May 2015 edition by Sweetcrude reports

Buhari’s

emergence as president-elect excites investors

$200m boost for Nigeria’s coal-to-power programme PgP/13 48

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A Review Of The Nigerian Energy Industry May, 2015

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Local banks stifling Nigerian content fund NCDMB allays concerns

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Nigeria set to heal after years of rape & plunder NNPC/NAPIMS goes rogue Buhari’s change mantra raises hope Operators want Nigeria Content sustained

Contents

2015 May, SweetcrudeReports

Editor’s note

his edition of your foremost energy publication is a special one. It provides a review of the state of the Nigerian oil and gas sector in the last five years. It also sets agenda for Nigeria's incoming President General Muhammadu Buhari (rtd), who assumes office on May 29. Besides, it is also packaged specially as an international edition for the purpose of the Offshore Technology Conference, OTC, 2015, holding in Houston,Texas, May 4-7; and where your SweetcrudeReports will, as usual, take its pride of place amongst leading oil and gas publications in the world. The 2015 OTC is a landmark one for us at SweetcrudeReports because we will hold the inaugural edition of our annual Nigerian Content Investment Forum, NCIF, which would be running alongside the OTC every year. NCIF is an event we have carefully packaged with the support of our partners to offer something really meaningful and beneficial to the Nigerian participants at the annual OTC, away from the jamboree that has often characterized Nigeria's participation at the conference.

Back to Nigeria's incoming government, General Buhari (rtd) certainly has an arduous task. After his election victory on March 28 and the back slapping in the euphoria of celebration, he must attempt to bring healing to a Nigerian oil and gas sector that has witnessed unprecedented rape and plunder in the last five years, which, incidentally coincides with the tenure of Mrs. Diezani Alison-Madueke as Petroleum Minister. In our cover story for this edition, we bring you a chronicle of the rape and plunder that characterised the industry within this period. It is a compelling story; one that could make you weep for Nigeria. Also, in this edition, we present you an in-depth report of how local Nigerian banks are stifling the Nigerian Content Development Fund put in place to to support contracts, projects and programmes of the Nigeria oil and gas service companies and related indigenous operators within the industry, plus the story of how Samsung Heavy Industries has shunned the Nigerian Content Law to award a United Kingdom-based firm, Bridon, a mooring cables supply contract for the Egina oil field.

NCIF is conceived as a platform for Nigerian oil and gas entrepreneurs seeking foreign partners to meet international companies, especially Original Equipment Manufacturers, OEMs, looking for opportunities in Africa. Indeed, it's a forum where prospects would meet opportunities.

If you love the above highlighted stories, I can assure you that the newspaper you have in your hands has much more stories you will find both exciting and informative on our website: www.sweetcrudereports.com.

Please, join us as we kick-off this all-important event at the landmark Houstonian Hotel in Houston, Texas at 3pm on May 4. Details at www.ncif.com.ng.

Please, enjoy, and don't forget to keep a date with us at the Houstonian Hotel for the Inaugural NCIF.

4 8 18 21 29 36 44 48 50 53 55 58

COVER

Nigeria set to heal after years of rape and punder

OIL

Crude oil production, export rise in January -CBN report

FOCUS Local banks stifling Nigerian content fund

GAS

Falling oil prices: Time to shift to gas?

POWER

Nigerians say electricity supply has worsened since privatisation -Poll

FINANCE Foreign investment inflow into Nigerian oil sector dips by N622m

LABOUR

Labour raises committee on new minimum wage

SOLID MINERAL

$200m boost for Nigeria’s coal-to-power programme

FREIGHT Stakeholders urge incoming govt to reposition maritime sector

MOTORING Automobile manufacturing in Nigeria: Prospects & challenges

TECHNOLOGY Reflection seismology

COMMUNITY Who really are these pipeline vandals?

EDITOR-IN-CHIEF Hector IGBIKIOWUBO EDITOR Chuks ISIWU ASSISTANT EDITORS Yemie ADEOYE Ike AMOS Eluonye KOYEGWUAEHI

SNR. CORRESPONDENT Oscarline ONWUEMENYI Sam IKEOTUONYE

GM, Marketing Nkem IGBIKIOWUBO

+234 08060249746

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Printed and Published by Sweetcrude Limited Plot 2191 Osiefa Crescent, ‘Amuwo Odofin, GRA, Lagos.

WEBSITE: www.sweetcrudereports.com Enquiries? Call: +234 08023145252

2015 May, SweetcrudeReports

Cover Story

2015 May, SweetcrudeReports

Nigeria set to heal after years of rape & plunder NNPC/NAPIMS goes rogue Buhari’s change mantra raises hope Operators want Nigerian Content sustained HECTOR IGBIKIOWUBO & OSCARLINE ONWUEMENYI

il industry operators, local and foreign energy enthusiasts and observers are of the consensus that Nigeria’s oil and gas industry has been through the most harrowing experience of its existence in the last five years, surviving what an erstwhile group executive director of the NNPC describes as a vicious cycle of rape and plunder superintended by the country’s first female petroleum minister, Diezani AlisonMadueke. Another services provider noted however, that g i v e n th e c u r r e n t r e a l i t y (President Jonathan’s loss of his re-election bid), the industry can at least start to heal. SweetcrudeReports investigation reveals that no agency of government reflects the ‘rape and plunder’ of the last four years as much as the activities of the Nigerian National Petroleum Corporation, NNPC’s, investment arm, the National Petroleum Investment Management Services, NAPIMS, which has gone rogue. The negatives narratives identified by operators who allude to the rape and plunder of the industry include but are not limited to: lack of effective industry leadership; lack of board meetings of the NNPC, resulting in the stunted growth of the corporation; subversion of projects’ contract tendering processes, inability to facilitate

passage of the Petroleum Industry Bill despite several promises and assurances; undue interference in the operations of the NNPC, leading up to replacement cum imposition of five group managing directors in 4 years; inability to rehabilitate the NNPC domestic refineries despite repeated promises; imposition of companies without any proven track record on projects, resulting in cost escalation; introduction of a fraudulent oil Swap programme shrouded in secrecy; petroleum subsidy payments to marketers, which spiked to an all-time high (with monies being paid to firms that supplied nothing); indictment by the Nuhu Ribadu Committee Report of the Petroleum Revenue Special Task Force; the petroleum minister’s refusal to appear before the House of Representatives to answer questions on a N10 billion scandal involving hire of a jet for her private use; allegations of impropriety regarding the award cum concession of oil assets of the Nigerian Petroleum Development Company, NPDC, to Atlantic Energy, resulting in loss of revenue to the federation account; allegations of nonremittance of revenue by the NNPC to the federation account; spike in crude oil theft in the Niger Delta despite award of multi-million dollar pipeline surveillance contracts to exmilitants, among others. The last five years also boasts of a success story in the establishment of the Nigeria Oil and Gas Industry Content

Diezani Development Act. Operators recall that the enactment of the Nigerian Content Act shortly after Diezani Alison-Madueke was appointed petroleum minister created a positive stir, leaving the industry with the impression that things were about to change. Despite the debilitating impact of these negative narratives, the victory of retired General Muhammadu Buhari at the presidential polls conducted in March and the ‘change’ mantra that characterised his campaign, as well as his well known zerotolerance for corruption appear to have permeated every strata of the Nigerian society, including business circles, raising hope for

Nigeria Content Investment Forum

Where prospects meet opportunities

the beleaguered oil and gas i n d u s t r y . Chronicle of Rape & Plunder SweetcrudeReports investigation reveals that at the time Diezani Alison-Madueke was appointed Nigeria’s petroleum minister in the second quarter 2011, the NNPC was neck deep in transition in line with the recommendations of its consultants. But this was brought to an abrupt halt; she quickly fired Mohammed Sanusi Barkindo, the Group Managing Director and brought in Shehu Ladan, who was replaced one month later by Austen Oniwon. A little after one year, Austen

Oniwon was replaced by Andrew Yakubu, who was later replaced by Joseph T. Dawha. Industry operators say these changes engendered an air of deep uncertainty in an industry buffeted left, right and centre by all manners of negatives both local and international. Mandatory periodic board meetings of the NNPC which had to ratify decisions on projects were reduced to a rarity. An NNPC official who spoke on condition of anonymity disclosed that the function of the Board was totally usurped by the minister who handed down instructions on what she wanted done. The fate that has befallen the NNPC

CONTINUES ON PAGE 5

Houston, Texas, May 4, 2015 For far too long oil & gas enthusiasts from Sub Saharan Africa, especially Nigeria visit the USA in search of technical partners, products and services. Most of them go back empty handed. We seek to change all of that. Enquiries: tukur70@sweetcrudereports.com, yemie@sweetcrudereports.com Powered by

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2015 May, SweetcrudeReports

and the minimal tax allowances for investment incentives on gas. Mark Ward, who is chairman and managing director of ExxonMobil Nigeria and the president of the Oil Producers Trade Section, OPTS, of the Lagos Chamber of Commerce, which includes Royal Dutch Shell, Total, Chevron, ExxonMobil, and Agip, said at a recent workshop organised in Lagos by Ernst & Young that tax terms in the bill are “so uncompetitive it risks rendering offshore oil and gas projects unviable, and could halt investments.” The OPTS said the effect of the PIB will be that: most gas projects will not go ahead; Nigerian government’s objective to triple power generation (using gas) will not be achieved; the new fiscal regime renders all new deepwater and several onshore projects uneconomic; Nigerian oil and gas sector will not be globally attractive; joint venture funding issues are not resolved; contract approval challenges are not resolved; there is lack of clarity around key terms; and investment will be lower as viability declines.

Diezani

Nigeria set to heal after years of rape & plunder CONTINUED FROM PAGE 4 applies to several other government agencies and organisations superintended by the petroleum minister - where managers operate under a cloud of fear and uncertainty. International oil companies, IOCs, operating in the country have often lamented the shortsightedness in policy implementation, and its impact on investment in the oil and gas industry. Many of them claim they have been forced to “adapt” to the ever-changing policy environment. Subversion of Egina project’s contracting process A typical case in point is the subversion of the contracting process surrounding the award of the $15 billion dollars Egina oil field development project. Despite the recommendation of NAPIMS, the NCDMB and Total that the contract for the FPSO be awarded to Hyundai Heavy Industries, HHI, the petroleum minister, working hand-in-glove with the NNPC group executive

council, which she controlled, awarded the $3.3 billion FPSO contract for the project to Samsung Heavy Industries. Almost three years later, with nothing tangible to show, Samsung has submitted a variation demanding over $300 million and the the petroleum minister has not done anything to reign in the cost escalation. Only recently, Samsung, in a clear disregard for Nigeria’s Local Content laws, awarded a mooring cables supply contract for the Egina oil field to a United Kingdom-based firm, Bridon. The PIB

Decrees that have administered the sector for about 50 years. It will also redesign the oil and gas governance structure (including the establishment of seven new institutions), commercialise and restructure the state-run NNPC, revise fiscal regime for onshore, shallow water and deepwater oil and gas production, and change the provisions for awarding, renewing and revoking licenses and leases. It was originally expected that when passed into law, the new law will take away the roundlyabused Presidential/Ministerial power of discretion, which has been at the root of corruption and mismanagement in the system.

The Petroleum Industry Bill, PIB, has languished in Nigeria’s legislative cauldron for more than seven years since it was first introduced. And as the bell tolls for the end of tenure of the current National Assembly, the PIB appears set for certain doom, yet again.

The PIB has nevertheless suffered interminable delays since it was first presented to the sixth National Assembly in 2008, which later abandoned it after some time-wasting legislative manoeuvres.

It is expected that when passed into law, the PIB will replace all existing oil and gas legislations, which include about 16 previous bills, and various Acts and

Oil industry operators contend that no bill in the history of Nigeria’s experiment with democracy has undergone as much political and economic

machinations as the PIB. Thus, from the goings-on since the very idea of an all-encompassing reform law for the nation’s oil and gas industry was muted, it seems that the PIB was always doomed to fail even before it was birthed. Opposition has come from oil multinationals, who have done as they pleased for decades; from entrenched interests within the bureaucracy; and from the corruption-ridden NNPC whose executives live large at public expense by exploiting the rampant opacity that defines its operations. IOC Disenchantment/Declining Investments The former managing director of Shell Nigeria, SPDC, Mr. Mutiu Sunmonu, sums up the sentiments of the IOCs about the PIB: “The PIB proposes multiple increased royalties and fiscal terms that will slow down new investments in deep water considerably. It will also exclude a number of legitimate costs from being recovered. Uncertainties around these issues are already stalling development of major discovered resources and discouraging companies from undertaking the aggressive exploration programmes they launched under the 1993 production sharing contracts (PSC)”. Basically the IOCs don’t like the PIB propositions and think it a bit draconian in its nationalistic tinge. They had expressed worries over the increase in the gas tax from 30 percent to 80 percent, increase in royalty payment from seven percent to 12.5 percent for big producers

The former Regional Executive Vice President of Shell Exploration and Production, Africa, Ms. Ann Pickard, dealt the most devastating blow on the ongoing negotiations between the NNPC and other stakeholders in the industry over the PIB, when she noted that the PIB lacks insight into the very basics of the oil and gas industry. According to her, the PIB threatens to make the present situation in the nation’s oil and gas industry worse. “If passed in the form currently proposed, its mistakes will take years to correct. Nigerians will have to wait longer for the electricity they need to light their homes at night. They will have to wait longer for the jobs they need to put food on the family table. The government will have to face difficult choices to balance the budget with less money available for the social services that the people need,” she stated. Pickard explained that Shell and other companies – both international and Nigerian – have extensively shared their thoughts and knowledge with government over the proposed industry reform bill. Domestic refining In the last four years, under Diezani Alison-Madueke, millions of dollars have been voted for the rehabilitation of the four refineries of the NNPC, yet none of these refineries: two in Port Harcourt, and one each in Warri and Kaduna, have operated optimally, calling to question the amount of monies spent so far. Subsidy Removal Over half of the Nigerian population lives under the poverty line of one dollar a day, with another quarter hovering

CONTINUES ON PAGE 6

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2015 May, SweetcrudeReports

Oil tank farm CONTINUED FROM PAGE 5 just above the line. Government policies that for decades provided social protection for the poor—through generalised subsidies for food and public utilities; free education and health services; and low cost housing—have all proven, over time, to be costly and inefficient. More importantly, these subsidies are no longer fiscally affordable. Worse still, in the last decade high economic growth rates averaging of 6 per cent a per annum, not only failed to “trickle down” and lift people out of destitution, but was in fact associated with a rise in the country’s poverty. Indications are that the subsidy-based policies increased the poor’s dependence on government assistance for survival and further squeezed the state budget. SweetcrudeReports checks reveal that in the last 10 years, the Nigerian government paid the following amount of money as subsidy cost on petroleum: N151.9 billion in 2006, N188 billion in 2007, N256.3 billion between January and July of 2008, N421.5 billion in 2009 and N673 billion in 2010.

payment in 2012 but at the end of that year, it had shot up to N1.049.6 trillion. In 2013, N971 billion was budgeted for payment of petroleum subsidy. In the 2014 budget, provision for petroleum subsidy payment to marketers was retained at the previous year’s level of N971.1 and indications are that by the time a review of the total outflow is tallied it would exceed the one trillion Naira mark. The government is proposing to spend N458.68 billion on subsidy in 2015, but it is early days yet to determine what the final tally would amount to. In January 2012, the government removed petroleum subsidy which had clearly become unmanageable and this resulted in a nationwide protest. Shortly, after the protest, the House of Representatives instituted a probe by an ad-hoc committee headed by Farouk Lawan ‘to verify and determine actual subsidy requirements and monitor the implementation of the subsidy regime in Nigeria’. The committee report established that the subsidy regime operated between 2009 and 2011 was fraught with endemic corruption and entrenched inefficiency.... “the Committee established subsidy payment of N2,587.087 trillion as at 31st December, 2011 amounting to more that 900% over the appropriated sum of N245 billion”.

In 2011, the Petroleum Products Pricing and Regulatory Agency, PPPRA, a government body charged with managing petroleum imports and determining subsidy payments was mysteriously moved from the “This figure of N2,587.087 supervision of the presidency to trillion is based on the CBN the ministry. figure of N844.944 billion paid to At the end of 2011, the NNPC, in addition to another petroleum ministry under figure of N847.942 billion D i e z a n i A l i s o n - M a d u e k e reflected as withdrawal by approved the payment of N1.3 NNPC from the excess crude trillion in subsidy claims to Naira account, as well as the petroleum marketers. Strangely, sum of N894.201 billion paid as this amount was reviewed up to subsidy to marketers. The figure N2.19 trillion under the excuse of of N847.942 billion quoted paying arrears. N888 billion was strongly suggests that NNPC earmarked for petroleum subsidy might have been withdrawing from two sources especially

Rape and plunder in oil/gas when the double withdrawals were also reflected both in 2009 and in 2010.” The Committee Report disclosed that NNPC was not accountable to anybody or authority (except of course the petroleum minister). In 2011, under Diezani AlisonMadueke’s watch, the NNPC processed payment of N310.4 billion as 2009-2011 arrears of subsidy on kerosene, ‘contrary to a presidential directive which removed subsidy on kerosene in 2009. The corporation also processed for itself, direct deduction of subsidy payment from amounts it received from other operations such as joint venture before paying the balance to the federation account, thereby depleting the shares of states and local governments from the distributable pool. The direct deduction in 2011 alone, which was N847.942 billion, was done without any provision in the Appropriation Act. Among other things, the committee recommended that all those in the management and board of the NNPC directly involved in the infractions identified for the years 20092011 should be investigated and prosecuted for abuse of office by the relevant anti-corruption

agencies. However, this has not been the case. Whereas, small time marketers have been picked up at random and a pretence made at prosecuting them, the recommendations of the House of Representatives committee has been largely ignored – NNPC officials and the Minister of Petroleum Resources, who superintended the rape and plunder of the sector have carried on with business as usual. Oil Swap Programme In 2013, the Nigerian ministry of petroleum resources introduced a crude oil ‘Swap programme’ which entailed the petroleum minister using her discretion to allot crude oil volumes originally designated for domestic refining by the NNPC to companies she choose. The NNPC gets allotted 445,000 barrels of crude oil per day for domestic refining and our investigations revealed that the petroleum minister used her discretion to allot 260,000 barrels of this volume to six c o m p a n i e s . Further checks to determine the contractual obligations of the companies involved in the crude oil ‘Swap programme’ has met a brick wall.

The Petroleum Revenue Special Task Force Although the Petroleum Revenue Special Task Force headed by Mallam Nuhu Ribadu was instituted by the minister of petroleum resources, its report indicted the government, the NNPC, international oil companies and the minister of petroleum resources for all manner of malfeasance ranging from extra-budgetary expenditure to unwholesome deployment of discretion, among others. The report detailed how the NNPC under the minister’s watch treat oil revenues which should accrue to the federation account as reserve of money that could be used for illicit purposes without accountability. N10 billion private jet scandal As if the ministry of petroleum resources and the NNPC didn’t have enough scandal to contend with, sometime in 2014 federal lawmakers in the House of Representative revealed they had uncovered a whopping expenditure in excess of N10 billion spent by the NNPC paying for the hire of jet planes for the use of the minister of petroleum resources. Lawmakers identified two aircrafts, a Challenger 850 and a Global Express XRS, used by the minister. However, reports have it that the owners of the Challenger 850 fled the country when lawmakers embarked on an investigation. When confronted, the NNPC denied any wrong doing, noting that in the course of its operations, the corporation could own or charter aircrafts. On her part, when invited to appear before the lawmakers to explain the circumstances

CONTINUES ON PAGE 7

Cover CONTINUED FROM PAGE 6 surrounding her use of private jet, the minister obtained a court order restraining the lawmakers. The judge ruled that even though the lawmakers had the powers to invite the minister, they did not follow due process. NNPC/NAPIMS goes rogue: Imposes companies on the Bonga SouthWest/Aparo unit field development Operators note that probably emboldened by the seeming inability of the lawmakers to reign in the excesses of the minister, the NNPC/NAPIMS, one of the agencies the minister superintends, has completely gone rogue. SweetcrudeReports investigation has uncovered a letter written and signed by Jonathan Okehs, the Group General Manager of NAPIMS, the investment arm of the NNPC, which amply captures the excesses that has permeated the very fabric of decency that once ruled the operations of the NNPC. The letter titled: Bonga SouthWest/Aparo Unit Field Development Project, EPC 2Pipelines, Flowlines, Risers & Offshore Installation Services (Approval of Technical Evaluation Result), was addressed to the Shell Nigeria Exploration and Production Company, SNEPCo. The NAPIMS helmsman directed the company to only progress bidders whose technical proposals had passed the minimum threshold of 60% to the commercial stage of the tender. Under the guise of deepening Nigerian Content, Mr. Okehs instructed that bidders should progress to the commercial stage strictly on the following basis: “Incorporate FODE-EMAS in their consortiums specifically for the transportation, load-out and installation of sub-sea umbilicals (static & dynamic) and all offloading lines, which is well within the capacities of EMAS excellent fleet of reel lay vessels. “FPSO towing from South Korean Yard to in-country integration yard and from integration yard to offshore location should be done by Bluewater Shipping/GMT Energy Resources Limited. “ O f f s h o r e M a r i n e vessels/logistics services is provided by CNS Marine Nigeria Limited. “Provision of Industrial Gas and PipelineProcess Services for in-country fabricated items is done by LB Energy Limited and Global Process & Pipeline Services Limited. “Blasting & painting services for in-country fabricated items is provided by Iron Ox Metalworks Nigeria Limited and Lavie Energy Limited. “Freight forwarding & logistics management services is provided by Basle Line Nigeria Limited". When contacted, Mr Okehs said, “I would suggest you check

2015 May, SweetcrudeReports

the facts and then publish. As long as you are sure of your facts, there will be no problems. And I suppose you know what credible journalists do in these situations”? Industry operators who did not want their names in print say t h e y a r e al ar m ed at t he brazenness exhibited by NAPIMS regarding the imposition of the aforementioned companies, while noting that the imposition ha resulted in cost over-run of the affected projects.

Rape and plunder in oil/gas

“It is inconceivable that NAPIMS would seek to impose companies which did not participate in the technical evaluation on a process as a basis for progressing successful bidders to the commercial stage. It has never happened in this industry before and it speaks volumes for how low the management at NAPIMS have sunk,” one of the operators volunteered. A ranking personnel at the NNPC who also spoke on condition of anonymity disclosed that the NAPIMS GGM does not have “the balls to write such a letter to SNEPCo without the active approval of the minister of petroleum resources”. “Under the current dispensation, NNPC is just a rubber stamp and the NAPIMS GGM takes instructions directly from the minister of petroleum,” the NNPC personnel disclosed. In his reaction to the

Oil rig contract to support BSW/Aparo project has encountered some delays. SNEPCo remains optimistic that an FID in the 2015/16 timeframe under the right condition is possible. We

don’t

comment

Provision of Industrial Gas and PipelineProcess Services for incountry fabricated items is done by LB Energy Limited and Global Process & Pipeline Services Limited

bank. An independent audit led by PriceWaterHouseCoopers, to determine what amount of money was actually outstanding, was later instituted by the government. And the final report showed that $1.48 billion hadn’t been remitted. Pipeline contracts

surveillance

Under the watch of Diezani Alison-Madueke the NNPC has paid hundreds of millions of dollars to ex-militant warlords for the protection of crude oil pipelines and facilities. Yet, the country also recorded the highest volume of crude oil shut-ins and corresponding theft within the same period. Buhari’s change mantra raises hope

development Mr. Ohi Alegbe, the group general manager in charge of public affairs at the NNPC said “there is no truth in the matter that the minister of petroleum added a list of bidders through the GGM". “It was the GGM’s effort to further increase Nigerian Content in areas hitherto not considered for Nigerian Companies. Some selected companies were included based on competencies exhibited in the areas,” he said. The NNPC spokesman concurred that the letter in question emanated from the GGM NAPIMS, adding that “there is no foul play”. He also noted that there is no cost overrun since the project is yet to be approved. When contacted, Mr. Precious Okolobo, the manager in charge of media at Shell Nigeria said: “the tender process for the EPC

confidential business discussions with our contractors”. CBN alleges $20 billion oil revenue unremitted In the 3rd quarter of 2013, Dr. Ngozi Okonjo-Iweala, the Nigerian minister of finance and coordinating minister for the economy, queried the NNPC management, asking them to account for over $9 billion of unremitted funds. Shortly thereafter, the governor of the Central Bank at the time, Sanusi Lamido Sanusi joined the fray noting that over $49 billion in oil revenue hadn’t been remitted. The saga culminated in the exit of the CBN governor determining that a figure of $20 billion remained unremitted. Owing to the CBN governor’s uncompromising disposition insisting that monies hadn’t been remitted, President Jonathan demanded that he proceeds on terminal leave from the apex

Infected by the change mantra which swept retired General Muhammadu Buhari to victory, even though some have rather adopted a ‘wait and see’ attitude, most operators are hopeful that some measure of change will be witnessed in the oil and gas industry. “Given the rot in the system, the General Buhari administration would require more than the just mouthing change because there are tough decisions to be made,” a former managing director of the NNPC who did not want to be quoted volunteered. “The NNPC has always been an easy source for any administration to obtain easy funds without appropriation even before it is retired to the federation account. It will take an iron will not to succumb to the allure of such access to dispense favour.” Alluding to the broom stick symbol of General Buhari’s

political party, the All Progressives Congress, the former NNPC helmsman said “he will need a bigger broom, nay, a turbo-charged, efficient vacuum cleaning system if he hopes to make any impact on the industry”. Nigerian Content Act Operators opine that the passage of the Nigerian Content Act and subsequent establishment of the Nigerian Content Development Monitoring Board, NCDMB, in April 2010 shortly after Diezani Alison-Madueke’s appointment as petroleum minister, created the impression that the industry was on the cusp of a positive turnaround. Well intentioned and created for the right reasons, industry operators say the full potentials of the Board has not been realised owing to a number of factors including non-passage of the PIB which has impacted investor confidence and inability of the NNPC and petroleum ministry to move projects caught up in the tendering cycle along in a timely manner. The responsibilities of the board include but are not limited to the following: Increase indigenous participation in the oil and gas industry; Build local capacity and competencies; Create linkages to other sectors of the national economy; and boost industry contributions to the growth of the National Gross Domestic Product. Operators hail the initiative behind the Nigerian Content Act and the activities of the Board as a success story which the incoming administration must sustain and nurture to enable the Board grow Nigerian Content to its full potential.

