Oer Oct/ Nov Edition

Covering Local Content in Energy Oil & Gas N500 7.0Ghc US $3.00 2.5

Vol. 5 No. 10 Oct/Nov., 2016

MADE IN AFRICA: Driving Sustainable Economic Growth Ghana’s Oil and Politics: What Do Ghana’s Political Parties Have To Offer?

Pg32 ‘Our Joint Ventures need sufficient operational, financial independence to be self-financing.’ – Austin Avuru

Saipem-Nigeria Completes Fabrication and Load-out of EGINA

Pg7 “Our goal is to exceed the expectations of every client by offering manufactured transformers of the highest quality” - Baynes

Ernest Baynes

PUBLISHER/EDITOR-IN-CHIEF: Nneka Ezeemo EDITOR: Margaret Nongo-Okojokwu PRODUCTION: Chiamaka Umeh CORRESPONDENTS: Shola Akingboye (Abuja Bureau Chief) Vivian Osuji Isreal (Head, South-South Bureau, Port Harcourt) Jerome Onoja (Lagos) Gilbert Boyefio (Ghana Correspondent) Business Development Executive: Jerome Onoja Arit Asuquo Dan Ruth Muo (South Africa) CREATIVE: EtimSkill

Charity Place, Unit 1 Thurrock Park Way Thurrock Park Ind. Estate Tilbury, Essex Rm 18 7Hz. +447974199137

GHANA OFFICE: +0243915206 gilly2002gh@gmail.com orientenergyreviewgh@ gmail.com

PHOTO: KPMG AFRICA

CIRCULATION MANAGER: Ajayi Kayode LONDON OFFICE:

CONTENT

ORIENT ENERGY REVIEW has emerged to be the platform and voice for the growing local content policy across the world. It is a monthly publication of Orient Magazine, Newspaper and Communications Limited 5, Dipo Dina Drive, Abule Oshun, Badagry Express Way Lagos. www.orientenergyreview.com email: info@orientenergyreview.com

Welcome!

Make it in Africa

M

anufacturing is at the heart of sustainable economic development in Africa today, indeed manufacturing offers African countries a chance to increase resilience to economic shock; particulaly as the global economic headwinds are having negative impacts on countries, and causing slowdown in the global economy.

African countries, as well as other emerging countries in the world, which had over the years, relied on developed economies for survival, are beginning to take steps to develop their local economies, putting in place infrastructures and policies to support businesses and encourage wealth creation. A major sector that has been tipped to drive development in Africa is the manufacturing sector. It has been argued by experts that the only way to grow the African economy is by looking inwards, growing local capacities and capabilities, while creating an enabling environment for local businesses to thrive.

Africa has what it takes to build, grow and shine for the rest of the world, but does Africa really know this? In this edition, we throw more light on this venture and explore the possibilities behind the MADE IN AFRICA! Mantra.

We have some other very interesting stories from the Energy mix, looking at Gas to power, Alternative energy, Local Content and the already heated Ghanaian Presidential elections, as it relates to the growing TEN and Jubilee fields.

We honestly want to hear from you, your feedback is very important to us as we continue in our pursuit for Local content development across the continent. Kindly drop me a line using the email addresses below.

Have a great read!

Cheers!

Margaret Nongo-Okojokwu Editor, Mobile +234-8136329948 m.okojokwu@orientenergyreview.com info@orientenergyreview.com orientenergyreview@gmail.com

INDUSTRY NEWS 5 LOCAL CONTENT 7 10 COVER INTERVIEW 16 20 - 21 PHOTO GALLERY

22-25 29 31 32 34 37 38

EDITOR’S NOTE

THE POWER ROUND TABLE

7

MINING/ SOLID MINERALS MARITIME/LOGISTIC

GHANA REPORT DRILLING/ EXPLORATION/ PRODUCTION

POWER GAS

34

32

Orient Energy Review October, 2016

3

INDUSTRY NEWS

Aramco Awards NPCC LTA Offshore Agreement

S

audi Arabia Aramco’s Offshore Projects Department has awarded a fifth Long-Term Agreement (LTA) to National Petroleum Construction Company (NPCC) of Abu Dhabi, United Arab Emirate.

In June 2015, Aramco awarded the previous four LTAs to sundry engineering, procurement, fabrication, and offshore installation contractors.

Under the agreements, contractors were mandated to deliver large numbers of offshore oil and gas producing platforms, tie-in platforms, pipelines, power cables, and all related facilities that Aramco requires under its current Master Plan for fields offshore of Saudi Arabia.

The LTAs run for six years with a further option of extension up to 12 years. Ahmad Al Saadi, senior vice president of Saudi Aramco’s Technical Services, said: “This fifth strategic LTA is needed for the successful execution of the complex and extensive offshore projects to be completed in the offshore oil and gas fields…all within an aggressive schedule.”

He emphasized the importance of local procurement, working with local companies and contractors, and employing Saudis as stipulated in Aramco’s In-Kingdom Total Value Add program NPCC, established in 1973, provides EPC services for offshore projects and providing engineering, procurement, project management, fabrication, installation and commissioning.

T

he Brazilian parliament has approved a legislation aimed at removing Petrobras’ obligation as sole operator of the country’s pre-salt developments.

According to analyst Douglas-Westwood (DW), these ultra-deepwater fields, discovered in 2007, represent a huge economic opportunity as the largest group of offshore reserves uncovered yet in this century.

However, development progress has been slow paced given the country’s financial difficulties resulting from the lower oil price and the impact of the country’s “Operation Car Wash” corruption scandal.

Mounting financial pressure has led Petrobras to cut its CAPEX plans and production targets.

By opening these deepwater assets to foreign investors, the government hopes to step up the pace of development and production from the pre-salt fields, freeing Petrobras to focus on more developed plans with existing offshore infrastructure and lower CAPEX requirements.

Due to the significant potential on offer, DW expects many international E&P companies to pitch in. However, as Petrobras largely controls Brazil’s E&P activities, the few international compa-

Oil price May Hamper Brazil’s Plans to Open Pre-salt Fields nies engaged in deepwater action off Brazil, such as Shell and Anadarko, may still prefer to focus on other commitments.

Shell inherited various large producing interests off Brazil following its acquisition of BG Group, while Anadarko is working on its Shenandoah project in the GoM, and on advancing gas field developments off Mozambique. And the current oil price environment could deter other operators because of the huge CAPEX requirements for ultra-deepwater developments.

Meanwhile, if the Organisation of Petroleum Exporting Country’s (OPEC) recent announcement of production cuts lifts the oil price significantly next year, the pre-salt fields may become attractive to international investors, DW suggests.

Nigeria Signs $15 Billion Oil And Gas Deal With India

T

he Federal Government of Nigeria has entered into a $15 billion deal with India, with the latter expected to make advance payment for crude oil purchases from the former.

According to the Minister of State for Petroleum Resources, Emmanuel Ibe Kachikwu, the terms of the deal would be ironed out soon.

Under the deal, the Indian government would pay Nigeria in advance for crude exports, which would be paid back on the basis of the firm Term Crude Contracts, TCC, over the years.

Also included in the deal is the consideration for Indian public sector companies participating in the refining sector in addition to exploration and production activities on a government-to-government basis by the companies. Other terms include long-term contracts for the supply of crude to Indian companies from Nigeria as well as the execution of infrastructural projects by Indian

companies in the country.

Between 2015 and 2016, India imported close to 23.7 million metric tonnes of crude and more than 2 million metric tonnes of Liquefied Natural Gas (LNG) per annum from Nigeria.

On completion of the negotiation, the two countries reached an agreement to work on a Memorandum of Understanding (MOU) to enable investments by the Asian country in the Nigerian oil and gas sector and particularly in areas such as term contract, participation in the refining sector, oil and gas marketing, upstream ventures, development of gas infrastructure and in the training of oil and gas personnel in Nigeria.

The MoU is expected to be signed in December 2016 according to reports.

Dr Ibe Kachikwu

www.orientenergyreview.com

Orient Energy Review October, 2016

5

LOCAL CONTENT

Wabote Resumes as Executive Secretary, Nigerian Content Board …pledges to create jobs, upscale capacity of Nigerians …plans review of implementation process

T

he newly appointed Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Engr. Simbi Kesiye Wabote assumed office on Monday at the Board’s headquarters in Yenagoa, Bayelsa State, pledging to use the implementation of Nigerian Content to support President Muhammed Buhari administration to create jobs and upscale the capacity and skills of Nigerians in the Oil and Gas Industry.

The Executive Secretary, whose former positions included General Manager, Business and Government Relations, Shell Petroleum Development Company Nigeria, Local Content Manager, Shell C&P Global and General Manager, Nigerian Content Development, commended the management and staff of the Board for the huge achievements they recorded in the past six years in the implementation of the Nigerian Content Act. He however, noted that the urgent task before the Board would be to review its activities and implementation process and evolve new strategies. According to him, “the next step is that we are going to take stock and ask ourselves, how have we implemented the Act, where have we made progress and where do we need to change our tact and strategies. How have we been able to achieve some of the targets set out in the schedule, where are we in each of those categories and what are the big ones we need to focus on to move to the next level?”

Admitting that the oil and gas industry is facing challenges, particularly the sharp drop in crude oil price, reduction in activities and inability to fund new projects,

6

Orient Energy Review October, 2016

L-R Former Acting Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB) Mr. Patrick Daziba Obah welcoming the new Executive Secretary, Engr.

Simbi Kesiye Wabote to the Board’s premises in Yenagoa, Bayelsa State.

Wabote promised to lead the Board to find prospects in the circumstances, adding “that it is in times like this that opportunities are created because you ask yourself, what can we do differently?”

He also hinted that the Board will extend its focus to indigenous operating companies, noting that the Board’s jurisdiction goes beyond monitoring international oil companies to include the midstream and some part of the downstream segments of the industry.

He emphasized that the Board would look at the entire oil and gas spectrum to see how to create opportunities for Nigerians, support vendors and assist them to deliver optimal value for the country.

Reacting to the erroneous impression that NCDMB is responsible for the protracted contracting cycle, Wabote insisted that the Board would not abdicate its roles in the bid process as had been canvassed in some quarters, tasking operators and service companies to play their part to address the challenge.

He explained further that “I have been on the other side and I can confirm that the hue and cry about delays in contracting cycle is not just

on the part of NCDMB. The operators and contractors have to clean their tables if they want things to be done differently.”

He also dismissed insinuations that his background would influence him to unduly favour operating companies in the implementation of Nigerian Content, saying ,“I am now a government official and government has its procedure and processes that we must implement and we will implement the Nigerian Content Law to the letter.

That is the objective with which I am taking this office.

I am accountable to people that put me here.”

The scribe also commended the former Acting Executive Secretary, Mr. Patrick Daziba for the high sense of duty exhibited during the period he acted and solicited the cooperation of management and staff to deliver on the Board’s mandate.

www.orientenergyreview.com

LOCAL CONTENT

Saipem-Nigeria Completes Fabrication and Load-out of EGINA *Celebrates 14 million LTI

S

aipem Construction Nigeria Limited has completed the fabrication and load-out of the EGINA Umbilicals, Flowlines and Risers from its Rumuolumeni fabrication base.

The load out took place at a well-attended ceremony organised by Saipem and in attendance were Dr. Maikanti Baru, Group Managing Director of the Nigerian National Petroleum Corporation, NNPC; Mr. Nicolas Terraz, MD & CEO, Total E&P Nigeria Limited; Engr. Simbi Kesiye Wabote, Executive Secretary, NCDMB and the host, Mr. Guido D’ Alonso, MD, Saipem Contracting Nigeria Limited asa well as other dignitaries drawn from both diplomatic and political circles.

Speaking at the event, Dr. Baru lauded the giant strides taken a few years ago by NNPC, TUPNI, SAPETRO, Petrobras and CNOOC following the award of the contract for engineering, procurement, construction, installation and pre-commissioning (EPCIP) of Umbilicals, Flowlines Risers, Offloading systems and Offshore works for Egina project to Saipem in 2013.

He commended the management of Saipem for the good work they have done with the load out of UFR modules. The GMD also seized the opportunity to reiterate the NNPC’s commitment to the successful implementation of all provisions of the Nigeria Content Act to improve and accelerate local content capacity development in all of its projects. …Growing Influence of the Nigerian Content Act The UFR load out project was built from scratch to finish by 25 Nigerian-born engineers who were trained and equipped with new sets of skills with little supervision from expatriate staff.

The engineering design and fabrication was carried out at the SCNL fabrication yard at Rumuolumeni in Port Harcourt, Rivers State with a 6 million LTI recorded on the project. The NCDMB Executive Secretary, represented by Mr. Obah while reacting to the accomplishment of local content regarding the completion of the project, also lauded the efforts of SCNL by training and equipping young engineers with new sets of skills for

www.orientenergyreview.com

Fabrication of FPSO piles at SNCL Yard, Port Harcourt

the challenges of modern day business in the oil and gas sector.

The Executive Secretary also reiterated the board’s commitment to partnering the IOCs and other industry stakeholders to expand and deepen local content in the oil industry as this singular act will help to create and retain jobs for the teeming unemployed youths in the country.

…Celebrates 14 million LTI Mr. Bennett Agidi – The Deputy Project Manager, Egina UFR while giving a presentation on the scope of work done said the project composition is a combination of thirty-three thousand tons of steel adding that over 6 million LTI was recorded before the project completion.

He disclosed that SCNL had fabricated eighty thousand tons of steel at the Rumuolumeni PHC yard in 14 million LTI man hours. An award was presented to Saipem yard manager Mr. Francessco Bocutti in appreciation of him and his teams’ effort for the recorded feat. First oil from the Egina oil field is expected to be achieved by the first quarter of 2018.

The Egina Field located about 20 kilometers from producing Akpo field lies within the same Oil Mining Lease OML 130. The field is situated in water depths of up to 1,750km and was discovered in 2003 by the Egina-1 exploratory well.

Lack of Capacity Still Constrains Local Content in Ghana – AGI

T

he Association of Ghana Industries (AGI) has cited the lack of capacity building as one major constraint to local content in Ghana.

After almost three years since the passage of the Petroleum Local content law, Ghanaian companies are yet to actively participate in the oil and gas sector.

“There are certain areas that due to the nature of they being technical or capital intensive make it difficult for local companies to meet up with competition. The situation is also attributed to the nature of the lack of enough expertise on the part of the local entities,” CEO of the AGI, Seth Twum Akwaboah told Citi Business News.

A latest report by the Petroleum Commission has shown that total volume of oil contracts amounted to 6.3 billion dollars between 2010 and 2015.

Of this, local components amounted to 1 billion dollars, compared to 5.3 billion dollars that went to foreign companies.

This also comes on the back of concerns that local companies totaled 300 while foreign companies totaled 150.

Meanwhile Seth Twum Akwaboah is convinced the intervention by the Petroleum Commission to ensure companies in the petroleum sector comply with the law, should assist local companies leverage opportunities with their foreign counterparts.

