Investors await takeover of power assets by Vanguard Media Limited

Oil firms borrow N3.44trn from Nigerian banks

Nigeria realised N400bn from electricity privatisation P\10

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No oil spill in Funiwa field

SEPTEMBER, 2013

Privatisation:

Investors await takeover of power assets

hevron Nigeria Limited (CNL), operator of the NNPC/Chevron Joint Venture, has described as false any report of spill in its Funiwa field located in CNL’s Eastern Operational areas, in Bayelsa State of Nigeria. The General Manager, Policy, Government and Public Affairs; Mr. Deji Haastrup, said, “Any report of spill in our CNL Funiwa field is false in its entirety and we advise all enquiries about CNL operations to be directed to us instead of third parties.” Haastrup said that this clarification has become

CONTINUES ON PAGE 7

P\9

Nigerian oil industry lacks transparency, good governance — AfDB

Contents 3

COVER

OIL

FOCUS

GAS

POWER

FINANCE

SOLID MINERALS

LABOUR

18 20

MARITIME

COMMUNITY

Privatisation: Investors await takeover of power assets

Nigeria lost $100bn to foreign crude tankers-NCDMB

Nigeria realised N400bn form electricity privatisation

Cooking gas scarcity worsen in East, South Nigeria

Development partner critical to power sector reform, says Nebo

Oil firms borrow N3.44trn from Nigerian banks

Charcoal, Agricultural produce dominate Nigeriaâ&#x20AC;&#x2122;s export

NUPENG decries exploitation of petrol station workers

Multi-trade, AMATO to acquire 2,000 new truck

INSURANCE

GCC insurers face competitive environment despite growth

JTF intensifies war against oil thieves

Sweetcrude is a publication of Vanguard Media Limited

THE TEAM Ag. EDITOR Clara Nwachukwu CORRESPONDENTS Victor AHIUMA-YOUNG Godwin ORITSE Jimitota ONOYUME Samuel OYANDOGHA Emma Arubi Michael Eboh Rosemary ONUOHA Sebastine OBASI Kunle KALEJAWE MANAGER, MARKETING Ubong NELSON PAGE LAYOUT/DESIGN

Francis AYO & Johnbull OMOREGBEE

Enquiries Call: 08098051103

Printed and Published by

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Vanguard Media Limited. Vanguard Avenue, Kirikiri Canal, P.M.B. 1007, Apapa.

All correspondence: P.M.B 1007, Apapa, Lagos.

ig e ri a m a de ab o ut N 4 0 0 billion from the sa le of power assets, making it t he biggest sales in the country's histor y. But history will judge government by what it did with all the mone y and how soon it translated to regu lar power supply for Nigerians. Already economic experts have called for judiciou s use of the funds, warning that it shou ld not be used for political purposes, as feared. Accordingly, this e dition is devoted to the power sector and all that have been since the Aug ust 21. The Chairman o f the Technical Team, of the Nat ional Council on P r i v a t is a ti o n , N C P, M r. A te do Peterside, says it is no longer business as usual for electricity, as he gives more in sight into what transpired during the sales. Outside power, w e also bring you in du st ry u p da t e s i n O i l , G a s, Finance, Solid M inerals, Labour, Insurance, M aritime, and Community. The package may be smaller, but it is no less richer th an Sweetcrude is known for. Enjoy!

Cover Story

When 13 out of 14 bidders for the PHCN successor companies met the August 21 deadline for the payment of the remaining 75 percent of their bids, not a few Nigerians were upbeat that the much talked about power sector reforms would come to pass after all. The Federal Government had realised about N400 billion from the sale, thus making it the biggest privatisation sales ever in the history of Nigeria, and Africa. However, the euphoria and hope for improved power supply in the country, which would translate to an improved economy, may be a mirage if urgent attention is not paid to the lingering labour issues that had pitched the government against labour unions. Following the full compliance of the investors to take over the power stations, the important question many Nigerians are now asking is; when is the handover? Waiting for instructions Surprisingly, the incumbent managements of these privatised companies have ceded their rights to handover to the workers and the Ministry of Power. According to a top PHCN official who spoke in confidence with Sweetcrude, “It is only the Minister and the labour unions that can comment on the preparedness of the management to hand over the plants to the new investors. The management is merely watching events as they unfold.” But the National Union of Electricity Employees, NUEE,

Investors await takeover of power assets A

fter almost 10 years of struggling to privatise Nigeria’s power sector, the plan finally sailed through almost a fortnight ago, when the Federal Government’s National Council on Privatisation, NCP, blew the final whistle for preferred bidders to pay up and take possession of their assets. In this piece, Sebastine Obasi, assesses the level of preparations by the investors and the incumbent management of these 15 Power Holding Company of Nigeria, PHCN, successor entities to change ownership and leadership.

has dismissed government’s directive to the new investors to take over the PHCN assets, saying it is impossible to take over due to pending labour issues. NUEE cautioned that government would be creating a fertile ground for a show down, unless all labour issues are resolved. According to the NUEE General Secretary, Mr. Joe Ajaero, “They cannot take over. It is absolutely impossible.

Workers entitlements have not been paid. In most of the zones, Lagos, Ibadan, Benin, Enugu, and so on, not a single worker has been paid. In the few places that they paid, they only paid a fraction, leaving the bulk of money unpaid. If they are creating a scenario for a showdown, the workers are prepared for it.” Ajaero argued that allowing the investors to take over the power stations would amount to

economic fraud. “If the entitlement of workers is not paid before these investors take over, more people will be impoverished while a few continue to live in mass wealth.” He also said that the sale of PHCN’s assets for about N400 billion was a far cry from its worth as the workers entitlement would cost about N500 billion. “How will the government raise the N500 billion to pay workers severance package. PHCN generates N300 billion annually

and we want to sell it for less. It is sad,” he said. He explained that the company ’s revenue profile proved that PHCN generates about N25 billion a month, which amounts to N300 billion annually. According to him, the NCP Act stated that 10 percent share of the sale of PHCN should be given to employees, “ which is not debatable”. He therefore urged the government to implement the Hassan Sunmonu Committee’s report on the power sector reform, so as to settle the entitlement of workers. Sweetcrude gathered that the handover of the 15 unbundled generation and distribution companies to the new owners may be delayed. Industry sources said that the handover will not be soon due to the inability of government to conclude payments of the severance packages of PHCN workers. According to sources, due to the huge amounts involved (over N300 billion), it will not be economically wise for government to release the money at once. “Because of the huge amount involved, government can’t release the fund at once, it is batch by batch and that will take some time to be concluded,” the source said. Acquiring liability-free assets Already, the new owners have made their decision known at a recent meeting with the power minister that they will not take

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Cover Story CONTINUED FROM PAGE 3 over the companies unless all labour issues are resolved. However, there are concerns that while the new investors are preparing to take over the PHCN assets, government is still spending money for their m a i n t e n a n c e . M r. M i k e Uzoigwe, Chief Executive Officer, CEO, Egbin Power Station, Ikorodu, Lagos, said that the process of privatisation started since 2005, and if there had been no repairs since then, the station would have been operating below capacity. “The point is that the process of privatisation started since 2005, that is eight years ago. If we had stopped repairing this plant since eight years because some people were coming to buy it, this plant would have been running only two units by now. But because we have been repairing this plant since eight years ago, we are currently running five units to generate 1,080 megawatts instead of 440MW from two units. “That is why we are going ahead to repair unit 6. The money is already in place and we are thinking that Nigerians will be better for it if power supply improves by tomorrow,” he said. According to Uzoigwe, “Though privatisation and takeover of this plant may soon happen, we have a philosophy of continuation with all what we are supposed to be doing here until the day the new investors take over, otherwise this plant will be operating only two units and the country would be in deeper darkness. It is hoped that by the end of this year, power supply situation or available capacity in this country will generally improve, considering the completion of ST-06, which will make all the units in Egbin to operate and deliver the installed

Investors await takeover of power assets The point is that the process of privatisation started since 2005, that is eight years ago. If we had stopped repairing this plant since eight years because some people were coming to buy it, this plant would have been running only two units by now capacity of 1,320MW.” Uzoigwe also noted that “Nigeria has never privatized the power industry. So, we don’t know how it works. If you read journals and internet, you will see some countries that tried privatisation but went back to where they were before because there were many challenges they never knew. In our own case, there are problems of bad infrastructure and political issues that are posing challenges to what the

government has genuinely started. But we promise everybody that a day is coming in the future when there will be power all over the country.” Outstanding issues While government insists that the power reform is on course, concerns have continued to mount over what the Minister of Power, Chinedu Nebo has described as ‘slippages’. For example, in spite of repeated assurances for the payment of severance package for workers to be disengaged from the system to enable the new owners take over, payment only started early August, without evidence that the settlement would be completed soon. Also, three conditions precedent are still pending. These are metering of the grid interface points, testing of the Market Operators Settlement Systems and processes; and the constitution of a dispute resolution panel. According to the Chairman of the Roundtable of Distribution Companies, Dr. Ransom Owan, “