Oil

2015 May, SweetcrudeReports

Central Bank of Nigeria headquarters, Abuja

Crude oil production, export rise in January –CBN report OSCARLINE ONWUEMENYI

igeria's crude oil production and exports rose in January, in spite of numerous handicaps, including widespread vandalism of oil pipelines and the global slump in price of oil. The Central Bank of Nigeria, CBN, said in a document obtained by SweetcrudeReports in Abuja that despite a 23.7 per cent fall in price, the volume of Nigeria’s Bonny Light crude oil produced and exported in the month of January increased by 2.6 per cent and 3.5 per cent rtespectively when compared with the figure for December 2014. The Central Bank pointed out that the fall in oil price was not peculiar to the Bonny Light as the average prices of all other competing crudes fell below their levels in the preceding month. The document revealed that crude oil and natural gas production was estimated at an average of 1.95 million barrels per day, indicating an increase of 0.05mbd or 2.6 per cent above the average of 1.9 million bpd recorded in the month of December. Similarly, crude oil export during the period under review

increased by 3.5 per cent, while deliveries to refineries for domestic consumption remained at 13.95 million barrels. According to the CBN, “Nigeria’s crude oil production, including condensates and natural gas liquids, was estimated at an average of 1.95 million barrels per day or 60.45 million barrels for the month (January). This was 0.05 mbpd or 2.6 per cent above the average of 1.90 mbpd or 58.90 million barrels produced in the p r e c e d i n g m o n t h . “Crude oil export was estimated at 1.50 mbpd or 46.50 million barrels for the month. This represented an increase of 3.5 per cent above the 1.45 mbd recorded in the preceding month. Deliveries to the refineries for domestic consumption remained at 0.45 mbd or 13.95 million barrels during the review month.” On global crude oil, the bank noted that the prices of the Organisation of the Petroleum Exporting Countries’ basket of 11 crude streams declined by 23.4 per cent in January, as against the average recorded in December. The document further noted that, “At an estimated average of $48.21 per barrel, the price of

Crude oil export was estimated at 1.50 mbpd or 46.50 million barrels for the month. This represented an increase of 3.5 per cent above the 1.45 mbd recorded in the preceding month Nigeria’s reference crude, the Bonny Light, fell further by 23.7 per cent below the level in the preceding month. The average prices of other competing crudes,

namely: the West Texas Intermediate at $47.19 per barrel; the United Kingdom Brent at $47.46 per barrel; and Forcados at $48.60 per barrel,

also showed similar trends as the B o n n y L i g h t . “The average price of OPEC’s basket of eleven crude streams, at $44.99 per barrel, indicated a decline of 24.3 and 57 per cent, compared with the $59.46 and $104.71 per barrel recorded in the preceding month and the corresponding period of 2014, respectively,” the CBN said in the document. Global crude oil prices have recorded unprecedented decline since the third quarter of 2014, a development that prompted stringent austerity measures in various countries, including N i g e r i a .

Norway's Scana to supply mooring equipment for Ghana FPSO

orway’s Scana Industrier ASA's subsidiary, Scana Offshore Vestby, would be suppling mooring equipment to Yinson Production (West Africa) Pte Ltd. in Singapore. The equipment will be used on an floating, production, storage and offloading, FPSO, facility for Ghana’s Offshore Cape Three Points (OCTP) Development Project.

This is the first time that Scana is delivering equipment to Yinson Production and “is considered an important breakthrough for the company’s products and technical solutions,” Scana said in a press release. The contract will take effect immediately, with delivery of the mooring equipment scheduled for the fourth quarter of this year.

2015 May, SweetcrudeReports

Oil

Samsung shuns Nigeria content, awards mooring contract to UK firm

Samsung Heavy Industry yard IKE AMOS

n an apparent disregard for Nigeria’s Local Content laws, Samsung Heavy Industries has awarded a United Kingdom-based firm, Bridon, a mooring cables supply contract for the Egina oil field. The contract, according to a statement by Bridon, is scheduled for delivery by the end of September this year. Doncaster-based Bridon supplies wire and fire rope, with a design life of 25 years, each complete cable reel will weigh an impressive 185 tonnes, or more than 15 double decker buses. Commenting on the deal, Andy Dodwell, Bridon's Commercial Director, said: “This demonstrates another significant achievement in our manufacturing capabilities, being the longest mooring cable Bridon has manufactured for more than a decade. "Samsung Heavy Industries placing their confidence in us for this critical project mooring demonstrates Bridon's position and status in technology leadership.” The Egina oil field is located 150 kilometres off the coast of Nigeria and covers an area of up to 500 square metres. Oil

reserves are estimated at 550 million barrels. The statement noted that the Bridon Technology Centre in Doncaster is one of the world's most advanced facilities for the development and testing of offshore ropes. It added that the £5 million high-tech hub is a state-of-theart facility, opened in 2013 to drive forward and enhance Bridon's research and product development capabilities. Continuing, Dodwell said: "We have significantly developed our global service offering, investing in purpose-built testing equipment. As a result of our innovations, the largest, most advanced ropes ever made are being sold around the world from Britain, helping to solve the challenges our modern offshore industries face.” Formerly British Ropes Limited, the company was formed in 1924 from an amalgamation of wire rope and fibre rope manufacturers, the earliest of which date back to the late 18th century. Bridon was acquired by Ontario Teachers’ Pension Plan in November 2014 from Melrose Plc for £365 million. Total sales in 2013 were £266.4m. As part of the sale, former owner Melrose will

The contract, according to a statement by Bridon, is scheduled for delivery by the end of September this year

contribute £6.7m into the Bridon Group 2013 Pension S c h e m e . Earlier this year, the firm

acquired Norwegian business ScanRope - a 77-employee manufacturer of steel and fibre deep water mooring

systems - from the Parker Hannifin Corporation. Bridon chief executive Jonathan Templeman said the acquisition was exciting and strengthened their position as the clear market leader in the sector. The group operates 12 factories worldwide with technical and sales offices, supported by a global network of agents and distributors. It has four factories in the UK, located in Doncaster, Coatbridge, Willington Quay and Neptune Quay.

Petrobras draws down $3.5bn Petrobras’s new financial director Ivan Monteiro signed the loan agreement during a visit to China this week, and outlined plans to tap the facility again in the near future. The loan will be issued in the 2015-16 period and is part of a co-operation agreement between the two entities.

Oil Platform

etrobras has signed up for a first $3.5 billion tranche from a debt facility agreed with the China Development Bank, CDB, the Brazilian oil company announced.

Faced by tighter credit conditions now than has been the case in recent years, Petrobras is laying the ground for a rationalised version of its colossal investment plans in May or June.

Oil

2015 May, SweetcrudeReports

Buhari’s

emergence as president-elect excites investors …Anti-corruption stance to drive industry recovery OSCARLINE ONWUEMENYI

eactions from the Nigerian oil industry to the election of former military ruler Muhammadu Buhari as the country's next president are overwhelmingly positive, with some officials predicting that suspended oil projects could be revived and even the once-feared militant group, the Movement for the Emancipation of the Niger Delta, MEND, welcoming his election. Buhari, who ruled Nigeria between 1983 and 1985, secured 15.4 million votes to defeat incumbent Goodluck Jonathan who secured 12.8 million votes, according to the electoral umpire, the Independent National Electoral Commission. Industry sources, who had previously feared that a Buhari victory could trigger violence in the oil-rich Niger Delta region, said the fact that the election was mostly transparent and was adjudged so by local and foreign observers had doused the expected tension. According to the Managing Director of Danvic Petroleum International Corp., Mr. Mayowa Afe, "That the election was fairly peaceful and the results declared without any rancour has helped to clear the uncertainty that trailed the election and will restore investors' confidence in Nigeria.” An industry analyst, Victor Eromosele, added, "That the election is seen to have been fairly peaceful should remove fears of likely unrest in the country, the oil region especially. Expect to see many of suspended projects back on track soon.” The rescinding fears over a new outbreak of violence in the oilproducing Niger Delta region was further bolstered after militant group, the Movement for the Emancipation of the Niger

Delta, MEND, which terrorised Nigeria's oil industry for years, described the emergence of Buhari as the "right choice.” "The Nigerian people have spoken and elected Muhammadu Buhari to be the next president of Nigeria," MEND said in an emailed statement signed by the group's spokesman under the usual pseudonym, Jomo Gbomo. "In doing so, we have not only made the right choice of a new leadership, we have also reaffirmed the strength of our democracy," it said. Officials from western oil companies, however, expressed cautious optimism over the emergence of a new administration, and urged Buhari, who is expected to be sworn in May 29, to move quickly to tackle crude oil theft. "There is still palpable tension in the oil region, like in (southern) Rivers State. However, one would expect that the incoming administration will give priority attention to stop oil theft as promised," said an official who declined to be named. While state oil firm, Nigerian National Petroleum Corporation, declined official reaction, some at the company expressed optimism. "We are expecting, for once, a change in administration of the corporation. I can tell you that the NNPC was headed in wrong direction, but I think with the emergence of a new government, that will be reversed," an NNPC source said. Meanwhile, traders active in both the Nigerian crude and gasoline markets said they did not expect any immediate change in the sector following the change in leadership, though differences in approach were likely to emerge in due course. “I don't think Buhari's election

Buhari

will have any effect in the short term. On the other hand, longerterm, the composition of the government will have an uncertain impact in the Nigerian market," a European trader said.

Southern England 'brimming' with onshore oil

"So far we haven't seen

While state oil firm, Nigerian National Petroleum Corporation, declined official reaction, some at the company expressed optimism anything out of the ordinary in the market," another trader said. A third trader said he expected "oil equilibriums" to change in the coming months as leading officials in the Nigerian oil sector are replaced. But in terms of Nigerian gasoline imports, a source said the importing companies were "well established" and it would be "difficult to replace them.”

nalysis of a well in southern England's Weald Basin shows that the region could be brimming in onshore oil.

So says junior exploration company UK Oil & Gas, which reported that US petrophysical analysis firm Nutech has estimated that the Horse Hill-1 well near Gatwick Airport, south of London, has total oil in place of 158 million barrels per square mile, according to a RigZone report. Nutech's report states that oil in place at the Horse Hill-1 well lies within a 653-foot aggregate net pay section, primarily within Argillaceous limestone and interbedded mudstones of the Kimmeridge Clay Formation as well as in the mudstones of the Oxford and Lias sections. Approximately 72 percent of the oil in place (114 million barrels of oil) lies within the Upper Jurassic Kimmeridge interbedded limestone and mudstone sequence. The Horse Hill licenses cover 55 square miles of the Weald Basin. UK Oil & Gas holds a 20.36-percent interest in these licenses. UK Oil & Gas CEO Stephen Sanderson commented in a company statement: "Drilling the deepest well in the basin in 30 years, together with the ability to use concepts, techniques and technology unavailable in the 1980s, has provided new cuttingedge data and interpretations to comprehensively change the understanding of the area's potential oil resources. "As a result, we believe that, in addition to the Portland Sandstone oil discovery, the Horse Hill well has discovered a possible world class potential resource in what is interpreted to be a new Upper Jurassic 'hybrid play'.” In a separate statement Ken Cronin, chief executive of onshore trade body UKOOG, added: "We have been drilling for oil and gas onshore in the UK for over 100 years. There are a number of sites in the south of England that have been producing oil for many years with great care for the environment and with no impact on local communities.

Oil

2015 May, SweetcrudeReports

Oil pipeline

Pipeline vandalism: Nigeria records 50 cases in six months - NNPC KUNLE KALEJAYE

he nefarious activities of vandals on Nigeria's crude oil and gas pipelines rose to an unprecedented level in the last six months with the country witnessing 50 cases of vandalism within the period, according to the Nigerian National Petroleum Corporation, NNPC. NNPC's Group Executive Director (Gas and Power), Dr. David Ige, made this known at the 12th annual Aret Adams Memorial Lecture in Lagos, where he spoke on the theme, 'Gas: An engine of growth for Nigeria'. Dr. Ige said vandalism of the pipelines had truncated government's efforts at achieving steady power generation through adequate supply of gas-to-power plants, as he maintained that gas remained the engine of economic growth ? for the country being as source of energy for the power sector. He noted that as part of efforts to make gas more readily available to power stations, the Lagos-Escravos pipeline extension construction will be completed in August, this year, to make the pipeline the largest in Africa

Besides power, he said, other sectors of economy that need gas are the manufacturing and fertiliser ? industries. "There is a gas agreement to supply gas to various plants such petro-chemical ? plants, fertiliser plants, power plants and manufacturing plants. The Indorama fertiliser plant will be ready by the end of 2015 and thousands of jobs will be created for Nigerians," Dr. Ige said. He however admitted that the government's gas market reform which started 10 years ago will take time to yield the desired result. Managing Director, Frontier Oil Ltd, Engr. Thomas Dada, who was the second speaker at the event, stated that though gas revolution has started in Nigeria, the tempo of the revolution was still slow. He explained that in the next 10 to 15 years, there would be significant improvement in the utilisation of gas to improve quality of life in the country. "For example, if you turn gas to power, it means that the hair dresser can do her business properly, the factories can produced their goods and people can be employed locally to generate jobs, and that can only be good for the Nigerian people. "It also means that when you finish work and you go to your house, there is constant power

He noted that as part of efforts to make gas more readily available to power stations, the Lagos-Escravos pipeline extension construction will be completed in August

for you to use, to cook, turn on the air conditioner, the TV and the likes before you go to work the next day. â&#x20AC;&#x153;This means a major improvement in the quality of life for every individual. So, there is both the economic benefit and also the personal benefit of improved power supply from gas, he said.

Russian oil output hits new post-Soviet high

ussian oil output edged up 0.6 percent in March to a post-Soviet high of 10.71 million barrels per day on increased production at Gazprom and Rosneft, according to Energy Ministry data. The output topped December's high of 10.67 million barrels per day (bpd), the data showed. The data includes output for crude oil and gas condensate which reached 45.275 million tonnes in March, versus 40.696 million the month before. Crude oil exports through oil pipeline monopoly Transneft rose by 2 percent to 3.91 million bpd, the ministry said. Oil and natural gas production accounts for half of Russian budget revenue, which has been hit by a 50

Oil production in the Arctic percent plunge in oil prices since June and Western sanctions over Moscow's involvement in the U k r a i n e c r i s i s . Oil and gas condensate production at Gazprom, the world's top natural gas producer, jumped by 14 percent in March from February. Rosneft, the world's largest listed oil producer

by output, increased its crude oil production by 0.2 percent to 3.81 million barrels per day thanks to higher output from its Vankor oilfield in eastern Siberia. Gas production was at 55.52 billion cubic metres, bcm, last month, or 1.79 bcm a day, versus 53.86 bcm in February.

Oil

2015 May, SweetcrudeReports

Q2 petroleum import allocations down 50%

Fuel import jetty OSCARLINE ONWUEMENYI

the performance in the first quarter,” a PPPRA source said.

uel importation into Nigeria in this second quarter of the year would be down 50 per cent as the government has issued permits allowing 1.5 million metric tonnes, MT, in petroleum imports for the period.

Nigeria was hit by petrol shortage in early February after marketers cut back imports under the Q1 programme following continued delays by the government to settle more than N264 billion ($1.41 billion) in debts owed on subsidies for previous imports.

The government, thus, slashed first quarter permitted volumes in half after private companies demanded the lower allocations due to rising import costs and a government subsidy dispute. The Petroleum Products Pricing Regulatory Agency, PPPRA, issued permits for around 3 million MT of petrol in Q1, which the agency said at the time was to cover for the nearlyabsent output from domestic refineries.

Import costs have also risen following the devaluation of the local currency, the naira, and higher bank charges. Industry officials said at the time that while the government has paid N100 billion of the total outstanding subsidy debt, marketers were concerned the debt may continue to mount even on Q2 imports, particularly as they come after the presidential election on March 28.

“For the second quarter, all major marketers reduced their request for allocation because even they have stagnated on meeting Q1 allocations,” said Femi Lawore, spokesman for the Major Oil Marketers Association of Nigeria, MOMAN, an umbrella group for the main fuel marketing companies in Nigeria.

The PPPRA also reduced the number of import permits to 36, from 42 in previous quarters, sources at the agency said. Despite being Africa’s top crude exporter and producing around 2 million barrels of oil per day, Nigeria imports more than 85% of its refined oil products needs due to poor performance of its domestic refineries.

Q2 permits were issued to marketers March 18-20. “Their allocations were halved based on

It imports petroleum products through two sources: PPPRA allocations to private

companies and swap agreements by state-owned Nigerian National Petroleum Corporation, NNPC, with providers to exchange crude oil for gasoline. NNPC, which manages the refineries, has said it was repairing the four state-run refineries to raise capacity utilisation to 90% of the combined total of 445,000 barrels per day, from the current low of around 10%.

Libya's AGOCO producing 317,000bpd L

ibyan state firm Arabian Gulf Oil Company, AGOCO, is producing 317,000 barrels per day (bpd), the highest level in the last two years, the company's spokesman has said. Libya now produces around 600,000 barrels of crude per day, less than half the 1.6 million bpd it produced before the fall of strongman Muammar Gaddafi in 2011. Several oil ports and major fields have been closed by fighting but the two biggest ports, Ras Lanuf and Es Sider with a combined capacity of 600,000 bpd, may open soon, officials say.

Gas production was over 2 billion cubic feet per day last week. Crude revenues are at the heart of a battle for control of the North African OPEC producer that has pitted the two rival governments against each other in a

growing conflict.

Libya's internationally recognised Prime Minister Abdullah al-Thinni said on Sunday his government would run its own oil sales and deposit revenues abroad in a bid to divert proceeds away from a rival self-declared administration in Tripoli.

But the Tripoli-based National Oil Company (NOC) still handles all oil sales and revenues, and AGOCO - although located in eastern Libya - is an NOC subsidiary. NOC has tried to stay out of the conflict between the rival governments. Ports and oilfields are also the favourite target of both militants loyal to the Islamic State group and local protesters with their own specific demands. A source from the Brega oil point near Benghazi said on Monday that the port and Sirte Oil Company, located in the port area, have been closed by protesters over the past week.

Oil

2015 May, SweetcrudeReports

OSCARLINE ONWUEMENYI

he Nigerian N a t i o n a l P e t r o l e u m Corporation, NNPC, has blamed it's inability to pay the high cost of maintenance proposed by original builders of its four refineries for their current poor optimisation s t a t e . The corporation however, assured that the refineries, located in Warri, Kaduna and Port Harcourt, would roar back to life early next year. Officials of the Corporation, disclosed this when they appeared before the Senate Committee on Petroleum (Downstream) investigating some events in the oil and gas industry, stating that the corporation could not afford the outrageous bills for their maintenance from the builders. Giving account of the state of the refineries before the Senate Committee, the NNPC’s Coordinator, Corporate Planning and Strategy, Dr. Tim Okon, said when the corporation invited the builders from Japan and Italy for turn-around maintenance, they refused to come. Instead, he said they recommended Saipem, a foreign firm operating in Nigeria - to carry out the turn-around maintenance on their behalf. While the Port Harcourt and Kaduna refineries were built by two Japanese firms Chiyoda and Japan Gas Corporation, JGC, the Warri Refinery was built by Snamprogetti of Italy. According to him, when Saipem eventually came, it offered to maintain the Port Harcourt Refineries at $550 million, Kaduna Refineries at $600 million and Warri Refinery at $180 million. Okon said the bills were unacceptable to them because they were too high despite the fact that the figures were eventually reviewed downwards. Okon explained that the high bills prompted NNPC to send some of its engineers to the builders abroad to learn the repair processes with a view to saving costs. Following this move, Okon said NNPC began to spend as low as N10 million to maintain the refineries every month as from October 2014. As a result, he said, the four refineries would roar back to life and produce in optimum capacity from the first quarter of 2016. According to him, whereas

Refinery

Why refineries are not performing - NNPC the refineries had the capacity to process 445,000 barrels of crude oil per day, they could currently process only 60,000 barrels per day as a result of maintenance problem and movement of crude through the

remaining barrels are sold in the international market. He explained that the NNPC paid international price for its crude everyday but the retail was low, observing that the situation would have been

Fresh reports have indicated that the Federal Government may have slowed down the process of selling the nation’s refineries following its failure to secure the support of the labour unions pipelines. He also said losses recorded from the use of the refineries had been attributed to lack of recovery mechanism for what has been done, adding that after processing only 60,000 barrels of crude per day, the

better if the National Assembly had passed the Petroleum Industry Bill, PIB. Also speaking at the hearing, NNPC’s Group Managing Director, Mr. Joseph Dawha, said the refineries would work in full capacity next year as a

result of the new strategy that has been adopted by the corporation. Fresh reports have indicated that the Federal Government may have slowed down the process of selling the nation’s refineries following its failure to secure the support of the labour unions. The government had in 2013 announced plans to sell the nation’s four refineries, comprising Port Harcourt Refining Company Limited I and II; Kaduna Refining and Petrochemical Company Limited; and Warri Refining and Petrochemical Company Limited. Although labour opposed the move, President Goodluck Jonathan had in December 2013 approved the constitution of a steering committee for the privatisation process. The terms of reference of the steering committee included advising the National Council on Privatisation, NCP, on the best way to privatise the refineries in a manner that would enhance the gains of the

privatisation programme; reviewing the diagnostic reports and recommendations of the transaction advisors; and making recommendations to the NCP on labour matters to ensure the successful privatisation of the refineries, among others. Although the BPE had listed the sale of the four refineries in its work list for 2014 after securing the approval of the NCP, the agency said the deal would only happen when the government secured a buy-in from organised labour. However, the General Secretary, Nigeria Labour Congress, Dr. Peter Ozon-Eson, said that as at 2015, organised labour remained opposed to the sale of the refineries and indicated the failure of the government to obtain its support. He also insisted that Labour’s position on the matter was that the refineries should be made to work and that the government should also open up the downstream sector of the petroleum industry so that private investors would be able to build their own refineries.

Oil

2015 May, SweetcrudeReports

Local firms ‘ve developed capacity to operate hi-tech assets, says Nwapa

Oil platform

xecutive Secretary of the Nigerian C o n t e n t Development and Monitoring Board, NCDMB, Dr. Ernest Nwapa, is excited that indigenous oil servicing companies have developed capacity to acquire and operate hi-tech assets and could participate in every segment of the oil and gas industry notwithstanding the challenges. Nwapa hailed the emergence of a new breed of Nigerian investors and the quantum of investments they are making in the oil and gas sector at the unveiling ceremony for the $170 million Petrolog Group’s newly-acquired DP2 Saturation Diving Vessel, believed be the largest of its kind in Sub-Saharan Africa. Petrolog's acquisition of the DP2 Saturation Diving Vessel has been widely described as a major feat in the implementation of the Nigerian Content Act.

the power and information technology sectors following the huge success recorded in the oil and gas industry. The Executive Secretary also stated that real Nigerian Content accomplishment would only come when vessels such as DSV Vinnice are constructed in Nigeria, expressing hope that any other such vessel to be acquired by a Nigerian investor will be outfitted at the Naval Dockyard Lagos and some of the components manufactured incountry. He assured that his Board was working with the National Petroleum Investment Management Services (NAPIMS) to ensure that any major asset acquired by a Nigerian investor gets deployed in the industry as doing otherwise will negatively affect the banks that funded the acquisition as well as make it difficult for other companies to get similar credit from Nigerian banks.