“But I think what the Petroleum Commission is doing is that when you submit your local content plan, they monitor and ensure that you have a clear plan of gradually transferring knowledge, expertise or information to local people so that they can come up,” he stated.

The comments by Seth Twum Akwaboah come ahead of a two day conference by the AGI scheduled for October 26 and 27, 2016.

This year’s summit is themed, “Local Content Development in Ghana, the Journey so far”.

Key highlights will involve conferences that center on oil and gas, mining, energy and building and construction.

Orient Energy Review October, 2016

7

LOCAL CONTENT

Nigeria’s Economy on the Brink…

Ex NNPC GMDs Dirisu Yakubu, Abuja, FCT

U

nless militants blowing up oil installations and facilities in the oil-rich Niger Delta are prevailed upon to stop their violent campaign, operations of the Nigerian National Petroleum Corporation, NNPC would shut down and cripple the nation’s economy.

This warning came from erstwhile Group Managing Directors (GMDs) of the NNPC at the end of their one-day meeting recently in Abuja, the nation’s capital.

The meeting which was attended by incumbent GMD, Maikanti Kacalla Baru and his predecessor and Minister of State (Petroleum Resources), Emmanuel Kachikwu Ibe and others before them was conveyed to proffer harmonious solution to the incessant bombing of oil facilities by militants since the assumption of office by President Muhammadu Buhari more than a year ago.

According to the former GMDs, there is the urgent need for security agencies and government to come up with a lasting solution to the menace of oil theft, bunkering and violence, noting that the shortfall in the nation’s crude oil export is difficult to accept in an economy battling recession that has thus far shown little sign of abating. They called on government to device diplomacy by bringing on board the host communities with the active involvement of the traditional institutions, if only to prevail on the boys to lay down their arms.

While commending the corporation for ensuring steady supply of the Premium Motor Spirit (PMS) in the last couple of months, they called for implementable measures to make the product available across the country for a sustained period.

Although, Nigerians have fairly adjusted to the new price regime

8

Orient Energy Review October, 2016

of N145 per litre of PMS, the ex-GMDs called for a further review, noting that the price cap is not in sync with the liberalization policy argument of government which is premised on competition and expected fall in price.

The refineries, they argued, would not yield expected mileage until they are restructured to meet the needs of an ever expanding population .They recommended the restructuring of the existing four refineries to operate as Incorporated Joint Ventures in the manner of the Nigerian Liquefied Natural Gas ( NLNG) framework where partners have satisfactory technical abilities and financial buoyancy.

Equally gratifying to the former eggheads of the NNPC was President Muhammadu Buhari’s relentless effort in the search for oil deposits away from the shores of the Niger Delta. It would be recalled that in the last few months, government intensified exploration activities in the Lake Chad Basin and the Benue Trough, with the latter said to be holding a huge prospect.

However, the former GMDs expressed their dismay over the huge debt profile of the NNPC even as they called for the formulation and implementation of cost saving strategies to stay afloat and remain productive in this time of financial squeeze. They therefore called on Baru to immediately carry out a comprehensive audit to determine the financial status of the corporation, if only to assist in the making of a decision on the most appropriate capitalization model to adopt.

This medium learnt that the increasing fixation of some media houses and civil society organizations in the last few months partly informed the decision of the ex-GMDs to come together for deliberations on the way forward for a corporation they superintended over at different times.

It is alleged in some quarters that underhand dealings by top officials of the NNPC in recent times is largely to blame for the inability of the company to live to its true potentials.

A highly-placed source who spoke

to Orient Energy Review in confidence said the meeting was not much about Baru given the fact that he assumed office barely few months ago. In his words, the ex-GMDs came around to also protect their integrity, knowing that when the books are opened, they would be called upon for questioning.

“They will tell you the purpose of their meeting was to lend support to the incumbent GMD in his search for answers to the incessant violence by the Niger Delta Avengers. That may be partly true but beyond that, we know more than what was fed to the public,” said the source, who described the development as “a smart move,” capable of diverting the attention of critics in the interim.

Asked to throw more light on his assertion, he continued: “It is common knowledge that the NNPC is one of the most poorly managed public enterprises since the return to democracy in 1999.

Do not forget that the current Emir of Kano, Sanusi Lamido Sanusi at a point berated the NNPC for failing to remit huge sums of money into the Federation Account, amongst other shady deals.

Now, the rot is much more.

Thus, when they assembled, those in the know were aware why they were in town.”

But regardless of the underlying motive of their Abuja gathering, stakeholders in the oil and gas sector say their advice is both apt and timely and if implemented could make the NNPC and indeed the economy more productive.

www.orientenergyreview.com

COVER

MADE IN AFRICA: Driving Sustainable Economic Growth

T

he global economic headwinds are having a negative impact on countries, hampering international commerce and 10

engendering a slowdown in the global economy.

The headwinds were occasioned by a number of factors, ranging from the slowdown in the economies of China

Orient Energy Review October, 2016

and Japan, volatility in the prices of crude oil, Britain’s unexpected exit from the European Union, EU, the unending crisis in Syria, Libya, South Sudan and some

www.orientenergyreview.com

COVER STORY

By Godspower Ike, MARGARET NONGO-OKOJOKWU

A

frica’s economic growth in 2016 was recently revised downwards to 2.4 per cent, from 2.9 per cent earlier projected. The reason for the downward revision was partly because of the global economic headwinds that are taking huge tolls on the economy of the continent.

This article seeks to explore the many initiatives introduced

by African countries to weather the challenges posed by the global downturn and how key countries in the continent are using manufacturing, among others, to drive sustainability, economic growth and development. countries in the Middle East, as well as the activities of the Islamic State and other terrorist groups in some parts of the world.

Specifically, the World Bank had revised its 2016 economic growth forecast down to 2.4 per cent from the 2.9 per cent pace earlier projected in January.

T

he bank, in the forecast presented in its June 2016 report, titled, ‘Global Economic Prospects: Divergences and Risks’, disclosed

www.orientenergyreview.com

that the revision was a consequence of the sluggish growth in advanced economies, stubbornly low commodity prices, weak global trade, and diminishing capital flows.

I

n the report, commodity-exporting emerging market and developing economies have struggled to adapt to lower prices for oil and other key commodities, noting that growth in these economies is projected to advance at a paltry 0.4 per cent pace this year, whereas growth in commodity import has been more resilient.

The World Bank report described its projections as subject to substantial downside risks, including additional growth disappointments in advanced economies or key emerging markets as well as rising policy and geopolitical uncertainties.

Commenting on the development, World Bank Group President, Jim Yong Kim, said, “In an environment of weak growth and eroding policy buffers, structural reforms have become even more urgent. Depressed commodity prices have slowed growth sharply in commodity-exporting emerging and developing economies, which are home to more than half of the global poor,” adding that “economic growth remains the most important driver of poverty reduction. This underscores the critical priority of pursuing growth-enhancing policies to eliminate extreme poverty and boost shared prosperity.”

Like the World Bank, the International Monetary Fund (IMF) had in July 2016, cut its global growth outlook for the next two years due to the uncertainty caused by Brexit.

Consequently, IMF now expects the world economy to grow by 3.1 per cent in 2016 and 3.4 per cent in 2017 - 0.1 percent down compared to the figures posted in April this year.

As a result of these gloomy forecasts, countries are beginning to look inwards in order to survive the expected downturn being expected globally in the days ahead.

African countries, as well as other emerging countries in the world, which had over the years, relied on developed economies for survival, are beginning to take steps to develop their local economies, putting in place to support businesses and encouraging wealth creation. A major sector that has been tipped to drive development in Africa is the manufacturing sector.

The Nigerian Angle In Nigeria, the manufacturing sector has had to battle with a tough and unfavourable operating environment, brought about mainly by the policies of the Central Bank of Nigeria, CBN, and the lack of policy direction of the Nigerian Government.

Other factors hindering the manufacturing space in Nigeria include the scarcity of foreign exchange and the declining value of the naira against major international currencies, especially the dollar.

However, the manufacturing in the petroleum sector, which had been tipped to play a major role in the development of the African economy, is of great concern to all and sundry.

The oil and gas manufacturing sector has not been left out of the prevailing challenges in the economy, as over the last couple of months, there had been a lull in the sector. The volatility in the price of oil had forced many oil majors to suspend most of their large-scale projects, while local manufacturers of equipment utilized by these oil majors have been somewhat idle.

S

ome of the major manufacturing concerns in the oil and gas sector in Nigeria are concentrated in lubricants manufacturing, umbilical manufacturing and assembly, oil and gas piping fabrication, electrical wirings and manufacturing, Others are Engineering, Procurement and Construction (EPC), onshore and offshore fabrication, ship building and repair; fabrication and installation of walk way bridges, wellhead jackets, decks, topsides and modules; construction, steel fabrication and erection of new mobile offshore drilling unit and shipbuilding.

The major factor constraining manufacturers is the difficulty in accessing foreign exchange- a challenge currently threatening their survival.

Manufacturers in the country had in recent past lamented the harsh policies of the Federal Government and the CBN which they claimed make their businesses

Orient Energy Review October, 2016

11

COVER STORY

difficult to thrive.

The Manufacturers Association of Nigeria, MAN disclosed recently that about 272 manufactures are either battling to stay afloat or have closed shop over the last couple of months, while thousands of jobs are being cut daily.

S

pecifically, Mr. Vincent Nwani, Director, Research and Advocacy, Lagos Chamber of Commerce and Industry, LCCI, called for an urgent review of the CBN’s policy on the restriction of access to foreign exchange placed on 41 items.

According to him, CBN has no option but to revisit and review the list, as about16 of the total items on the list, serve as critical raw materials for intermediate goods produced in Nigeria, especially as the country lacks the capacity to produce these items in sufficient quantity.

Specifically, Nwani said the policy had led to the loss of about 100,000 jobs over the last couple of months, with major blue chip companies in Nigeria relocating to neighbouring countries; while the ban on glass and glassware culminated in the loss of 80,000 jobs especially in the pharmaceutical industry.

He said, “Some of the items placed on the restriction list by the CBN should be restated until the country develops the capacity to produce them locally. Some of the items need a period of between three to seven years for the country to develop self-sufficiency in their production.

Speaking in the same vein, Executive Secretary of NASME, Mr. Eke Ubiji, stated that recently, about 222 of its members have either collapsed or are ailing, while he blaming lack of access to credit, foreign exchange challenges, high interest rate, multiple taxation and poor infrastructure, among others, for their woes.

Also speaking, Mr. Ambrose Oruche, Director, Economics and Statistics of MAN, said the unavailability of productive inputs is the major challenge confronting manufacturers, stating that this was as a result of the restriction placed by the CBN on certain 12

Orient Energy Review October, 2016

Nigerian Welder

items. In his words, the current operating environment in the country is harsh for many manufacturers to continue to operate, adding that some economic policies churned out by the Federal Government and the CBN are conflicting and are retarding the growth of the manufacturing sector.

He argued that the manufacturers were not consulted by the CBN and other regulators before the restrictions were placed on the items, noting that many of the products under foreign exchange restrictions are raw materials needed by manufacturers.

He said, “Presently, about 50 manufacturers have closed shop, while some have downsized. Some manufacturers are still producing due to their love for this country. Government policy on cement should have been adopted in this case. In the case of cement, Nigeria used to be a net importer of cement, but the government set up a policy over a five-year period, which made it possible that today, we are a net exporter of the commodity.”

Oruche further faulted the decision of the CBN to increase the Monetary Policy Rate, MPR, to 14 per cent, stating that it has made it difficult for manufacturers to access funds to finance their operations.

According to him, the fact that the economy is in recession ought to have driven CBN’s effort towards expanding the economy rather than contracting it.

H

e listed high interest rates, poor patronage of local manufactured

products, poor supporting infrastructure, such as poor power supply, policy somersault and policy inconsistency, among others, as the challenges confronting manufacturers.

In an apparent response to the lamentations of the manufacturers, the CBN had a couple of weeks ago, directed authorised dealers, mainly banks, to allocate 60 per cent of their total foreign exchange purchases from all sources, interbank inclusive, to manufacturers and 40 per cent to other users for the purpose of trade and other obligations.

T

his became necessary, as according to the apex bank, following the review of the returns on the disbursement of foreign exchange to end users, it was observed that only a negligible proportion of foreign exchange sales were being channeled towards the importation of raw materials for the manufacturing sector.

“Against this background and in order to address the observed imbalance, the authorised dealers are hereby directed to henceforth dedicate at least 60 per cent of their total foreign exchange purchases from all sources (interbank inclusive) to end users strictly for the purposes of importation of raw materials, plant and machinery.

The balance of 40 per cent should be used to meet trade obligations,

www.orientenergyreview.com

COVER STORY visible and invisible transactions,” the CBN said.

In its response to the CBN’s directive, MAN, said it sees the 60 per cent foreign exchange concession to its members as a welcome development capable of aiding efforts of government at reviving the industrial sector.

M

AN President, Frank Jacobs, said the association commends the governor and management of the apex bank for the long awaited reprieve, adding that it would enable the sector to determine the exchange rate and stop the volatility. His words: “If we bid foreign exchange at N1 to a dollar, for example, the bank would have no choice than to sell. Our members should not over bid but rather see this as opportunity to grow the industry and the economy.”

Lamenting that about 56 of the members of the association had been forced to close down within the last one year as a result of the foreign exchange crisis; Jacobs noted that the concession was the first time the present government was responding positively to the yearnings of the sector.

He stated that MAN had been in the forefront of advocating a special consideration and allocation of foreign exchange to the manufacturing sector of the economy. “This is in view of its contribution to the development of the economy; job creation, and most importantly, the much needed diversification of the economy, which is one of the priorities of the present administration,” he said.

Jacobs added that MAN, among other demands, including revisiting the 41 raw materials items banned from the foreign exchange list, had urged the CBN to implore commercial banks to give priority attention to foreign exchange requirement of manufacturers for importation of raw materials, machines and

www.orientenergyreview.com

spares.

H

e noted that to revive those companies that are moribund, government needs to reconsider its position on the 41 items as well as subsidise interest rate to the manufacturers to as low as 5 per cent.

He equally charged the government to look into the issue of power and recapitalise the Bank of Industry (BoI) to enable it provide funds for the real sector, noting that all the intervention funds ought to have been channeled to BoI for the development of the industry.

However, to further boost the fortunes of the sector through an effective research and development programme, the Federal Government, through a collaboration with the Nigerian Content Development and Monitoring Board (NCDMB), the Nigerian National Petroleum Corporation (NNPC), the Imperial College of London and four leading universities in Nigeria, are putting in place a framework for developing world class research for the Nigerian Oil and Gas Industry.

This is borne out of the crucial role research and development play in the manufacturing sector, especially in relation to innovation, growth and survival. It would also create linkages and synergy between research centres, educational institutions and the manufacturing sector.