The industry agreements (power purchase agreements, vesting contracts and the transmission network agreements), which underline industry revenue would be deemed illegal and a nullity until the declaration is made by the Minister of Power. This government policy risk makes it very challenging for the capital markets inside and outside of Nigeria to support our efforts financially.” He further explained, “As at now, the Discos operate at a loss and buyers would quickly deploy their respective turnbusiness around plans. However, a cost reflective tariff, which guarantees a regulated return and covers all Industry payments is not yet producing the desired results due to systematic and str uctural problems. If the Discos are unable to cover the cost of energy delivered to them, the Bulk Tracer, Transmission Company and Generating Companies will be adversely affected.” Owan’s position points to the fact that electricity tariff would be high by the time the investors take full charge. This was corroborated by the Chairman of the Nigerian Electricity Regulatory Commission, NERC, Dr. Sam Amadi, who hinted that “minor reviews would be conducted twice a year, but these would not result in unnecessary price increases. Instead, the reviews could actually lead to a reduction in tariff,” he said. Amadi did not sound convincing how two reviews in a year would not lead to price increase. He explained, “It is not true at all that consumers will be subjected to price increase twice every year. This is complete falsehood. There is a set tariff for

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A gas facility

Cover Story

Olorunsogo Generation plant

Investors await takeover of power assets CONTINUED FROM PAGE 4 2012, 2013 till 2017. Though there are minor reviews in June and December of each year, these reviews will not always result in any increase. In fact, the review will not result in an increase because our financial and technical assumptions are accurate.” Amadi described the Multi Year Tariff Year Order (MYTO) as a methodology to ensure that consumers have access to adequate and reliable electricity, stressing that it is a tariff plan that sets the prices of electricity over a period of five years. According to him, “MYTO allows for minor and major reviews at certain intervals. Major reviews are conducted every five years, while minor reviews are conducted on a twice-yearly basis. The reviews are done to assess whether the changes of macro-economic indices such as interest rates, gas prices and inflation are significant enough to warrant a change in the tariff (MYTO year commences in July).” He said that the Commission

has put in place measures to strengthen power sector regulation, and gave the assurance that NERC would address the issue to restore balance and equity in electricity distribution. On the transitional electricity market, he stated how rulebased industry is critical to its sustainability and growth, noting that as a regulator, NERC would protect consumers, whom he said are the primary concern of the Commission. “When operators fail to follow rules, it creates serious problems. The flouting of the load allocation formula is an example. An industry that is weak on rules also sends the wrong signals to investors thereby stalling the development of new projects. To this end, NERC has been meeting with critical stakeholders – generation and distribution companies, Transmission Company of Nigeria, Nigerian Bulk Electricity Trading Plc to ensure that the necessary conditions for the commencement of the rule-

When operators fail to follow rules, it creates serious problems. The flouting of the load allocation formula is an example

based Transitional Electricity Market are met. “The commencement of the Transitional Electricity Market will ensure more discipline, with all entities adhering to their contractual obligations as well as all rules and regulations, thereby translating to improved service delivery to electricity customers,” he said. Notwithstanding the hiccups being experienced in the quest to revolutionise the power sector, the Ministry of Power said it would soon declare the TEM open, for investors in the sector to commence real business following its record of

substantial compliance in payments by the preferred bidders. The Minister, Chinedu Nebo, also reassured Nigerians and investors of gover nment’s resolve to pursue the transformation agenda to the end, as well as to monitor the emerging transition market in order to protect the interests of both the citizenry and the investors. According to him, the stability of the national grid is being enhanced to ensure effective transmission of any quantity of power being generated in the new dispensation, while efforts

are also being made to provide more electricity off-grid, especially for the rural areas. Investors unveil plans While waiting for the federal government’s declaration of the TEM, the Chairman of Transcorp Ughelli Power Limited, TUPL, the new owners of the Ughelli Power Plant, Tony Elumelu, said that his company’s participation in the power sector reform was aimed at improving the living standards of Nigerians, as well as impacting positively on the economy. According to him, TUPL will in the next five years, increase the power generation of the plant from 300MW to over 1,070MW. “This is a laudable and remarkable achievement; but it is only just the beginning. We can now embark fully on our strategy to contribute to the development of Nigeria’s power sector whilst creating long-term economic and social value for our stakeholders and the greater community. We fully expect our engagement on this world-class project to improve the living standards of all Nigerians as well as impact positively on our country’s GDP,”

Oil

Nigeria lost $100bn to foreign crude tankers-NCDMB

he Nigerian economy lost over $100bn in its 50years of commercial oil production by allowing its crude to be carried exclusively by foreign owned t a n ke r s , t h e E xe c u t i v e Secretary of the Nigerian Content Development and Monitoring Board, Mr. Ernest Nwapa has said. Speaking at the launch of two brand new 45,000 metric tonnes tanker vessels, MT Abiola, and MT Igbinosa, by an indigenous firm, Ocean Marine Tankers (OMT), Nwapa said the country also lost opportunities to build a virile national carrier fleet on the back of the hundreds of millions of barrels exported

every year. He added that the country equally missed opportunities to train and utilise youths, especially from maritime communities of the Niger Delta in formal shipping activities. He expressed happiness that the trend began to change with the implementation of the Nigerian Content Act signed i n t o l a w b y Pr e s i d e n t Goodluck Jonathan, and empowering relevant officials and agencies to insist that indigenous owned tankers should carry Nigerian crude. Nwapa recalled that the M i n i s t e r o f Pe t r o l e u m Resources, Mrs. Diezani Alison-Madueke, had

crude, adding that one of the key requirements included ownership of tankers or Nigerian equity in tankers that will carry the crude. â&#x20AC;&#x153;In 2012, the guidelines were not fully implemented. The excuse was that there was no Nigerian owned tanker but the message was

He promised that the Board will ensure that any company that invests in crude tankers which meet the technical requirements will be utilised for transporting Nigerian crude directed in 2012 that the Crude Lifting Guidelines issued by the Board must count in the selection of companies to lift Nigerian

sent around the world that the Jonathan government was insisting that a portion of Nigerian crude must be carried by Nigerian tankers.â&#x20AC;?

He said that since then, about four other credible groups had demonstrated to the Board various models they plan to adopt to ensure compliance with the Crude Lifting Guidelines.

e added that sequel to the guidelines, the Minister will soon come out with regulations to enforce relevant provisions of the Nigerian Content Act, which stipulates that Nigerian owned tankers must be utilised significantly in the transportation of crude oil. The Executive Secretary commended Ocean Marine for proving that Nigerians can own crude carriers, and described the company â&#x20AC;&#x2122;s efforts as a clear demonstration of the confidence investors have in the current administration, which he said, is a strong belief that government will protect any investment made in line with Nigerian laws, policies and aspirations. He promised that the Board will ensure that any company that invests in crude tankers which meet the technical requirements will be utilised for transporting Nigerian crude. Nwapa also said that the implementation of the Nigerian Content Act had resulted in the domination of the industry landscape by Nigerian companies, with tremendous impact on the national economy, such that other sectors are replicating the models established in the oil and gas sector. He said there are measurable impacts in engineering, fabrication, oil field services, well technology and drilling rigs, marine vessel ser vices, equipment assembly and component manufacture and logistics. Noting that the upgrade of facilities have injected billions of naira into the economy, he listed other areas of increased Nigerian participation to include boat building and ship repair, coastal trade under the Cabotage regime, insurance, banking and legal services and crude oil and product sales. The two vessels would be used to supply crude oil to Warri and Kaduna refineries.

Oil

Sinopec to buy 33 percent stake in Oil & Community Apache’s Egypt oil PIB’s Fiscal Regime: FELIX AYANROUH

p a c h e Corporation of the United S t a t e s announced China’s Sinopec Group will acquire a 33 percent interest in its oil and gas business in Egypt for $3.1 billion cash. Apache, an independent oil and gas company with headquarters in Houston, said on its website the sale is part of the companies’ agreement to launch a global strategic partnership to pursue joint upstream oil and gas projects. “As the first step in this partnership, Apache will receive $3.1 billion in cash, subject to customary closing adjustments, in exchange for Sinopec gaining a 33 percent

minority participation in Apache’s Egypt oil and gas business,” the company said. The deal is expected to close in the fourth quarter. The announcement said Apache will continue to operate its Egypt oil and gas business. Apache Chairman and CEO G. Steven Farris said Sinopec’s technical expertise “complements our 20 years of experience operating in Egypt.” Sinopec, China’s leading oil and gas producer formerly called China Chemical and Petroleum Co., has been making deals around the world to help meet China’s growing demand for energy, T h e N e w Yo r k T i m e s

reported. The deal, when concluded, will enable Sinopec to expand output by an estimated 6.5 million tons of oil each year and will mark the company’s debut in the Egyptian oil and gas market, the Xinhua News Agency reported. Apache said net production from its Egypt operations averaged 100,000 barrels of oil and 354 million cubic feet of natural gas per day in 2012. The Times said the sale comes after a number of acquisitions by Apache in the past three years at a cost of more than $15 billion. The company says it is refocusing on its North American onshore holdings.