The saturation diving vessel, christened DSV Vinnice, is equipped for shallow and deep water operations and can be used for construction, repair and maintenance of oil-rigs and other offshore naval constructions.

Nwapa recalled that the Board made ownership of assets a key plank of implementation because it provided the opportunity for exposing the technology to other Nigerians.

Restating that Nigerian Content was a national agenda, Nwapa said the Federal Government was extending the implementation of the policy to

He also announced that the Board will henceforth make it a requirement for all contracting entities in the Nigerian oil and gas industry to adopt a faculty or

department in any Nigerian university and develop a programme that allow the students to learn on the company’s assets as a means of bridging the gap between universities and the oil and gas industry.

Operators to Govt: Deploy modern technology in combating pipeline vandalism

Giving his welcome address, the Chairman of Petrolog Group, Dr. Joseph Ebuh, described the Nigerian Content Act as the greatest boost to the company’s growth. He stated that “since the Act came into effect, we have been emboldened to take giant steps and risks to meet existing demand.”

He commended the NCDMB for its implementation of the Nigerian Content Act, which according to him has created opportunities for indigenous companies to thrive. In his comments, the Managing Director of First Bank, Mr. Bisi Onasanya confirmed that the bank supported Petrolog in the acquisition of the DSV Vinnice, affirming the bank’s readiness to support infrastructural development and local content. Delivering a goodwill message, the Group General Manager, NAPIMS, Engr. Jonathan Okeys, described the vessel as a welcome addition to the contracting pool, especially at a time industry operations were becoming more complex and moving into the deep offshore.

il and gas experts have asked the Federal Government to deploy modern technology in combating the activities of crude oil thieves in the Niger Delta area. They said in Lagos that such technology should include Closed Circuit Television, CCTV, and other electronic devices that could indicate that a pipeline was being tampered with. They also said that such devices would give timely images and reports to the Nigerian National Petroleum Company, NNPC, and other relevant bodies monitoring the pipelines to promptly tackle the problem. According to them, deploying such electronic monitoring devices would assist in reducing the huge national revenue loss through illegal bunkering of crude oil. Managing Director, Tec Flow Oil and Gas Limited, Mr. Simon Francis, said the issue of oil theft was a serious challenge that needed to be dealt with through a new mechanism as he stressed that the use of technology would contribute immensely to combating incessant vandalism in the nation’s pipeline network. He also urged the government to encourage private sector participation in the oil sector, adding that the organised private sector participation would expand the profit outlay of operators. “Crude oil theft remains a big challenge to the socio-economic development of the country. Government should also deregulate the downstream sector of the oil and gas. This is the only way to address fuel scarcity,’’ he said. Former National Publicity Officer, Petroleum and National Gas Senior Staff Association of Nigeria, PENGASSAN, Mr. Seyi Gambo, said government should focus more on ways to liberalise the downstream petroleum sub-sector.

Oil

2015 May, SweetcrudeReports

Saipem, Dangote JV targets 'complex engineering, construction projects’

AFRI CA'S BARREL EQUATIONS Chijioke Mama

Nigeria’s marginal oil fields – Open fields, closed gates

he September 1, 2014 issue of Time magazine had Republican Congressman Paul Ryan questioned by Time’s Belinda Luscombe in 10 Questions. On a question about Pope Francis calling capitalism “an economy of exclusion” Senator Ryan replied with a candid statement (Ryan is a catholic). He explained that the pope was trying to prevent a system where “you have open markets with no barriers to entry". In most capitalist economies of the world, government and its agencies frequently make policies that create conditions which works more like “open markets with fully closed doors”. Enter the petroleum industry in Nigeria (Contributing 14.40% of GDP and 75% of government revenues in the rebased GDP figures). Successive Nigerian governments – even the military regimes – have pursued the idea of growing the participation of indigenous Oil and Gas companies in that industry. This is conspicuous in the upstream segment which historically, is an exclusive boutique that sold only to International Oil Companies, IOCs, and foreign Exploration and Production, E & P, companies. The government has implemented a handful of very commendable initiatives to increase the role of indigenous companies. Notably the Local Content Initiative and The Nigerian Marginal Oil fields award rounds. Marginal Oil Fields Some Nigerian E & P companies have made very laudable progress in the upstream segment. Mention Seplat, Oando, Conoil and some winners of the marginal fields bid round of 2003; Walltersmith, Energia, Niger Delta Resources, among others. But a larger number has failed. In 2003, the Nigerian government – in the spirit of opening the market for indigenous upstream companies – awarded (farmed-out) 24 marginal field operating licenses, in a programme supervised by its Department of Petroleum Resources, DPR. However, about 65 percent of those fields are yet to be developed or reach first oil – 11 years after. There are a plethora of reasons for this situation – some cogent others flimsy.

Oil platform

roup Executive D i r e c t o r , Dangote Group, Mr. Devakumar Edwin, says the recent formation of a joint venture company between Dangote Industries Limited, one of the several companies under the Dangote conglomerate, and Italian engineering and construction multinational firm, Saipem, is aimed at securing complex engineering and construction projects He said the new multi-million dollar company, known as Saipem-Dangote E&C, will execute such projects at the highest level of efficiency in terms of costs and timing, adding that it would also ensure sufficient flexibility to adapt to project requirements. Dangote Group announced the formation of the company in a statement obtained by SweetcrudeReports, which indicated that Saipem-Dangote E&C would play in the Nigerian and Central/West African market. “Saipem and Dangote Group have a track record of successful collaboration, drawing on the strengths and competences of both companies. Dangote’s financial strength, expertise and standing in the sub-Saharan African market will complement Saipem’s

The combination of two excellences like Saipem and Dangote in Central Africa creates a new efficient and sustainable way of working along the whole value chain

These undeveloped fields translate to hundreds (if not thousands) of jobs tied down, in a nations with one of the worst rates of unemployment (an estimated 5.3 million jobless youths). This also means foreign exchange earnings lost (Oil and Gas makes up more than 90 percent of exports in Nigeria) and both government and corporate revenues forgone. Sadly, these are the very advantages that the Petroleum (Amendment) Decree No.23, 1966 sought to derive. (An amendment to the Petroleum Act, Laws of the Federation of Nigeria 1990, that introduced Section 16A (3) (a) which provided for Marginal Fields). These marginal fields were retrieved from the original concession owners in their respective OML and delivering to indigenous firms (through a structured bid process?). The procedure is largely designed to favour Nigerian firms. Given the recent strategic actions of most IOCs in Nigeria with respect to portfolio divestment and considering that a vast majority of the over 870 oil fields discovered in Nigeria has not been developed (about 120 are), experts in this industry believe that marginal fields hold the future of Nigerian’s crude oil production. Some have estimated the reserves held in Nigerian’s marginal field to be about 1.3 billion barrels. At a recent industry event, Nigeria’s Petroleum Minister Diezani Alison-Madueke (now also OPEC’s President) opined that the government’s vision for the industry is to increase crude production to 4 million barrels per day (bbl/d) and oil reserves to 40 billion barrels. (The actualisation date for this same vision has been shifted many times by previous governments).

unique capabilities in E&C. “This new partnership confirms the shared commitment of the two groups to both the Nigerian market and sub-Saharan Africa widely,” the statement said. It quoted the Edwin as saying: “We are confident that our partnership with Saipem will position us as a major player in the oil and gas sector. Dangote’s financial strength, expertise and standing in the sub–Saharan African market will complement Saipem’s unique capabilities in E&C in developing the new business. "Saipem values the satisfaction of its clients in the energy industry, tackling each challenge with safe, reliable and innovative solutions.

Dangote Industries and Saipem shall gain mutual benefit from this partnership.” Saipem’s Central Africa Regional Manager, Giuseppe Surace, said: “The combination of two excellences like Saipem and Dangote in Central Africa creates a new efficient and sustainable way of working along the whole value chain.” Dangote Group, owned by Africa's richest man, Aliko Dangote, is one of Africa’s largest industrial conglomerates. It has been a key investor in the Nigerian economy for a number of years and is seeking to help the country create a more efficient industrial and energy infrastructure via strategic investments in a number of upstream oil and gas projects.

While this vision is realisable, the requisite framework may be absent. This perhaps accounts for the continued failure in attaining these goals among other problems. Presently, major IOCs (particularly, Royal Dutch Shell and America’s Chevron) are divesting some of their portfolios from onshore and continental shore assets in Nigeria. Shell has sold OMLs 18, 24, and 29 to Mart Resources, Pan Ocean, and cash-loaded Aiteo/Taleveras consortium respectively. The current focus for this Big Budget companies is deep offshore. This reiterates the common notion that marginal fields are strategic to the future of petroleum production in Nigeria. Furthermore, the elephant fields discovered in the past decades are gradually turning into brown fields and barrels are declining too, while the much delayed Petroleum Industry Bill, PIB, has made the situation even gloomier by stalling reasonable exploration activities that could lead to big finds. Thus, more and more of already established reserves are coming into the hands of Nigerian firms. But you just asked what they will do with it? Closed Gates In this open market, however, the doors are not really open. The very necessary conditions required to ensure a high percentage of success for the farmees are grossly lacking. Industry analysts have continuously canvassed the creation of more support structures. Government literally delivers these babies without providing a good post-delivery nurse. When analysed from an enterprise perspective, the statutory role of DPR has little or no contribution to make towards the successful (post-acquisition) development/operation of these fields. Acquirers are left to fend for themselves (especially financially) without the requisite institutional support and fiscal policy. (Acquiring a marginal field cost millions of dollars, from initial application fees to legal fees, signature bonus and royalties).

2015 May, SweetcrudeReports

Focus

2015 May, SweetcrudeReports

Nigerian banks

Banks stifling Nigerian content fund NCDMB allays concerns

OSCARLINE ONWUEMENYI

igerian operators have alleged that a number of the banks appointed to apply the Nigerian Content Development Fund for the development of small and medium enterprises servicing the oil and gas industry are stifling the seamless application of the Fund. “These banks have been more of an obstacle than a bridge to accessing the funds, and this has resulted in very minimal traction in the growth of local services for the oil and gas industry,” one of the services providers said. The Nigeria Oil and Gas Industry Content Development (NOGICD) Act of April 2010 established the Nigerian Content Development Fund (“NCDF” or “the Fund”) for the sole purpose of funding the implementation of Nigeria content programmes within the Nigeria Oil and Gas industry. The Fund is a pool of mandatory contributions from one per cent of every contract awarded in the upstream sector. This money is set aside and employed to support contracts, projects and programmes of the Nigeria oil

and gas service companies and related indigenous operators within the industry under a defined framework. The Executive Secretary of the NCDMB, Mr. Ernest Nwapa in an interview with Sweetcrude Report at the background of the Nigerian Oil and Gas Conference, in Abuja, denied the allegation that the banks are stifling the operations of NCDF, stressing that the Fund is not meant to be given out as grant to indigenous operators. He also observed that there has been an appreciable ‘uptake’ on the fund by operators in the industry. “The money is accessible to operators. The money is meant to facilitate funding agencies to give money to indigenous operators. That is the way the fund is designed, at least at this phase. You remember that this fund came in as a zero fund. So, we designed it such that in the first five years of the fund, it will only be a fund that people will see as a guarantee, believing that it will grow,” he said. Confirming that the fund has been accessed successfully by some Nigerian service companies, while some other companies are at various stages of processing their applications,

We are not satisfied with the level of access to the fund and we are working to review the administration process,” he said.

the Executive Secretary said the Board was working with the F und M anager s -B GL -U B A Capital Consortium to fine-tune the conditions to be met for prospective beneficiary companies so as to make it more accessible. “We are not satisfied with the level of access to the fund and we are working to review the administration process,” he said. He however, clarified that the delays experienced in the application of the Fund emanated mostly from the processes in the banks and how the companies packaged their proposals, adding however, that some conditions were introduced to ensure that beneficiaries were

serious service companies who had bankable plans. He underlined that the Board decidedly appointed a fund manager and constituted an Advisory Committee, which comprises representatives of international oil companies, Petroleum Technology Association of Nigeria, (PETAN), Oil and Gas Trainers Association of Nigeria (OGTAN) and Bank of Industry in an effort to create a structured and transparent process for accessing the Fund. The current conditions require the benefitting company to tieup an arrangement with its bank for a facility meant for financing the acquisition of assets and

ensure that it draws down the loan and services it successfully. The Fund will then kick in to offset 50 per cent of the interest charged by the bank Nwapa added that, “The fund is growing and it has grown to the point where we are looking at remodelling it because now, there is cash in that fund but it will never be a fund that people will treat as grant. It is something that people will take in a structured way. Many of the banks that are funding operations are funding because that fund is there. The fund is there as a collateral sitting in many banks and the banks are linking the loans they are giving to stakeholders to that fund. So, if you expect the NCDMB to have a vault somewhere so that when you want to do something, you will come and the Executive Secretary will approve $10 million for you, it does not work that way. The banks are designed to give those monies out.” He explained that the services of the financial advisers, BGLUBA Capital Consortium were engaged to develop an operating structure around the Fund to enable Nigerian oil and gas service companies access credit

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2015 May, SweetcrudeReports

Focus

Banks stifling Nigerian content fund

Banking hall CONTINUED FROM PAGE 18 facilities and support from Nigerian Banks and other financial institutions using the NCDF to secure more favourable transaction terms. The operating structure was designed with capacity to create and attract other complementary funds like intervention funds from developmental and intervention partners, private equity funds from venture capitalists and private equity firms as well as syndicated international debt from multilateral agencies, export credit agencies and other international financial institutions. Specifically, the NCDF was designed to provide credit enhancement in the form of a guarantee to enable Nigerian oil and gas service companies access credit facilities at competitive terms; provide up to 50% cashback interest incentive on those credit facilities in order to drive cost of funds downward; and engage in developmental interventions that are targeted at infrastructure expansion, establishment of new facilities and human capital development. Furthermore, the Fund was created to facilitate continuous access of Nigerian project promoters and operators to competitive funds to execute oil and gas transactions; as well as promote full participation of Nigerian oil and gas service companies in the industry value

chain on a sustainable basis. According to BGL-UBA Capital Consortium, operators of the fund, significant progress has been made and a number of milestones achieved in the operation of the Fund. An emailed response to questions posed by our correspondent pointed out that the scheme has created platform for onboarding the vast base of indigenous companies across oil and gas value chain; engineering, fabrication, equipment suppliers, EPC and oil service providers (vessel owners etc). It noted that, “Over $20.8 million has been financed by various banks under the NCDF commercial intervention programme. Significant investments has been made by the Nigerian Content Development & Monitoring Board (NCDMB) under the

NCDF developmental intervention programme including but not limited to support investments in pipeline project, development of oil and gas industrial park, capacity building programme for key expertise required to deliver industry projects (capacity building training etc). “Key acquisition financed under the scheme include the acquisition of one of the largest indigenously owned body-wide marine vessel (90 tons tug boat). About $3 million is available to be utilised as cash-backed interest incentive to indigenous companies who had access to funding under the programme in the last nine (9) months.” BGL-UBA Capital Consortium also noted that, consequent to the cash backed interest incentive benefits, the dollar cost of funds under the scheme has been

About $3 million is available to be utilised as cash-backed interest incentive to indigenous companies who had access to funding under the programme in the last nine (9) months

significantly reduced; benchmarking an average of 5% cost of funds and financing up to 5 years loan repayment tenor. “Over $60 million worth of projects in loan application have reached different advanced stages and are expected to be financed by various banks under the NCDF commercial intervention programme over the next four (4) weeks. Some of the projects include expansion project for pipe coating plant, acquisition of logistic vessel, expansion project for a fabrication facility etc. “The scheme currently has projects valued at over $250 million at different discussion and credit review stages with funding banks; and a number of them expected to reach financial close within the next three months,” it added. The Consortia further noted that since commencement of the scheme, a number of areas requiring improvements have been identified and key strategies are being put in place to facilitate their achievement, including continuous awareness of the scheme for all the players, operators and key stakeholders would continue to be deployed. It added that because certain transactions require in-depth understanding of oil and gas sector, banks’ officials who package the financing and indigenous companies’ employees who respond to

banks’ requirements would continue to undergo appropriate trainings to understand and handle complex transactions in the sector (call-off contracts, vessel acquisition, non-project backed facility etc). Speaking further on its role in the management of the Fund, Nwapa noted that, “The NCDMB is not a bank. BGL-UBA Capital is managing the funds. We are an agency of government that is holding contributions of oil industry stakeholders in trust for them. We have to put the contributions in a bank; we have to use banks that understand financing to administer the fund. NCDMB was not set up to administer funds; it is only set up to make sure that people pay the money into an account as designated by the law.” He explained that the usage of the money has been structured into two legs. “The 30 per cent leg is for direct interventions as you know, where if we find a project to do, we promote it and pay for it. If we find a scheme that trains our people, we pay for the training. If we find things that people are reluctant to fund because they are not sure it is beneficial, we pay for it as a pilot. But if you have a business venture and you need a loan to execute that business venture, especially if it is a capacity development-related venture, the fund gives your bank comfort to give you a loan because

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Broad street, Lagos

Local banks stifling local content Fund CONTINUED FROM PAGE 19 the fund is a guarantee from us. “When you start paying back your loan, 50 per cent of your interest is taken by the fund. That is what investors want. But there are people, who have the view that because that fund is there, they can just come to the NCDMB to give them money. How many people will get such money? The demand for fund by the industry is beyond $1 billion at any given time for these kinds of things. So, the fact that there is $350 million in that fund or has been collected does not mean that NCDMB will start giving people the money. That is not the way the fund is structured.” According to Nwapa, the fund is performing satisfactorily. “It started as zero fund in 2010. By 2011, we had only about $25 million. Today, we have over $600 million and the more it grows, the more the banks have confidence to give loans to the operators. We are constantly reviewing with the banks and encouraging them to be less rigid about their requirements from oil and gas sector companies because they have, in addition to whatever direct collateral and security they are getting, our fund provides additional

guarantee.” The local content boss explained that the oil and gas industry is so structured that before you get a major contract, you have gone through a lot of screening and beyond that, the law states that if a product is being manufactured in Nigeria, it must be used before you import. “So, I would as a bank manager, be very keen to loan money to somebody, who is going into manufacturing because the product he is going to manufacture already has a market and is therefore, going to be used. So, we keep telling the banks to be a little bit more liberal with their requirements because the fund has given them further underpinning.” Seventy per cent of the pool is to be used to provide guarantees for single digit and longer tenure lending by banks and funding institutions to Nigerian service companies seeking to acquire critical assets while thirty per cent will be applied for direct intervention by the Board in critical infrastructure development and training programs. Speaking on the issue, the Contracting and Procurement Global Local Content Manager, Shell Exploration and

When you start paying back your loan, 50 per cent of your interest is taken by the fund. That is what investors want. But there are people, who have the view that because that fund is there, they can just come to the NCDMB to give them money

STEPS TO ACCESSING THE NCDF Production International Ltd, Engr. Simbi Wabote advised the Board to publicize the procedures and requirements for accessing the NCDF and use feedback from the exercise to improve the administration process. He counseled against letting NCDF go the way of the moribund Nigerian Content Support Fund which could not be accessed by any service company. Towards ensuring compliance by service companies, Wabote said the Board needs to revamp its monitoring process, noting that the Nigerian Content Act did not allow for non-compliance by local service companies.

nterested Nigerian oil and gas service companies are required to observe the following steps in expressing interest to access the Fund:

Log-in to the website of the Nigerian Content Development and Monitoring Board (NCDMB) and locate the NCDF link to access • the Operating framework, financing term sheet as well as Free Answers & Questions (FAQs) on the NCDF. The website address is www.ncdmb.gov.ng. • Approach one of the participating Banks as listed on the website to discuss financial needs and commence the loan application process. • Upon acceptance of funding proposal by the participating Bank, notify the financial advisers via an email to confirm the Bank’s engagement. The financial advisers will be required to coordinate the process of securing an offer with the Bank, executing the Loan Agreement as well as issuing the NCDF guarantee. Details of the financial advisers can be located on the NCDF link on the website. • As soon as the terms of the Loan Agreement are met, the NCDF guarantee will be executed and loan disbursed.

Gas

2015 May, SweetcrudeReports

Falling oil prices: Time to shift to gas?

OSCARLINE ONWUEMENYI

he global decline in oil prices has exposed the Nigerian economy to unimaginable dangers, leading government officials to state that the Value Added Tax, VAT, which presently stands at 5-10 percent, may be doubled if oil prices continue to slide. The local currency, the naira, has been devalued, taxes are now being imposed on luxury goods, while the oil price benchmarkhinged budget has been revised. Brent crude oil price which peaked at $115 a barrel in June last year, declined to about $45 per barrel by January this year before rallying to $60 per barrel last month. Crude oil accounts for about 90 per cent of Nigeria’s export earnings and 70 per cent of total revenue. As such, any drop in the price of oil has a significantly negative impact on the Nigerian economy. The effects of the falling oil prices is already being felt in the local economy, and government officials are scrambling for answers to dwindling revenues. With declining revenues from sale of oil, coupled with an inexplicable increase in oil

pipeline vandalisation across the country, many industry watchers are wondering why the government is not making a major pitch for expansion of gas potentials in the country. Nearly everyone agrees that with sufficient gas production and distribution, the nation’s energy and feedstock needs will be met, power generation will improve and the knock on effect for Africa’s largest economy would be enormous. Clearly, gas is of national strategic importance. With its potential of prompting an industrial revolution as is presently the case in Qatar and China, a Nigerian manufacturing renaissance is bound to happen which would mop up tons of unemployed youths. Recall that in March, 2011, President Jonathan launched the Gas Revolution – Rebirth of Industrialisation agenda, which he said will save Nigerian from the brink of hopelessness and truly reposition the country to become the industrial giant of the continent. The President had noted that over the next few years, full implementation of the entire gas master-plan agenda will result in about $25 billion worth of investments in gas processing, transmission and downstream gas utilisation

projects. Many analysts have argued that gas is the future, and according to the Nigeria Infrastructure Advisory Facility, NIAF, the nation has enough gas reserves to power the entire country and neighbouring countries for the next 50 years. So, the question may be asked: why is there no much concerted government and private effort to expand gas production and distribution in the country? Speaking at last month’s Nigerian Oil and Gas Conference, in Abuja, Mr. Abiye Membere, a former Executive Director (Exploration and

Production) at the NNPC, noted that, “The oil and gas industry did not start well. We started the oil and gas industry only looking for oil as if the gas aspect was not important,” adding that this mindset chiefly explains the current lack of investment in adequate gas infrastructure in Nigeria. S p e a k i n g t o SweetcrudeReports, in an interview, the Group Executive Director for Gas, NNPC, Dr. David Ige, noted that government has taken the right steps at every turn to ensure the attainment of the Gas Master

Nearly everyone agrees that with sufficient gas production and distribution, the nation’s energy and feedstock needs will be met, power generation will improve and the knock on effect for Africa’s largest economy would be enormous. Clearly, gas is of national strategic importance

plan, describing all the work done so far as building a robust vehicle engine, which is expected to drive the strategic aspirations of the nation to attain gas-based industrialization and economic sustenance. According to Ige, “We have done a lot to get to where we are today. We have implemented the most aggressive gas infrastructure implementation in the last three or four years. We have moved significantly on pricing, and we are moving in a very orderly journey towards export parity in pricing beyond which we will now move to a fully liberalised pricing framework.” If nothing at all, the Nigerian domestic market serves as enough reason for the imperativeness of gas development and utilisation. With the availability of cheap natural gas; more private owned factories, power plants, oil refineries, petrochemical plants and fertiliser complexes, such as that of Africa’s richest man, Aliko Dangote - which is currently underway - will be commonplace. This essentially means that more attention needs to be given to the adequate and practical implementation of the Gas Master Plan and also the Nigeria Gas Transportation Network Code.