The collaboration which spearheaded

by NCDMB seeks to establish a Centre of Excellence (CoE) for oil and gas research at the Federal Universities of Technology Minna, Niger State, Akure, Ondo State, Owerri, Imo State and the Niger Delta University Yenagoa,

Bayelsa State.

The aim, according to the NCDMB, is to solve oil and gas industry challenges in Nigerian universities and local research centers thereby growing local research capacities and retaining huge sums which stakeholders normally spend on research overseas.

He listed other objectives to include developing a pool of capable researchers and world class research centers, linking the oil and gas industry to academia and local supply chain through research programs and creating employment and training opportunities for Nigerians on the back of research projects domiciled in-country.

With this, the Federal Government of Nigeria has shown commitment to growing the manufacturing sector and is also a realization that the sector is crucial to the development of the economy, capable of cushioning the country from the effect of the global economic squeeze.

T

he same is the case for other African countries, which have stepped up efforts and mapped out strategies and policies to help reactivate their various manufacturing sectors.

Manufacturing Saves South African Economy In South Africa, industrial production measures the output of businesses integrated in the manufacturing sector of the economy.

For instance, stronger performance

GE’s Onne facility in River State now has the capability to fabricate subsea wellheads in Nigeria for the company’s Oil and Gas customers

Orient Energy Review October, 2016

13

COVER STORY

Steel workers in Africa

in the manufacturing industry has helped in keeping South Africa’s economy out of a recession, and has led to a slight upward revision in annual growth forecasts, according to a report by the Oxford Business Group in September 2016.

Production in South Africa’s manufacturing industry was up 4.7% year-on-year (y-o-y) in June – marking the third consecutive month that annualised production figures increased, according to data released by Statistics South Africa (Stats SA).

T

he sector’s results were well above the 3.1% y-o-y market expectation for June, predicted by a Nedbank survey of economists, hand marked the highest level of growth recorded since July of last year.

Moreover, increased production in June was not driven by significant progress in one or two key segments, but by broad gains across most of the manufacturing sector, with eight of the 10 divisions covered in the survey reporting positive growth.

The OBG report clearly listed these expansion indices as being underpinned by, among others, higher output in petroleum, chemical products, rubber and plastic products (15.4%); wood and wood products, paper, publishing and printing (4.4%); and food and beverages (2%), corroborating these figures is the preliminary Stats SA data.

With manufacturing and mining together accounting for 20% of the country’s GDP, the spring and summer performance thus far – with June’s results coming

14

Orient Energy Review October, 2016

on the back of improved results in the preceding two months – pushed the economy into positive territory, at 3.3% quarter-on-quarter (q-o-q) in the second quarter, offsetting the 1.2% q-o-q negative growth seen in the first quarter of the year.

The positive results led to an upward adjustment in growth forecasts. In September Lesetia Kganvago, governor of the South African Reserve Bank, announced that the bank had revised its growth predictions from zero to 0.4% for the year due to a “higher starting point”, with predictions of 1.2% and 1.6% for 2017 and 2018, respectively.

‘Manufacturing in sub-Saharan Africa tends to be overlooked, but African manufacturing is doing better than people think, says Dr Dirk Willem te Velde, Senior Research Fellow and Director of the Supporting Economic Transformation programme at ODI; ‘Production, employment, trade and foreign direct investment (FDI) in the region’s manufacturing sector have actually increased in real terms over the past decade – and faster than the global average – thanks to strong growth in parts of Africa, domestic policy and institutional improvements, and rising wages in China’.

The Research Fellow who spoke at the African Transformation Forum, which was held in Kigali Rwanda on 14 -15 March 2016, posited that sub-Saharan African manufacturing exports (including re-exports) overall, doubled between 2005 and 2014 to more than $100 billon. Asian countries have become more important destinations.

African countries are also increasingly exporting manufactures to each other, from 20% of total manufacturing trade in 2005 to 34% in 2014’s.

‘And while the global economic slowdown led to a 30% decline in the value of non-manufacturing African exports

to the EU, US, Japan and China in 2015, manufacturing exports – especially to China – held up much more positively. This is important: manufacturing offers African countries a chance to increase resilience to economic shocks’, says Dr Velde.

The evidence shows that African manufacturing is growing in real terms. Considering the data available, between 2005 and 2014, manufacturing production more than doubled from $73 billion to $157 billion, growing 3.5% annually in real terms. Some countries show particularly strong annual growth: Uganda’s manufacturing grew by 5% over 2010-2014; Zambia’s by 6% over 2008-2012; and Tanzania’s by more than 7% in the last decade.

F

oreign Direct Investment in African manufacturing is increasing from a low base, having risen in many countries between 2003-2006 and 2010-2014. And direct investment from one African country to another is now a significant source of FDI, ranging from 4% in Ghana, 25% in Mozambique and Tanzania, to more than 40% in Rwanda.

What can African countries do?

Ethiopia, Kenya, Nigeria, Rwanda and Tanzania are already, relatively well positioned to attract manufacturing FDI. The ODI new Manufacturing FDI Potential Index highlights Ethiopia’s competitive labour costs, Rwanda’s investment climate, Tanzania’s transit location, relative production complexity in Kenya and Zambia, and the size of market in Nigeria as factors conducive for manufactur-

www.orientenergyreview.com

COVER STORY ing investors. Well performing special economic zones in Ethiopia and Rwanda show that governments can succeed in attracting manufacturing FDI if they really set their minds to it.

S

o what are the essential elements of a coherent industrial strategy? Dr. Velde highlights the following: Continued improvements in the basics, including sound macroeconomic management, stronger general investment climate, support for the private sector, and development of public infrastructure and relevant skills; An export push, including regional trade and integration; Agglomeration through building and running efficient special economic zones and industrial parks; Active foreign direct investment promotion and building linkages with local firms; Supporting local small and medium enterprises to enhance productivity and access technology and long-term finance to help them venture into new or more sophisticated products; Improved coherence and implementation coordination within government; Strengthened consultation and collaboration between government and the private sector.

African governments also need to take an adaptive approach. Many used to set ambitious yet inflexible targets for large scale industrialisation. But as Rwandan president Paul Kagame said at the African Transformation Forum: ‘Plans and frameworks should not become a barrier to action or course correction.

Mistakes will be made along the way and money wasted.

We have to stay adaptable and flexible.’

The United Nations expects that Africa’s population will double to 2.5 billion people by 2050. The middle class is rising, indicating an increase in consumption. Moreover, the population growth indicates a

www.orientenergyreview.com

dramatic need for employment.

Africa has no alternative to developing a strong value-added manufacturing base. The continent, however, has a way to go: in 2014, 30 per cent of China’s GDP came from manufacturing, according to the World Bank. By comparison, Nigeria’s share stood at just 9 per cent, Kenya 12 per cent, Zambia 8 per cent.

According to Johan Aurik, managing partner and chairman of the board of the global management consulting firm A.T. Kearney,”Africa has ample opportunities to grow its manufacturing base in a broad range of industries. Local beneficiation of resources in for example oil and gas is one example. Moreover, the growth of the population will spur growth in direct consumer industries such as food/agriculture and beverage, home and personal care, apparel, and even automotive. Other likely target sectors include secondary industries such as building and infrastructure due to further urbanization and the need for infrastructure investments”, he said.

Africa has a massive opportunity.

Multilateral collaboration across the continent and public-private partnerships locally will lead the continent on a path to success.

Above all it is important that African governments, business, labour unions, and communities work together to develop economic clusters. Companies that start on their own will have a difficult battle and need to have deep

pockets to make all of the above happen. Organizing all stakeholders in the economy to develop industry clusters, which provide for local demand and can compete in international markets, will create the sustainable success the continent in longing for.

I

t is expected that these renewed tilt towards revamping the continent’s manufacturing sector would help push the continent towards industrialization and rapid economic growth and development.

Bearing in mind the contribution of the sector through job creation, government should create a special interest rate regime for manufacturers at a single digit rate of not more than 5 per cent if we truly want to diversify the economy,

Manufacturing in Africa

Orient Energy Review October, 2016

15

INTERVIEW

‘Our Joint Ventures need sufficient operational, financial independence to be selffinancing.’ – Austin Avuru

M

r. Austin Avuru, co-founder of Seplat, was appointed Chief Executive Officer on 1 May 2010. He obtained a Geology degree from the University of Nigeria, Nsukka in 1980 and a post-graduate diploma in Petroleum Engineering from the University of Ibadan, Nigeria in 1992.

Prior to joining Seplat, Mr. Avuru spent twelve years at NNPC beginning in 1980, where he held various positions including wellsite geologist, production seismologist and reservoir engineer. In 1992, he joined Allied Energy Resources in Nigeria, a pioneer deepwater operator, where he worked for ten years as exploration manager and technical manager. In 2002, Mr. Avuru established Platform Petroleum Limited and held the role of managing director until 2010, when he left to take up the CEO position at Seplat. He is also a director at MPI, which is listed on NYSE, Euronext Paris.

Mr. Avuru has served the oil and gas industry in various capacities, including technical coordinator for the review of the industry’s Memorandum of Understanding, MOU, membership of the ministerial committee on the restructuring of the DPR and consultant to the Senate committee on petroleum resources between 2000 and 2003. He also chaired the technical subcommittee that drafted the policy blueprint which then formed the basis of the Nigerian Content Act of 2010.

He spoke with OER Editor, MARGARET NONGO-OKOJOKWU at the Offshore Technology Conference 2016 in Houston, Texas, on the viability of the Nigerian Joint Ventures as a reliable source of funding in the oil and gas sector among other things. Excerpts!

T T

he crisis in the Niger-Delta is affecting oil production, what is the way out in your opinion?

he point I’m trying to make is that we cannot continue to think that the problem is that of the Niger-Delta itself, because that has been the mindset in the thinking of the industry-that all you need to do is to curtail the violence in the Niger-Delta. That hasn’t worked and as I said using the Nigerian Liquefied Natural Gas, NLNG example, there must be something NLNG is doing right, if for 16 years they have been operating without disturbance from their host communities. I also think we must be able to come up with a structure that will enable the communities that host us feel a sufficient sense of ownership of the business we do, such that they will rather support us than disturb us. There must be something we can do better, like the NLNG is doing. I don’t think the Bonny community will watch you disturb NLNG. They have too much at stake to allow you do that.

With the declining oil prices, what should

16

Orient Energy Review October, 2016

be a source of alternative funding for the industry?

Y

ou should first of all ask me what you can do about reduction of cost. You must evolve an operating structure. It is not about giving handouts to the communities, you must evolve an operating structure that makes the communities happy to host you and work with you because they have sufficient interest at stake. I just used the LNG example that there must be something they are doing well if they have been delivering cargoes of LNG without hindrance from their communities for 16 years, so that is one element. The second element which was discussed in details was about contracting circles. Fair enough, government itself has come out to say let’s work on the contracting circle of not less than 6 months because the circle kept worsening until at a point, it got to about 24 years and in some cases everybody forgot about the contracting process and the job never get done and that has a way of adding to the cost and the uncertainty. So if you were the one bidding, you are going to add that entire premium. If you borrow money to do that work, you just keep waiting from the time you submitted your bid to when they announce the winner. All these add to the cost of doing business. Those are just two elements that I say if you address, you would have addressed cost by 40 percent.

On funding, I think we can evolve a structure that gives each Joint Venture, sufficient operational and financial independence to be self-financing. Luckily, each Joint Venture today is a producing JV and you have to ask yourself if the minority party is able to fund its operations from its revenue. Why won’t the majority be able to do that? It is about evolving that structure that doesn’t enable us to go round in circles. You talked about alternative funding; all these have to do with one party submitting part of its revenue to the other to fund them. What that simply means is that the JV as a unit will be self funding and the structure of the JV and the JOA the way they exist today allows for that self funding mechanism. Once they approve the budget for the year, that requires no new legislature, it requires nothing else to be done other than the minister and the GMD having the

www.orientenergyreview.com

INTERVIEW courage to grant each JV, a self funding autonomy.

Are they not aware of this over the years?

I

f you want me to give you a 30 years history of JVs, I can. I worked in what is called Joint Venture Department which is now NAPIMS back in 1985, and at that time once the GM JV signs cash call request, once we have treated it and he signed it, we go straight to the Central Bank for payment. It is when we gradually started that the system got elastic and everybody got involved that cost of operation had to be legislated. You have to go to the National Assembly to get your cost. You put it in the budget and 40 percent of the budget is approved 7 months into the year. You are wasting your time, go and check the production profile; JV production has gone from 2.2 million barrels to 1.2 million barrels and the only reason we are still doing 2 million barrels is that deep water production makes up for it, and deep water production is going to be on the decline in the next 5 years. So the real impact of poor funding of JVs will start showing up in the next 5 years when as a nation we start doing not more than 1.6 million barrels per day. So we must address it today by starting to do things right, it is almost too late if only we can arrest the decline.

With what you are saying now, if you migrate from the PHC model, the JVs have to be financially and administratively autonomous. So what happens to the debts profile in the industry? What level of engagement in the industry do JV operators have on how to defraud the backlog of arrears?

E

verybody is doing it, individual companies are engaging at individual levels to defraud the arrears because it is a business killer. Chevron eventually negotiated a $1.2 billion of facilities. Today, activities are picking up in Chevron because they have their funding in place.

Each company is having indi-

www.orientenergyreview.com

vidual engagement with government but what I’m offering is a universal solution that will apply to every JV in a very simple manner. I don’t have to go and borrow on behalf of NNPC with interest rates and all that; I’m saying that the Joint Operation partner between us and government, there is enough in that to fund the cost. If you think that revenues are low like they are now, it is within the ambit of the JV to reduce their CAPEX for the year. It is a budgeting issue, so you draw up a budget that is in tandem with expected revenue so that after funding the operation, you have enough to pay royalty and taxes to government. This is normally how it is drawn up; you don’t draw up a deficit budget. You draw up a deficit budget and borrow up to make up for the deficit if it is high impact budget that will yield a lot of revenue. So the same way you prepare your budget and execute it in a prudent manner, the revenue coming out of your operations should be applied towards funding that cost. It is very simple and I’m not saying anything that is new. It is just that over the past 30 years, we have moved away from it to the point where we are now.

Every imaginable person is involved in the process of appropriating money for cost of operation and we have lost it all.

Right now government is paying much more money to fund their own operations than they would have done if they had adopted the model I’m talking about.

Whether you are talking about SA or Alternative funding, if your partner is borrowing money on your behalf to fund you, then that is what it is.

Given your exposure to the capital market and given the kind of impact this situation is having on your performance, how do you balance out between your expectations from your investors in the company and their partners in the public sector?

W

hat we have up to this point is a problem that has piled up. We are looking forward to how to provide the solution not just for funding of future projects but we need to clear the backlog, because what it means is that if my partner does a little just more of his own equity crude towards meeting the cost, then he has that little more to clear the backlog over time. To tell you the truth, where we are in today, if I know for certain that there is a monthly or quarterly payment that comes in and I do it over the next 3 – 4 years, it won’t matter to me. I can book it as future revenue; it is the uncertainty that makes it difficult.