Russia threatens Belarus with oil supply cuts

ension between Russia and Belarus rose on Thursday as Moscow warned oil supply cuts to its energypoor neighbor could last for months, and Minsk threatened to open a criminal case against a Russian tycoon with Kremlin ties. The close but often rocky relationship between the exSoviet states hit a major bump this week when Vladislav Baumgertner, the chief executive of potash company Uralkali, was arrested in Minsk. On Wednesday, Russia ordered its oil companies to cut supplies to Belarus by

about 25 percent, prompting talk of a trade war. Belarus relies entirely on Russian oil to keep its two major refineries running to supply the local market. Russian pipeline monopoly Transneft said on Wednesday Russia would cut oil supplies to Belarus by 400,000 tons in September due to maintenance work at the trunk pipeline. On Thursday, Russian news agencies quoted Deputy Prime Minister Arkady Dvorkovich as saying Belarus would receive reduced volumes of oil in the fourth quarter, indicating the

No oil spill in Funiwa field CONTINUED FROM PAGE 1

necessary in view of reports by some news media alleging that there has been a spill in CNL’s Funiwa field. He emphasized that CNL conducts its operations to ensure the safety of the people and the environment at all times. “CNL reiterates its commitment to effective environmental management in line with one of its core values of protecting people and the environment in all its operations,” Haastrup said.

cuts would carry on long past September. “On the basis of planned oil deliveries for 2013 and on the volumes which already have been shipped, the cuts in oil supplies will surely affect the fourth quarter,” the government press service cited Dvorkovich as saying, according to Interfax. In Belarus, state investigators raised the prospect of also prosecuting billionaire Suleiman Kerimov, the top shareholder in Uralkali, which controls 20 percent of the world potash market.

A Moment of Truthfulness

’m starting to have this sinking feeling that meaningful opportunities are slipping away from the Petroleum Industry Bill’s (PIB) debate – particularly its fiscal regime. Stakeholders are threading the 2009 PIB path of self-destruct. Although, the global debate regarding oil and gas fiscal regime is not new and will continue for ages, one wonder the motive behind the IOC’s recent chutzpah of debagging the PIB on the pages of Newspapers instead ofa constructive discourse. Some background: Although you’d never know it from all the diatribes, with the IOC’s predicting a dooms day if the PIB is passed, the PIB is based on the Report of the Oil and Gas Reform Implementation Committee (OGIC) set up by the Federal Government in year 2000 to carry out a comprehensive reform of the oil industry. The PIB is a reform legislation geared towards a robust legislation that establishes lucid rules, procedures and institutions for the administration of the petroleum industry in Nigeria. Some of the objectives of the PIB include the following: Establish transparency and Accountability Create a robust economic environment to attract investments Establish flexible and competitive fiscal framework Promote exploration and exploitation of Petroleum Resources Increase gas supply for domestic utilization and industrialization Create efficient and effective regulatory institutions Furthermore, the PIB’s fiscal regime will increase government take and yet encourage investment in the petroleum industry - it allows for production based incentive system. The bill proposes the volume-based royalty – sliding scale between five percent and 22 percent depending on production volumes and location. The OICs in their recent media blitz have alleged that the fiscal regime proposed under the new law risk cutting oil and gas output from 63 percent to about 25 percent – about 2.4 million barrels a day. Also, that this will translate to about $185 billion loss in revenue for all stakeholders as new project will be stalled.They went on to state that this will create one of the harshest production sharing contract, PSC regime globally - governmentseconomic rent (royalties, taxes and NOC profit oil) will be at 96 percent.The IOC’s predictions and figures in my opinion are stochastic and should be taken as is. Does the IOC’s think this tactic will stop the PIB’s passage? It is wrong for the government and its proponents to keep on hinging on the fact that previous fiscal regimes were grave wrong meted on the country by the IOC’s, as if the 2012 PIB isa reparation legislationmeant to atone for past wrong or injury done. Stakeholders should not be oblivious to the fact that oil and gas exploration and development is a business and should be taken as such.It is readily apparent from heuristic analysis by expert in the field that a fiscal regime should neither deter investment which would otherwise have been made, nor should it encourage investments which would otherwise not have been made. That is, the interest of both parties – as in this case the government and the IOC’s should be mutual. It is obviousthat the objective of both host government and the IOC’s is maximizing the present value of revenues generated by petroleum activities. Every government in drafting a fiscal regime for its petroleum industry must ensure that the host state as a custodian to oil and gas resources on behalf of its citizens, maximize revenue, including tax receipts generated by the exploration and development operations. This objective entails designing a fiscal system where exploration and development rights are acquired by companies who place the highest value on them. On the other hand OIC’s objective is to build equity and maximize wealth by producing oil and gas at the lowest possible cost and the highest possible margin.The IOCs have a fiduciary duty to manage and protect their shareholders interest in its investment, including where they believe it will yield the best returns. However, comparing fiscal regimes on the level of “state take” is an over-simplification of the issues, particularly when the calculation is of the percentage of the gross project revenues that accrue to the state as this ignores even the effect of differences in costs of development and production among others economic factors. It should be noted however, that fiscal system also includes all aspects of the contractual relationship between the host government and an IOC. Petroleum contracts or agreements require negotiation by the parties involved. It is important to state that at every contract stage which often involves the battle of the forms (exchange of contracts) end with parties adopting a contract beneficial to all parties involved – including one’s entered into in Nigeria. The OIC’s should also in the legislative formulation of the PIB put on its contractual negotiation armor in the drafting process of this bill.

Oil

EIA: World petroleum product consumption sets record high in 2012

he world’s consumption of p e t r o l e u m products reached a record high of 88.9 million b/d in 2012, as declining consumption in North America and Europe was more than outpaced by growth in Asia and other regions, according to a recent study by the US Energy Information Administration. The study examines regional trends in petroleum consumption between 1980 and 2012. Asia’s consumption

China’s oil firms barred from expanding refining China’s government has barred its two biggest oil producers from expanding their refining after they failed to meet pollution targets. The penalties for PetroChina and Sinopec are a fresh blow to China’s stateowned oil industry following this week’s announcement that four senior executives are under investigation for unspecified offenses. The Ministry of the Environment said PetroChina and Sinopec failed to meet standards for reducing “chemical oxygen demand,” a measure of pollutants released into bodies of water. The ministry said because of that, the companies are barred from expanding or renovating oil refining capacity. PetroChina Ltd. is Asia’s biggest oil producer by volume and Sinopec, also called China Petroleum & Chemical Corp., is the region’s biggest refiner.

increased by 4.4 million b/d between 2008 and 2012. In 2009, Asia overtook North America as the world’s largest petroleumconsuming region, fueled by demand increases from China and India. According

to EIA’s projections, China is expected to replace the US as the world’s largest net oil importer this fall. US consumption was reduced in 2011 and 2012 as a result of higher oil prices and increased fuel efficiency

of light-duty vehicles. Motor gasoline consumption, which makes up almost half of total US liquids fuel consumption, fell by 290,000 b/d between 2010 and 2012. Petroleum use in Europe has declined consecutively since

2006, due to weak economic performance and government policies in favor o f e n e r g y e f f i c i e n c y. Europe’s petroleum use declined of 780,000 b/d in 2009 and 570,000 b/d in 2012.

Oil

Nigerian oil industry lacks transparency, good governance — AfDB MICHAEL EBOH

he Nigerian oil and gas industry l a c k s t r a n s p a r e n c y, accountability and good governance, according to a report by the African Development Bank, AfDB. The AfDB, in its African Economic Outlook for 2013 and 2014, further lamented that Nigeria’s economy is dependent on sectors that are either climate sensitive or contribute to climate change, such as oil and gas, as well as agriculture, forestry and fisheries. The report said that the Nigerian environment is increasingly threatened by natural disasters, such as drought, desertification and floods, which have threatened the livelihoods of farmers and food security in recent years. The AfDB further stated

that wastage of oil resources, pollution from oil exploration activities and gas flaring in the Niger Delta, remains a concern to the country. “Furthermore, to curb wastage and introduce fiscal pr udence in the management of oil resources, the government established the Sovereign Wealth Fund (SWF), with strong institutional oversight responsibilities. “Also, the government introduced the Petroleum Industry Bill (PIB) (currently under consideration by the national assembly), aimed at further enhancing transparency, accountability and good governance in the petroleum industry,” the AfDB noted The AfDB bemoaned the insignificant contribution of the oil and gas sector to the country’s Gross Domestic Pr o d u c t , G D P, d e s p i t e Nigeria’s huge oil resources. It said, “Nigeria is the

largest oil producer in Africa and the tenth largest in the world, averaging about 2.3 million barrels per day, with 37.2 billion barrels of proven oil reserves. “Despite these impressive oil resources, the contribution of Nigeria’s oil and gas sector to the national Gross Domestic Product, GDP in 2012 was only about 14%. This is the direct consequence of the importation of 80 per cent of the goods and services needed for projects in the sector. Nevertheless, about 79 per cent of federally collected revenue and 71 per cent of total export revenue are from the oil and gas industry. “Even though Nigeria is the tenth largest oil producer in the world, it imports about 85 per cent of its refined petroleum products due to the low capacity utilisation (around 30 per cent) and frequent breakdowns of its refineries.”