2015 May, SweetcrudeReports

Gas

NNPC Towers in Abuja

Govt regulated gas price 'to disappear soon' - NNPC

n a clear declaration of government's plan for full deregulation of the gas industry, Dr. David Ige, the Nigerian National Petroleum Corporation, NNPC's, Group Executive Director, Gas and Power, says manufacturers using natural gas in the country should get ready for a ‘deregulated gas price’ regime. “We are heading to a period where there would be willing buyers and willing sellers in the gas industry. The government regulated price is going to disappear soon," Ige told oil and gas industry stakeholders Lagos, hinting that the new price regime might come into effect before the commencement of the implementation of the Nigerian Gas Transportion Network Code, NGTNC Ige, who insisted that the time has come for gas users, including manufacturers and domestic consumers to pay varying prices, added: "The regulated price is there because there are no commercial structures in place to guide the operation of the market. Once there are structures that would guide commercial activities, there

would be change in the ways transactions are conducted. This will be made possible by the Nigerian Gas Transportation Network Code. “You don’t expect somebody to bring his money, invest it by laying gas pipelines and charge lower prices for transporting gas from his base to where users or buyers would use the product. The economy is becoming market driven. What the government is saying is that people should handle gas from the commercial point of view.” NGTNC is being introduced by the NNPC and the Department of Petroleum Resources, NNPC, following complaints by the Manufacturers Association of Nigeria, MAN, on behalf of its members that gas supply was not as transparent as it should be. The government last year fixed new prices of gas at $2.5 per 1000 standard cubic feet (scf) for power plants while methanol, fertiliser and petrochemical firms were expected to buy at $3 for 1000 scf. Ige said the manufacturers complaints

that the exchange rate of one dollar to N197 (official price) had eaten deep into their production costs was understandable as he urged them to wait for the implementation of the gas transportation network code. Deputy Director, Gas Monitoring and Regulation at DPR, Antigha Ekaluo, said: “The goal of the code is to allow the forces of demand and supply to govern the market. DPR wants to reduce its intervention in the sector by taking a back seat. “Though the DPR would perform its oversight functions or roles of ensuring that everything works out fine in the oil and gas industry, the body will take a back seat position to encourage growth.” The deputy director stated that fixing of gas prices was not part of the functions of DPR, but added: “If you are a manufacturer and you have an item to sell, you fix your price and sell. Whoever is willing to buy your product would come and vice-versa. The same thing is what we are advocating for in the gas sector. The slogan is free entry, free exit.”

US world's largest gas, oil producer in 2014 - EIA

S petroleum and natural gas production volumes remained tops in the world in 2014, exceeding that of both Russia and Saudi Arabia, according to estimates from the US Energy Information Administration, EIA. EIA specifies that its petroleum production figures encompass crude oil, natural gas liquids, condensates, refinery processing gain, and other liquids such as biofuels, Oil&Gas Journal reported. Despite the 50% decline in crude oil prices that occurred in the second half of last year, US petroleum production still increased 3 quadrillion btu (quads) - 1.6 million b/d - in 2014. US petroleum production since 2008 has increased more than 11 quads, spurred by dramatic growth in Texas and North Dakota. US gas production increased 5 quads - 13.9 bcfd - over the past five years. Combined hydrocarbon output in Russia increased 3 quads and in Saudi Arabia 4 quads over the past five years. EIA noted that total production in both the US and secondplaced Russia was almost evenly split between petroleum and gas. While total petroleum and gas production estimates for the US and Russia in 2011 were roughly equivalent, US production by 2014 exceeded Russian production by almost 12 quads. A report from Cedigaz, highlighted the challenges in the coming years faced by the Russian gas industry, where stagnating domestic demand and weakening export markets have created a situation of overproduction, made worse by western sanctions and low oil and gas prices. With the overall increase, the US, in 2014, produced nearly twice the petroleum and gas as third-placed Saudi Arabia. Saudi Arabia’s total production - which heavily favours petroleum - was nearly unchanged from 2013. EIA last week reported that in 2014, Saudi Arabia, the Organisation of Petroleum Exporting Countries’ only true swing producer, earned a third of total OPEC oil revenues, which were down 11% on the year.

2015 May, SweetcrudeReports

Gas

We don't owe Nigeria $100m over gas supply - Ghana's Energy Ministry OSCARLINE ONWUEMENYI

he Ghanaian government says it is not owing $100 million to the Nigerian Gas Company, NGC, which had led to a cutoff in the supply of gas for its power plants. A communications consultant to the Ministry of Energy and Petroleum, Edward Bawa, denied the reports that Nigeria has cut gas supply to Ghana in an interview with a local news site. M r . B a w a , w h o acknowledged that Ghana’s power plants were running on gas supplied from Nigeria, was emphatic that Nigeria has not cut gas supply to Ghana. But he disclosed that a plant at the West African Gas Pipeline Company developed a fault last week but that the fault was rectified within an hour. Mr Bawa’s response follows reports that Nigeria has cut gas supply to Ghana. Ghana is said to be indebted to Nigeria Gas of some $100 million.

Nigeria Gas Company is, therefore, dragging its feet with regards to the supply of gas while this amount is unpaid,” Dr Bawumia stated

The New Patriotic Party’s running mate for the 2016 elections Dr Mahamudu Bawumia disclosed during Central University College’s distinguished speaker series a fortnight ago that the current power crisis the country is plagued with is partly due to government’s failure to settle a $100 million debt it owes Nigeria Gas.

The latest development, if true, means Ghana will lose about 600 megawatts of power from its national electricity grid as most of the thermal plants in the country r u n o n g a s .

NLNG sheds light on alleged N180m briber to Bonny Council

he Nigeria LNG Limited, NLNG, has restated its commitment to assisting the Federal Government achieve maximum benefit from natural resources in the country as it sought to clear its name from allegations of bribery and corruption over its tenement rate payments to Bonny Local Government Council in Rivers State. The company was reacting, according to a statement obtained by SweetcrudeReports, to "recent Nigerian social media posts about an alleged bribery incident, linked to 2014 tenement rate payments made by the company to Bonny Local Government Council (BLGC).”

“Nigeria Gas Company is, therefore, dragging its feet with regards to the supply of gas while this amount is unpaid,” Dr Bawumia stated. “Ultimately, the dumsor problem is more of a financial problem than a technical one,” he suggested. According to reports in the country, Nigeria has apparently cut gas supply to

Ghana over indebtedness.

The company said that rather than N180 million as alleged in the posts, it paid only N140,000 to Bonny Council. "NLNG’s assets in Bonny LGA had been assessed in accordance with the relevant bye-laws of Bonny LGC and issued a Demand Notice dated November 13, 2014 for the sum of One hundred and forty million naira (N140, 000,000.00) only," the statement read.

Gas terminal

It added that the company made the payment for the invoiced sum (N140,000,000.00) and not one hundred and eighty million naira as alleged. Furthermore, it stated that the payment was made on February 6, 2015 by electronic transfer in line with standard NLNG practice, to the account in Ecobank Nigeria Plc nominated by Bonny LGC, and not by cheque, as alleged in the misleading social media posts.

2015 May, SweetcrudeReports

Gas

Gas processing plant

Shell acquires BG Group for $70bn

n in one of the biggest deals in the history of the oil and gas industry, the Royal Dutch Shell has acquired Britain's BG Group for US$70 billion. The companies said the transaction involves cash and shares, providing investors with a 50% premium on BG's current share price. The deal is expected to lift Shell's market capitalisation to about US$248 billion as it closes the gap on industry leader, Exxon, whose market value is estimated at US$360 b i l l i o n . It is the third largest oil and gas merger ever and the biggest since Exxon bought Mobil for US$80 billion in 1998. Among key production assets acquired by Shell are deepwater fields off Brazil and LNG projects in Australia. BG's Brazil portfolio includes stakes in five pre-salt discoveries in the Santos basin and operating rights for 10 blocks in the Barreirinhas basin. The company has forecast 2.6Mboe/d of gross capacity in

Brazil following the startup of 15 floating production, storage and offloading, FPSO, units by 2018. Shell is a major investor in the LNG business, particularly in Nigeria where it is a major player, controlling 25.6 per cent of the shares in Nigeria LNG Limited, a multi-billion dollar investment designed to harness Nigeria’s vast natural gas resources and produce LNG and natural gas liquids, NGLs for export. BG Group, formerly a part of British Gas, is active in more than 20 countries, including Nigeria, has a strong record in exploration, with additional annual average production capacity of one billion barrels of oil equivalent in its portfolio over the last decade The company hopes to be the largest contracted supplier to China, the world’s fastestgrowing LNG market, by 2017, with potentials to delivered gas to at least 26 of the 27 countries that currently import LNG. Meanwhile, the acquisition will increase Shell's global proven oil and gas reserves

25% while adding 20% to output capacity. "We have been scanning quite a few opportunities, with BG always being at the top of the list of the prospects to combine with," Shell CEO Ben van Beurden said during a conference call. "We have two very strong portfolios combining globally in deep water and integrated gas". The BG takeover comes as oil and gas companies grapple with a steep decline in oil prices, which have shed $60/b since June. According to Edmar Almeida, an energy economics professor at the Federal University of Rio de Janeiro, the deal could trigger more merger activity in the coming months. “Such an abrupt change in prices mean companies suddenly have investment commitments that are beyond their capacity," Almeida told Bnamericas. “This makes fusions more attractive and we could see more larger firms looking for these types of opportunities."

…Needs to go beyond oil price bet in BG deal

hen it comes to forecasting the oil price, big companies play their cards very close to their chests.

But the 50 per cent premium that Royal Dutch Shell agreed

to pay in a stock and cash deal to acquire smaller rival BG says a lot about Shell's expectations for a swift recovery in oil prices. The beauty of the deal and the upside, though, won't be in the bold bet on oil prices rising to $90 per barrel turning good, say investors and analysts as they urge Shell to use the deal as a opportunity to review its portfolio and geography. "The upside comes in the deal becoming a catalyst for change in transforming the upstream business over the next 4-5 years in a way that the previous pivot towards North American onshore really failed to do, in our view," Reuters quoted UBS as saying. Pascal Menges from the Lombard Odier Global Energy fund said Shell's deal heralded a scrabble by Big Oil to improve the overall quality of portfolios. "Management will have their work cut out to execute the deal and generate synergies and assets sales. The risk of indigestion is not small," he said. Analysts from Barclays agreed that because the BG deal brings Shell rich reserves and production outlook in Brazil, it hoped it would prompt the company to slow down or relinquish less competitive assets. "This includes high break-even projects such as Shell's heavy oil portfolio in Canada, assets difficult to develop such as those in the Arctic and projects in geopolitically unstable regions such as those in Iraq and onshore Nigeria," it said. Shell's stock was up 1 percent on Thursday after falling 5 percent on Wednesday when investors expressed unease about the generous premium even though they celebrated the fact that Shell had finally done a big deal. CONTINUES ON PAGE 25

2015 May, SweetcrudeReports

Gas

Shell needs to go beyond oil price bet in BG deal

Gas processing plant

CONTINUED FROM PAGE 24

During a wave of megamergers 15 years ago - when BP bought Arco and Amoco and Exxon bought Mobil Shell stayed on the sidelines. RISING GEARING Prior to the acquisition of BG, Shell, alongside Exxon, was seen as one of the best companies in terms of breakeven, in other words, its ability to balance its books, invest and pay dividends from cashflow without borrowing too heavily. Contrary to Shell, which prior to the acquisition needed $75 per barrel to balance its book, BG, going through a peak investment period, needed a price of over $140, according to analysts from Jefferies. "Shell's metrics/targets for the deal are based on the oil

price recovering to an average of $90 in 2018," said analysts from Investec. If prices stay lower, Shell would probably be forced to hit its self-imposed gearing ceiling of 30 percent, up sharply from its 2014 net debt/capital ratio of 12 percent and the imminent 20 percent post-deal completion, according to Investec. That might cost Shell a downgrade in ratings, something the firm said it would be prepared to sacrifice - if it was just a onenotch downgrade - in order to preserve growth and dividends. It is due to meet ratings agencies soon. "Downside comes if oil prices stay low and costs don't fully adjust: although by using mainly stock and not debt Shell has largely hedged that effect out to

shareholders," UBS said. It said it estimated that each $10 per barrel difference in the oil price scenario would result in a 2 percentage point change in gearing for the combined company. Earlier, ratings agency S&P placed its 'AA' long-term rating for Shell on negative watch citing an increase in debt by paying a cash consideration of about $20 billion to BG shareholders. S&P sees oil at $55 a barrel in 2015, $65 in 2016, and $75 thereafter. â&#x20AC;&#x153;With oil price expectations and hence near-term multiples in flux, we turn to dividend as the basis for setting our Shell target price," Deutsche Bank said in a note adding that it believed the current yield of 5 percent was an appropriate reflection of risk and reward at this point in the cycle.

Contrary to Shell, which prior to the acquisition needed $75 per barrel to balance its book, BG, going through a peak investment period, needed a price of over $140, according to analysts from Jefferies

Gas control valve

2015 May, SweetcrudeReports

Gas

Gas pipeline

DPR says PIB will not jettison gas transportation network code KUNLE KALEJAYE

he Department of P e t r o l e u m Resources, DPR, has reiterated that w h e n t h e Petroleum Industry Bill, PIB, is eventually passed into law by the National Assembly, it will n o t t r u n c a t e t h e implementation of the Nigerian Gas Transportation Network Code, NGTNC. This assurance was given by the DPR Head, Gas Division, Engr. Antigha Ekaluo, to industry stakeholders at a forum organised by DPR in Lagos, hinting that there are provisions for the NGTNC in the PIB. NGTNC, according to DPR, is intended is set out as a contractual framework between transporter (or network operator) and network users (known as shippers) that provides open competitive access to existing and future gas transportation infrastructure. The idea to establish the NGTNC was conceived by the Federal Government to regulate and control the operation of gas pipelines. It was reasoned that successful transportation of gas for power generation, domestic use and

other purposes required a set of rules governing the quantity and quality of gas to be injected into the network and transmitted to end-users. Engr. Ekaluo maintained that PIB made specific provision for the implementation of NGTNC in the development of Nigeria's natural gas for both domestic use and export., explaining that the network code has provision to address existing relationship between gas distributors and it's customers. In his words, "NGTNC will survive the implementation of the PIB. The PIB is not coming to knock off the network code because the bill made specific provision for the code. "Existing gas distribution agreement will not be knocked out, rather, there is a law in the code for gas distributor to migrate successfully into the the network code without any loss.â&#x20AC;? Meanwhile, some stakeholders in the gas industry have thrown their weight behind the full implementation of the Nigerian Gas Transportation Network Code. Goodwill messages from Shell Petroleum Development Company, Chevron, Addax Petroleum and Niger Delta Power Holding Company during

the stakeholders' forum in Lagos showed their support for the implementation of the network code. However, some industry players, at the forum, expressed concern on some terms in the network code. Some off-takers are bothered by the monopoly of the Nigeria Gas Company, NGC, and its mother company, the Nigerian National Petroleum Corporation, NNPC, in the gas market. The Manufacturers Association of Nigeria also called on DPR to intervene on the currency to be used for gas purchase, stressing that Nigeria's currency should be used as against the current trend of foreign currency (dollar) in the transaction. Some gas suppliers on the other hand are worried about who bears the financial cost when there is gas shortage due to pipeline vandalism. End-users of gas, especially power plant operators, also wants DPR to establish stiffer penalty in the network code for gas suppliers and shippers who inject off-spec gas into the network. They lamented that most of their gas turbines have become

The PIB is not coming to knock off the network code because the bill made specific provision for the code

faulty due to the supply of off-spec gas into the network, leading to total shut down of their operations. In response to the industry players' concerns, DPR assured that there was adequate provision in the code to address their concerns, adding that the code will be totally transparent, will create level playing ground for all and stimulate investment.

Dutch govt tightens controls on gas

he Dutch government will demand risk analyses from gas companies when setting natural gas production levels, and involve local authorities in the decision-making process.

The measures, effective immediately, come in response to a critical report by the countryâ&#x20AC;&#x2122;s Safety Board in February that found the safety of citizens in Groningen province, home to Europeâ&#x20AC;&#x2122;s largest gas field, had not been taken seriously enough when determining gas production levels in the past, Reuters reported. Earthquakes linked to production in Groningen have caused billions of euros of damage, though no serious injuries. In February, Economic Affairs Minister Henk Kamp ordered production at the Groningen field to be cut, leading to a price surge across north-west Europe. In a letter to parliament, Kamp repeated he would make a further decision on gas production on 1 July.

2015 May, SweetcrudeReports HEAD OFFICE: KM 1, Osubi/Eku Road, , Osubi-Warri, Delta State, Nigeria. GSM: +234(0)8033182411 JETTY: Okpaka Waterside, Okpaka, off DSC expressway, Warri. E-mail: melcurtltd@yahoo.com, info@melcurtltd.com

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2015 May, SweetcrudeReports

Gas

Cote D'Ivoire, Sahara Energy strike relationship on Nigeria's gas

ote D'Ivoire says it has struck a deal with a Nigerian company, Sahara E n e r g y , t o facilitate import of Nigeria's liquefied natural gas, LNG, cargoes into the French-speaking West African country. It is part of plans by that country to support its growing p o w e r n e e d s . Making the disclosure recently in Abuja, a director at the Ivorien Ministry of Energy, Kone Moussa,who was at the head of a delegation to Nigeria, said his country would be relying on structural diversion of LNG cargoes from Nigeria as a starter within the next few months to tackle the growing energy needs. He said the working relationship with Sahara Energy would drive this process. The Nigerian National Petroleum Corporation, NNPC, has announced plans by Cote D’ Ivoire to procure LNG supplies from Nigeria following the visit of the Ivorien delegation to its group managing director, Dr Joseph Dawha in Abuja. Announcing this in a statement, Group General Manager, Group Public Affairs Department at the corporation, Mr. Ohi Alegbe, said the request from Nigeria's fellow West African country is coming as Nigeria moves to seek broader frontiers for its Liquefied Natural Gas away from the traditional Asian-pacific hub. According to the NNPC, the package, which is the first of its kind in the West African subregion, would see Nigeria commit a small chunk of its daily LNG

LNG Finima

output to its sub-regional neighbours. Nigeria’s LNG output presently stands at over three billion cubic feet of gas per day. While receiving the delegation, Dr. Dawha said the corporation was ready to cash in on the opportunity in line with its overall strategic expansion drive for Nigeria’s LNG market. Dawha emphasised that the move would help broaden the s u p p l y b a s e . He noted that, “At the moment, the entire West African subregion, starting from Nigeria, is undergoing phenomenal economic growth and that practically translates into a higher demand for energy. "As you know, the West African Gas Pipeline (WAGP) terminates in Ghana; so Cote D’Ivoire has come to request that we bring gas to them in the first instance by LNG and ultimately in the future by extension of the pipeline.” The NNPC GMD noted that apart from offering a strategic opportunity for his corporation and Nigeria, the project was in line with the NEPAD (New Partnership for Africa’s Development) spirit.

He added that the project would serve the mutual growth of ECOWAS member countries by fostering the economic integration of the West Africa c o r r i d o r . “What this means is that in future we don’t have to go as far as Europe or Asia to supply LNG when we can do so next door,’’ Dawha said. Also, a delegation from Ghana, led by the Minister of Power, Mr Kwabena Donkor, was also the NNPC Towers to seek support on recent unintended gas supply disruptions in the West Africa Gas Pipeline grid. The Ghanaian minister was received on behalf of the corporation by the Executive Director, Gas, Dr. David Ige, who assured that the NNPC was working aggressively with other partners to restore supply disruptions wrought by extraneous factors. “It has been a very difficult time not only for Ghana but for Nigeria as well because of the disruptions in the gas pipelines. “But I believe that the various interventions that are ongoing by the Federal Government would help restore as well as grow the reliability of the WAGP,’’ Ige s a i d .

NGC laments impact of pipeline vandalism on its operations

he Nigerian Gas Company, NGC, a subsidiary of the Nigerian National Petroleum Corporation, NNPC, has lamented the negative impact of pipeline vandalism on its operations and to the economic health of the nation. Acting Executive Director, Operations of the company, Mr. Gabriel Aggrey, while reacting to recent attacks on its pipeline in the Niger Delta region, said the company is poised to stop further attacks on its facilities. He lamented that tampering with gas pipelines reduces the gas volume that they are able to extend to customers. According to him, “Whenever it happens, we lose about 1.5GW of electricity to the network of the national grid and a volume of about 200 million is differed.” Apart from the huge resources used to fix pipelines when they are vandalised, Aggrey also said it degrades the nation’s power generation capacity. “The core fuel to most of our power plants is our gas. So if we cannot take gas to the power plants, generation suffers. “The bleep we have been seeing recently in power generation and availability of power in the country has to do with this vandalism,” he said. Pointing out solutions to the challenge, the company said that it plans to bring on board, host communities to be a part of those to secure the assets. According to an official with the company, the gas pipeline was vandalised on March 2, 2015 by unknown persons, noting that the impact of the destruction stretched as long as 56km from the point of the blast.

Power

2015 May, SweetcrudeReports

Lagos at dusk

Nigerians say electricity supply has worsened since privatisation -Poll …60% see no improvement in power supply OSCARLINE ONWUEMENYI

ore than 60 per cent of Nigerians have reported no significant improvement in power supply over the past two years, a survey h a s s h o w n . Majority of Nigerians also say electricity generation and supply has worsened since the privatisation of the defunct Power Holding Company of Nigeria Plc, PHCN, in 2013. Power poll results released by NOIPolls Limited for the first quarter of 2015 revealed that an average of 62.6 per cent of Nigerian households saw no improvement in power supply to their households (from first quarter 2013 to first quarter 2015); leaving only 37.4 per cent who said they saw some improvement. This implies that for a period of two years of monitoring trends in the power sector, there has been no remarkable improvement in power supply, as the larger proportion of

Nigerians did not see any improvement in power supply to their households. In line with this finding, the South-West region had the highest average proportion (67 per cent) and the South-East region had the lowest average proportion (56 per cent) of respondents who saw no improvement in power supply to t h e i r h o u s e h o l d s . More findings revealed that over the same period, Nigerian households received an average daily cumulative power supply of between 5.4 – 7.1 hours per day.

"This has also impacted on the spending of Nigerians on power supply; as these alternative sources are typically more expensive to run than direct power supply from DISCOs," the report stated. An evaluation of expenditure of Nigerians on actual power supply from Distribution Companies, also known as DISCOs, as well as expenditure on alternative sources, revealed that on the average (between Q2 2014 and Q1 2015), Nigerians spent between 3,302 - 3,613 on actual power supply from DISCOs and between 8,321 - ? 11,198 on alternative sources of power.

According to organisers of the poll, these findings highlight the existence of certain inherent issues in the nation's power generation, transmission and distribution value chain.

This therefore brings the average total monthly expenditure on power to between 11,623 - 14,811.

As a result, the direct effect of these issues can generally be seen in the widespread purchase and use of alternative sources of power (such as generators, inverters, and solar installations etc) by a high per centage of Nigerians (average of 77.5 percent).

"This finding throws light on some challenges Nigerians (especially low income earners) may be facing in the distribution of household consumptionexpenditure; giving that the average income for Nigerians in this category ranges from 5,000 40,000," it stated.

According to organisers of the poll, these findings highlight the existence of certain inherent issues in the nation's power generation, transmission and distribution value chain The report added that, "while the demand for power continues to increase even with the rise in population, access to power and the ability to meet this demand is highly important in enhancing household and business activities, as well as driving development in Nigeria. "This in turn would depend greatly on the successful reform of the power sector with clearly outlined strategies which are time bound and incorporates diversification in power generation for the nation through other available sources.” The power sector in Nigeria has been beset with numerous

challenges manifesting in poor power supply to the final consumer. The report further highlighted that since the privatisation of the Power Holding Company of Nigeria Plc. (PHCN) in 2013, Nigeria’s electricity generation capacity has declined from the peak generation of about 4,517.6 megawatts, MW, in December 2012 to about 3,670MW in January 2014. "This occurred in a period when the forecast for electricity generation was placed at 12,800MW. On a per capita consumption analysis, Nigeria is

CONTINUES ON PAGE 32

2015 May, SweetcrudeReports

Power

Govt greenlights nuclear power for nation’s development

Nuclear power plant

he Nigerian government is determined to establish nuclear power projects across the country and has shown commitment by taking on the responsibility for infrastructure and manpower development to create the requisite enabling environment for the successful implementation of the programme in partnership with the private sector. Out-going President Goodluck Jonathan disclosed recently at a plant commissioning in Olorunsogo, Ogun State that the nuclear project, planned for takeoff by 2020, is on course with necessary consultations going on. He however noted that the government is very conscious about the likely implications of the atomic project, therefore the Nigerian Atomic Energy Commission would be mandated to monitor its operations when completed. The move will, however, be subject to the position of the incoming General Muhammadu Buhari (rtd) administration, which will assume office on May 29, on the matter. “We have the potentials to generate enough power for our domestic use in this country, we can harness our gas, water

resources. Already, we are working on two dams in the North, our coal reserve is abundant. The very unpopular one is the energy from atomic sources, which we are working very hard to deploy. The National Atomic Agency will always control it because of its sensitiveness and implications of developing that project. "We are lucky as a nation that we have all these resources,” President Jonathan said. Sources in the administration said the new emphasis on fasttracking the nation’s nuclear energy development was scripted to align with government’s power-sufficiency agenda for the country. They add that the National Nuclear Power Roadmap developed and approved by the Federal Government for implementation envisages the nuclear power plants coming into operation by 2020. In a recent interview with SweetcrudeReports, the Director-General and Chief Executive Officer of the Nigeria Atomic Energy Commission, NAEC, Dr. Eripamo Osaisai, said assurance of long-term energy security requires detailed energy planning which would entail analysis of the supply side, including available energy resources, exploitation

strategies, and deployment schedules, as well as a realistic projection of energy demand over time.