Again, what I’m proposing can clear the

backlog over time and going forward it won’t even rise at all.

With this planned zero funding; what will be the role of government in Joint Venture?

N

NPC is a son of somebody; it is an investing entity under MDAs, so it is one of the agencies of government earning revenue for government. NNPC in partnership with several JVs should be able to fund them; it doesn’t means that the JVs will not be funded.

It means that you do not expect any annual appropriation from government to give you to run your business. You should figure out how you are going to provide funding to run your business. So government will wait for you to pay what is due to them which are tax, royalties and profits. And today it is the same thing. Government doesn’t get more than that today. If government gets N45 billion from NNPC as gross revenue and gives back N10 billion to go and run its cost even after it has delay of 7 months before that is approved, then the revenue is N35 billion. That same N35 billion NNPC will pay to government as royalty, tax and profit without going through all these legislative hurdles. So what I’m proposing does not reduce government revenue by one dollar, it will enhance it because it will reduce the cost of money that we are bearing today in funding the operations.

In the case of price fall for the industry, I know that a lot of IOCs have come up with cost cutting strategies. Some were doing downsizing. How has your company been able to weather the storm? Secondly I was at a forum where you spoke about the call for all the oil wells in the country to be metered, I want to know if you still hold on to that view? If this is done, how do you think the country will benefit from it?

L

et me start with the last one so that I won’t be accused of proposing a scheme that will be too expensive, providing meters for all the wells in the country will be too expensive. What I have always said is that every producer delivering crude oil into an export partner most meter what he is delivering.

Wherever you joined the export

Orient Energy Review October, 2016

17

INTERVIEW pipeline you must put a large unit that measures the gross crude oil you produce and the net crude oil you produce after removing water.

That way when you sum up the crude oil produced in any particular pipeline and you match that against the meter at the end of the export terminal; if there is any difference then you can begin to say where the difference is coming from, whether it is theft or shrinkage. Until that is done, the theft factor will remain.

Do you think that is the solution?

Y

es, that is the proper thing to do. You won’t pay electricity bill unless you meter what you are consuming. That is the right thing to do. You cannot have a situation where different float stations are delivering crude with different BS and W value. If you produce 10,000 barrels and your BS and W is 40 percent, it means it is only 6000 barrels that is oil, 4000 barrel is water, if that BS and W goes up to 45 percent then your crude oil is no longer 6000 but 5500, so you cannot have different fields and different float stations delivering into the export pipeline and you will be assuming different BS and W value, and you only physically examined it at the terminal to physically see what is there and you tell me that it apply to everybody as theft. It cannot be the case, you must measure accurately what is water and what is crude at what is entering the export pipeline and what is at the terminal.

Now to your second question of what we are doing to weather the storm. Like every other company, it has to do a lot with the individual company. It has to do a lot with your planning and execution capability. As you run an operation and face head winds, you should be able to take a step back and rearrange your operations to face the head winds. So we came in at the end of 2014 and suddenly saw the crash.

It took us 2 months to reverse our 2015 work programme that was already approved and cut Capex at 39 percent. Up till today, we have not downsized. When you look at the savings from even letting 20 percent of staff go, that is not where the big headache is, so we didn’t touch any staff but looked at other areas where we could cut cost. The worst thing for a company like us - we are not a 100 years company like

18

Orient Energy Review October, 2016

Shell that has a team of staff across the world, and if activities peak up they can always redeploy staff, we are not. We are still in the growth mode and if you start throwing your staff away because of 2-3 years head wind when you need them most; you find out that you have thrown them away; we are not going to take that risk. But we looked at all the areas that we could cut cost to match the current realities and also our gas production was a good edge. So those are the key areas we were able to weather the storm and going forward, I think that the company we are building is one that should be able to weather any storm otherwise we will be out of business.

I was at another forum where some of your co-operators complained about Nigerians working for them. They also complained about Nigerian oil servicing companies creating gaps and payment for man hour lost. How have you been able to solve these issues because NCDMB says you must employ Nigerians for certain services? Secondly, it was in the same forum that you declared that the fall of the naira affected loans taken before the naira lost its value to the dollar. How are you going to bridge the gap?

L

et’s put the ‘borrowing part’ of what I said this way: Exchange rate has little to do with operators in the oil and gas industry because our revenue is in dollars except for those of us producing gas that earns naira even though the pricing is in dollar we physically pay naira – they are the only ones that have to worry about the piles of naira; every other person no matter how small or big the primary revenue is in dollar. Really, exchange rate shouldn’t be an issue for typical oil and gas companies. They actually go to the market to buy naira to run their naira business; so exchange rate should be an

The real impact of poor funding of JVs will start showing up in the next 5 years when as a nation we start doing not more than 1.6 million barrels per day. So we must address it today by starting to do things right, it is almost too late if only we can arrest the decline.

issue. If you borrow in dollar and you are earning in naira like you are running a gas business, then you might start facing some problems if you don’t get official exchange rate to change the naira to dollar and that is the only point you might have problems.

My attitude to the Nigerian Content has always been that among Nigerian companies, we give jobs to those who show competence to do them and there are quite a bunch of them. So we are not in the regime of pretence because I know how it happens in the industry where some big companies in order to meet local content demand, give jobs to some Nigerian companies and still award the same jobs somewhere else to get the result. For us we work with a lot of Nigerian companies and we are not forced – there is nobody who has said you most give that job to a particular Nigerian company. We give them to tender and prove their worth and they will get the jobs, and if they cannot execute same; they won’t get a job from you again.

That has always been our attitude.

So for us, it is not patronage for the sake of it. It is to find out those who can do the job and give them the job.

Tell us about the impact of political risk on borrowing. You have just stated that ordinarily you don’t have problem with the dollar issue but then you find out that compared to other African countries, when you add the libel and the political risk you will be getting up to 20% while in places like Ghana, you will be getting just 8 percent. If dollar is not an issue, how then do you weigh the political risk?

I

don’t know if you can get eight percent in Ghana. It depends on the regime because when our business was booming, it wasn’t this high but dollar debt is generally 9 – 11 percent. It is 18 – 22 percent if you borrow in naira. If you are borrowing from an international bank into Nigeria, it is probably 1 or 2 points what Nigerian banks will give you.

Unless it is a short term loan, it is difficult to service a long term loan.

You have regularly in your annual report, emphasized your strength in gas as a major driver of your business growth; mapping out a lot of funding for that. What is the outlook of your returns on that and how has

www.orientenergyreview.com

INTERVIEW that strengthened your business in this kind of regime of falling oil prices?

Let me say what I haven’t said before. We try not to beat our chest on our gas business at Seplat. You know that the entire gas gathering project funded by the Chinese in Ghana – that project is about $1.6 billion but what is the volume of gas they are delivering? A 120 million per day, we are doing 300 million a day and we didn’t spend half a billion dollar to go from 15 million to 300 million.

What is the secret?

W

e are prudent but we don’t beat our chest about it. All of you went out to cover Total’s chest beating gas gathering, how much did you report? You said $3 billion for that whole project, right?

How much are they delivering?

900 million! How much are they delivering to the domestic market? 300 million! So we are doing 300 million today and we are not making any noise about it. We built a $150 million plant in 18 months and commissioned it, that same plant is going to go up 275 at the end of this year.

There is no any other person that will show you 300 million of new build processing facility in the past 3 years at cost that we can afford. I always say to people that until Dangote started manufacturing cement, we thought only white people could manufacture cement. You will soon find out that until a couple of serious minded Nigerian companies get into this business, you will see a lot of things about cost inefficiency. In the past 2 years I have been talking about domestic energy security.

Only indigenous companies can deliver it, not just by shipping out LNG and pay us $4 billion a year. If there is no electricity, it won’t take us anywhere. We must deliver the energy needed to power our economy. That is our job; it won’t be done for us by any foreign company.

You said something about LNG that we need to learn a lesson from them in terms of their

www.orientenergyreview.com

dealings with their community. What has Seplat been doing in terms of that and let me add what is the latest development with regards to Seplat’s partnership for building a refinery?

F

irst I think the industry now recognize that the Seplat model of community engagement is working, and people should ask us what we are doing.

We are not doing anything supernatural; we simply believe that there must be a way to operate where you recognize the dignity of members of the community that host you. For too many times, people go into a community thinking what do we do to pay them off, how do we buy their nuisance so we can start to operate. You know that is why a Professor in Harvard came up with the policy of Share Vision.

So if you go to a community and you are doing business and you are making money; if you open your mind you will find out some services those in the community can render that are valuable to you.

They are not beggars, and just by taking those services and paying them, you are expanding the economy of these communities. You are not doing them a favour, they largely depend on the business you do. As a result, they are unlikely to destroy your facilities.

That has been model, everyone at Seplat knows that, we are not going to communities to give them tokens and expect them to be happy with what we are doing. You are going in there believing that there are things they can do for you, there are staff that can work with you. We hire staff from the communities, when they come they see themselves not as part of the community but as Seplat staff. There are contractors from there who work for us and we give them a chance to perform.

If you put all of that together plus the fact that we are close to communication we nip whatever would have been the problem in the bud. But I try not to hype it because it is still a work in progress.

On the refineries, what has happened is that NNPC asked for expression of interest for anybody who wants to co-locate a refinery and the refinery business is not our core area of focus. Internally, we have said that if there is an opportunity that aligns with our operating principles to run a refinery in the west, we would be interested because we have production activities in that region. If the Warri refinery belongs to us, we will not even export our crude; we’ll simply take all of our production activities to Warri refinery. Then we take an interest in possible co-location with a team. If they say we are pre-qualified, we move forward and if they say we are not; we continue with our

core business which is the production of oil and gas What about the modular refinery?

W

e built our gas plant in a modular form- designed it with 5 modules, each modules being 75 million cubic. We were able to build the first 2 modules but putting enough infrastructures for additional modules, you just plough them in without any additional work. We commissioned the first two modules in 2015, and within this year; we were able to plough in 3 more modules and expand the plant within a year. It was designed such that it was possible to bring in modules in units and just plough in.

Thus, modular refinery ordinarily means that you design a refinery in such a way that it is possible to put in a unit and if the need arises, you can increase your capacity by ploughing another unit. So you can design a 150, 000 barrel refinery in 3 modules of 50, 000 barrels each.

What it means is that the tanks, power supply, etc are designed to take 3 modules but you can start with one then the additional cost and infrastructure to bring the other 2 will be smaller. But everyone keeps talking about modular refinery, I don’t get it. A Topping Plant like the one Niger-Delta has – only an upstream company can have a toping plant because it means you can extract one product and the residue you plough back into your crude; you don’t throw it away. So if you are not an upstream company, you cannot buy crude, process with a Topping Plant and 50 percent of it is wasted, you cannot make money that way. In the case of Niger-Delta, they put 1000 barrels, so if you are producing 2000 barrels, you put 1000 barrels into that and then you extra about 120 litres of diesel plus 500 barrels of heavier crude that is residue, you then put that 1000 barrel into your remaining crude and export so you don’t lose anything; you just extract an equivalent of 500 litres per day of diesel out of it.

Again if you are not an upstream company and you build a Topping Plant then it is a disaster because if you throw half of your crude away as residue then you will never make money. Again people must understand what they represent, because in Nigeria we used the phrase, modular refinery as if it is the solution.

Orient Energy Review October, 2016

19

PHOTO GALLERY Nigerian Economic Summit Tagged MADE IN NIGERIA, October 2016

T

he 22nd edition of the Nigerian Economic Summit opens with #MadeInNigeria as focus

Nigeria’s President, Mohammadu Buhari declares the Summit Open; while drumming up support for Made In Nigeria Goods and services.

“If made-in-Nigeria must succeed, it should not be the challenge of the federal government alone. All the 36 states of the federation and the Federal Capital territory (FCT) must have a role to play.” – Dr. Adedoyin Salami, Chairman, Nigeria Economic Summit Group (NESG) Board Committee on research and publication

President Muhammadu Buhari in a chat with Ministers at the Summit President Muhammadu Buhari (M) Flanked BY Minister of Budget and National Planning, Senator Udoma Udo Udoma and by NESG Chairman Alhaji Kyari Bukar [L-R] President Mohammadu Buhari; Chairman, Nigeria Economic Summit Group, Mr. Bukar Kyari; and Manager Nigerian Content Development of Shell Nigeria, Austin Uzoka

THE MADE IN NIGERIA F

VP Yemi Osinbajo inspects an Exhibition booth at the summit.

20

Orient Energy Review October, 2016

www.orientenergyreview.com

PHOTO GALLERY SEPAN Rebrands Alternative Energy for Sustainable Growth at NAEE 2016

T

he Sustainable Energy Practitioners Association of Nigeria (SEPAN) has redefined its mission at the 2016 edition of the Nigerian Alternative Energy Expo (NAEE), where it gathered leading local and international stakeholders who meet annually to chart a way forward on promoting renewable sources of electricity generation in Nigeria, a call for investments, as well as protecting the planet in line with global green revolution campaigns.

The 2016 edition, sixth of its kind provides more of a bumper package with theme: Embracing Sustainable Energy for Sustainable Growth. The event, christened with exhibition of renewable technologies by various investors, was also heralded by presentations from industry experts who rubbed minds on how to move the industry forward including forging new partnerships through networking with decision makers, business leaders, project owners and buyers.

Our Abuja Correspondent, SOLA AKINGBOYE captured the event in pictures:

FESTIVAL, LAGOS 2016

Orient Energy Review October, 2016

www.orientenergyreview.com

21

“Our goal is to exceed the expectations of every client by offering manufactured transformers of the highest quality� - Baynes of critical thinkers. Critical thinkers are supposed to be thinking faster, more efficient and more effective in comparison to things that have been taught. We have to constantly evolve. That is the cornerstone of our company; objectively looking forward.

Ernest Baynes

E

rnest Baynes is a young entrepreneur and founder of Baynes Transformers Technology, a company positioned as a quality conscious and cost effective supplier of new transformers, combined with the skills to support the market with an efficient repair facility of transformers of all sizes. based in Johannesburg South Africa. In this exclusive interview with Orient Energy Review’s Jerome Onoja, Ernest bares his mind on the vision of the company which he has been running for more than a decade.

Tell us about yourself and your company.

My name is Ernest Baynes, the owner and founder of Baynes Transformers. The company was founded in 2004 and I have been running it for the past 11 years. It is a family business; my mom used to run it for 22 years. She was the very first black female in the country to run a successful company.

I am the very first black, young, and upcoming breed in South Africa. I am the only one with the BE level triple one, triple A plus. So I am the only one with all the credentials for BE level.

That means it is a very white dominated arena and we want to change that playing field to an increase of playing on the demography of our country, representing all races.

What are the goals and mission of your company?

The goal is to cultivate a new breed

22

Orient Energy Review October, 2016

Primarily, what do you do, what do you manufacture?

