Change, they say, is the only constant thing in life, but accepting change is even more difficult than instituting it. And so it is with current reforms in Nigeria’s petroleum sector, where attempts to introduce changes in line with global developments are being resisted every step of the way.

Notwithstanding that last year began on a stormy note with nationwide protests over the partial withdrawal of fuel subsidy by the Federal Government and resultant increase in the pump prices of petroleum products, the Ministry of Petroleum Resources had to forge ahead with the reforms meant to position the industry on a more profitable path.

But one thing that came out from the protests was the call from Nigerians and various interest groups on the need to also enhance transparency and probity in the sector, and there were attempts by various agencies of government to clean up the system, in order to enhance public confidence.

Nigeria’s Minister of Petroleum Diezani Allison-Madueke

Taking the full responsibilities for the sector, the Minister Petroleum Resources, Mrs Diezani Alison-Madueke, went on to set up four task forces to look into the different segments of the industry with a view to promoting efficiency and transparency in the industry.

Among the committees were: the Special Task force on PIB headed by Senator Udoma Udo Udoma; Special Task Force on Governance and Control headed by Dotun Suleiman; Special Task Force on Petroleum Revenue chaired by Mallam Nuhu Ribadu; and the Task Force on National Refineries headed by Dr. Kalu Idika Kalu.

The draft PIB

The Task force on PIB was the first to submit its report after the Osten Olorunsola led technical sub-committee completed its work after weeks of painstaking sessions, and the draft bill was submitted to the minister. The draft bill was later submitted to the Federal Executive Council, FEC, following some extensive deliberations, and upon approval subsequently submitted to the National Assembly for legislative considerations.

In view of the controversies that trailed the previous bill associated with forgery and multiple versions, the minister explained the new Petroleum Industry Bill, PIB, was imbedded with security features and tamper proof attributes including coding.

Commenting on the PIB, Alison-Madueke said the new PIB was drafted with equity in mind and that the concerns of the international oil companies were taken into consideration so as to engender a win-win situation for Nigeria as well as stakeholders in the oil and gas industry.

She listed some of the new provisions in the Bill to include those creating the Asset Management Company which will take over the management of the Joint Ventures from the NNPC, which will be unbundled to make way for the establishment of a new company, the National Oil Company which will be competitive and profit-driven.

Gas to power

In line with the Federal Government’s desire of ensuring sustainable delivery of electricity to Nigerians through adequate supply of gas to the power stations, the minister declared a 12-month gas supply emergency plan to address the inherent misalignment of gas to power.

She said, “During this period, the Ministry of Petroleum Resources, together with the NNPC and the gas producing companies will deploy extraordinary measures to accelerate opportunities for quick wins in order to ameliorate the potential gap between gas demand and supply.”

To achieve this a decision was reached to strengthen the capacity, as well as the roles of the Gas Aggregation Company of Nigeria Limited, GACN, which is a DPR-regulated company of the Ministry, vested with the responsibility for gas sourcing and allocation, as well as the operator of the commercial framework of the Gas Master Plan.

Part of the functions of the Gas aggregation company include processing requests from gas buyers; managing gas supply/demand allocation, as well as facilitating Gas Supply Aggregation Agreement GSAA negotiations, as well as Identifying gas sources/suppliers and designing incentives for accelerated domestic gas delivery.

Others are driving the implementation of the findings of the recently constituted Emergency Gas Committee with emphasis on short and medium term gas supply, and on a sustained basis; ensuring integration as well as alignment between gas demand and supply to ensure robustness of longer term gas supply to power; and providing implicit data to enable the DPR to be more proactive in compelling suppliers to meet domestic gas supply obligations.

However, about five months into the emergency gas supply programme, the minister declared that the ministry had surpassed its gas to power target for 2012.

Alison-Madueke noted that the underpinning improvement in gas supply which precipitated the noticeable increase in volume of power generations were aggressive infrastructure expansion and gas supply development initiatives.

“Since the roll out of the plan, we have achieved major milestones in the expansion of the Escravos-Pipeline System – the major gas supply artery to the power plants. This is part of the most extensive expansion ever undertaken on this pipeline network since it was built 30 years ago,” she said.

She listed the items completed in the critical pipeline segments to include the 27kmX24inch permanent gas supply pipeline from Itoki to Olorunshogo via Ewekoro all in Ogun State, the 56kmX24inch Escravos-Warri gas pipeline – doubling the pipeline capacity and enhancing gas evacuation from Escravos as well as the 130kmX36inch Oben to Geregu pipeline.

“The net impact of all these is the addition of 120million cubic feet of gas per day (mmcf/d) to the grid and the permanent elimination of the challenges of low gas pressure that has plagued the Olorunshogo PHCN and NIPP power plants. We are also now well positioned to supply gas to the existing Geregu Power plant and all anticipated future expansions in that axis,” she revealed.