The AfDB said further, “The infrastructure deficit in Nigeria is a major bottleneck for the structural transformation of the Nigerian economy. This is particularly so in the electric power industry and road and rail transport.

privatisation/concessioning and Public-PrivatePartnerships (PPPs) are critical. “This is a major priority for the current administration, and improvements have been observed in critical infrastructure development in the country. However, progress in PPPs has been slow. “Nigeria continues to be ranked very low in the World Bank Doing Business report. This is because of unfavourable physical, institutional and regulatory environments for doing business in the country. “The time it takes and the cost of starting and operating a business, plus trade regulations, taxation,

Despite these impressive oil resources, the contribution of Nigeria’s oil and gas sector to the national Gross Domestic Product, GDP in 2012 was only about 14%. “Increased public sector investment in infrastructure, improved project implementation and the leveraging of private investments to complement the efforts of the government t h r o u g h

and the state of infrastructure, are often cited as constraints to doing business. They need to be addressed. Various initiatives by the government to tackle these problems have slightly improved the business and investment climate.”

Focus

r. Atedo Peterside has been a banker all his life; although now a retired banker of repute, but he is still the Chairman, Stanbic IBTC Bank Plc. But in this interview with Clara Nwachukwu, the focus is not about the financial services sector, but his headship of the Technical Committee of the National Council on Privatisation, NCP. The Council just concluded the largest privatisation transaction in Nigeria’s history with the sale of 15 power companies unbundled from the Power Holding Company of Nigeria, PHCN, to private investors. Despite this success, there are still some issues leading to when Nigerian will begin to experience uninterrupted power, which Peterside clarifies. Excerpts:

lose focus. Let us wait until the last dollar has been received on the last Disco and the last Genco. Only then will I attempt a mild celebration.

For more than 13 years Nigeria has struggled to privatise the Power sector,

Mr. Atedo Peterside

Nigeria realised N400bn from electricity privatisation why did it take so long to achieve? The political will was not there and the knowledge was not there either. Unbundling a power sector into its constituent parts and privatising them transparently is a herculean task. Having gone this far, what is your view of the justconcluded sale of the 15 P H C N s u c c e s s o r companies? First let me clarify the number of PHCN Successor Companies. There are 11 Distribution Companies (Discos) and 7 Generation Companies (Gencos) and then there is the Transmission Company of Nigeria (TCN).

Second, let me object to the use of the word “Conclude”. I am a firm believer in the saying that “it is not over until the fat lady sings”. Sportsmen know that a game is not over until the final whistle goes. We received 25% down payment on 10 Discos from the preferred bidders. Nine of them paid the balance of 75% on or before the 21st August deadline. The Core Investor for the 10th (Enugu Disco) defaulted and did not pay the balance of 75%. All is not lost there because we do have a Reserve Bidder and from the noises I have heard them making, they appear to be ready to step in and pay. For the 11th (Kaduna Disco) the process is still on because a Preferred Bidder

The Core Investor for the 10th (Enugu Disco) defaulted and did not pay the balance of 75%. All is not lost there because we do have a Reserve Bidder and from the noises I have heard them making, they appear to be ready to step in and pay and Reserve Bidder emerged later and so the transaction is still proceeding. Fo r t h e G e n c o s , f u l l payment has now been received for Kainji, Geregu, Ughelli, Egbin, and Shiroro (a fraction of their funds came in late). There is a $30m approximate shortfall

out of the $201m total that was due on Sapele. Meanwhile a preferred bidder ($260m) and a reserve bidder have emerged for the 7th Genco (Afam) and so that transaction is still proceeding. Now you understand why I object to the use of the word “Concluded”. I do not want to

This exercise is reputed to be the biggest sales in Nigeria’s privatisation history, how do you feel being on the team that brought it to pass? I like the use of the word “team”, because it has been a team effort. I am uncomfortable with the attention which the media has tried to heap on me. I am only a member of the National Council on Privatisation (NCP). The Chairman of the NCP is His E x c e l l e n c y, t h e V i c e President and as you know he reports to Mr President. If something goes wrong in Nigeria, we blame the Presidency. If something goes right people want to exclude the Presidency and praise someone else. That is dishonest. Leaders must be given full credit for successes and then they must also accept the blame for failures. Let us be fair. You are right that it is Nigeria’s largest privatisation transaction. Actually, I am told it is also Africa’s largest privatisation transaction. But you are the Chairman o f N C P ’ s Te c h n i c a l Committee that oversaw the entire process. Are you not a leader then? The Technical Committee is an advisory body. Our advice could have been accepted or rejected. If our advice is accepted and everything goes right then the credit must still go to those who accepted our advice. Let us call a spade a spade. This is a team effort and at the head of the overall team is the Vice President, who reports to Mr President. As the Chairman of the Technical Committee, what specific roles would you say your committee played in the success of the programme? As I said earlier, we advised on the technical details of the transaction and oversaw the implementation/execution by the Bureau of Public CONTINUES ON PAGE 11

Focus

Nigeria realised N400bn from electricity privatisation private sector to take control of the Discos and Gencos. If anybody thinks that it can be “business as usual” hereafter, then they will be swept away as a result of their own folly. Are you not the Chairman That is the lesson of history. of that Power Sector SubWith regard to technical Committee? issues, there is one issue that Ye s I a m , b u t t h e seems not to have been taken membership includes other into consideration in the stakeholders such as the p r i v a t i s a t i o n Minister for Power, the DG of programme, which is BPE, the Vice Chairman of NCP’s Technical Committee, the issue of territorial Mr Haruna Sambo and many delineation. Under one PHCN entity, there was others. no need to mark the There appeared to be too boundaries of where one many committees and task distribution company f o r c e s o n p o w e r begins and another ends, privatisation, which was not but now there is a need for the case with the others, why boundary demarcation or is was this so, especially as this a non-issue? It is a non-issue. some of these committees w e re re p u t e d t o h a v e Shouldn’t this boundary contributed in the delay of delineation have been the programme? As explained earlier, I chaired both the NCP’s Po w e r S e c t o r S u b Committee as well as its Technical Committee. I am not aware that either of these committees delayed anything. The Technical Committee is an advisory body. We always gave our advice promptly. If you are focused on the national interest and what is best for Nigeria and Nigerians, then you will be very prompt in your decision making. It is the shameful pursuit of vested interests by decision makers that has delayed progress in the past. Enterprises (BPE) and the transaction advisers (CPCS). We were also assisted greatly by the NCP’s Power Sector Sub-Committee.

The problem with power is not just about generation and distribution, but more of transmission, yet the deal with TCN does not appear to be tidy with the back and forth issues with Manitoba Hydro of Canada. What is the situation with transmission? There is a board of TCN and they must be held accountable. The centre of gravity of Nigeria’s power sector has shifted to the private sector. Over N400 billion has been paid by the

Mr. Atedo Peterside

might be some need for minor clarification. This is not a deal-breaker.

privatisation era, and in what ways? If everything that is “privatisable” has been privatised then there will no longer be a need for a National Council on Privatisation. Nigeria is very far away from that point. We have not even touched the Nigerian Railways. Nitel is still lying comatose and is still being used as a vehicle for milking the federation. There is a lot that still needs to be done. We must take our country back from those who have looted it for decades while pretending to be running state-owned enterprises.

Will your committee still re m a i n re l e v a n t p o s t -

Now that the sales have been largely concluded,

If everything that is “privatisable” has been privatised then there will no longer be a need for a National Council on Privatisation. Nigeria is very far away from that point. We have not even touched the Nigerian Railways. Nitel is still lying comatose and is still being used as a vehicle for milking the federation

done before the entities were put up for sale to avoid possible disputes and litigation? The boundaries were established. At best there

what is the next step for the investors and how soon will Nigerians begin to get a reprieve from their frustrations with power? I believe the Discos are the most important business units because they are the ones responsible for the “last mile” and they have the customer interface. There should be efficiency gains arising from a better alignment of goals in the sense that they only get paid when there is electricity supplied to your house and the meter is running. They are therefore as eager as you and I to do away with darkness in our homes and offices. There is hope yet for Nigeria. Let us look at the bright side and smile

Gas

US gas price sensitive to LNG exports

Cooking gas scarcity worsens in east, south Nigeria KUNLE KALEJAYE

carcity of L i q u e f i e d Petroleum Gas, LPG, also known as cooking gas is worsening in the South Eastern and South South regions of Nigeria, resulting to about 50 per cent increase in the price. The product, which was sold for N3,000 (12.5kv cylinder) is currently going for between N4,000 and N4,500 in the affected regions. The scarcity of the product Sweetcrude gathered can be attributed to the port congestion in Apapa, Lagos, which is causing delays in the discharge of products at the jetties. A source who spoke in confidence said priority is

being given to vessels carrying Premium Motor Spirit, PMS also known as petrol, and Dual Purpose Kerosene, DPK because of their high demand. Recall that the Nigeria Ports Authority, NPA had earlier stated that the expected quantity of PMS in the country will arrive in nine tanker vessels, in addition to about 223,985MT of the product awaiting berth since July 11, 2013. The vessels according to NPA will berth at the Atlas Cove Jetty (ACJ), Bulk Oil Plant (BOP), Single Bouy Mooring (SBM) and the Petroleum Wharf Apapa (PWA) jetties. The vessels are among the 84 ships expected to hit Apapa Port, Tin Can Island Port, PTML and Lagos jetties in the month of August, in which 41 ships are laden with containers and