We manufacture distribution transformers from 16KVA cable, up to about 5 10 MVA. We have also been fortunate that we are at the final stage of identifying, securing and finalizing our relationship with an international organization. We do have an MDA in place but I am unable to give you further development on this.

But what would this collaboration do to the organization?

First of all, it is going to be an organization with huge years of IP Active at their disposal, which they are prepared to share with us and I will be able to share that IP with the African continent. We will also be able to train our people with new and latest technology. So cultivating this new breed will expose them to the latest technology and at the same time, we are going to start coming out with our own IP (Intellectual Property).

I think it is going to be a three-pronged approach; over and above that, it is going to be a very reputable company. So I do not think we are going to have any challenge with regards to the Research and Development (R&D) component. What will make us strong is that we have a very strong and established R&D department. Why R&D? Because products would keep evolving. That is one of the key elements. With that we are not going to be saturated with constant technological advancement and evolutions, but we are also going to be a leader in that industry.

How many employees do you have?

We have about 50 people, and with the expansion plan, we are looking at increasing it to about 200 people. We are going to do so in a phase approach, with regards to the training components. We want to give every candidate an equal, one-on-one opportunity to be trained properly. The duration of the training would take the region of three to five years, depending on the candidate. It is also a training that is very unfamiliar to us as black people, so we have to do it properly as this would drive our economy. Without

electricity, there is no industrial revolution.

At the moment, where is your facility?

The company is situated in Johannesburg. We prefer having it in one place and the reason for that is so that we have total control of the quality component. With that we are going to mitigate all possible negligent components that could come in while still doing the manufacturing process.

How big is your turnover?

The turnover is in the region of 15 to 20 million dollars, but we want to increase it to about $240 million. That is after the new merger.

Tell us about your trade mission in Nigeria.

I am one of the individuals that have been identified by government, likewise my colleagues, to discuss ways to promote young and upcoming entrepreneurs in the business spaces. Our trade mission has been on the basis whereby we try to establish and collaborate with our counterparts, here in Nigeria, and in so doing, we want to establish some form of strengthening of bi-lateral agreements and see exactly how we can find synergy, going forward in whatever we manufacture and also find the counterpart, whereby eventually, we want Nigeria to become independent, self-sufficient, to have its own independence with regards to industrialization and we want Nigeria to have all these benefits and with all your people and facilities, and in so doing, we would have emancipated the people.

What do you think about the Nigerian market?

The market is huge. I think for the vastness for the population, it is definitely holding out; it is working. But I think there are improvements that we can leverage on and make things work efficiently. It is working right and I think it is something we need to work on as a collective, and find the solutions. The solutions are there; it is just for us to search at one point and starting plugging those points. Not putting in transformers and equipments that do not serve the purpose. Transformers

www.orientenergyreview.com

are supposed to be out in the field for duration of 20 to 25 years. I do not know what the current supplies of transformers are all about.

I don’t know what the state is, but that is what we are here for.

There are two different types of transformers — Aluminium and Copper transformers and that is depending on the price that you are going to pay for it. Copper has more longevity compared to aluminium.

How exposed are your engineers and where do they train?

The fortunate thing with this collaboration and merger is that we are definitely going to look at every qualified individual out of South Africa. As what has always been the case in a white dominated industry, we are fortunate that we have access to one of the very oldest person in the industry and we want to harness and pick his brain as much as possible, so that the knowledge can be passed down to us, black people.

And he is more than willing to do that. In support thereof, I have surely thought that our strategy is to merge with an international partner and with that we are going to have IP that are 105 years old.

Prior to this merger, how do you train your engineers, do you have affiliations with foreign trainers?

It is an industry whereby you know they have to be qualified individuals. We teach people on the actual jobs, sometimes we start to draw from the pool of disadvantaged individuals from universities and training colleges, because they have got the theoretical background and we can merge it with the practicals, making them become well-rounded in the career space they want to operate.

What is the plan here for you in Nigeria?

Our plan is to identify an individual we can actually work with.

I have been fortunate that there have been a few keen interests shown by some people in Nigeria.

We are going to continue discussions with them; find out what is it they bring to the party; what is required; earmarking Nigeria counterpart is one part, the partner has to do something, he has to bring something to the party.

We would want to establish a good relationship. What is also very important is that there is enough for every company to make a fair living on. Marketing

www.orientenergyreview.com

is one strategy and it is based on whose transformers would last the longest.

What standards are used in the manufacturing of these transformers?

They are going to be manufactured according to SANS 780 that is for distribution. For power it is IEC 67006, that is the international standards and then all the various sub-categories that go with them, because there are references to various other standards. These items are in direct contact with our public and any negligence on thr part of the manufacturers is surely going to be dealt with severely.

Do you have any plans to manufacture these equipments here in Nigeria?

Our intention first is to identify partners, then after which we would want to see what the market is, then start sending them up.

Yes, we want to have a manufacturing facility in Nigeria, but not only that, we want to also commit to the training of Nigerians, our counterpart in the industry and then after which we would replicate the exact same company as ours, here in Nigeria.

Then after this, we want to have some form of exit strategy; whether we would become a minority stakeholder in the company or we become a totally insignificant entity within the country.

As a form of emphasis, you are not just coming to establish a company, but also to build the capacity of Nigerians, right?

Absolutely, anything back to the people, so that they would be responsible for their own electricity. They are going to have their own staff complement and they would be then be running and maintaining the entire project.

What can your company do to help Nigeria escape its power challenges and problems?

Right now, I think there is the lack of maintenance. That is going to be a key component. I also think there is the shortage of skills. We are going to start from the scratch, but we will definitely get there.

With that approach we will definitely make inroads, as long as the products are superior products and operate within the normal parameters they were made to be manufactured for.

Who are some of your major clients in South Africa?

Eskom. I have been repairing for them and we are currently bidding for a new three and five-year contract. We have been very successful in that sense. We are definitely coming with something new. What makes our transformers special is that we will have R&D of the latest technology. We are coming up with cheaper alternatives to the current solutions; because at first, we just manufacture in copper, but now, we are going to offer in aluminium, which is going to make us competitive. But we are not going to compromise on quality. That is key to this entire exercise. It is going to be

senseless, if we are going to be starting in Abidjan, we are going to be repairing transformers there, and by the time it comes to Lagos, it is going to go back to Abidjan, because the transformers we fixed there are inferior. We need to move on to other areas, that is our intention. We do not want to go back.

Going back is going to be almost like a no-no and in that area. I have taken a stand that we are doing should done 110 per cent right.

I have observed that Nigeria’s transformers are very low to the ground, while in South Africa, we have them up on the pole, and that has reduced the safety component of it, because kids can easily access Nigeria’s transformers.

Another thing is that our transformers do not have the insulators coming out on top, because we look out for the environmental change. If for instance, a bird sits on it, it gets electrocuted.

That is why we have done away with that. Hence, our insulators do not come on top; it always comes on the side.

The other thing is that we have very well-oiled winding capacity and we can wind up to about 0.45 of a millimeter.

That is nearly half of a millimeter, which is the strain of your hair. That is the machinery that we have there.

That is extremely important, because the higher the KV ratings, the more the turns. The more the turn of the wire; the turn of the wire, the more difficult it is to handle, and so it goes on.

So if you are going to have an individual doing assembly of the transformer, it is not going to be only assembly, it is going to be assembly with all the other disciplines to make this person multi-skilled. Therefore the possibilities of him becoming retrenched are almost obsolete, because there are so many component parts that he can couple within the infrastructure. We do not want to have a 100 people, but it can be one person that we can able to tutor with the right ratio of supervisor-tutor training and also we want to keep the complement at the right level.

What is your next move from here?

There is going to be a certain phase of due diligence that is going to be conducted. After that, there is definitely a support of the department which brought us to Nigeria. I think there is definitely a willingness to assist in that regards.

Orient Energy Review October, 2016

23

IBEDC is the Best Distribution Company in Nigeria – Ayodele

E

ngr. John Ayodele is the Deputy Managing Director Ibadan Electricity Distribution Company, IBEDC. A distinguished Electrical Engineering graduate from Ahmadu Bello University, he is a versatile executive and engineering management professional, with an unparalleled history of success spanning more than 35 years in Government Agency management, engineering operational oversight, strategic policy formulation, engineering design and execution. His career spans over a myriad of strategic roles and functions like; The Director, Telecoms and Postal Services, with Federal Ministry Of Communications Technology, Abuja, Nigeria, The Director, Investment and Sector Development Federal Ministry Of Power, Abuja, Nigeria, The Executive Director, Operations Power Holding Company Of Nigeria (PHCN), Abuja, Nigeria, The General Manager (Technical Services), PHCN and a repertoire of others.

Speaking with the Orient Energy Review Editor, MARGARET NONGO-OKOJOKWU, on the sideline of the Power Nigeria Conference in Lagos, the amiable Engineer explains to us what makes his company tick, amongst other national issues. Excepts.

You said IBEDC is the best distribution company in Nigeria, can you buttress that?

24

It is not a statement from me. It is a statement that is backed up by law. As you are aware, we have the regulatory agency which benchmark every Distribution Company (DISCO) and rank us every quarter. In the last ranking, we came first.

In ranking us, they looked at our operations, innovations, customer service and issue that borders on Health, Safety and Environment (HSE), infrastructure development and payment within the business environment, the market. All these things put together makes us number one.

Why do you think you had that kind of success?

We couldn’t have had anything less than that. If you look at our logo, it says ‘We will make life better for everybody.’ We cannot have that kind of logo and be left behind, because then we cannot say we are making life better for everybody. It is a mandate that we have from our Board. It is something that we take very seriously, especially, customer service. This is because good customer service would give you better result. If you have bad customer service, people would use their mouth to destroy you and they would not take your services seriously.

So, do you mean your customers are satisfied with your services?

Of course, go anywhere in Ibadan and find out. But it would be very shallow, for me to say everybody is happy, because while we are talking, some areas may have low supply for many reasons, not because the fault is ours. Those ones won’t say they are happy. But we try to meet our customers’ needs and I think we are not doing badly in that.

As a DISCO, there are lots of peculiar challenges among 11 of you. How is Ibadan coping and managing to weather these challenges?

There aren’t too many peculiarities or challenges, most challenges are what you

Orient Energy Review October, 2016

would find in many other DISCOmetering plan not adequately funded or executed; customers enumeration that you would want to do, funding is limiting you; generally, liquidity and people not wanting to pay their bills.

It is general to all of us. And since we have a lot of rural areas, rural dwellers or rural classification in our bills, R1 and R2, they constitute 60 per cent of our energy need and they are most difficult. They are the people you would have to chase back and forth to get them to pay. Some would just not pay; some don’t even have money to pay anyway. Peculiar problem will include the fact that we are almost buried in a civil service state and if you look at most of the states that we are resident, some have not received salaries for three, four and five months, so payment of electricity is a different thing. They would say they do not have and cannot pay. It is one of our problems.

NERC has issued an instruction on CAPMI….?

They asked us to discontinue the CAPMI that was in existence even before the sale of the electricity companies. They didn’t say they are against the CAPMI as a programme, but that the CAPMI is not even made for this type of business venture, so we should discontinue it and create a new system purely by ourselves.

What does the former CAPMI entails?

The former CAPMI said people can buy meters by themselves; because of the liquidity in the system, they buy meters, but you must install the meters within 45 days. This is because people were saying they would wait for long periods, yet no meter. So if you want meters within 45 days, you pay within the CAPMI. The law mandates us that when the meter is installed, each time the person gets a bill; he must see evidence that he is getting a refund. Refund in terms of energy. For example, if you vend for 500, they may give you 700 watts, until we liquidate your money, with interest.

Is Ibadan already taken off with

www.orientenergyreview.com

the new CAPMI? No, the present CAPMI ends by the end of this month, so really, one cannot be talking about a new CAPMI. But definitely, we need to start a new programme, with effect from this month. By beginning of October, we are coming out with our own type of arrangement. I don‘t want to say CAPMI, because CAPMI has been abolished, but whatever name we give to it, it would be structured close to what we have in CAPMI. But it would be a willing buyer, willing seller. You cannot be cajoled to it; you voluntarily accept to go into it.

So would it help in addressing the billing or the metering system?

No, it is supposed to help in the liquidity area, such that there is money for the meter, even though it is like borrowing the money to us, therefore, getting the meter should not be much of a problem to us, like when we need to look for both the money and the meter. Now, we only need to look for the meter, not the money.

How do you source the meters?

Do you use locally manufactured meters?

As a matter of policy, under CAPMI, not necessarily because in CAPMI, we get contractors willing to supply us meters, we don’t tie their hands that it must be locally made. But meters that we buy on our own are 100 per cent manufactured in Nigeria.

That means you are promoting local content?

If we don’t promote it, who would promote it for us? That means we would be taking all our money every time to China or Portugal. We insist that if you are not manufacturing in Nigeria, we won’t buy meter from you.

Even from next year, any type of CAPMI-related issues that we are doing, if you are not manufacturing in Nigeria, we will insist that you do. We are not saying that you cannot operate without us, but you must go and source meters from local manufacturers, because that is our own way of promoting local products.

What about transformers?

www.orientenergyreview.com

There is no one that is making transformers in Nigeria today…

There is a company over there…

You know, transformer is a higher level of technology. I have not seen anyone that is really producing it. People keep coming to make claims, but if we are satisfied with them, we would insist on patronizing local manufacturers. If any local company can meet our demand, we won’t go anywhere for it.

How does power generation in Nigeria today affect you?

I am into this business and I understand it perfectly. I don’t join people saying it is one megawatt today and all that, because, really to me, it doesn’t make sense. What people need is energy. How much energy do you have? Energy is power over time. So because you may say at one o’ clock, you are supplying 3,000MW, one minute or two minutes after that, anything can happen.

You might scale up. Energy per unit time is power; per one time, kilowatts, just one shot. But over time, you find that there is a variation.

Yes, we are all struggling with it, and that is why we are going into partnership with those who want to do embedded generation, whereby people would generate power within our franchise, but with a difference. We are not just buying the power from them; we target the power to some of our big customers. That would relieve us from servicing the big customers and we would use the remaining power for other people. This embedded power would definitely be more expensive than normal power.

Are you saying embedded generation is the solution to our power crisis?

All over the world, embedded power is not the answer to anything. It is a temporary solution to the nation’s power problem, pending the time the system would grow. Embedded can never be a solution.

It is just to help in the face of scarcity, it provides a service for a couple of years, pending the time that the country would grow, or when companies would grow their system.

Generally, what do you think is your customers’ impression of IBEDC? Fantastic! Go there and interview them.

It is fantastic. We have good customer relations and we meet with them, and we have zero tolerance for people being rude to their customers, or people who go out to cheat their customers.

You don’t have issues of uncaptured metering system?

That one would always remain.

Even in the United States, you still have issues of meter or of people still trying to bypass meters. That is why our structure of metering is different from many others. We put meters on the pole and they still go there to bypass it. That is why we have reduced the number of prepayment that we do. Because we spend so much money on prepayment, yet they still bypass, which means we still need staff to go there and monitor. That is why we go for the cheap post-paid meter.

