in the Bill has precipitated an air of uncertainty in the upstream oil sector, Sweet crude checks revealed that international oil companies operating in Nigeria have made good their threat to starve the country’s upstream oil sector of further investments for the next five years.

When contacted, a general manager in charge of operations of one of the joint ventures who insisted on maintaining anonymity, lamented the situation, noting that with no decision taken on outstanding projects, ‘chances are that it is only a matter of time before production begins to shrink’.

“You must understand that funds cannot be kept indefinitely waiting for Nigeria to get its act together. The international oil and gas companies would definitely move their funds to frontiers where they can obtain reasonable returns within defined time frame.”

Reacting to recent news publications that Shell may be looking to offload some of their idle acreage in the Niger Delta, the general manager said he had difficulty absorbing this possibility.

“Shell has been out of production in Ogoni land since 1993. Yet they have resisted all attempts by the government to assign another operator for its acreage there. Even while the Nigerian civil war lasted, Shell did not offload any of its acreage. I really don’t see the rationale to do so in this instance. In fact, I think that story was floated to gauge reaction from certain quarters,” the general manager noted.

The oil industry chieftain also noted that the purported attempts at divestment also comes at a time when the security situation in the Niger Delta appears to be under control, noting however, that the government of the day and the NNPC were hostile towards the international oil companies.

Deregulation fuels scarcity:
Despite government’s numerous excuses tendered through the Nigerian National Petroleum Corporation (NNPC) regarding the non-availability of petroleum products across the country, commuters had to endure one of the harshest transportation conditions in the country’s history.

Sweet crude checks revealed that the persistent fuel scarcity may not be unconnected with government’s inability to take a decision on whether or not to go ahead with the deregulation of pump prices of petroleum products in the downstream sub-sector.

While the government insists that it is still engaged in dialogue with organised labour, civil society and concerned stakeholders, retailers continue to hoard fuel in anticipation of an imminent announcement of full blown deregulation.

It is anticipated that following announcement of commencement of full blown deregulation, retailers with old stock of fuel would benefit from the upward review of prices.

Retailers in the Lagos area and other parts of the country monitored had resorted to selling fuel at various prices above the approved pump prices in a bid to fleece hapless motorists and derived maximise profits from the prevailing air of uncertainty.

When contacted over ongoing sale of petrol at varying prices within the Lagos area, Mr. Billy Agha, the Director of Department of Petroleum Resources (DPR) admitted knowledge of the development and implored this reporter to get organised labour to succumb to arguments in favour of full blown deregulation.

“My brother the situation is quite regrettable. This is why you guys in the media should get organised labour to realise the pain and suffering motorists and commuters have been subjected to. Even if we have deregulation today, petrol will not sell for up to N100 per litre,” he enthused.

Meanwhile organised labour continues to insist on availability of enhanced local refining capacity, improvement in receptor terminal capacity to reduce cost of demurrage, stop bridging of petroleum products by trucks and ensure movement of products by pipeline, identify and bring to book the so called ‘cabal’ that continues to undermine the functionality of the refineries and fix dilapidated roads to reduce the carnage, among other demands.

In the face of this uncertainty, most fuel consumers who rely on generators to provide electricity had to spend the yuletide in the dark
Electricity supply nightmarish

Although the ministry of power wouldn’t admit it, Sweet crude gathered that owing to insufficient gas supply, power generation by the Power Holding Company of Nigeria (PHCN) remains below 3000 Megawatts.

In a related development, Nigeria appears to have lost a whooping $1.5 billion (about N222 billion) in revenue as a result of the shut in of the Trans Forcados Pipeline (TFP) which has been out of service since June, 2009 owing to repeated acts of vandalism.

The initial expectation was that the Utorogu, Oben, Sapele and Ughelli would receive 610 million standard cubic feet of gas for power generation translating into about 2,440mw of electricity if delivered.

However, indications are that given the spate of vandalism recorded within such a short time span, this may not happen anytime soon.

Most power consumers have resorted to permanent use of their power generators owing to the unreliability of the public utility company. Unfortunately, they also have to contend with scarcity of petroleum products owing to hoarding by the retailers.

Further checks revealed that less than 30 per cent of Nigerians have access to the public power utility company and most of these power consumers across the country enjoy less than an average three hours of power supply each day.

Investigations revealed that while Shell Petroleum Development Company (SPDC), the operator of the Trans Forcados Pipeline (TFP) had been working round the clock to restore the TFP to service, the company suffered a major set-back earlier in the month when it confirmed 8 additional damaged points on the line.

Dr. Lanre Babalola, the Minister of Power disclosed at the weekend that actual generation has gone up to 3,700MW while generation capacity is now 5,600MW.

He said if the fresh holes discovered by oil companies on their pipeline are repaired this may boost gas supply to the power plants and boost actual power generation to 4,000MW.

“What is holding us now is gas and I am sure as soon as the companies are able to increase supply to PHCN generation companies the idle machines will come alive.

As we speak now we have over 2,600MW idle machines that we cannot put in use due to lack of gas,” Babalola noted.
He explained that government is doing everything possible to deliver on its promises to Nigerians adding that at the highest government level meetings are being held to resolve the challenges posed by gas supply for power generation.

The minister also disclosed that supply has been restored to Ikoyi and Victoria Island where a major transmission station at Dolphin collapsed recently.

It was also gathered that as a result of the shut in, 20 million barrels equivalent of crude oil loss has been recorded and this translates to a loss of $1.5bn revenue to the nation.

Even though SPDC crude oil production in Delta state can account for upwards of 300,000 barrels per day, the current total production from the state is about 30,000 barrels per day, a miserly 10 per cent of installed capacity.

Babalola disclosed that the PHCN used its resident engineers to back feed the affected areas and restore supply seven days ago.
He also disclosed that work is in top gear at the National Control Center Osogbo where a 150MVA transformer was lost to fire recently.


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