China, Brazil, India, Kuwait and Iran also generate significant electricity from NPPs.

The big question, however, is how feasible is the nuclear energy option?

“In Africa, countries like South Africa, Egypt and Tunisia have already begun implementation of nuclear energy, with many planning to introduce it in order to meet their energy needs. As it stands now, there is a strong global nuclear renaissance for electricity generation, both in terms of expanding current capacity as well as introduction in some countries,” Osaisai noted.

According to Osaisai, as at the end of 2009, there are about 450 Nuclear Power Plants, NPP, operating in more than 30 countries, which supplies about 16 per cent of the global electricity. More than 30 new plants are under construction in different countries of the world. Majority of these plants are located in the industrialised countries, including the United States, France, Russia, Sweden and South Korea. Quite a number of other emerging economies such as

He added that preliminary assessment has shown that with proper planning and structured implementation, Nigeria stands to gain much from exploiting nuclear energy resources. “As an

The national strategy for the implementation of the approved NP programme has been finalised with the assistance of the International Atomic Energy Agency, IAEA

emerging economy with limited infrastructure, Nigeria would only adopt an established nuclear power technology with a good track record and operation experience. Such a technology should be reasonably standardized, amenable to easy maintenance, with clearly defined vendor support programmes and suitability for eventual domestication,” he explained. Osaisai observed that the Federal Government of Nigeria has activated the Nuclear Power, NP, programme, and has approved the roadmap for its implementation. The national strategy for the implementation of the approved NP programme has been finalised with the assistance of the International Atomic Energy Agency, IAEA, a meticulous implementation by the Nigeria Atomic Energy Commission, in partnership with other relevant stakeholder institutions and international development partners, is envisaged. In readiness for the implementation of the programme, the Nigerian Atomic Energy Commission announced the selection of four sites across the country for the location of nuclear power plants, even as it stated that the first plant is expected to begin operation by the year 2020.

2015 May, SweetcrudeReports

Power

Sapele power station

Nigeria re-assures investors on profitability of electricity industry …Vandalism blighting achievements on power supply - Govt OSCARLINE ONWUEMENYI

ncidents of vandalism of oil and gas pipelines have blighted the achievements of the Federal Government in the area of power supply, according to Minister of Power, Prof. Chinedu Nebo. The minister made this disclosure as he re-assured potential investors of the immense profitability in the Nigerian power sector despite recent drawbacks experienced due to vandalisation of gas pipelines across the country. "Incidents of vandalism of oil and gas pipelines have blighted many of the achievements that have been recorded in increasing the supply of gas to power. “These acts by their sheer savagery and regularity have constrained the generation of power to much less than the current system capacity of about 5,500MW," Nebo said at the 2015 edition of Nigeria Power Forum in Abuja. He added that whilst government is leaving no stone unturned to bring these incidents under control and the perpetrators to book, it remains open to partnerships aimed at achieving lasting and sustainable solutions.

Nebo assured of government’s support in making the sector very profitable for investors. He said, "I would also like to use this opportunity to assure our new and prospective investors, local and international, of the Government’s continued support and interest in making the emerging Nigerian Electricity Supply Industry a very profitable investment destination.” The Minister listed some of the power privatisation gains and achievements under his administration to include: “appreciable increase in Generation Capacity by the new private sector owners of GENCOS with the following additions: Ughelli: from 160MW to 610MW (eventually to 1610MW) Egbin: from 1080MW to 1320MW “Kainji Hydro: from 80MW to 230MW (eventually to 470MW) Jebba Hydro: from 450MW to 546MW6. In addition, two National Integrated Power Projects (NIPP) Power Plants, namely Alaoji (960MW) and Calabar (563MW) were completed."l According to Nebo, “The intervening year has seen unprecedented collaboration between the ministries of Power

and Petroleum Resources. This by itself is a very commendable development given the obvious dependency of the Nigerian Power Industry on gas. I am also very pleased to highlight a number of achievements of this collaboration. “The increase in the price of g a s - t o - p o w e r from$1.50/mmBTU to $2.50/mmBTU with a maximum allowable gas transportation price of $0.80/mmBTU. The appreciable increase in the quantity of gas available for power generation to levels that can support the generation of up to 5, 500MW.” He noted the remarkable milestone of the first supply of gas from a marginal field producer, Frontier Oil, to Ibom Power. "Also, there was the settlement of legacy gas debts owed to gas producers by the erstwhile PHCN generation plants under the Central Bank of Nigeria, CBN, Intervention Facility for the Nigerian Electricity Supply Industry. "The most recent execution of the long outstanding PRG for the Gas Supply Agreement, GSA, between Chevron and Egbin Power Plant," the minister pointed out. He said it was worthy of note that all the 10 NIPP Power

Plants have now achieved gas supply. "All these Power Plants are now on the way to being privatised with preferred bidders already announced. We expect in the coming months to have the transfer of the assets to the new private sector owners c o n c l u d e d . " Nebo said it is evident from the

foregoing that a lot of progress has been made. “These achievements are a demonstration of what is possible and can be said to have set the scene for the way forward which will see Nigeria well on the path of meeting its target of generating 20MW by 2020" he said.

UNEP confident about future of renewable energy

N Environment Programme, UNEP, has expressed confidence about the future of renewable energy as it maintained that global projections of renewable energy growth had been consistently underestimated. UNEP Executive Director, Achim Steiner, made the disclosure in a keynote address on renewable energy at the recent Atlantic Council-hosted meeting in Washington D.C., during which he highlighted the results of the latest Global Trends in Renewable Energy Investments report by the Frankfurt School-UNEP Collaborating Centre and Bloomberg New Energy Finance. Emphasising the unprecedented rate of growth of renewables over the last decade, Mr. Steiner stressed that global projections of renewable energy growth are consistently underestimated, and actually grew by 17 per cent to US $270 billion last year. Over 100 GW of generating capacity added around the world made 2014 the best year ever for newly installed capacity, he said. The International Energy Agency's, IEA, moderate scenarios forecast the share of electricity produced from renewables to reach 57-71 per cent in 2050. The continuing decline in technology costs of solar and wind power have contributed to this positive projection.

Power

2015 May, SweetcrudeReports

Power sector held back by poor financing, gas issues -Amadi

Gas power plant OSCARLINE ONWUEMENYI

financing.”

He added that distribution companies are struggling to get consumers to pay their bills and this means that their revenue is so poor they are unable to pay producers for power.

he Nigerian E l e c t r i c i t y R e g u l a t o r y Commission, NERC, has admitted that Nigeria’s electricity industry is being hindered by producers’ inability to raise finance and natural-gas shortages, which has curbed companies’ ability to boost investment in output as the country suffers from daily blackouts. Despite billions of dollars worth of investments which has culminated in the privatisation of the Nigerian power sector, peak electricity output of Africa’s biggest economy is about 3,800 megawatts, with another 1,500 megawatts unavailable because of gas shortages. Chairman of NERC, Dr. Sam Amadi, who spoke in an interview with Bloomberg in Abuja, noted that there were still issues of creditworthiness for many of the electricity companies. According to him, “Power generation is not coming on board because the distribution companies are weak, they’re not credit-worthy and can’t get

Nigeria, beset by frequent blackouts, dismantled the state monopoly and sold hydro- and gas-powered plants to try bring in investment needed to expand electricity supply. The industry requires $18 billion to $20 billion to boost supplies to 10,000 megawatts within six years, according to the nation’s privatisation agency. Amadi pointed out that South Africa, with a third of Nigeria’s population, has eight times more installed capacity. One megawatt is enough to provide energy to 2,000 average European homes, or about 333 in Japan. He, however, observed that a possible lifeline was on the way for the ailing electricity sector with the N213 billion intervention fund provided by the government. He said, "Power generation and distribution companies can now access a 213 billion-naira ($1 billion) bailout announced by

authorities in September to shore up struggling operators. The fund is supposed to help them pay off gas-supply debts and meet debt-service obligations to lenders on loans of almost 500 billion naira, on which some were falling behind. While Nigeria was the world’s fourth-biggest exporter of liquefied natural gas in 2012, it’s struggling to meet local demand for the fuel used by plants that generate at least 70 percent of the country’s electricity needs. The nation, which holds Africa’s biggest gas reserves of more than 180 trillion cubic feet, is expanding pipeline networks so that they can service power plants and industries and not just exports.

Nigerians say electricity supply has worsened since privatisation -Poll CONTINUED FROM PAGE 29 ranked a paltry 178th with 106.21 KWh per head, behind other African countries like Gabon and Ghana. "The reasons for the gulf in supply-demand range from: old dilapidated plants (at least 80 percent are over 10 years old); challenges with access to funds by organisations that recently acquired PHCN subsidiaries; and poor gas supply to power generating plants," the report stated. Furthermore, it noted, setting prices for consumers that promote efficient use of electricity is a challenge as costs vary across times of day (peak/off-peak), seasons (dry/rainy), users (commercial/residential), and geographic areas (urban/rural). Electricity prices in Nigeria are below production costs, therefore the industry is unable to generate enough revenue to cover its operating costs.

For now, the country has “one of the lowest rates of net electricity generation per capita in the world,” the U.S. Energy Information Administration said in a statement posted on its website on Wednesday.

NOIPolls introduced the Power Polls in 2013 with the aim of monitoring the progress made so far in the power sector reforms in Nigeria, and to explore the perception of Nigerians towards the power sector reforms.

“There is hope that gas is coming,” Amadi said. “We have promised that by the end of this year we should be able to have enough gas to fire about probably 5,500 m e gawat t s .”

The polls were conducted monthly to explore the amount of power supply received daily and expenditure on power supply, as well as the state of power supply to households and its effect to consumers especially in the use of alternative sources of power and its financial implications. The results from the polls are presented in quarters from Q1 2013 to Q1 2015.

2015 May, SweetcrudeReports

Power

2015 May, SweetcrudeReports

hairman of the N i g e r i a n Electricity Regulatory Commission, NERC, says the power distribution companies, DISCOs, are now expected to first consult with consumers before any request to his commission for increase in electricity tariff. This is part of the outcome of the recent 50 per cent slash on electricity tariff by the Federal Government. Dr. Amadi disclosed this as he gave details of the price slash and its implications for the DISCOs and the electricity consumers. The 50 per cent cut on electricity tariff, which was directed by President Goodluck Jonathan, took effect from April 1. According to the NERC boss, the 50 per cent cut refers to commercial loss that has divergent impact on electricity consumers tariff, which will now be recovered by DISCOs themselves unlike in the past when NERC built

Electric pylons

NERC says DISCOs now to consult with customers before tariff hikes components in tariff structure to enable DISCOs recover their losses. This, he said, meant that his agency has now asked DISCOs to recover their losses, as consumers would no longer bear the brunt of such losses. Dr. Amadi further stated that the 50 per cent commercial loss implementation varies from one DISCOs to another noting that what is obtainable in Enugu DISCO might not be feasible in Ikeja or Ibadan DISCOs. He also noted that it is now the responsibility of DISCOs to convinced the regulator of any exceptional circumstances for such loss to be passed on to the consumers. He said the 50 per cent tariff slash sequels complaint from electricity consumers particularly industrial users such as Manufacture Association of Nigeria, MAN. MAN had recently issued a threat, warning of looming job losses and impeding collapse of businesses over the very high

tariff structure for industrial users. The development had led to series of meetings with NERC and the subsequent setting up of a technical committee to look into the issue. In their initial response to the tariff cut, the DISCOs had insisted on the old tariff under the Multi-Year Tariff Order, MYTO 2.1 as they claimed they were yet to officially communicated by NERC on the presidential directive. A ranking official in one of the 11 DISCOs in the country, had told SweetcrudeReports they are yet to receive official letters notifying them to implement the 50 per cent cut, adding that the DISCOs would be operating with the old tariff which came into effect on January 1, this year, until they r e c e i v e d o f f i c i a l communication from NERC. The source, who prefered not to be mentioned in print, however, disclosed that the DISCOs were going ahead to commence customers

Geothermal plant

World body highlights new opportunities in geothermal energy â&#x20AC;ŚSays 24 nations harnessing it to generate electricity

eothermal energy, the flow of heat energy radiating from the earth's core, provides unique opportunities for cost efficient, sustainable food production and processing in developing countries, a new report by the Food and Agricultural Organisation, FAO, has said. Also, 38 countries are currently using geothermal energy for direct application in agricultural production while some 24 others are harnessing it to generate electricity, according to the report, which said Iceland, Costa Rica, El Salvador, Kenya, New Zealand and the

Philippines derive more than 10 percent of their electricity needs from natural heat s o u r c e s . Of the 23 developing countries that are using geothermal, the majority currently apply it to space heating and recreational purposes like bathing only, leaving its significant potential for agricultural uses untapped, FAO added. In some developing economies, as much as half of all food produced is lost post-harvest that's due in part to a lack of affordable energy for food processing, according to "Uses of Geothermal Energy in Food and Agriculture".

2015 May, SweetcrudeReports

Finance

2015 May, SweetcrudeReports

Foreign investment inflow into Nigerian oil sector dips by N622m

Oil platform IKE AMOS

significant decline was recorded in f o r e i g n investment inflow into the Nigerian oil and gas sector in the fourth quarter of 2014, as the total amount of capital imported into the sector dipped by $3.112 million (about N622 million) to $46,459 (about

N9.3 million), compared to $3.159 million recorded in the previous quarter. The decline, according to the Nigerian Capital Importation Summary Report for the Fourth Quarter of 2014, published by the National Bureau of Statistics, NBS, was due to uncertainty over the 2015 general elections in the country. The NBS declared that capital imported into the oil and gas sector dropped by

98.53 per cent from $3.159 million, about N631.8 million recorded in the third quarter of 2014.   Quarter on quarter, the amount of foreign investment inflow into the oil and gas sector in the fourth quarter was $53.605 million (about N10.721 billion) lower than the $53.65 million foreign investment inflow recorded in the fourth quarter of 2013. Furthermore, the NBS

Forte Oil records 11% drop in profits for 2014

orte Oil Plc has p o s t e d a n unimpressive performance in its 2014 financial year, as its profit for the year dipped by 10.93 per cent to N4.457 billion. Specifically, the company’s profit for the year dipped by N547 million from a profit of N5.004 billion recorded in

the 2013 financial year. The decline in its profit, according to its 2014 annual report and accounts, was in spite of a significant improvement in its revenue for the period. In particular, its revenue appreciated by 32.88 per cent to N170.128 billion, compared to revenue of N128.028 billion in 2013. Its revenue was eroded by cost of sales which stood at

N151.66 billion compared to a cost of sales of N115.767 billion. Cost of sales accounted for 89.14 per cent of its total revenue. The company posted gross profit of N18.465 billion, rising by 50.57 per cent from N12.26 billion recorded in 2013, while its other income dropped to N1.4 billion from N6.388 billion recorded in 2013.

stated that $201.136 million foreign investment inflow was recorded in the first quarter of 2014, $3.831 million was recorded in the second quarter, $3.159 million in the third quarter and $46,459 in the fourth quarter, compared to foreign capital inflow of $3.518 million, $70.828 million, $1.624 million and $53.65 million in the first, second, third and fourth quarters respectively of 2013.

It recorded distribution expenses of N2.482 billion, compared to N2.936 billion in 2013, while administrative expenses stood at N9.244 billion as against N9.444 billion recorded in 2013. Operating profit rose to N8.137 billion in the 2014 financial year from N6.27 billion in 2013; profit before income tax dipped to N6.006 billion, from N6.525 billion in 2013.

To this end, the NBS said, “Total capital imported in the year of 2014 summed to $20.751 billion, lower by $576.61 million or 2.66 per cent from the $21.318 billion that was imported in 2013. “The annual decline was primarily due to the reduction in the value of capital imported in the fourth quarter of 2014, which was expected, as investor confidence is low during the build up to a Presidential election.” The NBS further stated that the total inflow of foreign capital into the Nigerian economy declined by 2.66 per cent or $576.61 million to $20.75 billion, an equivalent of N4.15 trillion in 2014, from $21.318 billion recorded in 2013. The NBS noted that in the fourth quarter of 2014, capital valued at $4.5 billion was imported to Nigeria in the fourth quarter of 2014, bucking the upward trend that had been observed throughout the preceding quarters of 2014.

2015 May, SweetcrudeReports

Finance

IKE AMOS

igeria earned N 4 8 6 . 4 4 billion from the sale of crude oil and gas in the month of January 2015, according to data released by the Central Bank of Nigeria, CBN. According to the CBN Economic Report for January 2015, the amount earned by the country from the sale of crude oil accounted for 68.4 per cent of the federallycollected revenue for the period. The rise in oil receipts relative to receipts in the preceding month, the CBN said was attributed to the increase in receipts from crude oil and gas exports as well as domestic crude oil and gas sales. The CBN noted that the receipt from crude oil and gas sales was higher than the receipts in the preceding month and the corresponding period of 2014, by 3.9 and 0.9 per cent, respectively. Particularly, the CBN estimated gross federallycollected revenue in January at N710.78 billion, representing an increase of 4.6 and 4.3 per cent above the receipts in the preceding month and the corresponding period of 2014, respectively. The CBN further put crude oil production, including condensates and natural gas liquids in January 2015 at 1.95 million barrels per day (mbd) or 60.45 million barrels for the month. According to the apex bank, crude oil export was estimated at 1.50 million barrels per day (mbd) or 46.5 million barrels during the month, adding that the average price of Nigeria’s reference crude, the Bonny Light (370 API), was estimated at $48.21 per barrel, indicating a further decline of 23.7 per cent below the level in the preceding month. On the other hand, the CBN said, “Non-oil receipts (gross), at N224.34 billion or 31.6 per cent of the total was 6.2 and 12.3 per cent higher than the receipts in the preceding month and the corresponding month of 2014, respectively. “The increase in non-oil revenue relative to the preceding month reflected the rise in receipts from VAT, customs and excise duties and independent revenue of the Federal Government during the review month.”

Gas plant

Nigeria earns N486bn from oil, gas sales in one month Of the gross federallycollected revenue, the CBN said the sum of N465.76 billion, after all deductions and transfers, was transferred to the Federation Account for distribution among the three tiers of government and the 13.0 per cent Derivation Fund. It said, “The Federal Government received N220.44 billion, while the state and local governments

igeria-focused oil group, Mart Resources has recorded a 20.85 per cent drop in its net income for the 2014 financial year, to $28.1 million. This, according to a statement by the company announcing its audited result for the year ended, December 31, 2014, is against a net income of $35.5 million recorded in its 2013 financial year. To this end, the company is proposing total dividends of 0.075 Canadian dollars per common share for its

received N111.81 billion and N86.20 billion, respectively. The balance of N47.31 billion was distributed among the oil-producing states as 13.0 per cent Derivation Fund. “From the VAT Pool Account, the Federal Government received N10.58 billion, while the state and local governments received N35.26 billion and N24.68 billion, respectively.

“In addition, the sum of N15.63 billion and N10.55 billion were shared as excess crude and exchange rate gain among the three tiers of government and 13 per cent Derivation Fund as follows: Federal Government ( N7.16 billion and N4.84 billion); State Governments (N3.63 billion and N2.45 billion); and Local Governments (N2.80 billion and N1.89 billion).

“The balance of N2.03 billion and N1.37 billion was distributed to the oil producing states as 13 per cent Derivation Fund. “Overall, the total allocation to the three tiers of government from the Federation Account2 and VAT Pool Account in the review month amounted to N568.79 billion, compared with N574.68 billion in the preceding month.”

Mart Resources’ income drops to $28m production day was 8,761 over Umusadege, others bopd compared to 6,032 shareholding, translating to aggregate dividend of $24.3 million. This is against an aggregate dividend of $68.7 million declared in 2013. This was in spite of a significant increase in its daily crude oil production. Specifically, the company recorded average daily oil production and sale of 6,469 barrels for 2014 from the Umusadege field, compared to 4,000 barrels of oil per day in 2013.

The company said, “Mart's share of average daily oil produced and sold for the year ended December 31, 2014 from the Umusadege field per calendar day was 6,469 barrels of oil per day (bopd) compared to 4,000 bopd for the year ended December 31, 2013. “Mart's share of average daily oil produced and sold for the year ended December 31, 2014 from the Umusadege field per

bopd for the year ended December 31, 2013. “During the year ended December 31, 2014, the Umusadege field was shut down for a total of 95.5 days, compared to 123 days in 2013, due primarily to various disruptions, lack of storage capacity at the Brass River export terminal, and repairs and maintenance to the export pipeline and export facility.”

2015 May, SweetcrudeReports

Finance

Oil price decline: Nigeria’s 2015 budget unrealistic — FDC IKE AMOS

nalysts at Financial Derivative Company, FDC, have described Nigeria's 2015 budget as unrealistic, in light of low crude oil prices. The analysts, in their report titled, ‘Oil Prices and 2015 Budget,’ said: “The proposed oil price and exchange rate benchmarks, albeit more in touch with reality than their previous assumptions, may eventually prove unrealistic. At the moment, the baseline assumptions in the 2015 budget still make for an unrealistic budget.” Commenting on the details of the budget, the analysts said, “From what is accessible, lower oil prices have apparently translated directly to proposed spending cuts and lower revenue projections in the 2015 budget. “The aggregate expenditure is budgeted at N4.457 trillion, down 7.76 per cent from 2014, while revenues are down by 3.43 per cent from 2014 at N.3.602 trillion. This breaks down into N1.918 trillion of oil revenue and N1.684 trillion of non-oil revenue, a ratio of 53:47. These lower estimates are considerate of reduced subsidy spending for 2015 coupled with the devaluation rebate. “In terms of recurrent expenditure, it has been estimated at N2.616trn with the rising wage bill and pension claims continuing to constitute major expenditure pressure points. Approximately 70 per cent of

Oil rig

recurrent expenditure is accounted for by personnel costs and eight per cent by pensions. “Personnel costs have risen over the past nine years growing from about 32 per cent of the entire budget to just over 40 per cent proposed for 2015. With the addition of SURE-P, debt service and statutory transfers, aggregate recurrent expenditure comes to N3.971 trillion, 85.8 per cent of budget.” The analysts lamented the significant reduction in

capital expenditure in the budget, stating that it will weaken earnings growth and hinder the growth of the economy. They said, “No other component of the proposed budget makes Nigeria’s vulnerability to oil price shocks more apparent. This drastic fall in capital spending suggests a reduction in the number of capital projects to be executed. “It thus weakens the much needed revenue support required to bolster inclusive

Oil price slump to impact Nigerian banks, economy —S&P OSCARLINE ONWUEMENYI

nternational credit rating agency, Standard & Poors, S&P, has said that banking sector profitability and asset quality in oil exporting countries, including Nigeria, would be vulnerable to low oil prices especially in those

that have relatively low fiscal buffers. Following the significant drop in oil prices over the past few months, reaching around $55 per barrel for Brent as of mid-February compared to more than $100/bbl a year ago, the rating agency has revised its price assumptions. S&P now expects Brent’s price to stabilise around $55/bbl in 2015 and increase slightly to

around $65/bbl in 2016. Mohamed Damak, an analyst with S&P observed that, “While our base-case scenario assumes this drop will not significantly affect the performance of oilexporting countries’ banking systems, a few of them could suffer higher credit losses and lower liquidity. “In particular, the banking

growth and development in 2015, or to lower the infrastructure deficit, which is the key constraint to nonoil growth.” Continuing, the analysts said the $52 per barrel oil price benchmark proposed by the National Assembly is optimistic, warning, however, that external factors might make the price unrealistic. The analysts said, “The oil price benchmark at $52 per barrel has been set with optimistic expectations of an average price of oil above $50

systems of countries with low fiscal buffers, significant economic imbalances, and high dependence on oil-related bank deposits may come under pressure." While analysts do not expect oil’s price drop to have any major negative implications on these countries’ banking systems, in the GCC, banks in Bahrain and Oman are vulnerable indirectly through the potential drop in investments and economic growth.

per barrel for 2015. While we believe this is achievable, a further decline in prices could be on the horizon if Iran’s nuclear deal with the West succeeds. This would allow it to add 5mbpd to the global oil markets. The analysts further stated that a further decline in crude oil prices would inevitably lead to further adjustments to the benchmark or even expenditure cuts. They said, “It is worth noting that fellow Organization of Petroleum Exporting Countries (OPEC) countries Venezuela, Iran and Angola have assumed benchmarks of $40 per barrel. “The lower oil benchmark price does not get any further support from the production level benchmark. With an average production rate of 1.9mbpd over the past two years, the 2.27mbpd benchmark is overly optimistic, particularly as the challenges of oil theft, bunkering, and production shut-ins persist. “Furthermore, current global oil industry dynamics may compel OPEC to ensure strict compliance to production quotas by member countries.

