..says GENCOs indebtedness to banks average N356bn
… Experts identify weak regulation, others threats to economy Devt
By Ediri Ejoh
MORE turbulence may continue to linger in the country’s economy, as it losses over N534 billion revenue a year to the inefficiency of the power sector, Managing Director, Seplat Petroleum Development Company, Dr. Austin Avuru, said yesterday.
This was even as he identified a huge deficit of about N356bn incurred from debts owed banks by the Generating Companies, GENCOs, in the third quarter of 2016.
This was disclosed at the 7th Emmanuel Egbogah Legacy Lecture Series, themed: Nigeria Petroleum Industry: The dawn of a new era.
According to the Seplat boss, Nigeria continues to lag behind in its electricity consumption despite its huge proven gas reserves estimated at 192 Trillion Cubic Feet, TCF.
His words: “If you look at our power sector, especially in relation to gas, there is infrastructure deficit. The Distribution, DISCOs network is just about 20 per cent of what it should be, even on Transmission, TCN, it is 10 per cent loss on the grid, while distribution is about 50 per cent loss on the grid.
“We have 4gigawatts, GW, generation versus an installed generation capacity of 12GW. We have huge gas resources stranded in the Niger -Delta. The generating companies today are indebted to banks to the tune of N356bn. Over half a trillion naira, N534bn revenue was lost by the power sector in 2016. As I said earlier,
50 per cent of the power generated is lost in distribution.
“Consumers owe almost half a trillion naira. Between 2015 and 2017 alone, we created a liquidity gap that is almost $3bn coming largely from a tariff that is inadequate and losses that are as high as 50 per cent.”
Among other challenging issues he identified are low domestication of gas resources, ailing power sector
and abysmal level of domestic refining.
On regulatory challenges, Avuru noted that “Between 2015 – 2017, 18 months of regulatory lacuna disorganised the power sector reform program: created operational indiscipline, truncated MYTO, created a huge liquidity gap of over N1 trillion. The mess is now difficult to reverse, ineffectiveness of the Nigeria Electricity Regulatory Commission, NERC, fostered by a vacuum in the position of Chairman since December 2015.”
In the petroleum sector, he attributed the current downturn in Nigeria to weak regulation, saying, “strong regulation is imperative to recover losses incurred over the past and then puts the industry in a better light that would attract investors as well as best practices.”
He added that oil price collapse and conservative long term views present a compelling case for Nigeria to optimise domestic utilisation of hydrocarbon resources. “Oil and gas sector still expected to play a major role in revamping the economy through restoring oil production and gas revolution, among other aspirations in the 7 Big Wins and ERGP”
He further noted that critical to achieving long term sustainability in both the petroleum and power industry involves capacity building: Human Capital, technological development and effective regulation.
Speaking also, a petroleum economist and the Director of Emerald Energy Institute in Port-Harcourt, Pro. Wumi Iledare, argued that the sector is in dire need of sustainable institutions to fight the dearth that has crunched the industry.
He said, “We have laws and policies to drive a sustainable industry. Unless the institutions are been strengthened to its full capacity, such as the research and development, petroleum institutions, etc., these policies will remain vague in operation as thereby, weakening the country’s economy.”
On his part, Managing Director of Niger Delta Exploration and Production (NDEP) Plc, Mr. Layi Fatona, called for the development of indigenous operators in the petroleum industry. He added that the sector development is bench- marked on indigenous participation.
He, however, called for discipline on its practice in the industry as well as compliance on laid down rules, so as to discourage wrong practices from expatriates, International Oil Companies, IOC.