The type we buy now has electronic reading devices. I can stay in a street and take 10 to 15 meter readings at a go and move on. I don’t need to go to anybody’s house. It would eliminate interference of people wanting to write N1, 000 but end up writing N10, 000 and vice versa.

What about the issue of vandalism?

It is there, it is part of the system.

Vandalism is just something that we have to live with. They cut gas pipeline and others. …But how do you cope with these kinds of challenges, and still be the best?

Best doesn’t mean we are the best worldwide. I mean, we can’t sing our praises and say we are the best worldwide. They say when you are in the city of the blind; the one-eyed man is a superstar. We still have a lot of challenges and we need to grow; we need to improve on our services. It is just a way of telling us that we are doing well, but we have not reached there. It is just a path for us to move on and be better.

Do you think we are getting it right in terms of power?

I won’t stay here and tell anybody we are getting it right totally. But IBEDC is trying to get it right, because that is the only thing I can tell you. I can’t tell what is happening in other DISCOs, what they are doing or their challenges. For IBEDC, we have started on the right path, and we are climbing up, we are moving and we will get there.

Orient Energy Review October, 2016

25

FINANCING ENERGY

Lekoil Raises Fund for Otakikpo Start Up W est Africa-focused oil and gas exploration and production company, Lekoil, has announced that it has raised gross proceeds of about $12.4 million through the placing of 48.33 million new ordinary shares to finance the final amount of expenditure to bring the Otakikpo into commercial production.

According to the company, the Otakikpo project is expected to begin production in the coming weeks. The balance of the net proceeds is to be used for general corporate and working capital purposes, The Telegraph reports.

“This placing, and our undrawn

debt facility, give us a cushion with which to bring Otakikpo into commercial production and to ramp the field up to our phase one target of 10,000 barrels of oil per day.

I look forward to announcing shortly the Company’s first production and cash flows,” Lekan Akinyanmi, Chief Executive Officer of Lekoil, said.

Lekoil is expected to begin commercial oil production from Otakipo marginal field, located in Oil Mining Lease (OML) 11 in Rivers State this month, following the completion of the Otakikpo-003 well.

After the successful return of the Otakikpo-002 well, first oil from Otakikpo flowed to surface in September last year.

The oil and gas exploration company last

month said that with four production strings now set for production; it is targeting production of 10,000 barrels of oil per day (bopd) by year-end.

Afterwards, it will continue to Phase two of the Otakikpo field development plan which is to bring production to a target of 20,000 bopd, depending on necessary approvals by the Department of Petroleum Resources (DPR) and Joint Venture Partners. *The Telegraph

NNPC Slashes Price of Nigeria’s Crude Oil Grades * NNPC towers.

T

he Nigeria National Petroleum Corporation, recenly, slashed the official selling price of Nigeria’s crude oil grades as parts of a strategy to make Nigeria crude oil attractive to buyers and to help it regain its share of the global crude oil market.

According to a report by Bloomberg Energy, the NNPC cut the price of every type of crude it sells in an effort to regain a share of the global oil market at a time when there is a huge glut of cargoes.

The report disclosed that the NNPC lowered by at least $1 a barrel, its official selling prices (OSP), for 20 out of 26 oil grades monitored by Bloomberg, according to pricing lists. It noted that Qua Iboe, Nigeria’s largest export 28

crude oil under normal circumstances, was reduced by the most since 2014.

Specifically, it explained that the NNPC cut the selling price of Qua Iboe for November to a 17 cent premium to the benchmark Dated Brent, according to the price list, from $1.07, while it reduced the price of Bonny Light to a seven cent premium and Forcados to a 41 cent discount to Dated Brent. Brent crude futures, the report said, slumped as much as 2.7 percent to $51.27 a barrel, the largest intraday decline since September 27.

They were down 2.2 percent at $51.51 at 3:49 p.m. on the ICE Futures Europe exchange in London. Mele Kyari, Group General Manager, Crude Oil Marketing Division of the NNPC, stated that the price reductions are due to a huge cargo overhang as the country attempts to regain market share.

Kyari disclosed that five companies that market the nation’s crude oil had raised the issue of high official selling prices, adding, however, that the decision to cut the price was unrelated to those complaints.

The Bloomberg report stated that like every other crude oil producer country, Nigeria is grappling with prices that are less than half what they were in July 2014. What makes Nigeria’s situation more acute, the report said, is a militant campaign that resulted in export flows

Orient Energy Review October, 2016

falling to the lowest in at least nine years earlier this year, adding that shipments are gradually resuming, and lower prices are a sign Nigeria is seeking to become more competitive in an already oversupplied global market.

The reductions, the report noted is coming on the heels of the Organisation of Petroleum Exporting Countries attempts to cut its combined output to 32.5 million to 33 million barrels a day in an effort to steady oil markets.

According to its survey of four buyers of West African crude oil after the NNPC announced the price slash, the report stated that the changes to November prices have brought them back to accurate market levels. Commenting on the development, Eshan Ul-Haq, Principal Consultant at KBC Process Technology Limited, said, “It is a bearish signal for the light, sweet market.

In order to capture a higher share of the market, OSPs have to come down. “Because an OPEC output cut would primarily affect medium and heavy crude grades, lower prices from Nigeria are likely to reduce the price differential between light and heavier oil.”

www.orientenergyreview.com

MINING/ SOLID MINERALS

Missing Mining Millions: South African Public Protector Reveals Shocking Details

Public Protector Thuli Madonsela (file photo). Photo: Werner Beukes/SAPA

T

he results of Public Protector Thuli Madonsela’s investigation into missing mining royalties from the Bapo-Ba-Mogale community’s collective “D” account have been received with shock Guests at a Public Protector feedback session gasped when they heard that the R617.3m first deposited into a North West community mining royalties account in 1995 had dwindled to R721 000 by July this year.

The information was revealed on at a community briefing in Brits at one of Thuli Madonsela’s final tasks as she prepares to leave office.

Speaking through an interpreter, Madonsela said the R617m initially deposited was made up of R392m in deposits by Lonmin and other businesses, and R224m in interest.

Her office has been investigating what happened to the Bapo-Ba-Mogale community’s collective resources in its “D” account after the community wanted to know where the money went, what it was spent on, who authorised the spending and who the beneficiaries were.

They also wanted the alleged abuse of resources relating to the construction of Kgosi Mogale’s

www.orientenergyreview.com

palace to be investigated.

Madonsela’s office explained earlier in a statement that the money generated for the “D” account is controlled by the Department of Co-operative Governance and Traditional affairs but there was nobody overseeing it.

In 2014, the community stopped using the account, preferring a newly established investment wing for its resources.

Since then, about R40m in royalties was received, but most of it was used for administrative purposes.

Recently, Madonsela said a further R40m came in, but R100m was borrowed from the Public Investment Corporation, leaving the account in debt.

In the previous briefing in July, she said that over the past 20 years, the North West

government was accountable for the expenditure of R617m in the account, paying suppliers directly for goods and services in line with a budget presented at the beginning of each year.

The biggest amount spent, said the Public Protector in July, was on the building of the palace.

A final report is not yet ready for the anxious community because the investigator has to check invoices and expenditure against what was delivered, and to whom. A quantity surveyor is also involved in these checks.

This means the report will only be available by December, or at the latest, January.

In the meantime, she urged the community not to accuse anybody of anything until there were definite answers.

“We don’t want to point fingers at people because of suspicion. Whatever we say will be backed by documents and prices charged to the palace,” she said.

“In the meantime we are asking you to stop accusing each other of any theft, of any wrongdoing.” * Jenni Evans, News24

Angola : Lucapa Announces Sales Plans For Last Quarter

M

ining firm Lucapa Diamond has scheduled two diamond sales for the last 2016 quarter as recoveries of large special stones continue at its Lulo mine, in Angola.

The first sale is scheduled for mid-Novemeber and will include the 172 ct and 104 ct Type IIa diamonds recovered at Lulo at the end of September.

The sale parcel will also include a 72 ct Type IIa stone which the company recovered recently at the mine.

Let’s recall that Lucapa Diamond achieved last quarter ended in September, a record output of 8,853 ct of diamond at the Lulo mine. This represents a 154% increase compared to output from Q3

2015.

The Lulo diamond mine extends over 3,000 km² and is located in the Lunda Norte province, which is situated 630km east of Luanda.

Orient Energy Review October, 2016

29

COMMUNITY DEVELOPMENT

Vandalism: Nigeria’s Oil Producing Communities to Take Over Pipeline Security

O

il producing communities, under the auspices of Host Communities of Nigeria (producing Oil and Gas), HostCom, have promised to set up a pipeline security unit across the Niger Delta region to forestall the incessant cases of pipeline vandalism and protect other critical oil and gas facilities.

Speaking in Abuja during the inauguration ceremony of the HostCom Pastors’ Forum, Federal Capital Territory Chapter, Abuja, Mr. Mike Emuh, National Chairman, HostCom, stated that the group would henceforth expose the cartel responsible for the destruction of the country’s oil and

gas assets and individuals responsible for short changing the country in the petroleum sector.

He said the Police, the Army, and other security agencies alone cannot deal with the issue, noting that HostCom would partner with the authorities, where necessary, to bring an end to the crisis in the region.

He said “We will be flagging off pipeline security unit of the host communities. The police and the army cannot handle issues of pipeline vandalisation alone.

“We are aware that it is in the heart of President Muhammadu Buhari to make sure that those who are involved, the cartel, the cabal, engaging in oil theft, pipeline vandalisation, bush load-

ing, 50 nautical miles offshore oil theft and others, would be brought to justice. The host communities that own the oil and the terrains would know what to do in that regard. The host communities’ pipeline surveillance unit would come on board and that would arrest the issue, because every village knows the bad man and the good man. We the owners of the oil and gas, we know those who are involved. It is a cartel. They feel as if they cannot be touched, but the host communities will fish them out. They cannot eat their cake and have it. Pipeline vandalism will stop,” he said He, however, disclosed that those currently bombing pipelines in the region are not vandals, stating that they are “freedom fighters.

They are not vandals. They may be bombing the pipelines, asking for one thing or the other, because they are denied of their divinely endowed prerogative, such as the 13 per cent derivation, PIB not passed for nine years and other relevant issues, such as oil blocs award among others.” *Africa Oil +Gas Reports

Shell Moves To Give Bayelsa Communities Uninterrupted Power Supply

S

uccour will soon come the way of four Kolo Creek cluster communities in Ogbia Local Government Area of Bayelsa State as Shell Petroleum Development Company, SPDC, has commenced the building of a gas turbine plant at Imiringi to provide uninterrupted electricity supply to the area.

The oil-rich communities of Elebele, Imiringi, Otuasega and

30

Orient Energy Review October, 2016

Yiba-Ama (Oruma) have been without electricity over the years, following the collapse of the state- owned Imiringi gas turbine.

The new SPDC gas project known as ‘K2S’ being handled by Nestoil, when completed is expected to boost commerce in the area where many of the residents have been forced to relocate to Yenagoa, the state capital, due to the many years of power outage.

Chairman of Kolo Creek Cluster Development Board, Chief Okpu Solomon, at the commissioning of some SPDC sponsored projects in the area, thanked the oil company for initiating the gas turbine project. *Vanguard

www.orientenergyreview.com

LOGISTICS/ MARITIME

Nigeria Loses N2trn Annually To Crude Lifting By Foreign Vessels

T

he Ship Owners Association of Nigeria, SOAN, and the Nigerian Ship Owners Association, NISA, say about N2 trillion is lost annually by allowing foreign carriers to exercise dominance over the carriage of 150 million of Nigerian cargo, including crude and products, according to Shipping Position Daily.

They attributed the loss by Nigeria to the NNPC’s, exclusive use of foreign shipping companies for transporting the Nigerian crude, which is sold on Free-onBoard, FOB, rather than on Cost, Insurance and Freight, CIS. The Federal Government through the Federal Ministry of Transportation and other agencies are now taking steps to facilitate

a partnership between the Nigerian ship owners and reputable foreign shipping companies to form joint venture companies that will be granted the national carrier status in order to promote local content in the transport of the Nigerian crude within the next five years.

Shipping Position Daily reported that the Nigerian Content Development and Monitoring Agency, NCDMB, convened a meeting with the NNPC, Nigerian Maritime Administration and Safety Agency, NIMASA, as well as stakeholders in the oil and gas industry and the shipping sector in Lagos to deliberate on how to make the Nigerian shipowners activate participants in the lifting of the nation’s crude oil.

Rising from the meeting, tagged “Crude oil Off-takers Nigerian Content Deliverables”, the agencies pledged to grow local content in the lifting of Nigeria’s crude oil

by working with Nigerian shipping stake holders to develop in-country assets and capacity that meet international standard.

They also agreed to ensure that companies that invest in ownership of crude oil lifting vessels are given first consideration in line with the provisions of the Nigerian Local Content Act and the NIMASA Act.

Alhassan Abubakar Emerges New Onne Port Manager

A

lhaji Alhassan Ismaila Abubakar has now assumed duties as the new Port Manager in charge of Onne Port Complex.

The appointment as the new Port Manager in Onne Port followed some minor reshuflements at the Nigerian Ports Authority (NPA), at the Lagos Headquarters.

Abubakar, who until his new posting to Onne Port was the Traffic Manager at Calabar Port. He took over from Mr. Durowaiye Ayodele as the new Onne Port Manager. On his part, Mr. Durowaiye Ayodele who was also transferred has resumed work at the Western Ports HQ in Lagos.

Addressing the new Port Manager, during a brief handover ceremony, Mr. Durowaiye Ayodele (outgoing Port Manager), expressed his appreciation to the various Heads of Departments, for their loyalty and dedication during his tenure. He urged all to continue to support the new Port Manager the way they supported him to succeed.

Mr. Ayodele informed that Onne Port has two major operational areas, which includes Federal Ocean Terminal (FOT), and Federal Lighter Terminal

www.orientenergyreview.com

(FLT). He added that Onne Port is not only Oil and Gas Port, but is also strategically located for the generation of revenue for Nigerian Ports Authority (NPA).

The outgoing Port Manager said that Onne Port has three Concessionaires, including Intels, Brawal Oil Services and West African Container Terminal (WACT).

Responding, the new Onne Port Manager, Alhaji Alhassan Ismaila Abubakar thanked him for his kind dispositions, and wished him well in his new posting.

He reminded all the departmental heads on the need to work as a team, and solicited for total cooperation for attainment of the goal of Onne Port Management. ‘’Let me state that working with you is going to be very pleasant, because my success is your success’’, he emphasized.

He described the new Managing Director of NPA, Hadiza Bala Usman as a 21st century worker, noting that she is committed to her work, and very passionate about efficiency and revenue generation. ‘’ Let us all help to block all revenue leakages. We should be innovative and committed to our work’’, the helmsman, tasks his HODs. He also appealed for the general commitment, insisting that there is the need to share information, because nobody knows it all.