2015 May, SweetcrudeReports

Finance

Fuel attendant

IKE AMOS

oing by the slight rebound in crude oil prices in the international market, the Nigerian government will record a shortfall of about N194.35 billion in the payment of subsidy for Premium Motor Spirit, PMS, at the end of 2015, analysts at BGL Plc have projected. The analysts, in their Economic Note for March 2015, said the N240 billion budgeted for petroleum subsidy in 2015 would be inadequate, especially with the slight improvement recorded in crude oil prices in the last couple of weeks. The analysts, led by Mr. Femi Ademola, Head , Research & Intelligence, BGL, said, “The effect of the rebound in crude oil prices and the decline in the value of the naira, is an expansion in subsidy per litre from a meagre 32 kobo per litre by our estimates on January 20th on the N87 per litre peg to N29.83 per litre currently. “Consequently, the subsidy implication on government finance, increased from N12.8 million per day to N1.19 billion per day on the

Nigeria to record N194bn shortfall in subsidy payment —BGL 40 million litre per day domestic consumption of refined petroleum. “At this rate, the N240 billion budgeted for petroleum subsidy in 2015 would remain inadequate for that purpose if oil price stabilise at price above $60 per barrel and exchange rate at above N176 to a dollar.” According to the analysts, the fall in crude oil price at the international market represents a double whammy

for the Nigerian economy; a depressing pressure on government revenue alongside a provision of N240 billion for fuel subsidy payment in 2015. They argued that if the subsidy leakage is plugged through full deregulation, the savings could be channeled into some more productive fiscal spending. The analysts attributed the lingering fuel scarcity to market uncertainties which

was as a result of the Federal Government to deregulate the petroleum sector in the wake of the declining crude oil prices. They said, “The failure of the Federal Government to take advantage of the reduction in oil prices to deregulate and the choice to reduce the peg also created market uncertainties that are arguably responsible for the sudden scarcity of products in major cities in Nigeria in recent times.”

Asian LNG spot prices tumble 70%

pot prices for liquefied natural gas, LNG, in Asia have been sluggish, falling to around $7 per million British thermal units, nearly equal to the prices of their European rivals. Because of the "Asian premium," the practice of a number of Middle Eastern oil exporting countries of adopting different pricing formulas for crude oil exports to different regions,

LNG prices have long remained higher than in Western countries. But now buyers hold the high ground in price negotiations, and some Middle Eastern gas producers are increasing exports to Europe. Asian LNG spot prices tumbled nearly 70% after hitting a record high of $20 in February 2014. The difference with the National Balancing Point (NBP), Europe's benchmark gas

price, was as large as $10 last year, but the NBP briefly topped its Asian rival in February this year. This year, new LNG supply is slated in the Asia-Pacific region: In Australia, several LNG projects will start operations in Gorgon, Western Australia, and other areas. There are also plans to increase LNG output in Indonesia. Gavin Thompson, an analyst at Wood Mackenzie, a British

They further called on the Federal Government to tap into the opportunity presented by the present situation to implement the deregulation of the sector. The analysts said, “Fortunately, increasing number of Nigerians appears to favour the deregulation as long as product supply is stable. We retain our opinion that the option for a full deregulation of the downstream oil sector is still relevant at this time. research company, predicts that 12 million tons of LNG will be supplied annually. Meanwhile, demand remains sluggish in Asian countries. With high levels of LNG inventories, Japanese electric power companies' appetite for procuring LNG on the spot market is weak. An LNG procurement official at a major power company said demand is weak during spring and industrial electricity demand is also falling short of the plan.

2015 May, SweetcrudeReports

Labour ELUONYE KONYEGWUAEHI

he Nigerian Labour Congress, NLC, has set up a committee to develop proposals on a new national minimum wage as part of the preparation for negotiation with the Federal Government and other employers. This came as NLC vowed to cripple activities of state governments that have refused to fully implement the N18,000 national minimum wage that was signed into law in 2011 by President Goodluck Jonathan government. At the time of this report, states such as Ebonyi, Enugu, Anambra, Benue, Niger and Plateau have either not implemented the minimum wage or partially implemented it, with council workers and teachers being the worst hit. Giving details of the outcome of the Central Working Committee, CWC, meeting of his faction of the NLC, Comrade Joe Ajaero, said it was clear to everybody that the N18,000 minimum wage was no longer realistic to the economic reality of the time, citing among others, the devaluation of the national currency and high cost of living. According to him, “having observed that the five-year tenure of the National Minimum Wage comes to an end later this year, consequently the CWC endorses the Minimum Wage Committee proposed by the National Administrative Council and directs that the committee develops proposals on a new national

2015 May, SweetcrudeReports

Labour raises committee on new minimum wage …Says N18,000 pay no longer realistic

Nigerian workers

minimum wage as part of the preparation for negotiation with the Federal Government, Nigeria Employers' Consultative Association”. On non-payment of salaries, Ajaero said the CWC-insession observed that some states as well as federal

agencies were owing salaries for many months. "Delayed payment of salaries is wage theft and grossly unacceptable. The CWC therefore mandates the new leadership of NLC and State Councils to take immediate measures to compel every

employer, whether public or private, in particular state governments, to pay the arrears of salaries without further delay,” he said. He noted that the meeting was aware of the moves by the Federal Government to c o m m e n c e t h e

Organised labour, employers set agenda for incoming Buhari govt ELUONYE KONYEGWUAEHI

rganised labour and employers alike have tasked the incoming government of General Muhammadu Buhari (rtd), which takes effect by the end of this month, to pay special attention to deplorable state of insecurity,

economy and unemployment, among others. While the Nigeria Union of Petroleum and Natural Workers, NUPENG, Association of Senior Civil Servants of Nigeria, ASCSN, and National Union of Textile, Garment and Tailoring Workers of Nigeria, NUTGTWN, spoke on behalf of labour, the Nigeria

Employers' Consultative Association, NECA, spoke for employers. NUPENG expressed optimism that the coming of the new government would be good for Nigeria, especially for the oil and gas industry, maintaining that as a former Minister of Petroleum, Buhari understands the problems of the sector.

The union said it was sure that the president-elect would a d d r e s s t h e protracted Petroleum Industry Bill, PIB, and other issues in the sector, stating that it had no doubt that he would bring his past leadership experience to bear in moving the nation forward.

implementation of the Steve Orosaye Report on merger of Federal Ministries, Departments and Agencies, emphasising that CWC has warned the Federal Government, that it would resist any attempt to hide under the exercise of implementation of a controversial committee report to lay off Workers in the public sector and deepen unemployment in the country. Comrade Ajaero decried the use of security agencies to address industrial matters involving labour and employers, saying the “CWC notes with concern the ways and manners some security agencies are being misused to harass and intimidate some leaders of affiliates of NLC like National Union of Banks, Insurance and Financial Institutions Employees in the bid to deny them the right to freedom of association".

2015 May, SweetcrudeReports

Labour

Mechanic workshop

PenCom moves into informal sector ELUONYE KONYEGWUAEHI

he National P e n s i o n Commission, PenCom, has commenced a nationwide dialogue with self-employed persons and workers in the informal sector ahead of the commencement of the Micro Pension scheme in the country. Micro Pension is a financial programme for the provision of pension services to selfemployed persons and informal sector workers. The programme has been successful in India, Kenya, Ghana and other countries even as it is expected to take off in the country before the end of this year. Addressing participants at the one-day workshop on the Contributory Pension Scheme, CPS, for selfemployed people in Lagos recently, the Director General of PenCom, Mrs. Chinelo Anohu-Amazu, said the Federal Government planned to bring the over 50 million workers in the informal sector into the CPS using the Micro Pension initiative.

She said government hoped to bring at least 20 million informal sector workers and self-employed persons into the scheme in the next four years and assured that necessary arrangements were being put in place to ensure a smooth take off of the scheme later this year. “Take care of your financial needs in old age now that you

are working, not later. Whatever you gain here, please share with your colleagues at the branches and local units,” Mrs. Anohu-amazu admonished. Also, the Head of Research and Corporate Strategy Department at PenCom, Dr. Farouk Aminu, reviewed extensively the features of the CPS and the Pension

Reform Act, 2014 with emphasis on coverage, access to retirement benefits under the scheme and the Pension Protection Fund. He assured the workers that PenCom understood that the informal sector was characterised by the absence of formal structures, low and irregular incomes earned by workers except those on fixed salaries, highly mobile and

flexible jobs, lack of permanent work address in many instances and was ready to ease the stress associated with registration and participation for the target workers. Farouk said the above peculiarities required special registration and customer service platforms even as the commission is anticipating erratic contributions, remittance and withdrawal arrangements. PenCom, he added, hopes to make the scheme flexible to accommodate workers in the informal sector and selfemployed persons, adding that the commission is ready to partner trade associations, non-governmental organisation, NGOs, and religious bodies to make the scheme work. Highlighting some of the benefits that self-employed people and workers in the informal sector could reap by participating in the scheme, he said in addition to providing them income in their old age and inculcating a savings culture through highly protected and regulated investment, the scheme would afford them the opportunity to connect to other programmes of government while helping to finance infrastructure across the country. They could as well use the balance in their Retirement Savings Accounts, RSAs, as equity contribution for residential mortgages and support their businesses and benefit from other microcredit schemes and special awareness programme affiliated to the scheme, he said.

George Kirkland, Chevron vice chairman, retires in June

r. George L. Kirkland, vice chairman and executive vice president, Upstream, at Chevron Corporation, will retire from the company, effective June 15. Kirkland, who was in Nigeria from 1992 to 1999 as general manager of production, and chairman and managing director of Chevron Nigeria Limited, would be succeeded by James W. (Jay) Johnson, effective June 16.

“George’s business acumen and deep operational knowledge of our industry have helped create enormous value for Chevron and our shareholders over many years,” said John Watson , chairman and CEO. “I am confident our track record of success in the upstream will continue under Jay’s leadership, as his broad base of experience has prepared him well for the job.” Kirkland, 64, joined Chevron in 1974. He was

named executive vice president of Upstream in 2005 and elected vice chairman in 2010. During his career he has held numerous assignments across the company’s worldwide operations, including leadership roles in Indonesia and Nigeria, as well as president of the North America and international upstream businesses. Under his stewardship, the company enhanced its position as an industry

leader - it applied advanced gas injection technology to grow production at the Tengiz field in Kazakhstan, d e v e l o p e d groundbreaking lower tertiary resources at the Jack and St. Malo fields in the Gulf of Mexico, assembled a world-class shale oil and gas position in North America, enhanced functional capabilities and base business reliability, and developed long-lived liquefied natural gas assets at Gorgon and Wheatstone in Australia.

2015 May, SweetcrudeReports

Labour

he Nigeria Social Insurance Trust Fund, NSITF, has joined the league of big international institutions as it has bagged ISO 27001 for its giant stride in security and the dependability of its information assets and operational excellence. Before getting the ISO 27001, the NSITF had been a driver of reputational risks, had embraced global standards and complied with regulatory and legal requirements, protected the funds information assets and had put in place better management control of business operations. Speaking at the presentation of the ISO 27001 to the Fund by the British Standard Institute, BSI, in Abuja, the chairman of the board of NSITF, Dr. Ngozi Olejeme, said the certification, which is highlyrespected and sought-after by public institutions around the world, has elevated operations at the NSITF to what is operational only in a short list of great institutions in the world. Olejeme, who said the feat was as a result of determination and team spirit, noted that before her appointment to the board, NSITF was a shadow of itself with less than 80 staff and low work moral, but stressed with joy that presently, the Fund has employed over 5,000 staff nationwide, with assets to boast of and two bills passed in the National Assembly. She said, “With this certification, NSITF has strategically, endowed itself with values that repose our stakeholders confidence on the quality of what they get from the Fund when they do business with us. We therefore, now have in place a system that can detect the minutest risk factors in our operations, thereby, reducing loss to its barest minimum. "NSITF is proud to be among a very elite group of public institutions whose security practices and drive for excellence in operations meet the rigorous ISO 27001 standards. Achieving this milestone makes the Fund a leading social security institution in Africa.” Also speaking, the British High Commissioner in Nigeria, David Wolf said that the ISO Certification of NSITF represented combination of hard work by the team of the Fund and expressed pleasure

NSITF gets ISO certification for the Fund in receiving the certification. He said that it was an evidence of systematic approach by the government to protect the information of her clients. Managing Director of NSITF,

Munir Abubakar, represented by Acting managing director, Godson Dinneya, said that the Fund was committed towards actively raising the quality of life for every worker, adding that the ISO 27001:

2013 has strategically positioned the Fund in transparent light that gives confidence to all stakeholders and Nigerians as a whole to do business with it. “Our mission is to be

proactive in providing social security protection and safety nets for all Nigerians against deprivations and income insecurity in accordance with national and international laws, conventions and world best practices,” Abubakar said.

Dr. Olejeme

Why operators can’t use biometrics outside PenCom

irector General of the National P e n s i o n Commission, Mrs. Chinelo Anohu-Amazu, has explained why the pension industry may not use any data on Nigerians domiciled outside the National Pension Commission, PenCom, for the administration of retirement benefits schemes in the country. According to her, the enabling law for the Contributory Pension Scheme, CPS, Pension Reform Act 2014 mandates PenCom to maintain a data base on contributors and retirees in a National Data Bank domiciled in-house. Stakeholders during the PenCom session at the just-concluded Social Media Week in Lagos said they were worried about a possible information overload as a result of the multiple biometric and verification exercises that Nigerians were being

forced to do. These include the ones conducted by the National Identity Card Management Commission, bank verification and permanent voters card, etc. They also asked PenCom to link up with some of these organisations, access available data from their data bank and aggregate to give it the desired security identification needed for pension purposes. Responding, Mrs. AnohuAmazu said the pension law mandated PenCom to register, take the biometric of Retirement Savings

Account, RSA, holders and warehouse the information in-house. She said the commission already had the necessary database domiciled in a National Data Bank domiciled in-house and is currently reviewing these data to identify and correct m i s t a k e s a n d misrepresentations with a view to upgrading the system. The use of cards similar to the Permanent Voters Card, PVC, could be explored in the future to improve on the databank, she added.

The Commission is also worried about how to treat workers with many wives, particularly where death benefits are to be paid

The Director General also highlighted some of the reasons why PenCom might not leverage on existing information on the databanks kept by various institutions in the country, asking “how do you go about verifying information you are leveraging on?” This is a major concern for PenCom, she stressed. According to her, the Commission is also worried that the data stored in many of these data banks were accessible to unauthorised persons and institutions without regard for data privacy laws in the country. She also noted that some workers, particularly those in the informal sector and self-employed persons, do not have bank accounts while some others are not even bankable. The Commission is also worried about how to treat workers with many wives, particularly where death benefits are to be paid.

Labour

2015 May, SweetcrudeReports

n response to high unemployment rates and increasing cost and strain of job searches, Job-Link has opened Nigeria’s first job centre in Lagos and launched it’s official website. The purpose built recruitment centre which is located at 8 Kingsway Road, Ikoyi, Lagos is open from 8am till 4pm, Monday to Friday. Job-Link invites members of the public and all unemployed people to come and register and have its team of certified human resource managers connect them with suitable jobs in top companies and industries. Registration is free for the first 5,000 applicants. The job centre is specifically aimed at non-managerial, graduate and other entry level jobs in diverse industries. Director of Operations, Laolu Dare said, “Recent surveys from the National Bureau of Statistics show the main obstacles to securing a job being lack of funds to facilitate the search, insufficient exposure to recruiters, contacts and corporate networks as well as poor labour market information. "This culminates in a quagmire whereby unemployed people are either not aware of or unable to access job opportunities. Currently, people search for jobs by visiting individual employers with speculative applications or cold calling companies to discuss job opportunities, both of which are very ineffective. “By registering with JobLink, either through our office or website,

Job seekers

Job-Link opens Nigeria’s first private job centre …Launches website www.joblinknigeria.com, jobseekers have greater exposure to hundreds of employers. Our team of experienced recruiters continuously works on matching our members with job vacancies. Suitable candidates are then invited for interviews, first at Job-

Link and subsequently with prospective employers. If successful, they are placed in the job role. Membership also entitles the applicants to free career talks and seminars which occur on a regular basis.” “For all companies, recruitment is expensive

IPMAN sets up Committee to curb fuel supply interruption

he Independent P e t r o l e u m M a r k e t e r s Association of Nigeria, IPMAN, says its members would not allow interruption in the petroleum products supply chain in the country as it harped on the sensitivity of fuel supply. With recent fuel scarcity yet to totally disappear, the association said it would work to ensure "free

flow of petroleum products at all times". IPMAN gave these hints as its western zonal executive recently set up a caretaker committee to pilot the affairs of the association in the zone for the next three months. The setting up of the committee followed the shift of the nation's general elections from the original February date to March, which forced IPMAN to also reschedule its western zonal elections

originally scheduled for March 24. In a letter empowering the new committee, which was signed by the Zonal Chairman, Mr. Debo Ahmed and Zonal Secretary, Mr. Mark Alaba Obu, the association charged members of the committee to work to ensure there are no disruptions in fuel supply. The letter read: “IPMAN western zone hereby

Job-Link invites members of the public and all unemployed people to come and register and have its team of certified human resource managers connect them with suitable jobs in top companies and industries. Registration is free for the first 5,000 applicants constitutes a caretaker committee for Ore Depot to pilot the affairs of IPMAN Ore Depot for the next three months effective from March 13, 2015 at the first instance.” “The Zonal Executive Council took this decision on the grounds that the IPMAN Ore Depot election had earlier been fixed for March 24, 2015 without envisaging the shift in Nigeria’s general election to March 28, 2015 and the security situation usually accompanying the period of general election”.

and very time consuming. By joining Job-Link, employers have unlimited access to a much larger scope of candidates who are screened and shortlisted based on their requirements and with immense attention to detail. Our service to employers is completely free for those needing less than 20 vacancies filled per year, who are welcome to send us information as and when required, through our website. For larger companies, a corporate contract is established.”

Solid Mineral SAM IKEOTUONYE

igeria's plan to tap its underutilised coal deposits for p o w e r generation has received a boost from the African Development Bank, which has committed $200 million Partial Risk Guarantee, PRG, in support of the programme. Coming in the back drop of World Bank's refusal of financial backing for the coalto-power programme on the basis that coal was not environmentally-friendly as a source of power, the AfDB support is seen as a huge boost for the Nigerian government's plan. Managing Director and Chief Executive of Nigerian Bulk Electricity Trading Plc, NBET, Mr. Rumundaka Wonodi, who announced the AfDB support, said it was an African solution to an African challenge. Addressing journalists in Abuja, Wonodi stated that with this development, coalto-power projects in the country, including the the 1,200 megawatts, MW, coal power plant to be constructed By Zuma Energy Nigeria Limited at Itobe, Kogi State, would be .executed and completed timely. To make the Itobe power project work, the Nigerian Electricity Regulatory Commission, NERC, has recently separated into four different parts the statutory licence earlier granted to Zuma Energy Nigeria Ltd for the construction of the plant an arrangement under which NERC assigned four different licences to four new beneficiary Special Purpose Vehicles, SPVs, or companies, which will now take up the construction of units of the power plants in capacities of 300MW respectively. The companies, Itobe 1, 2, 3 and 4 Coal Power Plant Limited are still under the stable of Zuma Energy, however, they will each build 300MW capacities coal power plants within a defined timeframe and as well separately negotiate Power Purchase Agreements (PPAs) and tariff rates with the Nigerian Bulk Electricity Trading Plc and NERC. Speaking further on the

2015 May, SweetcrudeReports

$200m boost for Nigeria's coal-to-power programme

Coal mining

$200 million AfDB support, the NBET's chief executive officer, said the AfDB recognises Africa’s challenges in growing her electricity and thus came up with such support to enable her produce electricity from various

sources. He said: “It is welcome news and you know that we are also working with the World Bank for PRG to support the projects that we undertake. Unfortunately, the World Bank is very

reticent and they are not quite committed to giving support to coal because they deem it to be dirty fuel and not very good for the environment. However, the AfDB which is African, understands that Africa

South Africa launches continent's first platinum fuel cell

frica's first 100kilowatt, kW, fuel cell that runs on platinum and natural gas, has been installed at the Chamber of Mines in Johannesburg, which will provide baseload power to the entire building. The Platinum Power Fuel Cell is Africa's first-ever building base-load fuel cell that runs on natural gas. It could power the equivalent of about 100 average South African homes.

Speaking at the launch, Trade and Industry Minister Rob Davies said South Africa, home to 80% of the world's known platinum reserves, was at the forefront of developing fuel cell technology. Davies said the fuel cell components would see South Africa gain entry into the manufacturing and distribution of fuel cell components. They would be targeting 1 000 megwatts, MW, of platinum fuel cell-

generated electricity supply by 2020, which would increase platinum demand by 5%. Platinum Power Fuel Cell is a joint project between the Department of Trade and Industry, DTI, and Mitochondria, the energy company that received loan financing of R3.25- million from the Industrial Development Corporation, IDC. The DTI contributed R7.5- million for feasibility work of the project.

needs power from every source that it can, is supporting coal. “We welcome that and they offered to provide it in support of some of the projects that we are working on like the Zuma Energy if they feel that it is necessary and some of the other coal projects that we see around the country. It is a very welcome news and we appreciate that”. On the activities of his company, Wonodi said: “The bulk trader (NBET) was established to be a broker, a go-between the generation companies and distribution companies," adding: “The tariff that we work with is the wholesale tariff which is between us and the generation companies. To some extent, I think the collection losses were in excess and the way the commission is addressing it is based on consultation with the distribution companies.”

2015 May, SweetcrudeReports

Solid Mineral

Steel plant

he Federal Government is working on a m i c a b l e resolution of all issues with the core investor of the Ajaokuta Steel Company, ASCL, directorgeneral of the Bureau of Public Enterprises, BPE, Mr. Benjamin Ezra Dikki, has revealed. He disclosed this in Abuja, saying that a resolution of the issues with Global Infrastructure Nigeria Limited, GINL, at arbitration, will pave way for government's planned reprivatisation of the steel company. "The Federal Ministry of Justice is driving the process which is making steady progress and once the issues are resolved, Ajaokuta Steel Company Limited would be handed over to the Federal Government and we would begin another process of privatisation," Mr. Dikki said. He further explained that when resolved, the National Iron Ore Mining Company, NIOMCO, would be jointly owned by the Federal Government and the Global Infrastructure Holding Limited. Recall that the Federal Government, through the Ministry of Mines and Steel Development, concessioned the multi-billion dollar plant

Ajaokuta Steel: 'Govt working to resolve issues with core investor’ to GINL but no significant progress was made by the investor to turn around the company, prompting the government to attempt to take

the company back which has resulted in the ongoing legal tussle. Dikki debunked allegations

The privatisation tribunal will also enable us to take decisive action against non-performing investors," he stressed

of interference by influential persons in the country to tilt the privatisation programme to their favour, adding that all transaction processes followed laid down procedures and in tune with world best practices. “It is because of our strict adherence to the rules which are observed by security agencies and anti-graft agencies that international bodies like the World Bank, DFID and many others have continued to applaud us. For

Enugu coal: Millhouse Engineering to provide training for Nigerian workforce

S - b a s e d c o m p a n y , M i l l h o u s e Engineering and Construction of Chicago, would be providing training for the Nigerian workforce in the process of developing, explorating and mining of the Enugu coal reserves. Chairman of the company, Wilbur Millhouse, disclosed this as he disclosed that the

company would also support the local content policy of the Federal Government from beginning to the end of its project in the country. The Federal Government recently signed a M e m o r a n d u m o f Understanding, MoU, with Millhouse Engineering and Construction for the development, exploration and mining of the Enugu coal reserve and utilisation for power generation in the

country. Minister of Power, Chinedu Nebo, who signed on behalf of government, stated that plans were in top gear to actualise coal-power, in view of the abundance of high grade coal deposits in Nigeria. He urged the company to start with embedded power of about 4MW upwards, as it will enable it hit the market early.

the power transaction, it is acclaimed to be the world’s best. President Goodluck Jonathan received accolades from world leaders for the feat,” he stated. He maintained that reforms had worked for Nigeria and appealed for support by all Nigerians so that all critical areas of the economy are reformed. Dikki said the Bureau had proposed the setting up of a Privatisation Tribunal to handle cases o f p r i v a t i z e d enterprises. He said the matter was receiving attention by the Attorney General of the Federation (AGF) and that when approved, it would quicken the dispensation of justice in the over 200 cases the Bureau had in regular courts. "The privatisation tribunal will also enable us to take decisive action against nonperforming investors," he stressed.