Furthermore, the minister said that major works on the Utorogu and Ughelli gas plants have reached completion.  Earlier in the year both plants recorded an all-time low combined output of 300mmcf/d as a result of some maintenance challenges. With the repairs, the combined capacity is now 360mmcf/d which is a net addition of 60mmcf/d.

“Specifically, with these interventions, we are now able to supply gas to the full requirements of Egbin, Sapele PHCN, Delta IV, Olorunshogo both PHCN and NIPP plants and Omotosho PHCN power plants. In addition, we are able to meet the requirements of two out of three turbines in Geregu and one out of two turbines in Sapele NIPP,” she said.

Mrs. Alison-Madueke stated that despite the obvious marked improvement in power generation as a result of the Gas Supply Emergency plan, work continues on the implementation of the plan with further targeted additions.

Some of the projected additions include: a further 65mmcf/d within the next 3 to 4 weeks to come from ongoing work at Oredo field, which will effectively bridge outstanding gap in supply – enabling supply to all power plants on the Western axis. It was also projected that the gross short term additions by year end 2012 will be 245mmcf/d as opposed to the promised 180mmcf/d in the short term.

“In essence, Nigerians can expect continued growth over the current all-time peak recorded by the Power Ministry. Going forward this trend will continue as we finally address the underpinning challenges of the supply system. I am convinced that we have effectively come out of the deep with the Nigerian power situation and would expect a steady upward climb from here,” she maintained.

Reducing pollution, environmental degradation

The issue of the environment and oil pollution also featured prominently in the year under review, as quite a number of incidents occurred to fuel degradation and pollution. First was the incident of gas pollution wrought by the fire outbreak after an explosion from a new gas well head at Funawa 5 gas platform along the Kolu-Ama River in Southern Ijaw Local Government Area of Bayelsa State on the Drilling Rig KS located in shallow water approximately 10 km off the coast of Nigeria.

Alison-Madueke promptly swung into action by paying a working visit to the location and the Kolua-Ama community, during which she resolved to galvanise the International Oil Companies, IOCs, as well as the host communities to ensure that the operating environment is made safe for all concerned in line with international best practice.

At the end of the evaluation exercise, which saw the minister undertake an aerial survey of the eight host communities spread across Southern Ijaw and Brass local government areas, including Koluama 1, Koluma 11, Ekeni, Foropa, Fishtown, Ezetu 1, Ezetu 11 and Sanga, the minister assured the community that the President is determined to bring the suffering of oil producing areas to an end.

The communities received materials while Chevron was mandated to undertake proper clean and remediation in good time, and the communities commended the minister for her efforts

To demonstrate the seriousness to protect the environment, the minister in 2012 also set up the Hydrocarbon Pollution Restoration Project, HYPREP, in clear furtherance of the Federal Government’s commitment to implement the United Nations Environment Programme, UNEP Assessment Report on Ogoniland.

The minister explained that the setting up of HYPREP was in keeping with the Federal Government’s determination to protect the environmental human rights of the people, adding that the project will implement the recommendations of the UNEP report on Ogoniland as well as investigate, evaluate and establish other hydrocarbon impacted sites and make appropriate recommendations.

Enhancing downstream activities

To address the challenges of pipelines vandalism and petroleum product theft, Alison-Madueke  rallied the service chiefs and the Inspector –General of police to a strategy meeting in Lagos, where fresh modalities were drawn up to tackling the menace.

The Pipelines and Product Marketing Company, PPMC , a subsidiary of the NNPC in charge of the marketing and distribution of petroleum products under the leadership of Prince Haruna Momoh, has recorded commendable strides such as maintaining the national consumption supplies through the utilisation of coastal vessels.

Through this, the country continued to enjoy stability in products supply despite the challenges of willful damage of petroleum products pipelines, draft limitations at jetties, frequent rejection of daughter vessels by vessels, insufficient manpower in the cargo unit, disruption of pumping activities due to pipelines vandalism, loss of lives and a host of others

A major milestone was the re-commissioning of Aba depot which had been moribund for over seven (7) years due to constant vandalism on the 54km pipeline from Port-Harcourt to Aba.

An aggressive approach to the restoration of some inactive pipelines was adopted during the period like the pipelines to Gusau, Kano, Suleja & Minna were restored, wet with products and fully operational

To keep abreast with the modern trend in operation, especially in Aba depot, six analogue mechanical loading meters were upgraded to the latest load digit metering system. A brand new 500KVA power generating set was also installed. Also a turbo-generator 111A and C that supplies power to Escravos were rehabilitated and commissioned as well as the procurement and installation of three 3.3KVA X 1250KVA diesel generators at Ibadan depot.