Speaking on behalf of the Head of Departments, Dr. Goodluck Okpara, the Chief Medical Officer welcomed the new Port Manager to Onne Port. He said there

was a good working relationship between the former Port Manager, officers and staff of the Port.

He thanked the former Port Manager for his kind human relationship and concern towards the welfare of workers and pleaded with the new Port Manager, to follow the steps of his predecessor.

However, the new Onne Port Manager Alhaji Alhassan Ismaila Abubakar is a seasoned technocrat, and well versed in Transport and Logistics Management.

He is a member of Nigeria Institute of Transport Technology (NITT). He is also a professional Transport/logistics Manager with about 29 years of cognate experience in Port Operations/Transport Logistics and cargo handling businesses.

He is a graduate of Ahmadu Bello University, Zaria. He had held several positions since joining NPA. He had served in different capacities.

Namely as the Principal Manager Operations, Eastern Ports Headquarters, Port Harcourt; Principal Manager Traffic, Calabar Port before his current posting as Port Manager Onne Port Complex.

Alhaji Alhassan is also a graduate of University of Wales, College of Cardiff, United Kingdom, where he obtained Masters in International Transportation. He is married with children.

Orient Energy Review October, 2016

31

GHANA REPORT

Oil and Politics: What Do Ghana’s Political Parties Have To Offer?

John Mahama, Ghana’s President seeking a second term

By Gilbert Boyefio

A

s Ghana’s Presidential and Parliamentary elections draw closer, players in the oil and gas industry have started questioning the manifestoes of the two main political parties, the National Democratic Congress (NDC) and the New Patriotic Party (NPP), requsting their policy direction for the industry.

NPP manifesto: The New Patriotic Party (NPP) in its manifesto said it is committed to a transparent, accountable and efficient management of the country’s petroleum resources for the benefit of all Ghanaians.

Under the party’s petroleum revenue management ambition, the NPP said “Between 2017 and 2020, primarily allocate revenue from oil to infrastructure, health, education and agriculture; leverage oil revenue to complete the Accra-Kumasi-Paga rail line; connections and the rehabilitation of the Western and Eastern Rail Lines; and to manage and use the revenue from the Jubilee, as well as from the TEN and SANKOFA fields, in a responsible and transparent manner”.

The NDC manifesto The National Democratic Congress (NDC), the ruling government, in its manifesto indicated that “Ghana’s oil and gas sector has been significantly transformed under the NDC Government. Relevant laws have been promulgated to promote and regulate

32

Orient Energy Review October, 2016

activities in the industry. These laws have created a transparent oil and gas production and management regime”.

The NDC is promising to, among other things, “Construct a new and bigger Liquefied Petroleum Gas (LPG) pipeline to the jetty at Tema for more efficient discharge, storage and distribution of LPG; construct a second and bigger Single Point Mooring for petroleum products to ensure greater efficiency in the delivery of petroleum products into the country and to also make Ghana the petroleum hub for the sub-region; build a Liquified Natural Gas (LNG) infrastructure to ensure continuous supply of natural gas to power plants”.

Despite these provisions in the manifestoes of the two major political parties, oil and gas industry watchers are of the opinion that these provisions are not enough and do not represent a clear and comprehensive policy direction.

According to Samuel Bekoe, Africa Regional Associate of the Natural Resource Governance Institute, “The manifestoes have alluded to how they are going to use oil money but they are all general and vague.

It does not really point to targets or specific issues. Because we are guided by law, the oil money will always be used on certain sectors until we have a long term national development plan. Different governments have different priority areas and this eventually affects how the oil money is spent”.

Currently Ghana’s oil revenue contributes only about 5% to the country’s GDP. For Major (Rtd) Daniel Ablorh-Quarcoo, Former Chairman, Public Interest and Accountability Committee (PIAC), the 5% contribution of the oil and gas to the country’s GDP explains why politicians will not

overly focus on the sector as against the other 95% out there.

He however pointed out that, “There is no clear policy direction as to what direction Ghana want to take its oil and gas industry. But I must confess that I have not taken the time to study the manifestoes of the political parties.

So I don’t want to make a sweeping statement that their manifestos do not address these policy issues”.

Major (Rtd) Abloorh-Quarcoo, observed that the intention of the country’s Petroleum Revenue Management Act is that oil resources and revenue must make an impact in society but unfortunately that is not the case now.

In many of its reports, PIAC has accused government for spending on things that are not really the priority of the citizens.

“In most of the districts workshops that we organized, we got a lot of feedback from the people. And I really wish and hope that PIAC report for September, which is on the year 2015, will come out and be food for journalist to discuss. That will be a good platform to set the agenda for this year’s elections issues.

But at least if for nothing at all, I expect political parties who are competing for the mandate of the people to come clean on how they intend to use the oil revenue”.

Ghana’s Petroleum Revenue Management Act requires that the government should select four priority areas among the twelve areas identify for development.

“What we have seen in the past, is

www.orientenergyreview.com

GHANA REPORT

Some of the Contenders

that under capacity building, everything is included in there.

It has become an omnibus clause for mismanagement. It does not really fit.

If you look at the past six years our oil revenue amounted to about US$3billion plus, but we have not managed it well.

So far the construction of the Atuabo Gas Processing Plant is the only major thing that came out of our oil revenue. The rest if you ask me I don’t know. It has been a litany of we have done that and we have done this without being able to lay your hands on anything specifically. At least one third have been accounted for successfully with the two thirds clearly lost in the pool.

This is one reason why we have to support the National Development Plan and hope that all the political parties strictly adhere to it when it becomes operational”.

On his part, Mr. Samuel Bekoe, noted that Ghana has to look at what we want to achieve with the extractive sector in the medium to long term plan and aggressively pursue it because the oil resources are finite.

He advocated that Ghana can use the oil money to support the other sectors of the country’s economy such as agriculture.

“Take cocoa for example; Ghana is now the third largest exporter of cocoa in the world. Is cocoa

www.orientenergyreview.com

production and process our absolute advantage, I will say yes. So why don’t we process our cocoa beans into paste before we export.

So the vision will be that 50% percent of the oil money goes to support local people or local companies that build factories to process the cocoa beans before they export.

So in ten years when we access ourselves, we would have used oil money to diversify a major part of the economy. People will no longer be reliant on oil and gas but cocoa as well”.

Downstream expectations For Duncan Amoah,Executive Secretary, Chamber of Petroleum Consumers Ghana(COPECGH), they are very interested to know the position of the political parties on how to manage the numerous taxes on petroleum products.

“Some will just say at the altar of political campaigning that when they come they will reduce taxes and so forth, but we would want to hear a clear strategy that explains that if I reduce taxes by A or B this is how I am going to raise same or some amount of money from C or D to be able to shore up the differences in revenue mobilization drive”, Mr. Amoah pointed out.

To him, COPECGH is very worried about the tax component of deregulation, explaining that, “The ex-refinery price is currently around GHS1.64-1.70. The tax component alone is GHS1.50 there about, almost the same as the ex-refinery price.

The consumer is suffering.

With high taxes on petroleum, the moment crude oil prices start going up on the

international market, government will continue to rake in more, while the consumer is expected to pay more.

Because it is deregulated market governments, do not set prices anymore for OMCs. It means that those of us at the end of the triangular chain, the consuming public, not only disadvantaged but sitting on tenterhook in that you wake up one morning and pump prices are going up, you ask for a reason and they tell you world markets prices have gone up.

They have gone up because when you bring the crude products into the country, after paying the excise duty, road fund and all the others, government still charges you with 17.5 SPD. And because it is a variant tax, the moment world market prices goes up, the quantum or amount of that tax also goes up. There is a correlation effect and that has negative effect on the consuming public”.

According to him, there is still the stabilization margin in the price build up for petroleum products, meanwhile, under deregulations government is not paying any such difference margins to the service providers because government cannot pay for any under recoveries.

He said so whether OMCs or BDCs make gains or losses that is their own headache, and therefore queried what government is using the stabilization fund for?

Mr. Amoah pointed out that political parties are contesting for power to give the citizenry better living condition and therefore “We want all political parties to come out clearly to tell us how they intend to address this major concern”.

The Kwame Nkrumah FPSO

Orient Energy Review October, 2016

33

DRILLING/ EXPLORATION/ PRODUCTION

Libya’s Oil Production Hits 551,000 bpd

Egypt: Mostorod refinery to be completed in 2017 - ERC

T

he Egyptian Refining Company (ERC) has announced plans to conclude its refining project in Mostorod within the first quarter of 2017, as part of moves to address the supply gaps in the petroleum derivatives market.

According to ERC’s Managing Director, Mohamed Saad, 90% of the project has been executed while overall investments in the project have reached $3.7b, with the completion of all necessary procurement of materials and services. He added that the Egyptian General Petroleum Corporation (EGPC) owns 24% of the venture.

Earlier in September, Petroleum Minister, Tarek El Molla, announced that the ministry was focusing its efforts on new refining projects in the Suez Area.

The new Citadel refinery at the Mostorod Petroleum Complex is being built in an industrial area situated 10km to the north of Cairo, the Egyptian capital. The plant is to include 2 million tonnes per year unit for the production of high-quality diesel. The other complex units will include an 80,000bpd vacuum distillation unit (VDU), together with a 40,000bpd hydrocracker capable of transforming lower-quality products into the middle distillates which are in high demand. The crude distillation units are being constructed by ENPPI. Refinery capacity per year is expected to be 100,000bpd of refined products (2.5 million tonnes of diesel oil when the complex is complete).

34

L

ibya’s oil output has reached 551,000 barrels per day, bpd, bringing the country nearer to its target of 900,000 barrels per day by 2016 ending, National Oil Corporation chairman, Mustafa Sanalla has revealed.

This continuous increase came about after the North-African country reopened the Sidra, Ras-Lanuf, and Zueitina export ports in September.

Production was between 270,000 bpd and 300,000 bpd before the ports were reopened compared to the 1.6 million bpd Libya was producing before the 2011 civil

war crippled oil production.

According to OPEC, Libya produced 363,000 bpd in September, representing an additional 188,000 bpd to the current production, Oil Price reports.

Oil production is expected to reach a three-year high of 900,000 bpd by December, as fields begin operations and ports reopen after five years of armed battle which hampered sales.

The country has increased oil output after the NOC signed a deal with Khalifa Haftar, commander of the armed forces controlling key oil ports in September.

CGG Gets Multi-Client Projects Offshore Mozambique

C

GG has announced it has been granted an extensive multi-client program by the Institute of National Petroleum of Mozambique (INP), to obtain seismic data offshore Mozambique.

Under the program, CGG will carry out a 2D survey of more than 6,550 km in the offshore Rovuma basin, including blocks R5-A, R5-B and R5-C, as well as a large 3D survey of up to 40,000 km², over the Beira High in the Zambezi Delta. The 3D survey will cover blocks Z5-C and Z5-D and nearby to open acreage in the deltaic area which is believed to hold prospects.

The geophysical services company was also awarded an onshore airborne gravity and magnetic survey in the Southern Mozambique Basin.

The planned multi-client seismic program in the Mozambique Zambezi region is to form part of a broad, fully integrated geosciences package that will give companies a better general understanding of the region. A Marine gravity and magnetic data will be procured all together with the seismic to support regional interpretation.

“This award underlines the extent to which our reputation for high-quality ser-

Orient Energy Review October, 2016

Jean-Georges Malcor, CEO, CGG

vices and delivering value to our clients is recognized not just by oil and gas companies but also by national governments. As our first multi-client projects in Mozambique, these awards fit well with CGG’s long-term multi-client strategy to provide our clients with the most advanced understanding of the subsurface across the world’s key basins. The 5th License Round award process undertaken by the INP in 2015 saw a high level of interest in the Zambezi region and we believe our multi-client projects will highlight the exploration upside potential,” Jean-Georges Malcor told Energy-pedia.

www.orientenergyreview.com

DRILLING/ EXPLORATION/ PRODUCTION

Angola: Armada Olombendo FPSO Vessel Set to Sail to Eni’s Block 15/06, offshore Angola

E *Oil workers.

Gabon Oil Workers Strike Cuts Output From Onal Field

A

strike in Gabon by oil workers at French company Maurel and Prom has cut production from the Onal field to 10,000 barrels per day from 28,000 b/d normally, according to a statement from the oil ministry recently.

The strike, which started on Monday, was related to staff being laid off for missing work during a period of unrest after the presidential election, the Gabon oil workers union ONEP said in a statement. * Reuters

Libya Resumes Production at Key Waha Oil Field

L

ibya resumed production at the Waha oil field recently bringing overall production to 580,000 barrels per day, a senior Libyan oil official said penultimate Tuesday.

The Waha field, operated by the Waha Oil Co, is one of the main contributors for the major Es Sider export grade. It is the first Es Sider field to resume production.

The output is being redirected to the Ras Lanuf export terminal instead of the usual Es Sider port owing to limited storage, the official, who declined to be identified, said.

Libya’s oil production has been crippled for several years by an on-and-off blockade of its largest export terminals owing to civil unrest.

www.orientenergyreview.com

ni has announced the naming ceremony of the ‘Armada Olombendo’ Floating Production, Storage and Offloading (FPSO) vessel which held in Singapore. The FPSO will operate in Block 15/06, offshore Angola, for the East Hub Development Project. The vessel will soon be ready to sail to its final destination where, once in position, will commence mooring and hook-up operations.

Eni and its partners have reached a key milestone towards achieving the first oil from East Hub Development Project, which is planned by the first half of 2017. This follows the successful stream of start-ups in the West Hub Project, in the same Block 15/06, which is the only Block of those awarded in the 2006 bid round that has achieved production.

The East Hub Development Project encompasses 9 subsea wells, of which 5 are producers and 4 are water injectors, in water depth ranging between 450 and 550 metres. The hydrocarbons which are produced from these wells will be transported via a pipeline system to the FPSO to be treated

Location of Eni’s East and West Hub Development Projects (Source: Eni)

and stored prior to export.

Eni is the Operator of Block 15/06 with a 36.84% stake. The other partners in the joint venture are Sonangol Pesquisa e Produção (36.84%) and SSI Fifteen Limited (26.32%).

Eni has been present in Angola since 1980 with net current production of 135,000 barrels of oil equivalent per day.

Tanzania: Solo Oil says Ntorya-2 appraisal well likely to be drilled by Q4 Oil in its update on the Ntorya appraisal well in Tanzania, has announced Sthatolo the site being prepared for the Nto-

rya-2 appraisal well has now been completed and the mobilization of the Caroil 2 rig from the Ntorya-1 well site is in progress.

The Ntorya-2 pad is situated about 1.5 km to the southwest of the Ntorya-1 well.

The rig and associated equipment presently being transported to the new site, will be rigged up and tested, and afterwards go through any necessary maintenance.