He noted that due to the supply shortfall, preference is given to Lagos which is the biggest market for LPG, while little quantities are sent to the Eastern and Southern parts of the country. general cargoes. Commenting on the issue, the National President, Liquefied Petroleum Gas Retailers Association of Nigeria, LPGARAN, Mr. Michael Chika, admitted that supply of the product is stabilising in Lagos, and other Western states, but taking a slower pace in the Eastern and Southern states. Chika explained that the development is as a result of the recent face-off between

the Nigerian Maritime Administration and Safety Agency (NIMASA), and the Nigeria Liquefied Natural Gas (NLNG), which created a huge vacuum in the supply chain. He noted that due to the supply shortfall, preference is given to Lagos which is the biggest market for LPG, while little quantities are sent to the Eastern and Southern parts of the country. “A t t h e e n d o f t h e

he future price of natural gas in the US depends greatly on development of LNG exports, the outlook for which remains unclear, says Facts Global Energy (FGE). In an analysis comparing its projections for LNG exports with a base-case production forecast by the Energy Information Administration’s Annual Energy Outlook (AEO), FGE sees problems. FGE’s LNG export expectations are much greater t h a n E I A’ s : 4 0 m i l l i o n tonnes/year in 2020, and almost 80 million tpy in 2025, assuming full utilization of capacity, vs. 5.5 million tpy in 2020 and almost 30 million tpy in 2030 in the AEO reference case. Expected pipeline exports to Mexico plus LNG exports at FGE’s projected rates would absorb all incremental gas production in the AEO reference case. “O b v i o u s l y, t h i s i s a n untenable outcome as there is no room for domestic demand growth,” FGE says. “It implies that Henry Hub prices must rise higher than the AEO referencecase projections both to incentivize domestic gas supply and ensure that domestic demand is adequately served.”

NIMASA/NLNG face, there was scarcity of LPG in the market and that created a huge vacuum that required consistent supply of the product. “Lagos consume more of the product and when the vessels are discharged at the port, large amount of the product are distributed here and other states in the west. “As a result of port congestion, circulating the product has been very difficult. The LPG market is relatively stable since the face between NIMASA and NLNG ended but the price of the product has not gone down to what it was before the crisis. “As soon as the vessels discharge their content, we are expecting that supply will improve very soon. Presently there are no scarcities of LPG,” Chika said.

Power Development partners critical to power sector reform, says Nebo

150 companies to participate in 4th Int’l power expo conf Kunle KALEJAYE

Chris OCHAYI

he Minister of P o w e r , Professor Chinedu Nebo has said that the contributions of donor agencies and development partners are critical to the ongoing reforms in the power sector. Nebo who made the remark while speaking at a gettogether in honour of Ambassadors David Macrea and Pier re Fehye of European Union, EU, in Abuja acknowledged the valuable collaborators in driving the nation’s power reform. According to him, “our development partners have pledged important roles in advancing the goal and ambitions of this administration in the power sector.” “A l r e a d y t h e E U h a s demonstrated this commitment, thanks largely to the leadership role these envoys have played, he said. It is on record, he said, that the support has influenced the ongoing collaboration between the EU and GIZ in d e v e l o p i n g a n d implementing a €36 million grant, which EU is providing the some of €27 million for the development of renewable energy sources in Nigeria. While calling for continued support from other development partners, the Minister said Nigeria would appreciate further initiatives like these ones, all geared towards ensuring access to power by Nigerians in an equitable, competitive, and efficient manner that meets market demand and global best practices. In his goodwill message, Mr. Patrick of UNIDO identified power and development as interwoven, just as he expressed optimism that UNIDO and other development partners will continue to assist

Electricity transformer Nigeria to overcome its power sector challenges especially in the area of filling financing gap of some projects in the sector. Ambassador David Macrea said that the way the federal

government is taking on power sector reform is bold and right, and expressed confidence that in two years time, there would be remarkable improvement in power supply.

He urged Nigeria to continue to cooperate with development partners so as to see the power sector out of its present predicament.

Norway to build power plant in South Sudan

orway will help South Sudan build a hydropower plant with work expected to start e a r l y n e x t y e a r, diplomats said, raising hopes of ending an era of dark nights at least in the capital. Devastated by decades of civil war with Khartoum, South Sudan has no power grid. Electricity is only for the rich who can afford diesel generators at their villas in the capital, Juba, or business

travellers in the city ’s expensive hotels. The government has made more than $10 billion in oil revenues since a 2005 peace deal with Khartoum, but corruption and inexperience have hampered development since independence in 2011. Juba also has no sewage system. Running water in residential buildings and offices comes unfiltered from the Nile, delivered by an army of trucks. To kickstart development, Norway will partly fund and oversee construction of a 42megawatt dam on the White

Nile, providing enough electricity at least for Juba. Tenders will be awarded in autumn with work to start in early 2014 and end in two years, Western diplomats said. The project will cost around $160 million, of which South Sudan is supposed to contribute a quarter. With risk-averse Western firms largely shunning South Sudan due to its inefficient legal system, bidders for the plant will likely come from Asia, diplomats said. Chinese, Malaysian and Indian firms dominate the oil industry in South Sudan.

he fourth edition of Nigeria International Power and Expo Conference is expected to attract over 150 companies and participant cutting across all facet of the power sector including Power Holding Company of Nigeria, PHCN Successor Companies, the key Agencies and Operators in the sector, state governments as well as private and public companies from Nigeria and overseas The conference would be declared open by President Goodluck Ebele Jonathan which is schedule to take place in October this year in Abuja. Deputy Director of Investment and Sector Development, Federal Ministry of Power, Mrs. Kehinde Osinowo said at the debut of Nigeria International Power Expo and Conference about 4 years ago, the Federal Ministry of Power was highly active and supportive of this bold initiative. Speaking to news men at a press briefing to launch the conference, Osinowo explained that the Expo and Conference would give nothing less than a three pronged leeway of reaching out to more people. According to her, this is because the conference provides an avenue to meet Manufacturers, Dealers, Suppliers, Experts , Scholars, F i n a n c i e r s , Policy/Decision Makers and Executors in both the private and public sectors under one strategic business roof. “It is in this light that the ministry supports this expo/conference as it intends to use this edition to showcase to Nigerians all that have been done; all that are being done and all that are proposed to be done to develop the sector and power our homes, offices and factories.

Finance

CBN, Abuja

Oil firms borrow N3.44trn O from Nigerian banks Michael EBOH

il and gas f i r m s ’ operating in the country borrowed about N3.443 trillion from banks in Nigeria in a twoyear period between 2011 and 2012. According to data obtained from the Nigerian Deposit Insurance Corporation, NDIC, of the N15.424 trillion facilities given out by the banks to operators in the economy during the period in review, the oil and gas sector received the highest portion, accounting for 22.32 per cent of the total. The NDIC, in its annual reports and accounts, disclosed that as at the end of 2012, the exposure of oil and gas firms to banks in the country stood at N1.913 trillion, while the oil firms borrowed N1.53 trillion from the banks in 2011. The amount borrowed in 2012 is 24.84 per cent improvement above the N1.53 trillion borrowed by the oil firms in 2011. In 2012, the exposure of oil firms to the banks, according to the NDIC, represents 23.47 per cent of the total loans extended to key sectors

of the economy, while in 2011; it amounts to 21.03 per cent of the total credit extended. Compared to the oil and gas sector, the banks gave out loans totaling N1.185 trillion, representing 14.55 per cent of the total, to the manufacturing sector; N977 billion (11.99 per cent) to the General sector; N813.4 billion (9.98 per cent) to the General Commerce sector, while the information and communication sector got N722.87 billion (8.87 per cent). Others are Governments — N640.06 billion (7.85 per cent); Real Estate sector — N376.58 billion (4.62 per cent); Agricultural, Forestry and Fishing N293.09 (3.60 per cent), while other unlisted sectors got N1.228 trillion (15.07 per cent). In 2011, the Manufacturing sector was exposed to banks

to the tune of N1.108 trillion, representing 15.24 per cent of the total credit to the economy; General sector got N854.1 billion, representing 11.74 per cent of the total; General Commerce sector — N809.2 billion (11.12 per cent); Infor mation and Communication sector — N628.14 billion (8.64 per cent) and Governments — N542.93 billion (7.46 per cent). Others are: Real estate —N377.33 billion, representing 5.19 per cent of the total; Agriculture, Forestry and Fishing —N226.13 billion, representing 3.11 per cent, while other unlisted sectors received N1.197 trillion, representing 16.47 per cent. Giving a breakdown of activities in the oil sector in 2012, the NDIC said Nigeria’s crude oil output succumbed to the impact of

natural disaster, oil theft and oil pipelines sabotage, as production which stood at 2.48 million barrels per day as at August 2012, declined to 1.98 million barrels per day as at the end of 2012. The NDIC further stated that the flood which ravaged the oil rich Niger Delta compelled Royal Dutch Shell and Total, to shut down part of their production plants. It said, “The flood reduced oil production drastically by about 500,000 or 0.17 per cent by the end of 2012. Thus, as at the end of the period under review, production averaged 1.98 million barrels per day (mbpd) as against 2.39 million barrels per day recorded in 2011. ”In line with government’s commitment to a tighter fiscal stance, the benchmark price of oil remained at US $ 75 per barrel in the third quarter of the year.