Furthermore, the PPMC within the period was able to meet up with the challenges in the international market trend to:

Grow LPG sales and achieved a (100%) occupation in Lagos Jetties with no record of idle days as well as record drastic reduction of demurrage through effective and efficient utilisation of coastal vessels with a huge recovery and rehabilitation of the NNPC fenders and positioning in Lagos.

Oil exploration & production

To strengthen the NNPC’s capacity in oil production, the Nigerian Petroleum Development Company, NPDC, an upstream subsidiary of NNPC is the pivotal company of the Corporation engaged in the exploration and production of crude oil and gas. The transformation effort therefore targeted this company for growth and sustainable operations. In support of the NPDC growth plan.

Federal Government under the leadership of President Goodluck Jonathan approved the assignment of 55% equity stake in the 8 blocks (OMLs 4, 38, 41, 26, 30, 34, 40 and 42) whose IOC’s 45% equity stakes were divested under the NNPC/Shell/TOTAL/NAOC Joint Venture.

This has resulted in the addition of Over 1 Billion Barrels of Oil reserves and about 5 Trillion Cubic feet of Gas to NPDC asset base. These blocks are now free of the funding constraints of the JV and increased investments from both the NNPC and the parties that have acquired shell/Total/ Agip interests in these blocks can proceed to develop the blocks at an accelerated pace. Since funding is not expected to come through JV cash calls this production represents incremental royalty and tax contribution to the National treasury (see reserves slide).

Based on the foregoing, NNPC has now developed an aggressive growth plan for NPDC with detailed production and financial projections up to 2015. The growth plan seeks to reach a 2015 production target of 250,000 bpd from the current production capacity of about 90,000 bopd. Beyond 2015, NPDC aspires to be a medium size company with capacity to maintain oil production at about 400,000 bpd.

Nigerian Content

With the minister as the Chairperson of the Governing Council, NCDMB recorded immense Success in the following areas:

Robust implementation model for capacity development where NCDMB acts as facilitator while private sector operators inject new capital and innovation in facilities, infrastructure and training, fully aware that Nigerian Content counts in the award of contracts.

Creating productive employment for Nigerians by making sure that investments on field development and production bring about predictable employment generation for our people. This is well encapsulated under the NCDMB pupilage programme. Under the pupilage programme, Training Centers of Excellence are being established to provide world class training and certification; PETAN and other service providers are now mandated to commit to employment of Nigerians as pre-condition to participation in bids.

Equipment Component Manufacturing Initiative (ECMI) – ECMI was conceived to promote manufacturing activities in the country by linking equipment supply to the Oil and Gas industry to local manufacturing of equipment components or parts. The initiative is aimed at maximizing local value addition to meet the targets for equipment supply, as defined in the Schedule to the Act.

NCDMB now have commitment of OEMs and their local representatives to establish facilities in Nigeria for manufacturing pumps, valves, drilling equipment and electrical /instrumentation equipment. These constitute over 50% of procurement spend on equipment in the industry.

The Board has put in place a mandatory requirement that only vessels and rigs with Nigerian ownership can be utilized in the industry.

This singular initiative has stimulated acquisition of marine vessels and rigs by Nigerians. With impending increase in the number of Nigerians involved in transportation of crude we are sure to see more Nigerians acquiring crude carriers and LNG tankers

Nigerians are now involved in lifting of equity crude. This market is over $1.3 Bn per annum

Nigerians own rigs and marine vessels – Sea Wolf, Oando, marine platforms, C&I leasing, etc , thereby retaining over $2 Bn out of annual spend of $3.8 Bn

OEMs are setting up manufacturing  facilities in Nigeria and transferring technology, creating employment and utilizing available production inputs within Nigeria

First made-in-Nigeria production platform fabricated at NigerDock

First Xmas tree fabricated at Cameron

Pressure vessels for Ogbainbiri Flow-Station manufactured at Dorman Long

Market share for Nigerian companies operating in the industry increased from 62% in 2010 to 87% in June 2012, which means more opportunities created for Nigerians.

The one percent Nigerian Content fund is being applied for direct capacity development intervention and partial guarantees for the local service companies.

Specifically the NCDMB has so far applied the fund to the following:

Purchase of land for establishment of a 250,000 Mt /annum Pipe Mill and coating plant. FDI is estimated at over $300 Million while 5,000 jobs will be created and linkage enterprises also created

Training and attachment programmes-

Nigerians are being trained on environmental remediation as part of capacity building and also to address the age-long environmental degradation in oil bearing communities. Training in Geosciences is also on-going, to reduce dependence on offshore resources in this critical discipline

Provide interest rebate to qualified service companies as a way of reducing market interest rates to single digit.