Freight

2015 May, SweetcrudeReports

Stakeholders urge incoming govt to reposition maritime sector

Nigerian port

takeholders in the N i g e r i a n maritime sector have urged the i n c o m i n g government of General Muhammadu Buhari (rtd) to reposition the maritime sector to make it more competitive. The industry stakeholders, who also expressed excitement over Buhari's triumph in the March 28, 2015 presidential polls, also urged the president-elect to take a cursory look at the reports of the various committees set up in the past to chart a new course for the industry. They spoke under the auspices of the Nigerian Port Consultative Council, PCC; Association of Nigerian Licensed Customs Agents, ANLCA; National Association of Government Approved Freight Forwarders, NAGAFF; and Association of Registered Freight Forwarders, AREFF. Chairman of Nigerian Port Consultative Council, Chief Kunle Folarin, specifically urged the incoming government to reposition the

maritime sector to make it more competitive. Folarin, who gave the advice in an interview in Lagos, said the advice became necessary because a competitive maritime sector could grow the economy. “To grow the economy from the maritime contribution; to re-engineer the whole maritime sector to be competitive in the region. “To make sure that all the potentials and the reforms that have been carried out over the years within the maritime sector, in particular

the port industry, are optimised. A point in case of the concessioning regime, customs reform and so many other reforms that are taking place in the maritime sector to position the country to be the leader in the region. “The maritime sector wants to be the apex contributor to the economy; the core of the potential is there. The programmes and the projects that will deliver on this particular expectation are there. “So we will write the government to give priority

attention has been given to the oil and gas sector to the maritime sector,” he said. He added that a competitive maritime sector would offer job opportunities and create wealth for Nigerians, adding that the new government could achieve so much if it focused more on the sector. Speaking on his expectation of the new government to be formed by Buhari on May 29, National President, Association of Nigerian Licensed Customs Agents, Prince Olayiwola Shittu, said, “All the reports of all

the committees that have been piling dust, whether seen or unseen but without any action taking place, should be looked into. It is not a matter of setting up further committees but they should look at previous committees.” Shittu also expressed hope that the Buhari administration would r e v i e w t h e implementation of the controversial national automotive policy.

Lekki Deep Seaport to be built in 40 months - Aswani SAM IKEOTUONYE

anaging Director of Lekki Port Project, Mr. Haresh Aswani, says the proposed Lekki Deep seaport in Lagos would be built within 40 months. Aswani, who spoke during an inspection of the project site on the Lekki Free Trade Zone, LFTZ, also said the free trade zone would be the largest industrial city in Nigeria. Full construction of the deep seaport project, planned to cost about $1.5 billion, is expected

to commence in July this year. The Lekki port will be the deepest seaport in Africa outside that of South Africa, Asani said as he disclosed that the promoters of the project would soon give the green light China Harbour Construction Company to commence construction.

Meanwhile, the Nigerian Ports Authority has promised to make available its part of the funding for the year for the project, where it is representing the Federal Government. “The total amount of the federal government’s stake in this project is N118 million.

2015 May, SweetcrudeReports

Freight

Apapa port, Lagos KUNLE KALEJAYE

he Apapa Area Command of the Nigeria Customs Service recorded an impressive N32.3 billion revenue in March, up from N21 billion generated in the months of January and February each. The income came in through levies collected on import duties, seven percent port

Customs generates N32bn at Apapa ports in March levy, levies on various categories of imported commodities as well as the one percent comprehensive Import Supervision Scheme, CISS. A breakdown of the

disbursement of the revenue collected in March, as indicated in the revenue document, shows that N15.7 billion was sent to the Federation Account while N16.6 billion was remitted

APM Terminals Mumbai sets new record

PM Terminals Mumbai has set a new record for Indian ports by handling a total of 2.01 million TEUs during the fiscal year of 2014-15, representing the period between April 1, 2014 to March 31, 2015. APM Terminals Mumbai is one of three terminals currently operating at Jawaharlal Nehru Port, JNP, India’s largest container port, accounting for 45% of JNP’s throughput, and approximately 20% of India’s total container traffic. Larger vessels of the 9,000 TEU capacity class began calling at APM Terminals

Mumbai since 2013. The deepening of the Mumbai harbor channel in 2014 combined with an increase in the vessel size and container volumes are contributing factors to the growth. The increase, however, is straining the existing Indian port infrastructure, which must also deal with regulatory issues which have held back further infrastructure investment. “The need of the hour is to ensure we find an acceptable solution with the authorities on the longstanding issue of the tariff that we are allowed to charge at the terminal,” noted APM Terminals Mumbai, Chairman, Rizwan

Soomar. APM Terminals Mumbai has introduced a number of trade-friendly initiatives which have helped achieve faster gate turnarounds and increased productivity. Since the implementation of the new processes the terminal is handling an average gate throughput of 5,000 TEUs, compared with a previous daily throughput of 3,500 to 4,000 TEUs. In February 2015, APM Terminals Mumbai set a new record for highest February volume recorded by an Indian container terminal, with 164,678 TEUs.

into the non-federation account. Speaking on the development, Public Relations Officer of the Command, Mr. Emmanuel Ekpa, said the command

When there is increase in importation, there will certainly be an increase in revenue collection. I don’t want to say there was low import because importation is not a day affair

witnessed increased activities in the month under review as importers and agents rushed to take delivery of their consignments before the just-concluded presidential polls and the Easter holidays. He said the rush to clear consignments was what led to the traffic that has resurfaced in Apapa, host to the nation's premier port. “When there is increase in importation, there will certainly be an increase in revenue collection. I don’t want to say there was low import because importation is not a day affair. Although work was at a slow pace because of the elections, before the presidential election and the Easter holidays, traffic gridlock resurfaced in Apapa. “This was because people rushed in to take delivery of their consignments before the holidays and even some of those that were apprehensive of the aftermath of the elections also cleared their goods,” he said.

2015 May, SweetcrudeReports

Motoring

2015 May, SweetcrudeReports

Automobile manufacturing in Nigeria:

Prospects & challenges Nissan assembly plant in Nigeria

NKEM IGBIKIOWUBO

he Automotive Industry in Nigeria dates back to early 1960s when private companies like UAC, Leventis, SCOA, BEWAC and R.T. Briscoe pioneered the establishment of Auto Assembly Plants using Completely Knocked Down (CKD) or Semi-Knocked Down (SKD) parts. Government however, became involved in the industry between 1970-1980 when it concluded agreements with a number of Automobile Plants in Europe to set up 2 cars and 4 truck/light commercial vehicles assembly plants using Completely Knocked Down (CKD) Parts. The 2 car plants are Peugeot Nigeria Ltd. (PAN), Kaduna, and Volkswagen of Nigeria Ltd. (VWON) Lagos. The 4 truck plants are A n a m b r a M o t o r Manufacturing Company (ANAMMCO), Enugu, Styer Nigeria Ltd., Bauchi, N a t i o n a l T r u c k Manufacturers (NTM), Kano, and Leyland Nigeria

It is expected that when fully operational the new vehicle manufacturing industry will create 70,000 skilled and semiskilled jobs along with 210,000 indirect jobs in small and medium sized enterprises (SMEs) that will supply the assembly plants Ltd., Ibadan. These car and truck/light commercial vehicle plants were all privatized at the end of 2007. In 1982, the Federal Government completed agreements with five manufacturers for the establishment of the following five light commercial vehicle assembly plants: Mitsubishi in Ilorin, Nissan in Minna, Peugeot in Gusau, Isuzu in Maiduguri and Mazda in Umuahia. However, this was not to be. GM subsequently entered into partnership with UAC to produce Isuzu by FMI of UAC, which later became GM Nigeria Ltd. The Nigerian automotive Industry has installed capacity to produce 108,000

cars, 56,000 commercial vehicles, 10,000 tractors, 1,000,000 motor cycles and 1,000,000 bicycles annually. Capacity utilization in vehicle manufacturing is below 10% and about 40% in motorcycle, bicycle and components parts manufacturing. The current vehicle inflow into the economy is about 50,000 new and an ever increasing figure for used ones. This translates into about 100,000 units of new vehicles annually and is set to rise as the economy grows. The ECOWAS countries are current and potential customers for the Nigerian auto products.

With a new automotive policy that seeks to encourage and revive local vehicle assembly plants, the outgoing administration of President Goodluck Jonathan has expressed its optimism about Nigeria’s capacity to export cars in the nearer future. Even though those in the business of vehicle imports have risen against the new auto policy which they perceive as a threat to their business, it is nevertheless certain that the new automotive policy sets Nigeria on the path of being a major vehicle manufacturing hub in Africa, South of the Sahara. It is expected that when fully operational the new vehicle manufacturing industry will create 70,000 skilled and semi-skilled jobs along with 210,000 indirect jobs in small and medium sized enterprises (SMEs) that will supply the assembly plants. It is remarkable that no sooner had the policy been introduced than Nissan Motor Company announced that its first made-in-Nigeria car would be rolled out August 2014. According to Carlos Ghosn, Chief executive officer of

Nissan Motors, the company is willing to set up an automobile plant in the country. This move by Nissan could pass for the beginning of the reversal of the sorry state into which the nation’s automobile industry has plunged over the years. Another Nigerian company that has given meaning to the government’s automotive policy is the Innoson Group,which has carved a niche for itself in plastic and motorcycle manufacturing. The company started the construction of its auto plant at Nnewi, the industrial hub of Anambra State in 2007. In 2010, its subsidiary, Innoson Vehicle Motor, IVM, company first rolled out buses and other categories of vehicles except cars and on November 29, 2014 the Innoson Group rolled out the first made-in-Nigeria cars which Minister of Industry, Trade and Investment, Dr Olusegun Aganga unveiled at the Nnewi plant. The list of cars produced by the company include IVM Fox, IVM Umu and IVM Uzo CONTINUES ON PAGE 54

2015 May, SweetcrudeReports

Motoring

Innoson assembly plant in Nnewi, Anambra state

Automobile manufacturing in Nigeria CONTINUED FROM PAGE 53 cars, other products are Swing Arm Garbage Truck, Compactor Trucks, Towing Trucks, various sizes of buses, Sport Utility Vehicles (SUVs), Pick Up vans, security vehicles. The country has over the years become a dumping ground for virtually all kinds of vehicles ‘Tokunbo’ (secondhand) cars, buses and trucks – some of which are brought in over a decade old. In 2012, a total of 400,000 vehicles (300,000 used and 100,000 new) valued at N550 billion ($3.451 billion) were imported into the country, according data from the Nigerian Automotive Manufacturers Association (NAMA), the Nigerian Bureau of Statistics (NBS) and United Nations Conference on Trade and Development. There are indications that the government’s plan to curb this trend would amount to nothing if the government fails to see to the upgrade of critical infrastructure that would facilitate the success of the new auto plan. NAMA notes that infrastructural

upgrade is paramount to the success of the new auto plan adding that this must be a continuing process. If basic infrastructural needs such as roads, power and port facilities are adequately addressed, as promised by President Jonathan, it will boost the capacity of local manufacturers and attract more investors to the sector. In developing infrastructure, the public-private partnership model adopted by various governments has proven to be a viable option. Government should therefore encourage the private sector to collaborate more in infrastructure development. Industry operators are hopeful that the new auto

policy would be implemented such that it would encourage i n v e s t m e n t a n d technological development, reviving production activities in the industry and put local auto manufacturers on their toes to compete beyond the Nigerian shores. Countries like South Africa, Egypt and India have vibrant automobile sectors because their respective governments did not only introduce good policies, they also put in place measures to ensure such policies are well executed. Challenges in the Nigerian auto Industry The Nigerian auto

The Nigerian auto industry is literally under fire. It is bedeviled by a lot of factors. One of such is the issue of collapsed capacity utilization. Most of the plants are operating below capacity

industry is literally under fire. It is bedeviled by a lot of factors. One of such is the issue of collapsed capacity utilization. Most of the plants are operating below capacity. This under utilization came as a result of shrunken market, high production cost, stunted growth of the industry and uncontrolled or unchecked competition from importation of new fully built units and used vehicles. As a result of this, the market share level of the domestic plants shrunk from sixty-six per cent in 1988 to thirty per cent in 1991, even though there was a decline in the supply of new vehicles of all types was initially recorded in 1982 on account of adverse economic condition. The two passenger car makers have installed capacities of 104,200 units annually, while the commercial vehicle plants post a combined capacity of 128, 000 units per annum. Yet, at present, they don’t produce up to thirty percent of these capacities. Also, the inability of the National Automotive Council (NAC) to get OEMs and their global suppliers to create extensive manpower development programs that will ensure filling of gaps in the auto operations by Nigerians is a problem that ought to be addressed in line with the local content act. Other issues that have

limited this include lack of patronage both from Nigerians and the government, poor and non conducive operating environment, poor capital base, poor performance of local content suppliers, as well as obsolete technology. Added to these factors is the lack of political will by the nation’s administrators to fully commit to the development of the auto industry. Prospects Given Nigeria’s current population and economy, the country’s potential vehicle market is about a million vehicles a year. This is more than sufficient to support an automotive industry. The following are reasons that back up this position; 7th most populous economy in the world; a growing middle class (38 million); and a potential vehicle market of one million vehicles annually. Annual spending on vehicles import is over N550 billion (US$3.5 billion) and growing, making it the number two source of foreign exchange expenditure in 2012 after Boilers, machinery and appliances. Nigeria has not bound its tariff on vehicles at the WTO, except for ECOWAS and the auto industry is within the common tariff exclusion list. There is prospect for regional export potential into the West and Central African market; and availability of a large and trainable workforce. The lessons of Nigeria’s past vehicle manufacturing experience must be fully digested and it is not enough to have good intentions. What is crucial is that a workable plan for the achievement of these intentions is created and properly implemented taking due cognizance of the realities of the Nigerian experience and environment. The current move by the federal government to revamp the automotive industry is commendable, but more important is the need to pull out all the stops to create a vibrant industry such that the ambition to fully meet domestic demands and export cars will become a reality sooner than later. Obviously, a viable vehicle manufacturing industry will create huge beneficial multiplier effects for Nigeria’s economy and society.

Technology

2015 May, SweetcrudeReports

eflection seismolo gy (or seismic reflectio n) is a method of exploration geophysics that uses the principles of seismology to estimate the properties of the Earth's subsurface from reflected seismic waves. The method requires a controlled seismic source of energy, such as dynamite/Tovex, a specialized air gun or a seismic vibrator, commonly known by the trademark name Vibroseis. Reflection seismology is similar to sonar and echolocation. This article is about surface seismic surveys, for vertical seismic profiles, Seismic waves are mechanical perturbations that travel in the Earth at a speed governed by the acoustic impedance of the medium in which they are travelling. The acoustic (or seismic) impedance, Z, is defined by the equation: , where V is the seismic wave velocity and Ď (Greek rho) is the density of the rock. When a seismic wave travelling through the Earth encounters an interface between two materials with different acoustic impedances, some of the wave energy will reflect off the interface and some will refract through the interface. At its most basic, the seismic reflection technique consists of generating seismic waves and measuring the time taken for the waves to travel from the source, reflect off an interface and be detected by an array of receivers (or geophones) at the surface.[1] Knowing the travel times from the source to various receivers, and the velocity of the seismic waves, a geophysicist then attempts to reconstruct the pathways of the waves in order to build up an image of the subsurface. In common with other geophysical methods, reflection seismology may be seen as a type of inverse

Marine Seismic Survey

Reflection seismology problem. That is, given a set of data collected by experimentation and the physical laws that apply to the experiment, the experimenter wishes to develop an abstract model of the physical system being studied. In the case of reflection seismology, the experimental data are recorded seismograms, and the desired result is a model of the structure and physical properties of the Earth's crust. In common with other types of inverse problems, the results obtained from reflection seismology are usually not unique (more than one model adequately fits the data) and may be sensitive to relatively small errors in data collection, processing, or analysis. For these reasons,

great care must be taken when interpreting the results of a reflection seismic survey. The reflection experiment The general principle of seismic reflection is to send elastic waves (using an energy source such as dynamite explosion or Vibroseis) into the Earth, where each layer within the Earth reflects a portion of the wave's energy back and allows the rest to refract through. These reflected energy waves are recorded over a predetermined time period (called the record length) by receivers that detect the motion of the

ground in which they are placed. On land, the typical receiver used is a small, portable instrument known as a geophone, which converts ground motion into an analogue electrical signal. In water, hydrophones are used, which convert pressure changes into electrical signals. Each receiver's response to a single shot is known as a "trace" and is recorded onto a magnetic tape, then the shot location is moved along and the process is repeated. Typically, the recorded signals are subjected to significant amounts of signal processing before they are ready to be interpreted and this is an area of significant active research within industry and

academia. In general, the more complex the geology of the area under study, the more sophisticated are the techniques required to remove noise and increase resolution. Modern seismic reflection surveys contain large amount of data and so require large amounts of computer processing, often p e r f o r m e d o n supercomputers or computer clusters. Reflection and transmission at normal incidence When a seismic wave encounters a boundary between two materials with different acoustic impedances, some of the energy in the wave will be reflected at the boundary, while some of the energy will be transmitted through the boundary. The amplitude of the reflected wave is predicted by multiplying the amplitude of the incident wave by the seismic reflection coefficient , determined by the CONTINUES ON PAGE 56

2015 May, SweetcrudeReports

Technology

Reflection seismology

seismologist can create an estimated cross-section of the geologic structure that generated the reflections. Interpretation of large surveys is usually performed with programs using highend three-dimensional computer graphics.

CONTINUED FROM PAGE 55

Sources of noise In addition to reflections off interfaces within the subsuface, there are a number of other seismic responses detected by receivers and are either unwanted or unneeded: Air wave The airwave travels directly from the source to the receiver and is an example of coherent noise. It is easily recognisable because it travels at a speed of 330 m/s, the speed of sound in air.

Reflection seismology principles impedance contrast between the two materials. For a wave that hits a boundary at normal incidence (head-on), the expression for the reflection coefficient is simply

, Where Z0 and Z1 are the impedance of the first and second medium, respectively. Similarly, the amplitude of the incident wave is multiplied by the transmission coefficient to predict the amplitude of the wave transmitted through the boundary. (The formula for the normal-incidence transmission coefficient is

use this information to infer changes in the properties of the rocks at the interface, such as density and elastic modulus. Reflection and transmission at nonnormal incidence

As the sum of the squares of amplitudes of the reflected and transmitted wave has to be equal to the square of amplitude of the incident wave, it is easy to show that

The situation becomes much more complicated in the case of non-normal incidence, due to mode conversion between P-waves and Swaves, and is described by the Zoeppritz equations. In 1919, Karl Zoeppritz derived 4 equations that determine the amplitudes of reflected and refracted waves at a planar interface for an incident Pwave as a function of the angle of incidence and six independent elastic parameters. These equations have 4 unknowns and can be solved but they do not give an intuitive understanding for how the reflection amplitudes vary with the rock properties

By observing changes in the strength of reflectors, seismologists can infer changes in the seismic impedances. In turn, they

involved. The reflection and transmission coefficients, which govern the amplitude of

each reflection, vary with angle of incidence and can be used to obtain information about (among many other things) the fluid content of the rock. Practical use of non-normal incidence phenomena, known as AVO (see amplitude versus offset) has been facilitated by theoretical work to derive workable approximations to the Zoeppritz equations and by advances in computer processing capacity. AVO studies attempt with some success to predict the fluid content (oil, gas, or water) of potential reservoirs, to lower the risk of drilling unproductive wells and to identify new petroleum reservoirs. The 3-term simplification of the Zoeppritz equations that is most commonly used was developed in 1985 and is known as the "Shuey equation". A further 2-term simplification is known as the "Shuey approximation", is valid for angles of incidence less than 30 degrees (usually the case in seismic surveys) and is given below.

Where

R(0)=

reflection

coefficient at zero-offset (normal incidence); G= AVO gradient, describing reflection behaviour at intermediate offsets and angle of incidence. This equation reduces to that of normal incidence at 0. Interpretation of reflections The time it takes for a reflection from a particular boundary to arrive at the geophone is called the travel time. If the seismic wave velocity in the rock is known, then the travel time may be used to estimate the depth to the reflector. For a simple vertically traveling wave, the travel time from the surface to the reflector and back is called the Two-Way Time (TWT) and is given by the formula , where is the depth of the reflector and is the wave velocity in the rock. A series of apparently related reflections on several seismograms is often referred to as a reflection event. By correlating reflection events, a

Ground Roll / Rayleigh wave / Scholte Wave / Surface wave A Rayleigh wave typically propagates along a free surface of a solid, but the elastic constants and density of air are very low compared to those of rocks so the surface of the Earth is approximately a free surface. Low velocity, low frequency and high amplitude Rayleigh waves are frequently present on a seismic record and can obscure signal, degrading overall data quality. They are known within the industry as 'Ground Roll' and are an example of coherent noise that can be attenuated with a carefully designed seismic survey. The Scholte wave is similar to ground roll but occurs at the sea-floor (fluid/solid interface) and it can possibly obscure and mask deep reflections in marine seismic records. The velocity of these waves varies with wavelength, so they are said to be dispersive and the shape of the wavetrain varies with distance. Refraction / Head wave / Conical wave A head wave refracts at an interface, travelling along it, within the lower medium and produces oscillatory motion parallel to the interface. This motion causes a disturbance in the upper medium that is detected on the surface. The same phenomenon is utilised in seismic refraction.

CONTINUES ON PAGE 57

2015 May, SweetcrudeReports

Technology

Reflection seismology CONTINUED FROM PAGE 56

Multiple reflection An event on the seismic record that has incurred more than one reflection is called a multiple. Multiples can be either short-path (peg-leg) or long-path, depending upon whether they interfere with primary reflections or not. Multiples from the bottom of a body of water (the interface of the base of water and the rock or sediment beneath it) and the air-water interface are common in marine seismic data, and are suppressed by seismic processing. Cultural noise Cultural noise includes noise from, weather effects, planes, helicopters and electrical pylons and all of these can be detected by the receivers. Applications Reflection seismology is used extensively in a number of fields and its applications can be categorised into three groups, each defined by their depth of investigation: ! * N e a r - s u r f a c e applications an application that aims to understand geology at depths of up to approximately 1 km, typically used for engineering and environmental surveys, as well as coal and mineral exploration. A more recently developed application for seismic reflection is for geothermal energy surveys, although the depth of investigation can be up to 2 km deep in this case. ! *Hydrocarbon exploration - used by the hydrocarbon industry to provide a high resolution map of acoustic impedance contrasts at depths of up to 10 km within the subsurface. This can be combined with seismic attribute analysis and other exploration geophysics tools and used to help geologists build a geological model of the area of interest. ! *Crustal studies investigation into the structure and origin of the Earth's crust, through to the Moho discontinuity and beyond, at depths of up to 100 km. A method similar to reflection seismology which

Seismic tomograhic model of the mantle beneath the central Pacific uses electromagnetic instead of elastic waves, and has a smaller depth of penetration, is known as Groundpenetrating radar or GPR. Hydrocarbon exploration Reflection seismology, more commonly referred to as "seismic reflection" or abbreviated to "seismic" within the hydrocarbon industry, is used by petroleum geologists and geophysicists to map and interpret potential petroleum reservoirs. The size and scale of seismic surveys has increased alongside the significant concurrent increases in computer power during the last 25 years. This has led the seismic industry from laboriously and therefore rarely acquiring small 3D surveys in the 1980s to now routinely acquiring large-scale high resolution 3D surveys. The goals and basic principles have remained the same, but the methods have slightly changed over the years. The primary environments for seismic exploration are land, the transition zone and marine: Land - The land environment covers almost every type of terrain that exists on Earth, each bringing its own logistical problems. Examples of this environment are jungle, desert, arctic tundra, forest, urban settings, mountain regions and savannah.

Transition Zone (TZ) - The transition zone is considered to be the area where the land meets the sea, presenting unique challenges because the water is too shallow for large seismic vessels but too deep for the use of traditional methods of acquisition on land. Examples of this environment are river deltas, swamps and marshes, coral reefs, beach tidal areas and the surf zone. Transition zone seismic crews will often work on land, in the transition zone and in the shallow water marine environment on a single project in order to obtain a complete map of the subsurface. Marine - The marine zone is either in shallow water areas (water depths of less than 30 to 40 metres would normally be considered shallow water areas for 3D marine seismic operations) or in the deep water areas normally associated with the seas and oceans (such as the Gulf of Mexico). Seismic surveys are typically designed by National oil companies and International oil companies who hire service companies such as Breckenridge Exploration Co., CGGVeritas, Petroleum Geo-Services and WesternGeco to acquire them. Another company is then hired to process the

data, although this can often be the same company that acquired the survey. Finally the finished seismic volume is delivered the oil company so that it can be geologically interpreted. Land survey acquisition Land seismic surveys tend to be large entities, requiring hundreds of tons of equipment and employing anywhere from a few hundred to a few thousand people, deployed over vast areas for many months. There are a number of options available for a controlled seismic source in a land survey and particularly common choices are Vibroseis and dynamite. Vibroseis is a non-impulsive source that is cheap and efficient but requires flat ground to operate on, making its use more difficult in undeveloped areas. The method comprises one or more heavy, all-terrain vehicles lowering a steel plate onto the ground, which is then vibrated with a specific frequency distribution and amplitude. It produces a low energy density, allowing it to be used in cities and other builtup areas where dynamite would cause significant damage, though the large weight attached to a Vibroseis truck can cause its own environmental damage. Dynamite is an impulsive

source that is regarded as the ideal geophysical source due to it producing an almost perfect impulse function but it has obvious environmental drawbacks. For a long time, it was the only seismic source available until weight dropping was introduced around 1954, allowing geophysicists to make a trade-off between image quality and environmental damage. Compared to Vibroseis, dynamite is also operationally inefficient because each source point needs to be drilled and the dynamite placed in the hole. A land seismic survey requires substantial logistical support. In addition to the day-to-day seismic operation itself, there must also be support for the main camp (for catering, waste management and laundry etc.), smaller camps (for example where the distance is too far to drive back to the main camp with vibrator trucks), vehicle and equipment maintenance, medical personnel and security. Unlike in marine seismic surveys, land geometries are not limited to narrow paths of acquisition, meaning that a wide range of offsets and azimuths is usually acquired and the largest challenge is increasing the rate of acquisition.