“However, the average spot price of Nigeria’s reference crude, the Bonny Light, at the International market rose marginally from US $113.12 in October 2011 to US $113.76 as at the end of August 2012. “The gross external reserves stood at US$44.178 billion as at end of December 2012, representing an increase of US$11.193 billion or 33.93 per cent over the level of US$32.985 billion attained in January, 2012 and an increase of US$11.263 billion or 34.22 per cent over the December 2011 figure of US$32.915 billion. “The increase in the reserve level was driven mainly by proceeds from crude oil and gas exports and crude-oil related taxes as well as reduced funding of the WDAS.”

Solid Mineral

Charcoal, agricultural produce dominate Nigeria’s export Godfrey BIVBERE

HE nation’s export between Januar y and May this year was dominated by charcoal and agricultural produce, a trade report by Maersk Nigeria Limited has shown. The report showed that Nigeria’s charcoal export rose by 76 percent as of May 2013, when compared to the same period in 2012, and further attributed the rise in volume to the longer winter s e a s o n ex p e r i e n c e d i n Europe. The trade report which quoted the company’s Managing Director and Head of Central and West Africa Cluster, Mr. Jan Thorhauge, noted that finished product import rose by 39 percent during the same period due to major manufacturing firms streamlining their production activities by making Nigeria their main production hub for the region. Thorhauge said that containerised import market to Nigeria was estimated to have ended at approximately 159,000 FFE (40-foot equivalent units), as compared with the same period in 2012, which produced an estimated volume of 155,000 FFE, representing a relatively marginal year on year growth of around two percent. The Maersk boss also said that the Eastern Nigerian market, maintained its superior performance over the western part of the country, in terms of growth in volume ratio with a year on year growth ratio of 10 percent on import and one percent on export. Thorhauge said that Maersk Line maintained its position as the leading shipping line in Nigeria, and combined with its sister

Coal ready for export company Safmarine, commanded an estimated 37 percent share of the import market and 28 percent on the export market. “Not much has changed as the containerised market in Nigeria continues to be strongly dominated by imports, and for the last six years, the import/export ratio has remained at around 92 percent import versus eight percent export”. According to Thorhauge, most of the country ’s containerised cargoes come from the Far East, mostly China, while most of its export commodities have

been going to Europe. “The sourcing patterns have not changed fundamentally in the last six years, though imports from Europe and Middle East have experienced significant increase in the last two years. Major products coming from the Middle East are industrial raw materials, chemicals, electronics, iron and steel and tyres, while from Europe, major products include industrial raw materials, frozen fish and cars,” he said. The increased sourcing pattern can be attributed to better pricing from these

regions, increase in the age limits of imported automobiles from 5 years to 10 years, increased construction as well as growing demands for finished products by the Nigerian populace. He also said that Nigeria’s export ratio can be enhanced if the government is able to improve on infrastructure, such as power supply, road network and rail services. The dominant items imported into the country, according to Thorhauge, have remained the same over the past six years and are made up of traditional

commodities such as cars, electronics, construction materials, food items, chemicals, electrical fittings, machinery and paper among other goods covering industrial as well as private needs. “We are quite optimistic that the import market in Nigeria will grow by about 68 percent for the second half of 2013. The export market is subject to harvest conditions and global market prices, but we foresee an increase of about eight percent for the rest of the year.

Labour

Fuel station attendant

NUPENG decries exploitation of petrol station workers N

Victor AHIUMA-YOUNG

IGERIA Union of Petroleum a n d Natural Gas Workers, NUPENG, has decried the exploitation of petrol station workers by their employers, saying the workers must be unionized to check employers’ abuses. NUPENG’s General Secretary, Comrade Isaac Aberare, who spoke at the Delegates Conference of Petrol Station Workers, PSW, branch of NUPENG, in Benin City, Edo State, lamented that the potentials of the PSW

Branch had not been fully tapped, insisting that if the potentials were tapped, PSW would be a force to reckon with . According to him, “the focus of the leadership that will emerge from this conference should be directed to the organization of Petrol Station attendants in all the nooks and crannies of the country. “There is no place in this country, even the rural areas where you do not have petrol attendants. They are in thousands and yet they have not been fully unionised or integrated into your fold. This is a big challenge that you have to put on the

drawing board to fashion out way, methods and strategies to unionise the real petrol station workers and protect their interests from the exploitation of their employers. “It is saddening when you listen to their woes and the pittance paid them. The parent union is also worried about the non-unionisation of these workers, because they are the potential force that will make any nationwide strike very effective. The combination of Petroleum Tanker Drivers, PTD, and fully integrated PSW members will bring any government to its knees, when we embark on a

nation-wide strike. I therefore enjoin you all to give this challenge a food for thought and get cracking on how to fully unionise them.” Speaking on “leadership and accountability”, Aberare said, “Leadership and accountability are interwoven and intertwined, as leaders must be accountable all ways to the led. “A leader must live above board, he must have integrity, be focused, organised, intelligent and listen to his members. He must be able to attend to their problems, pursue their welfare and take risks on their behalf. A leader must be exposed,

knowledgeable and have the ability to communicate. He or she must not be far from its members. To be a good leader, you must be open and establish a good communication channel with your members.” “On accountability, a leader must not be corrupt or enrich himself at the expense of its members. It is sad to say that the problem, we have today in the polity is that our leaders are corrupt even at the national level of the s o c i e t y. Lack of accountability and transparency has become a social malaise and that is why nothing appears to be working.”

Labour

Labour, FG tango over PHCN workers’ terminal benefits

Labour leaders at a meeting

Victor AHIUMA-YOUNG

AT I O N A L Union of Electricity Employees, NUEE, has dismissed government claims that over 70 percent of the workers of the Power Holding Company of Nigeria, PHCN, have been paid their terminal benefits in preparation for private sector’s investors takeover of the assets of PHCN, saying the government is economical with the truth. The Federal Government had on Wednesday last week said it had paid the severance benefits of over 70 per cent of the workers as it worked

towards concluding the privatisation of the power sector, declaring that it would conclude the payment before the end of this week. However, a union leader who spoke on condition of anonymity told Sweet Crude that the government was simply telling lies. Ac c o r d i n g t o h i m , a “sizeable number of workers in Port Harcourt zone, are yet to receive the partpayment being made. Pockets of workers have only received in Ibadan and Jos so far while some workers are still battling to receive theirs in Corporate Headquarters, Abuja. Eight Distribution Companies (DISCO) stations out of 11

and the whole of Transmission Company of Nigeria, TCN in the entire country have not been paid at all. Of about the 35% paid so far nationwide, it has been part-payment to each of them.” NUEE had earlier spoken of the road blocks government was erecting ahead of the handover, saying, “our agreements takes effect from June 2012 and now because of their inability to implement the agreement, between June 2012 and July 2013, there is 13 months service that is not computed. So, because of that, we are going to have a show down with them. The 13 months service is not a National Youth Service to

anybody. The agreement we signed was in June 2012, and between June 2012 and now, we have 13 good months. How you compute this and add to workers’ entitlement is the issue that is on ground now. Nobody will tell you, after working for one year maybe you have worked for 10 years before, and you work for additional one year plus and you say that one year plus is for free. We have written to the Ministry of Power and up till now they have not acknowledge the letter. The ministry of power should be able to address even a letter by replying us to say we are not going to do this or that. We have written not less than 10 letters that they have refused to

acknowledge. However, the Federal Government last Wednesday, said it had paid the severance benefits of over 70 per cent of the workers of PHCN as it worked towards concluding the privatisation of the power sector, stressing that it would conclude the payment before the end of this week. Speaking through the Minister of Power, Professor Chinedu Nebo, at a seminar organised by the TCN for the electricity market participants, said “As of today, we have paid off the benefits of at least 70 per cent of the workers. And as we finish the severance payment this week or next week, the next part will be the pension for the workers.”