The company estimates that the Ntorya-2 appraisal well will possibly be drilled in December, 2016.

Solo Oil has a 25% interest in the Ruvuma Petroleum Sharing Agreement (PSA) which contains the Ntorya gas condensate first made in 2012 and the Ntorya-1 well which was tested at a rate of 20.1Mmscfd and 139bpd of condensate.

The Ruvuma PSA is operated by Aminex which holds the remaining 75% working interest.

Ntorya-1 in an independent report by Senergy (GB) has been said to hold a gross 153 bcf of gas in place, whereby 70 bcf is considered gross best estimate contingent resources. Another gross best estimate of undiscovered gas in place of more than 1 tcf

has been ascribed to the Ntorya Prospect in total.

The Ntorya discovery is situated 20 km from the 36” Mtwara to Dar es Salaam gas pipeline which transports gas from various fields, including the Kiliwani North Field where Solo holds a 7.125% interest, to gas markets, north of Tanzania, Energy-pedia reports.

“Advancing the Ntorya appraisal and its commercialization is now a key objective for Solo and we are pleased that rig mobilization is now underway. The discovery of gas in high quality Cretaceous sandstone reservoirs in the onshore portion of the Ruvuma Basin represents very significant value and we look forward to confirmation of the spud date in due course,” Neil Ritson, Chairman of Solo Oil said.

Orient Energy Review October, 2016

35

DRILLING/ EXPLORATION/ PRODUCTION

Nigeria’s Oil Reserves May Dry up in 30 Years, Experts Warn

T

he country’s crude oil reserves may dry up in the next 30 years, says Nigerian National Association of Petroleum Explorationists (NAPE).

President of the association, Nosa Omorodion, raised the alarm in Lagos at a media briefing to announce programme schedule for NAPE’s yearly conference.

He decried the lack of exploration in the country’s oil and gas sector, and called on the Federal Government to survey the Frontier Sedimentary Basins, which include Bida Dahomey, Anambra, Gongola, and Sokoto.

Nigeria’s crude oil production has been depleting in the last five years, dropping from 37 billion barrels to 28.2 billion, according to latest figure

from the Nigerian National Petroleum Corporation (NNPC).

The situation has also made NNPC Group Managing Director, Maikanti Baru, issue warning that the country could be facing more economic challenges given steady decline of its crude oil reserves.

According to Omorodion, there is the need for government and investors to look beyond the Niger Delta to other frontiers with potential for hydrocarbon resources.

“We must work hard to increase our reserves, which is presently low. This is not good for the country,” he said.

To increase the reserves, he said: “We need to go back to the basics, conduct credible licensing rounds, and incentivise exploration. Those were the glory years that led to assertions such as ‘scratch ground small and you will find oil’. The renewed exploration drive for frontier basin is commendable. It is, however, important to ensure that serious and meaningful engagement of members of host communities to foster security and sense of belonging exists,” he hinted.

To compliment government’s efforts in boosting exploration, Omorodion said NAPE would on November 14, 2016 host a pre-conference workshop on ‘Stimulating Investment Opportunities in Nigeria’s Frontier Basins’.

Mauritanian Government Signs Exploration and Production Contract with Kosmos Energy have recently been significant discoveries The Mauritanian government and Kosmos Energy of Mauritania have entered into an exploration and production contract, concerning Block C-6 located offshore northwest of Nouakchott, the Capital.

This E&P agreement which was signed between Mohamed Abdel Vatah, the Mauritanian minister of energy, and Andrew Inglis, CEO of Kosmos, is part of government’s policy to revive the oil industry.

According to the Energy Minister, the country, which became an oil producer in 2006, saw its production stabilized at 8,000 barrels per day rather than the initially planned 70,000 barrels, ensuring foreign exchange inflows of close to $12 million in 2015 into the country.

Kosmos Energy operates three offshore licences in Mauritania, which

36

Orient Energy Review October, 2016

of natural gas. Till date, the company has drilled three successful wells; C8, C12 and C13, offshore Mauritania.

The Tortue-1 and Ahmeyim-2 were drilled in the southern part of block C8 and made important discoveries in the Greater Tortue area. Kosmos also made another major gas discovery in the northern part of block C8 when its Marsouin-1 exploration well encountered at least 70 meters of net gas pay, signifying a substantial, play-extending discovery.

Ghana: Arnlea Wins Tullow Oil’s Inspection Contract

A

rnlea Systems has been awarded a contract to carry out inspection services for African-focused Tullow Oil Plc.The Aberdeen-based asset manager is to use its hazardous area inspection system, Intrinsix Ex, to carry out inspections on two floating production, storage and offloading vessels hired by Tullow Oil. The two vessels are to be used on the Jubilee and Ten fields offshore Ghana.Arnlea however, did not disclose the value of the contract, but said it won over £500,000 worth of new business with three major FPSO companies, including Modec, during H2 of 2016, according to Energy Voice.

“It is great testament to the cost saving and efficiency gains the Arnlea system can provide, especially in a constrained market.

Intrinsix Ex will allow Tullow to remain compliant, increase operational efficiency and achieve a return on investment well within the first year,” Allan Merritt, Arnlea managing director, said.

www.orientenergyreview.com

POWER

TOTAL Concludes Plans to Boost Nigeria’s Power Supply with $3bn

P

Pantami, the Director-General, National Information Technology Development Agency, said Africa hosts tremendous investment opportunities for technology-driven energy companies.

Pantami said: “From digital oilfields running on drones and robotics, to smart grids distributing electricity generated from renewable energy, the energy sector in Nigeria and Africa hosts tremendous investment opportunities.

“The meeting provides the opportunity for companies participating in GITEX to find new investment opportunities available in Nigeria under one roof.”

In a related development, Trixie LohMirmand, Senior Vice-President, Exhibitions and Events Management, Dubai World Trade Centre, said: “The energy, oil and gas sector in Nigeria and Africa is rapidly undergoing digital transformation.

“Key players can discover the latest innovations and business opportunities at GITEX Technology Week.”

ascal Dauboin, Senior Advisor for Digital Technologies, TOTAL, says the company is to spend $3 billion on energy modernisation programme in Nigeria to enhance efficient energy production and usage.

Dauboin made this known on Thursday during a meeting with Nigerian delegation at the Gulf Information Technology Exhibition in Dubai.

According to him, TOTAL aims to expand the electricity supply of Nigeria and create more efficient energy production and usage in the country.

He said: “The $3 billion energy modernisation programme aims to expand the electricity supply, create more efficient energy production and usage, and increase rural and semi-urban power access from 35 per cent to 75 per cent.

“TOTAL is at the forefront of adopting innovations such as drones, robotics, and early event detection systems to monitor and repair infrastructure.

“The new generations of sensors

will enable the development of new products for real time, on-line analysis, following the always increasing safety and quality requirements.

“Digitally transformed processes will increase performance, robustness and safety in many industrial domains, while building the job skills of tomorrow.”

Dauboin, therefore, urged other multinational companies to do more in supporting better energy infrastructures in the continent, especially in Nigeria.

He said: “Multinational companies’ experience of working in a multinational and multicultural context can help drive innovation across energy sector, by playing a leading role in supporting high-tech energy infrastructure projects in Nigeria and Africa at large.

“Nigeria is Africa’s largest oil producer, and the world’s fourth-largest liquefied natural gas exporter, according to the United States Energy Information Administration.

“In today’s interconnected world, the ability to find, share, and integrate knowledge from across the spectrum is essential.”

Dauboin said that TOTAL was rapidly undergoing a digital transformation, with a rapid uptake in innovative technologies that were driving digital oilfields.

Responding to the gesture, Dr. Ibrahim

By Sola Akingboye, FCT, Abuja

Senate Expresses Worry Over Liquidity Crunch in Power Sector

T

he Senate Committee on Power led by its Chairman, Senator EnyinnayaAbaribe, has expressed worry over liquidity crunch in the power sector just as they cast doubt on the financial and technical ability of the private investors in the power sector.

The Committee members who were on oversight visits to government agencies in the power sector were at the Nigerian Electricity Regulatory Commission (NERC) in the week. The lawmakers queried the reduction in cash collection which they claimed notched N15billion before privatisation but to about N5billion, even as electricity distribution companies relied on estimated billing rather than metered their customers.

Abaribe retorted, “Are you sure the privatisation of the power sector is producing the needed result with the underperformance by the new investors” even as he assured of his Committee’s readiness to give the needed empowerment to the Commission to ensure that it

www.orientenergyreview.com

perform its regulatory functions effectively.

Addressing the Committee members, the acting Chairman, Dr. Anthony Akah, said that the Commission was changing its regulatory approach from being soft handed as was adopted when the operators came on board three years ago to strict applications of rules and regulation to ensure operators in the value chain play by the rules and regulations.

Akah said that such strict applications of rules and regulations would be balanced with efforts to remove obstacles militating against optimal performance of licensees in the power sector.

He cited imposition of sanctions on erring operators in nine different instances within the last four months as indications of the change in regulatory tactics, even though some of the sanctions are been appealed in courts, he assured that the operators would be guided back on the track.

He listed some challenges to strict applications of rules and regulations as the inability of some of the critical stakeholders to meet the conditions precedent.

According to him, “the operators are hiding behind judicial proceedings to prevent post-

DWTC hosted GITEX Technology Week from October 16 to 20, 2016 in Dubai.

ing of letter of credit and possibility of escrowing their account,” thereby frustrating strict compliance with contractual obligations as well as causing liquidity problem in the sector.

Akah, however, assured that some of the electricity distribution companies which had initiated the court proceedings are beginning to see the futility of the exercise and may soon withdraw the suit they instituted.

He said that the Commission through its regulatory initiative facilitated 40 megawatts by Paras Energy in Lagos even as he advised the lawmakers to impress it on their respective state government to take interest in investing in the power which is on concurrent list in the constitution.

Experience in Nigeria, according to him, is not different from most other countries where power sectors have been privatised especially in the first five years when teething problems are managed but that Nigerians must begin to treat electricity as a product that has its cost of production.

Orient Energy Review October, 2016

37

GAS

Dangote Acquires Gas Processing Company in Netherlands

A

s part of moves to meet Nigeria’s energy demands, the management of Dangote Industries Limited has completed the acquisition of a gas company in Netherland.

According to the company in a statement, Twister BV, the company in question is a provider of robust solutions in natural gas processing and separation to the upstream and midstream oil and gas sector.

“This was an important acquisition for us. Twister’s cutting-edge gas processing technology is fundamental to delivering our strategy to unlock about three billion cubic feet per day of gas in order to meet Nigeria’s gas needs,” Aliko Dangote, President, Dangote Industries Limited, told CCTV Africa.

He added that Twister’s separation capabilities were intended to increase production and streamline processes in order to capitalize on high-yield gas processing to maximize revenues.

“The acquisition complements DIL’s portfolio of investments in the upstream, midstream and downstream segments of the oil and gas sector. The company will help design and build the gas plants, which will be critical in processing gas from oil fields for transportation via Dangote’s planned sub-sea pipeline for ultimate con-

Dresser-Rand compressors to handle OCTP gas offshore Ghana

S

sumption by various industries and power plants,” Twister said.

Twister BV was formerly owned by Shell Technology Ventures Fund 1 before the acquisition by Dangote and its partner, First E&P. The company’s gas plants are inexpensive to construct and operate, and delivers enhanced performance levels. The company has customers in Nigeria, Malaysia and South America.

“We are delighted by the confidence that the DIL and First E&P have shown in Twister to be their core provider of gas separation solutions. After very thorough due diligence, our technology has been recognized as a key enabler to reduce gas project costs, which is crucial in the current environment; we are excited to be part of the Dangote family of companies,” John Young, Chief Executive Officer of Twister said.

iemens’ Dresser-Rand business has won a contract to supply two compressor trains to an onshore gas reception facility in Ghana.

This will be supplied by non-associated gas from Eni’s Offshore Cape Three Points (OCTP) project: once onshore, the gas will undergo further compression for delivery into Ghana’s national network.

Eni Ghana commissioned the DATUM compressors, the first supplied

by Dresser-Rand to be driven by a Siemens gas turbine.

The two compressors are expected to be delivered in September and October 2017 with the plants expected to be fully operational in February 2018.

The centrifugal compressors, model D10R8B, to be driven by Siemens SGT-400 gas turbines, will be manufactured in Le Havre, northern France, with Dresser-Rand’s Hengelo facility in the Netherlands coordinating engineering, packaging, and testing of the equipment.

Oil Firms Back Nigeria’s Gas Development Agenda

Second Vice-President of Nigeria Gas Association (NGA), Mrs Audrey Joe-Ezigbo (left); first Vice President, NGA, Dada Thomas; Chairman/ Managing Director, Chevron Nigeria Limited, Clay Neff; President, NGA, Bolaji Osunsanya and Director, NNPC/CNL JV), Monday Ovuede during NGA’s courtesy visit to Chevron Nigeria Corporate Office in Lagos.

O

il and gas firms, including Chevron Nigeria Nigeria Limited, Energia Limited, and Lekoil have expressed support for Nigerian Gas Association (NGA) as it prepares to stage the largest gathering of gas players and stakeholders in West Africa later this month in Abuja.

Addressing the executive council members of the association during a courtesy visit to their various offices,

38

Orient Energy Review October, 2016

the companies expressed delight in identifying with NGA as the voice of industry in Nigeria, and its value propositions.

“Chevron delivered one third of domestic natural gas in 2015, helping to eliminate gas flaring and commercialising Nigeria’s natural gas resources in the process. Thus, Chevron’s partnership with Nigerian Gas Association is critical”, said Clay Neff, Chairman/Managing Director, Chevron Nigeria.

Chief executive, Energia Limited, Felix Amieye-Ofori said: “Considering our strategic development and growth plan along the entire gas-to-power value chain, we are glad to work with Nigerian Gas Association to ensure clarity on issues about the sector”.

Managing Director, Gas & Power, Lekoil, Shola Adekeye, said that as a new entrant into the gas and power sector, “we are glad to be part of NGA that will influence policies to proactively chart a new course for the sector”.

President, NGA, Bolaji Osunsanya, in his remarks said that the association has been very proud of Chevron and what it represents especially its gas utilisation projects, expressing appreciation to the company as “Chevron has been very supportive of NGA over the

years”.

Osunsanya also commended Energia for the vision to play in the entire gasto-power value chain in addition to its investments in refinery.

The NGA President applauded Lekoil for its “feat within a short while and its significant strides which has demonstrated possibilities within the sector.” adding that the forth coming International Gas Conference is a good platform for Lekoil to showcase and post their entrance into the gas sector.

Nigerian Gas Association seeks to promote investment in the sector, capacity building and entrenchment of standards amongst members through conferences, study groups and training in addition to working with government and legislators on policy issues. Amongst the critical issues that the association is currently canvasing include positioning gas as the new resource pride for Nigeria, shoring up gas reserves and re-visiting the Nigerian Gas Master plan to move the sector forward. *Guardian

www.orientenergyreview.com