Community

2015 May, SweetcrudeReports

Crude oil theft in progress

s NNPC goes local for pipeline security, Senior Correspondent OSCARLINE ONWUEMENYI examines this question in view of the widely held allegation that the corporation has full knowledge of who the saboteurs and vandals are. The latest, seemingly, lastditch effort by the Nigerian National Petroleum Corporation, NNPC, to squelch the intractable ghost of pipeline vandalism across the country seems to be raising more questions than answers. A quick recall: after witnessing an upsurge in the rate of pipeline vandalism and oil theft, a phenomenon that reached record proportions since the New year, the NNPC has announced a return to the use of local 'community protection' for its oil and gas facilities across the country. Over the past few years, the country has battled with huge revenue drops due to

Who really are these pipeline vandals? the activities of vandals of oil and gas pipeline. But, as NNPC officials would be quick to admit, there has been a noticeable uptick in the attacks and in the spread of violence against oil and gas facilities after the corporation ended several controversial billion dollar contracts to the so-called community-based security companies in 2012. Several government and security officials have sought to explain the mystery behind the recent spike in the number of oil pipelines that have come under attack and the attendant losses both in

financial and material terms, as well as its impact on the economy and environment. Recently, the Nigerian Gas Company, a subsidiary of the NNPC, lamented that the country has lost a minimum of N8.04 billion since January to the incessant vandalism of its gas pipelines. And last month, the Chief of Naval Staff, Rear Admiral Usman Jibrin, disclosed that Nigeria had been losing an estimated 100,000 barrels of crude oil valued at N1.18 billion daily to oil thieves. This amounts to an annual loss of N433.62 billion.

The Minister of Power, Prof. Chinedu Nebo, said pipeline vandalism has caused a shortage of gas for firing power plants, blaming the attack by vandals for the administrationâ&#x20AC;&#x2122;s inability to deliver on its promise of generating 5,000 megawatts of electricity after several years and billions spent. The NNPC, caught by surprise at the wilful and destructive attacks, has reportedly described its expenditure on the fixing of vandalised pipelines as burdensome and unnecessary. Speaking at a media briefing to clarify the highlights of the

Forensic Audit Report undertaken by the international audit firm, PriceWaterHouseCoopers, which directed the corporation to reduce its unnecessary expenditure, Group Managing Director of the NNPC, Dr. Joseph Dawha, noted that the huge debt incurred on stolen crude and fixing of the damaged pipelines occasioned by acts of sabotage was enormous and uncalled for. He said NNPC was operating under a very difficult environment and there was no special budget for the fixing of vandalised pipelines, which had to be CONTINUES ON PAGE 59

2015 May, SweetcrudeReports

Community

Bonga Oil Spill: Verification of claims on, in impacted communities MKPOIKANA UDOMA

erification of claims over the December 2011 Shell’s Bonga offshore oil spill have commenced in all the communities in Bayelsa and Delta States affected by the spill. Immediate-past Chairman of the Community Development Committee and Chairman of Koluama 2 in Southern Ijaw Local Government Area of Bayelsa State, Mr. George Ibobra, told journalists in Yenagoa that the verification exercise has actually reached the final stages. The December 2011 spill impacted six local governments areas in Delta and Bayelsa, after over 40,000 barrels of crude oil was discharged into the Atlantic Ocean during an operational mishap at the oil field operated by the Shell Nigeria subsidiary, SNEPCO. Ibobra, who had represented Koluama 2 on the Spill Impact Verification Committee, explained that the impacted communities in Delta and Bayelsa had inaugurated a 30-man committee in 2014, drawn from the six affected local government areas in the two states to conduct the verification of claims. He said some groups had taken undue advantage of the verification to circulate fake compensation forms to unsuspecting members of the public across the two states, advising the public to disregard the syndicates who were working outside the affected areas. He directed those who suffered impact of the spill to approach their community leaders to get verified. According to him, “It has gotten to our notice that people are currently circulating oil spill compensation forms in most Bayelsa communities. We wish to say that, for the purposes of the Bonga oil spill incident, impacted people in Brass, Southern Ijaw and Ekeremor Local Governments in Bayelsa are being verified through their community leaders.

“Any other group, apart from the Community Development Committee Chairmen, is unknown to us and whoever purchases forms from other sources does so at his or her own risk”. The community leader also stressed that the committee was collecting demographic data of impacted fishermen in a bid to assist them to file their claims after a sworn affidavit in any high court. He also revealed that the

committee had allocated quotas to all the impacted communities and issued forms accordingly, warning that those forms circulating outside the committee would not be included in the claims. “We are very meticulous in what we are doing and anyone selling forms to the public will be fished out eventually because we have set limits and are working within agreed quotas, so any

extra form cannot be accounted for. “The purpose is to authenticate the claims before they are submitted to SNEPCO for payment because we do not want people to make bogus claims that will spoil the case of those who genuinely suffered impact,” he added. It would be recalled that Southern Ijaw, Brass and Ekeremor LGAs, all on the Atlantic shoreline, were the

worst affected in Bayelsa State while Burutu, Warri North and Warri South LGAs were the worst hit in Delta State by the Bonga oil spill, which led the House of Representatives and the National Oil Spills Detection and Response Agency, NOSDRA, in December 2014, to recommend a compensation of $3.96 billion for victims of the incident.

Oil spill

Who really are these pipeline vandals? CONTINUED FROM PAGE 58

done whenever the occasion arose. According to him, “I quite agree that some expenditure is unnecessary, especially when they involve sabotage of our pipelines. We operate under very difficult environments. Expenditure of fixing pipelines and accounting for crude that were deliberately stolen are not expenditure the nation can afford. “We would rather have a system whereby crude is put in the pipeline and arrives at its destination and they are refined. This is a normal operation but we are really in abnormal operation.” The NNPC boss said vandalism had been a major

challenge the corporation had been facing in the last few months. Dawha, at the briefing, maintained that ending it's controversial contract with "community services" in the provision of security for oil and gas pipelines, may have led to a rise in pipeline vandalism across the country. Information r e a c h i n g SweetcrudeReports indicated that the Presidency is believed to have directed the Police and the Nigerian Security and Civil Defence Corps, NSCDC, to quit the job for the 'local pipeline defence' companies, which have been signed on by the

government. The companies are owned by some former Niger Delta militants and prominent citizens, including exmilitants Government Ekpemupolo, more popularly known as Tompolo; Mujaheedin AsariDokubo and Chief Bipobiri Ajube (aka Gen. Shoot-AtSight). There is also founder of the Oodua Peoples Congress, OPC, Dr. Frederick Fasehun and OPC National coordinator, Otunba Gani Adams. According to a source, seven companies were allocated “regions” or operational areas as follows: Egbe

Security River One (Bayelsa); Gallery Security (Mosinmi-Ore); Close Body Protection (Edo State); Adex Energy Security(Rivers) ; Donyx Global Concept (Lagos and Ogun); Oil Facilities Surveillance (Delta) and New Age Global Security (Mosinmi-Ibadan). The contract is estimated at billions of naira and the takeover by the companies is said to be with effect from March 16. But, it would appear that the NNPC has full knowledge of who the saboteurs and vandals are, and understand the broader ramifications of not agreeing to a return to the status quo before 2012.

2015 May, SweetcrudeReports

Community

0il pipelines

MKPOIKANA UDOMA

he Nigerian N a t i o n a l P e t r o l e u m Corporation, NNPC, has explained reasons for its return to the use of local 'community protection' for its oil and gas facilities across the country. The corporation had in recent past described its expenditure on the fixing of vandalised pipelines as b u r d e n s o m e a n d unnecessary. According to it, ending its original contract with "community services" in the provision of security for oil and gas pipelines, may have led to the current rise in pipeline vandalism across the country. NNPC announced the return to use of 'community protection' in a statement signed by the Group General Manager, Group Public Affairs Division, Mr. Ohi Alegbe, in which he called on the media and the public not to read political meanings to the corporation’s operations. Explaining the rationale behind the renewal of the contract which was first awarded in 2011, Mr. Alegbe stated that there has been a noticeable increase in the spate of attacks on crude oil, products, and gas pipelines since the expiration of the first community-based contract in 2012, leading to frequent production shut-ins and deferrals of gas supply to power plants. “The pipeline protection contract is part of our community engagement programme across our host communities aimed at getting community members

PIPELINE PROTECTION:

Why we resorted to community enforcers —NNPC

to help in the task of protecting the pipelines around their communities. “It would be recalled that while the earlier pipeline protection contract to the communities which lasted from 2011 to 2012 subsisted, breaches to our pipelines were minimal which conduced to the rise in production. The recent rise in the frequency and intensity of willful attacks on our pipelines dictates that we step up our community

engagement programme to help stem the tide of the pipeline vandalism scourge," he said. Speaking recently at an event, the Group Executive Director in charge of Gas and Power, Dr. David Ige, said vandalism was one of the biggest threats to NNPC operations and aspiration of the Federal Government to effectively deliver gas for power generation and for other purposes.

Ige noted that, “Over the last six months, we have been confronted with over 50 cases of pipeline attacks across the crude oil pipeline and gas pipelines. “The latest, which just happened about 24 hours ago, is on the LagosEscravous pipeline. Each of these attacks caused us significant amount of money to repair." According to Ige, “The pipelines are located in a

very difficult terrain to access. If there is an attack on the pipeline, the logistic of getting it repaired is expensive. “We continue to bear the cost of this, which we consider to be unnecessary. We are struggling with this problem. Since January alone, we have seen more attacks more than often.” Ige further explained that the last time the NNPC engaged "community services", which involved using local people to protect the pipelines, was in 2012.

Implementation of UNEP report, a priority, MOSOP tells President-elect MKPOIKANA UDOMA

he Movement for the Survival of the Ogoni People, MOSOP, has appealed to the President-elect, General Muhammadu Buhari, who clinched victory at the March 28 presidential poll, to make the implementation of the United Nations E n v i r o n m e n t a l Programme,UNEP, report a priority. M O S O P , w h i l e congratulating Buhari on his victory, lamented that the delay in the

implementation of the UNEP environmental assessment report on Ogoniland has continue to be a threat to the survival and general livelihood of the Ogoni people. A statement by the media and public affairs advisor to the MOSOP, president, Mr. Bari-ara Kpalap, said a quick and proper implementation of the report would address the issue of health challenges, food insecurity and deaths caused by the high level of hydrocarbon pollution in Ogoniland. "We would advise the

president-elect to realise that his electoral success is victory for democracy and the Nigerian masses who defied all odds to ensure his emergence. The victor must therefore respond positively by translating the trumpeted commitment to change into reality. "The non-implementation of the UNEP report has continued to compromise our survival as we continue to suffer food insecurity, health challenges, unabated deaths and related problems attributable to hydrocarbon pollution in the area."

"We believe that quick a n d p r o p e r implementation of the report would no doubt address these challenges.” MOSOP, in the statement, also hailed President Goodluck Jonathan, whose outstanding approach and response to the outcome of the presidential poll c o n v i n c i n g l y demonstrated political civility and statesmanship, which has deservingly earned him global recognition and respect.

2015 May, SweetcrudeReports

Community

IYC raises alarm over ocean surge in Bayelsa communities MKPOIKANA UDOMA

...Chides Chevron for neglecting Koluama Kingdom

he Ijaw Youth Council, IYC, has raised alarm over what it described as an ‘impending humanitarian and environmental disaster’ at Koluama I and II, in Southern Ijaw Local Government Area of Bayelsa State. The IYC, in a statement signed by its spokesman, Mr. Eric Omare, said the communities of Koluama Kingdom were on the verge of being wiped away following a dailythreatening ocean surge. “These communities, especially Koluama II, is at the risk of being overtaken by the ocean which has taken a substantial part of the land on which the community is situated, and if urgent steps are not taken, the entire Koluama II community may not exist in the nearest future”, the statement said. Omare, in the statement, also decried the neglect of the communities by the American oil giant, Chevron, after decades of oil exploration and exploitation in the area without commensurate corporate social impact to ameliorate the environmental hazards suffered by the community. “Koluama communities are yet to recover from the horrible gas explosion incident of January 16, 2012 occasioned by operational failure in Chevron’s KS Endeavour rig which resulted in a huge fire that burned for 46 days, destroying flora and fauna. “Chevron’s wilful refusal to pay compensation for damages arising from the 2012 gas explosion coupled with the abject poverty in the community speaks volume of the level of abandonment,” he said. The Ijaw youth body also accused the Federal Government of insensitivity to the plight of Koluama people as it maintained that despite repeated appeals to the government, the lifethreatening situation in the area had remained unattended to. It called on the Federal Ministry of Environment to

Ocean surge take proactive steps to avert the looming danger arising from the ocean surge. In another development, the IYC has commended the Federal Government on the recent award by the Nigerian National Petroleum Corporation of contracts for security of its pipelines to exNiger Delta militants and c o m m u n i t y - b a s e d organisations. In a statement commending

the government, the IYC stated: "It is on record that Nigeria in recent times has recorded an unprecedented destruction of oil pipeline facilities and loss of oil revenue as a result of sabotage under the supervision of the Navy, Army and Police. "There is no disputing the fact that community policing is one of the most effective means of fighting

crimes all over the world as no crime can be committed without the tacit or overt support of the people of a particular community. "Therefore, considering the fact that the conventional security outfits have failed in the protection of oil facilities, the federal government under the leadership of President Goodluck Jonathan made the best decision by awarding the

contracts for the protection of oil facilities to communities where these facilities are situated. "The IYC states without fear of contradiction that awarding surveillance of oil pipelines to communitybased contractors is the best means to protect oil facilities. There is no body that can protect oil facilities more than the indigenes of the communities".

NDDC steps up work on new headquarters

he tempo of work at the site of the new headquarters of the Niger Delta Development Commission, NDDC, along Eastern Bye-pass in Port Harcourt, Rivers State, has increased, as the commission works rowards relocation to the high-rise permanent office complex before the end of the year. Members of the NDDC Governing Board have

inspected the multi-storey building and showed eagerness to have the project completed as soon as possible. Briefing members of the board and management at the project site, the NDDC Executive Director, Projects, Engr. Tuoyo Omatsuli, said that the contractor had given a firm assurance that the building would be ready for commissioning before the

end of the year. He said that the main office complex, which had 12 floors, was now at the roofing level, while work was progressing satisfactorily on the ancillary structures, comprising facilities such as a medical centre, restaurant, bank, car parks, among others. Chairman of the NDDC Board, Senator Bassey EwaHenshaw, who led other

board members, including the executive management of the commission, said that they were anxious to complete the project so that staff of the commission would have a more conducive environment to discharge their duties.

2015 May, SweetcrudeReports

Community

JTF personnel on patrol

JTF arrests oil bunkering kingpin in Bayelsa MKPOIKANA UDOMA

roops of the Joint Task Force operating in the Niger Delta, also k n o w n a s Operation Pulo Shield, have arrested two alleged illegal oil bunkering kingpins at Gbarum Community in Southern Ijaw Local Government Area of Bayelsa State in connection with sea robbery activities. A statement by the spokesperson of the JTF, Col. Isa Ado, said the suspects, Tari-Ladei Bunaighe and Epowo John, were in JTF custody, awaiting further action. Meanwhile, according to the statement, 10 suspected illegal oil bunkerers were also apprehended by the Sector One of the JTF in Warri South, Delta State, and Umuoghun Community in Orhiomwhom Local Government Area of Edo

State. JTF seized from the oil thieves seven Cotonou boats loaded with substance suspected to be stolen automated gas oil, AGO, or diesel and 15-metre hose pipes. "The Cotonou boats and the hoses were destroyed while the suspects are in custody of the JTF for interrogation. "Two trucks with registration

number GWW 274 XA and XK 187 EPE were also discovered along AbrakaObiaruka road and Ugo Community in Ethiope and Orhionmwin Local Government Areas of Delta and Edo States," the statement also said. It further stated: "The trucks which were loaded with 33,000 litres each of

suspected illegally acquired AGO, were taken to safer place and destroyed in line with the mandate of the Task Force while efforts are on to apprehend the fleeing suspects.‎ "Additionally, the troops also arrested Mr Gege Esua and Mr Tombra Guyman in connection with the attacks on the gunboat crew of the

Task Force earlier this year." The statement said the suspects were intercepted and arrested along Letugbene Tunu axis in Ekeremor Local Government Area of Bayelsa State. "The suspects are in the custody of Sector 2 for preliminary investigation to ascertain their level of involvement in the attack," the JTF said.

Nebo commissions NDDC power sub-station in Delta MKPOIKANA UDOMA

inister of Power, Prof Chinedu Nebo, has inaugurated the multibillion naira 132KV transmission line and two 30MVA, 132/33KV substation with associated 33KV overhead lines built by the Niger Delta Development Commission,

NDDC, at Oghara in Ethiope West Local Government Area of Delta State. Nebo, at the inauguration ceremony, said the project was a big boost to the efforts of the Federal Government to expand electrification network across the country. Prof. Nebo gave kudos to the board and management of the NDDC for the success of the project, saying: “This

is what happens when you have a good team working for the people of the Niger Delta. The leadership in NDDC has shown that it is passionate about providing power to the people and I commend them for conceiving this worthy project”. The minister, who noted that it was heart-warming to learn that many more of such electricity projects were

being constructed by the NDDC in different parts of the Niger Delta, added that: “Mr. President is delivering essential amenities through the NDDC and he has shown through this project that he cares for the rural communities.”

Community

2015 May, SweetcrudeReports

E-mail: johniyene@yahoo.com

BUHARI:

Abiku's second coming

Medical personnel attending to a child

Shell tasks medical experts on service delivery MKPOIKANA UDOMA

h e S h e l l Petroleum Development Company of Nigeria, SPDC, has tasked experts in the Nigerian health sector to focus more on strategies that will further enhance service delivery to the public. The charge was given to the management and staff of Obio Cottage Hospital in Rumuobiakani, Port Harcourt, at a one-day stakeholders engagement and evaluation workshop, organised by SPDC under its community health insurance scheme. Speaking to newsmen at the event, Shell's Regional Community Health Manager, Dr. Babatunde Fakunle, noted that for health services to be fully effective in the country, it should not be seen as the responsibility of the government or private medical facility owners alone. According to him, "The health sector has to be the responsibility of both the government, private and the public sectors in other to deliver quality healthcare to the people. "The programme has to be owned by all the stakeholders, the government, the private sector and the beneficiaries. That is why we talk about Public-Private People's Partnership" Dr. Fakunle reiterated on the need for capacity and human

For health services to be fully effective in the country, it should not be seen as the responsibility of the government or private medical facility owners alone capital development for health workers, which he said was more important than erecting concrete infrastructures. He said that people believe that medical rendition is not a profit making venture, adding that if well organised it can yield a lot of revenue for the health sector. "You have to approach this kind of business as a profitable business. We know it's not the kind of business where you share profits, but it is profitable and there must be transparency and true accountability," he asserted. Decrying corruption and advocating for higher moral values, he stressed the need for zero tolerance for avoid corruption in the health sector. In the same vein, the Chairman of Shell's Cluster Development Foundation, Chief Joseph Amadi, who spoke on the challenges experienced during the conceptualisation of the project five years ago, said the project today has recorded a tremendous success in

r e n d e r i n g quality medical service to the people of Obio community and Port Harcourt, as it now serves as a research centre for medical students as well as doctors. It also serves as a minicentre for some critical health , he stated. It should be noted that Obio Cottage Hospital in Port Harcourt is one of the 20 health facilities supported, upgraded and fully equipped by the SPDC in the nine states of the Niger Delta, as part of its effort t o b o o s t community healthcare in the oil-rich region.

n African mythology, portrayed by the Ijaw (as "oru tubo"), the Igbo (as "ogbanje") and the Yoruba, a spirit child, Abiku torments his family by dying several deaths after being born to a particular family. In the Abiku narrative, the child and its family have mutually exclusive aspirations, for while the family desires to "earth" (that is, to compel the child to stay), the Abiku's lodestone is to die and leave a mourning family he would come back to in another Abiku life. Gen. Muhammadu Buhari is the unwilling general that was made head of state by the senior military officers that ousted the government of Shehu Aliyu Shagari in December, 1983. Like Gen. Murtala Mohammed before him, his candour, ascetic lifestyle and financial prudence appealed to the generality of the people. The people of Nigeria wanted Gen. Buhari to rule them, military man notwithstanding. The stories that filtered out of the barracks and elite officers' messes at the time suggested however that Gen. Buhari had no real desire to rule; he famously called up another general who had been in the core of the planning of the 1983 coup and offered him his (Buhari's) job because of intelligence reports he had received of another coup plot allegedly being organised by that officer. The significance of the story and its Abiku connection could only be understood by the predominance in that era of African leaders arresting and eliminating critics, political opponents and any persons they perceived as presenting a challenge to their authority. Several years after, Nigerians clamoured again for his leadership. After three unsuccessful attempts at the polls, Gen. Buhari was elected president by the people of Nigeria. As he awaits the two months transition period leading to his swearing in as president, the incoming president should be reminded of the many challenges facing the economy and the oil industry in particular he has to tackle. Buhari is not a new comer to industry issues, having been federal commissioner for Petroleum and Natural Resources as well as the first chairman of the NNPC. In 1978 Buhari's tenure as federal commissioner and chairman of the NNPC came to an end but as head of state, his handling of industry issues received rave reviews from distinguished technocrats like Dr. Aret Adams and his oil minister, Prof. Tam David-West. All the same, the Oil and Gas Industry that Buhari supervised in the 1970s and 1980s is different in a lot of ways from the industry of 2015. Gen. Buhari has to tackle a load of issues that beset the industry. In 1976 when the NNPC was created, it was an asset to the country. The NNPC Gen Buhari would meet when he enters office operates a parallel government within Nigeria, is arguably the most corrupt institution in the world that operates with an unofficial protocol and bureaucracy that has become a huge liability to Nigeria and the growth prospects of our GDP. Gen. Buhari would have to contend with an Oil and Gas Industry Bill that has become a joke in the National Assembly. This Bill was conceived to remove the waste in the bureaucracy of the NNPC, promote specialisation in the supervision of the industry and assuage the agitations of host and impacted communities of oil and gas operations. Gen, Buhari's choices are not many in this matter. Would he introduce an executive Bill scrapping the corporation he had the privilege to serve as pioneer chairman? I mean, who needs an NNPC, a multitude of subsidiaries and a supervisory federal ministry to oversee and supervise Nigeria's interests in a single industry? Would he urge his party faithfuls in the National Assembly to tinker with the PDP's own version currently being tossed around by several committees in the National Assembly, and give the country a Bill that is functional and satisfactory? The incoming president is inheriting a downstream sector that is driven by a dubious subsidy regime. The country is bled daily by technocrats and oil marketing companies who have taken advantage of this unwholesome policy to enrich themselves corruptly and at the expense of Nigerians; it is no secret that these elements continue to undermine efforts to refurbish our refineries in order to continue with the system that has made Nigeria, a producer/importer a laughing stock in international business circles. And that brings me to the business of the Nigerian government still operating refineries in the 21st Century. Would the incoming president tow the path of privatising Nigeria's four refineries or he would fall into the lure of hubris. Many leaders have kept structures that were unprofitable only because it assured them the scope of patronage and authority enjoyed by their predecessors. Nigerians expect decisions that would reflect the mammoth trust they have invested in their president elect. As he anticipates solutions to the corrupt practices in the industry that have undermined the Nigerian economy, we urge the presidentelect to consider pipelines vandalism, illicit refining activities, illegal bunkering and the vestiges of militancy in the producing and impacted areas. Another tinderbox is the management of Amnesty granted to the former militant groups in the Niger Delta; Gen. Buhari can play the conqueror and mismanage this sensitive issue. He can also play the role of a true statesman and handle it in such a manner that Nigeria and all the Nigerians affected feel like winners.

2015 May, SweetcrudeReports