Maritime

18 Shippers’ Council seeks co-operation on trade

New Trucks

Multi-trade, AMATO to acquire 2,000 new trucks

ultiTr a d e Nigeria Limited , has entered into partnership with the leadership of Association of Maritime Truck Owners (AMATO), to provide 2,000 new trucks to enable the truck owners replace their rickety ones with which they presently ply the nation’s roads. The partnership which has resulted in the importation of the first batch of the trucks for the association’s members on hire purchase, will also see the drivers moving to its new 5,000-truck holding bay, located within the International Trade Fair Complex, along Lagos – Badagry expressway. Speaking in Apapa, Lagos, chairman of AMATO, Mr. Remi Ogungbemi, expressed happiness with the

development which they believe will improve their business. Ogungbemi said the development of the new holding bay will help solve the problem of parking space created after the concession of the nation’s port terminal. According to him, the most challenging problem confronting the truck operators has been the dearth of modern truck terminals, since the era of ports reform. He however noted that the agency that carried out the reforms did not carry the truck operators along, thus most of the places designated as truck-terminals were taken over without providing alternatives. “The concessionaires barricaded the places given to them making it extremely impossible for trucks to manoeuvre to where they have been assigned to load.

The concessionaires barricaded the places given to them making it extremely impossible for trucks to manoeuvre to where they have been assigned to load Trucks must come from somewhere and cannot operate in the air,” he noted. He also explained that improved profitability and need for professionalism within the haulage sub-

sector of the nation’s import industry is a driving force for the partnership. According to him, “We have started working on how to bring professionalism into trucking business in maritime industry. We are trying to improve our standards, improve our operations and improve our language.” Also speaking on the issue, Consultant to AMATO Managing Director of Melno-CEO and partners, Chris Orode, said the movement of the trucks from the port environment in line with government directive, is part of measures to meet the 90 day ultimatum regarding the International Ships and Ports (Facilities) Code (ISPS). Orode expressed optimism that government will meet the requirements of the ISPS code before the expiration of the ultimatum.

he chairman of the governing board of the Nigerian Shippers’ Council (NSC), General Salisu Ibrahim (Rtd.), has called on stakeholders in the maritime sector to collaborate with the management of the Council so as to achieve its goal of creating the right environment for trade facilitation in Nigeria. The board chairman, made the call in Lagos at a forum put together for stakeholders by the board and management of the NSC. According to him, “It is true that shipping thrives on co-operation, equilibrium, level playing field, conducive atmosphere, competition, u n i f o r m i t y a n d internationality of rules, procedures and standards as well as efficient and dynamic dispute resolution mechanisms. These, the NSC will try to create, so that shipping and transport will contribute maximally to the nation’s economy. Once more, I must re-iterate that the achievement of these ideals is only possible with your full co-operation.” Ibrahim noted that the interactive forum was meant to create an opportunity for the governing board to meet the industry stakeholders and share ideas in an infor mal and relaxed atmosphere. He emphasized on the need for further interactive sections in which ideas would be shared on how to deal with the emerging challenges of the next global stage, as it affects international shipping and transport. “Your ideas and needs are quite critical in guiding our policy formulation and advice to government. Our desire is to deliver maximum service to the industry and we can only do that effectively when we know exactly what the industry wants at a particular point in time,” he said.

Maritime

Customs issues 2 months ultimatum to DTI operators I have resolved that henceforth, I am giving only two months to those operators of Direct Traders Input (DTI) to get a license. Now I am not going to give anybody the permission to operate a DTI without a license set up benchmark is so clear. When we take an average value, we believe that when you pay that amount and anybody delays you, in fact he will find himself in somewhere like Yobe or Plateau. But you people went to

Comptroller-General of Customs, Abdullahi Dikko

Godfrey BIVBERE

o m p t r o l l e rGeneral of Customs, Abdullahi Dikko, has issued two months ultimatum to Direct Traders Input (DTI) operators to get operating license or face the full weight of the law. The DTI is an electronic portal that allows importers and their agents to input data of their consignment into the central system to help eliminate paper work from cargo clearing process. The Customs helmsman gave the ultimatum in Lagos on Tuesday at a stakeholders sensitization meeting, stressed that the Service will henceforth come down hard on those who fail to get their

license after the expiration of the ultimatum. He also warned those that have license to be careful about the use of their license as he has instructed his officers to seize any license used for unauthorized purposes. According to him, “I have resolved that henceforth, I am giving only two months to those operators of Direct Traders Input (DTI) to get a license. Now I am not going to give anybody the permission to operate a DTI without a license. Anyone who has a license, we will allow him have a DTI. If you use your license unwisely, you will have double jeopardy because we will seize your license and seize the DTI.” On allegation by a representative of the Lagos Chamber of Commerce, Mrs. July Ogboru, on the activities of his stooges called ‘CG boys’ from the port, Dikko said that “It is you (agents). You collect a job from an importer, you sublet it to a junior agent, and the agent sublet the job of an officer. I am surprised that most of you stood up. In the whole of Nigeria, most of our problems are from Tin-can Island (Command). “Initially I set up benchmark. The reason we

the press and everywhere to start accusing me. When we bring up something that will appease all, some people go about…and you find out that those who go about do not even have a license, they are touts. Nigeria belongs to all of us,” he stated. Ogboru advised that if the Customs must achieve success with the use of Pre Arrival Assessment Report (PAAR), the perceived CG boys must be removed. According to her, many of the officers deliberately flout directives given to them by Area Controllers. She said that there are officers on the field who have created islands for themselves. “The only thing that can make the PAAR to work is to remove these officers from the field,” Ogboru said.

Insurance GCC insurers face competitive environment despite growth —report

Broker charges insurers on adequate reinsurance

ne of the m o s t significant challenges f a c i n g insurers in the Gulf Cooperation Council (GCC) is their ability to grow profitability and differentiate themselves in an increasingly competitive operating environment, a report by A.M Best has said. The GCC is host to three insurance hubs servicing the Middle Eastern & Northern Africa (MENA) region – the Dubai International Financial Centre (DIFC), the Qatar Financial Centre (QFC) and Bahrain. According to the report, competition among market participants continues to increase, despite the slowdown in the pace of new entrants into the market in recent years. Many local companies, in an effort to diversify their profiles and utilise capital more efficiently, are attempting to expand outside their local markets and grow their presence and franchise in the region. This is adding to competitive pressures further. The report stated “The MENA region has experienced regime changes and political unrest in the wake of the Arab Spring, which began in 2011, and resulted in the fall of some long-standing regimes. The social unrest has brought about a decline in investor confidence in much of the region and a subsequent decline in foreign investment. However, this has been somewhat offset by increases in the price of oil in the oil- and gas-producing GCC nations. “In the past few years, most GCC countries’ stable operating environments have attracted capital, although political instability overhangs the region. To varying degrees, the GCC countries have been affected by the Arab Spring, with Bahrain being the most negatively impacted.

Insurance policies illustrated

While there is a high degree of prudence and stability on underwriting activities, investment strategies have tended to be aggressive. This subsequently leads to volatility H o w e v e r, t h e B a h r a i n insurance market is displaying resilience as its GPW is expected to grow further in 2013,” the report noted. The report warned that such political uncertainties could continue to dampen

activity in the region. “The MENA region has experienced regime changes and political unrest in the wake of the Arab Spring, which began in 2011, and resulted in the fall of some long-standing regimes. The social unrest has brought about a decline in investor confidence in much of the region and a subsequent decline in foreign investment. However, this has been somewhat offset by increases in the price of oil in the oil- and gas-producing GCC nations. “While the top line has been affected by regional political and economic instability, many A.M. Bestrated GCC insurers have displayed resilience in their operating performances, despite the consequential limitations on underwriting activity and the impact on investment markets. Following the unrest, there has been a material tightening of policy wording in the region, driven by the international reinsurance

market seeking to alleviate uncertainty or conflict arising from strike, riot and civil commotion (SRCC) definitions. Most GCC insurers and reinsurers tend to be well capitalised and able to absorb riskier investment profiles, the report stated. “While there is a high degree of prudence and stability on underwriting activities, investment strategies have tended to be aggressive. This subsequently leads to volatility, not just in a company ’s earnings performance, but also in its level of risk-adjusted capitalisation as market values fluctuate. “A.M. Best notes many insurers and reinsurers have made concerted efforts to adopt more conservative and stable investment policies, shifting toward more liquid investment portfolios and secure investments, including cash deposits and bonds.

anaging Director of B o a f Insurance Brokers, Mr. Olumide Fatogun, has asked underwriters in the insurance industry to do a lot of reinsurance in special risk business if they wish to play big in the oil and gas sector. He also charged underwriters to ensure that they enter into reinsurance treaty with competent reinsurance outfits. Fatogun, who stated this in Lagos, noted that special risk business is highly capital intensive as such, insurers should ensure that adequate reinsurance is in place because adequate reinsurance is imperative for underwriting companies to pay claims promptly when and where the need arises. The insurance broker advised insurance operators to effectively use coinsurance to pull capital and develop relevant skills such that pricing of risks could be done in Nigeria, adding that they should avoid unhealthy competition that erodes the potential profitability of the companies to participate in the sector. Fatogun added that every oil and gas risk underwriting business must be insured to a Nigerian company for them to take what they can cover, then cede the rest to a captive company, adding that insurers are over exposing their account if they take too much of these special risk and exposing clients unnecessarily. While stating that the recapitalisation exercise increased the capital base of insurance companies and strengthened them for global competitiveness with improved capacity to underwrite insurance of oil and gas, Fatogun called on under writers to have reinsurance treaties with ‘A’ rated international companies to further increase their ability to underwrite special risks.

JTF in search of oil thieves

JTF intensifies war against oil thieves Jimitota ONOYUME

IL theft is not new in the Niger Delta, but its rising index in recent times is constituting serious worries to government, security agencies and other stakeholders in the oil and gas business in the country. The Chief of Army Staff, Lieut. Gen. Azubuike Ihejirika, met with his top officers in Port Harcourt, Rivers State, to critically look at how to nip the crime

effectively and tackle the problem. Ihejirika told SWEETCRUDE before the meeting that he was in the state to, among other things, discuss with his men on how best they could achieve concrete success in the anti bunkering crusade. The Managing Director of S h e l l Pe t r o l e u m Development Company, SPDC and Country Chair of Shell Companies in Nigeria, Mr Mutiu Sunmonu, has consistently lamented the negative impact of oil theft on the nation’s economy. At an interactive session with media in Port Harcourt, he

said oil theft was becoming a threat to the nation’s economy. He said those behind the illicit act, had set up tank farms and other storage facilities for their trade. Some, according to him, had also gone ahead to locally refine the product which they push into markets in the region. H e f u r t h e r ex p r e s s e d worries with the impact of their activities on the environment, saying it was constituting a major pollution problem. Sunmonu said the federal government had projected an

increase in oil production to about four [4] million barrels per day, with a reserve of about 40 billion barrels, wondering how realizable the projection is with the rising cases of crude oil theft in the region. Shell’s Nembe Creek Trunk line, NCTL, was shut down for about three months this year because oil thieves had punctured about 56 holes on the pipeline from where they siphoned crude into vessels, barges and tank farms for export and local refining. In its renewed battle to fight the ugly situation to a standstill in the region, the

J o i n t Ta s k F o r c e accompanied Shell’s technical crew on ground trotting exercise along oil pipelines in the high sea. The ground trotting exercise covered the NCTL between San Barth Manifold to Krakrama on the water ways. The Commanding Officer, 130 Battalion, Lt. Col. Caius Banshe, who led the JTF team, explained that the exercise was to confirm bunkering points on the Nembe Line that had been fixed by the multi-national oil giant. Shell’s surveillance contractors and the technical team were part of the verification exercise. A Spokesman for Shell, Mr. Joseph Obari, told journalists on the trip that his firm had to engage some locals as surveillance contractors to alert the firm of ruptured points on its pipeline, adding that the company at the end of the day sends its maintenance team to work on the points.

Community

Total decries impact of flooding on its operations

Newly constructed road

Total hands over road project to community P Jimitota ONOYUME

O R T H A R C O U R T: TOTAL E&P has handed over the Obiozimini Beach Road it constructed in Obiozimini community to the people of the area. Speaking at the commissioning ceremony in Obiozimini, Ogba Egbema Ndoni Local Government Area, the General Manager, JVA Field Operations, Total, Mr Jean Clude Vachet, said the road was economically viable and important to people of the area and the

local government. Continuing, he said the road would further help to attract development to the area even as he assured that the oil giant would maintain its warm relationship with its host communities. “This road will provide access to the great Sombreiro River with its quality of sharp sand. The beach road will not only provide resource for building construction within the Egi communities and beyond, but will also be a ready loading bay to feed the upcoming float glass

industry. This will provide excellent business opportunities for entrepreneurs and help in creating jobs for our teeming youths.” The Chair man of the Community Development Committee, Mr Ewe M b a d i ke , t h a n ke d t h e company for the road, and pleaded with the French oil giant to connect the Onoshiulo to Onoshi-Umu-Nkweke Road to also open up the entire area for development. Continuing, he also a p p e a l e d t o To t a l t o

commence direct drilling of its oil and gas deposit. “We therefore demand that the prestigious Total E &P Nigeria Limited should include and enlist Obiozimini community into the oil and gas producing communities and families (OML 58 Consultative committee). Instead of performing a directional drilling, we invite you to come and drill our oil and gas directly in our land,” he pleaded. Total thereafter, urged the community to take ownership of the road, stressing that they should “guard it jealously hereafter”.

O R T H A R C O U R T: TOTAL has lamented the impact of last year’s flooding in Ogba, Egbama, Ndoni Local Government Area on its operations. The Managing Director, Port Harcourt District, Mr Nicolas Brunnet, who spoke at the flag-off of the 2013 new yam festival in Egi, said the last one year was very challenging in the history of the operations in Oil Mining Lease, OML 58. He said that besides the technical challenge they witnessed at the Ibewa cluster, the flood also forced them to stop operations, a development that made it impossible for the company to complete its upgrade project initially planned to terminate in 2012. While commending the people of Egi for sustaining the New Yam Festival known as Egwu Ogba Festival, Brunnet said it would continue to partner with the community for growth and development. “ We c r a v e y o u r indulgence to bear with the management’s current challenges in the attempt to re-invigorate her operations and bring things to normalcy. This is reflected in many directions such as the cancellation of contracts and downsizing of operations, collapsing of managerial structures and merging of divisions,” he said. He further commended the people of Egi for being the first indigenous community to initiate a full fledged Chamber of Commerce ahead of an industrial revolution in the area. “We are proud to be associated with you and your people,” he said

Community

Contractors panic as NDDC tours projects

One of NDDC roads project under construction

Jimitota ONOYUME

ORTt Harcourt The newly appointed A c t i n g Managing D i r e c t o r, N i g e r D e l t a Development Commission, Mrs. Chris Atako, has put contractors on their toes, as she expressed disapproval with the quality of some of the jobs being done. At the students’ hostel project constructed by the Commission at the Rivers State University of Science and Technology, Nkpolu, Rivers state, Atako, who was visibly angry with the quality of the ‘job, told the contractor that he had to shore up the quality. She said that she had no option than to condemn what she saw when it was clear that it did not meet the contract specifications. “I am disappointed with the

standard of job, this contractor has no competence to handle this job, and I direct that you correct all the defects. We are particular about standard and finishing, there is no compromise,” She therefore directed the Commission’s engineers supervising the project to work with the contractor to see that the errors identified were corrected. Further more, Atako disclosed that the Commission planned to rehabilitate a rice mill project that it constructed some years ago at Elele Alimini, Ikwerre Local Government Area of Rivers State. She said the mill has capacity to produce 180 tonnes of rice per day, noting that the mill was built in 2010, but had not been put to use. As such she said the NDDC wants to revive the mill and bring it to

production. “Besides the rice project is in accordance with Mr. President’s transformation agenda which emphasizes wealth and job creation through agriculture” she said. She commended the Rivers State Government for its willingness to partner with the commission on the project and urged both the contractor and the commission’s directorate of agriculture to work out the details on the way forward. “We have a rice mill founded on the strength of partnership, for us partnership is a way to maximize resources, minimize waste and eradicate duplication. We shall always leverage this in our development agenda.” Similarly, at the University of Port Harcourt, Rivers S t a t e , A t a ko g a v e t h e contractor handling a

prototype hostel project, six weeks to complete the job. Upon the inspection of the job, she told the contractor should ensure he stuck to the specifications. “One thing I always advice our contractors is that they should tell us the truth. There is no point giving us the impression that they will finish a job at a particular time, and when we go there on the promised date the work is not done,” she admonished. Atako, who expressed satisfaction with the job, however charged the contractor to replace some broken tiles and give the wardrobe a face lift. At Otuoke, the home town o f Pr e s i d e n t G o o d l u c k Jonathan, where the NDDC had completed a modern Corpers’ lodge for NYSC corps members serving in the area, Atako expressed satisfaction with the job.

Shell women offer medical help to Lagos Island

arket women and residents of Lagos Island East local Government Area in Lagos State, turned up for free health checks and blood screening in events marking the “SWN & Me Day” by the Shell Women Network. More than 200 market women and residents of the area received free annual medical insurance and 125 eye glasses, even as medical personnel conducted checkups and tests on long queues of beneficiaries. “ To d a y, w e ’ r e demonstrating our commitment to the health and wellbeing of not only our staff but our neighbours and communities,” said the Managing Director, Shell Closed Pension Fund Administrator, Ms. Yemisi Ayeni, as she welcomed guests. “We also urge you to always know your medical status as this will enable you to better manage your health,” she added. The well attended programme featured interactive lecture sessions on different types of cancer, by Prof. Ketiku, Head of Oncology Unit, Lagos University Teaching H o s p i t a l , a n d Hypertension/Diabetes, by Dr. Ahmed Balogun, Head of Endocrinology/Medical Director of the Lagos General Hospital, while Dr Emokpae, Medical Director of Massy Children’s Hospital, Lagos, spoke on Asthma a n d H o u s e h o l d Emergencies. The General Manager, Gas, Shell Petroleum Development Company, S P D C , M r. U b a k a Emelumadu, thanked the doctors for their participation in the awareness sessions. “The quality of information shared and the response from participants is indicative of the fact that these diseases can be defeated because knowledge is power.”