Oil & Energy
As Jonathan Demystifies Power Sector
When nine months ago President Goodluck Jonathan assumed office and assigned to himself the position of Minister of Power, not many Nigerians were excited. Their skeptism hinged on the obvious reason that in the past, both General Sani Abacha and Chief Olusegun Obasanjo took similar steps during their respective regimes by appropriating to themselves the position of Petroleum Minister, yet no concrete results were achieved in the petroleum sector.
Pundits were of the view that Jonathan’s appropriating the Minister of Power Portfolio to himself would not revive the ailing power sector as they regarded the step as mere government rhetorics.
The power sector was already characterized by very low generation capacity, poor distribution network and a fragile limited transmission network. The multinational oil companies responsible for gas supply to the nation’s power station in joint venture with the Nigerian National Petroleum Corporation (NNPC) were unable to supply gas as the militancy that ravaged oil activities in the oil-rich Niger Delta region led to blowing up of strategic oil and gas pipelines. The situation resulted in the power plants either being shut down while few functional ones were producing far below capacity. The resultant effect was that most Nigerians groped in darkness and scores of companies whose operations were frustrated as a result of high cost of alternative power supply left the country for other West African countries.
Added to the situation was the fact that efforts by Chief Olusegun Obasanjo and Alhaji Musa Yar’Adua to revive the ailing power sector suffered failure inspite of huge funds invested. The much touted 6,000 megawatts targeted by Yar’Adua in 2010 also failed. The question that was in the lips of must Nigerians then was what magic approach would President Jonathan adopt to revive the dying power sector?
However, not deterred by the challenge, Jonathan took some proactive and far-reaching measures to give a breathe of life to the nation’s powerless power sector. He sort for and appointed high brow professionals with enviable record to confront the challenges in the sector. He appointed Prof Bart Nnaji as his Special Adviser on Power and also created some committees on power.
To address the gas supply challenge, the Presidency summoned the management of the multinational oil companies and NNPC and they reached an accord on the strategies to supply adequate gas needed to energise the power stations.
After casting a wide look at the sector, according to Prof. Nnaji, Federal Government came to the realization that Nigeria’s electricity infrastructure needs are enormous such that government alone cannot meet these needs, hence the urgency to involve the private sector.
In his paper, “The Role of the Private Sector and Structured Financing in Solving Nigeria’s Power Supply Problems”, delivered at an International Power Roundtable organized by the Rivers State House of Assembly Committee on Power last year, the Special Adviser to the President on Power said only about 40% Nigerians have access to electricity supply and that to meet the electricity demand of the nation’ by 2020, distribution network has to grow at the rate of at least 6% each year against the current average growth rate per annum estimated below 1%.
On the large funding required, Prof Nnaji said about $50 billion was required over the next ten years. “Government capital outlays for all capital budget is $5 billion annually meaning that annual funding requirement has outstripped the capacity of government funding”, he regretted.
The Federal Government has no option than to let go its monopoly on electric supply and opened its door widely for both local and foreign private investors. The government has offered prospective investors in the power sector a five-year tax holiday to serve as an incentive to woo them.
To achieve same goal, Bureau of Public Enterprises (BPE) has commenced road shows in Lagos to enlighten investors on opportunities in the sector. BPE said apart from the five-year tax holiday, another incentive for investors in the sector is the World Bank’s instruments to insure their investment against political risks in the country and assured investors of a cost-reflective tariff system.
Aside the Lagos event, meetings are scheduled to be held with investors in Dubai, United Arab Emirates’ on January 24; London, United Kingdom on January 27; New York, United States on February 1 and Johannesburg, South Africa, on February 11. This came ahead of a February 18 deadline for the expression of interest in the eleven distribution companies, four thermal generating firms and two hydro power stations in Nigeria.
The eleven distribution companies which investors are expected to express their interest in include Port Harcourt Distribution Company Plc, Abuja Electricity Distribution Company Plc, Benin Electricity Distribution Company Plc, Enugu Electricity Distribution Company Plc, Eko Electricity Distribution Company Plc and Ibadan Electricity Distribution Company Plc.
Others are Ikeja Electricity Distribution Company Plc, Jos Electricity Distribution Company Plc, Kaduna Electricity Distribution Company Plc, Kaduna Electricity Distribution Company Plc, Kano Electricity Distribution Company Plc and Yola Electricity Distribution Company Plc.
The four thermal generating stations which investors are expected to show interest are Afam Power Plc, Sapele Power Plc, Ughelli Power Plc and Geregu Power Plc while the two hydro power stations are Kainji Power Plc, including Jebba Power station and Shiroro Power Plc which government intends to give out to private investors under a concession arrangement.
According to Minister of State for Power, Mr Nuhu Wya, the forum in Lagos was organized to showcase numerous opportunities available in Nigeria’s Power sector.
Inspite of the fact that most government efforts are at early stages, the administration of Goodluck Jonathan has already recorded some humble achievements. The meeting between Federal Government and oil multinationals over gas supply has yielded fruits as Nigeria National Petroleum Corporation said it has already surpassed its gas supply obligation to power stations across the country, in line with Federal Government’s aspiration.
The group managing director, Engr Austen Oniwon disclosed this to newsmen in Abuja and added that NNPC has also taken proactive measures to ensure sufficient gas supply to the new ones under construction upon completion.
At present power generation in the country has risen to 3,800 megawatts. Analysts view this as very impressive considering the fact that generation was below 2,700 mega watts when President Jonathan assumed office. Minister of States for Power, Mr Nuhu Way promised that by the end of this quarter, generation will get to 4,000 megawatts.
It is obvious that when the action plans come to full swing, the nation will hopefully actualize its dream of stable power supply which has eluded it for decades.
Nigerians have attested to the fact that power supply has improved in all parts of the country compared.
However, the agitation by staff of Power Holding Company of Nigeria (PHCN) over their 135% salary areas, casual status of alleged 10,000 workers and other welfare issues need to be addressed considering the fact that they are stakeholders in the reform agenda. Unfortunately, the electricity workers have dragged the government to Abuja High Court over the issue.
Sabotage by electricity workers who connive with criminals to remove power facilities may affect the new effort of the government. Similarly the issue of estimated metering adopted by PHCN workers do not guarantee transparency. Experts are of the view that credit card system be adopted as is the case in Telecommunication sub sector.
Another area that also needs to be addressed is the award of rural electrification projects to portfolio carrying politicians who either abandon such projects or execute them at substandard level.
There is need for the Federal Government to fast track investigations on allegations of fraud which runs into billion over past power projects.
Be it as it may, Goodluck Jonathan has shown that the power challenges which affect socio-economic lives in Nigeria can be tackled as his efforts has renewed hope of Nigerians.
Chris Oluoh
The Bill for an act to prohibit gas flaring, encourage commodity utilisation, and provide for penalties and remedies for gas flaring violations has passed its second reading in the House of Representatives.
Sponsored by the Member representing Ikorodu Federal Constituency (APC, Lagos), Babajimi Adegoke Benson, the bill seeks to prohibit the flaring and venting of natural gas, except in strictly regulated circumstances, while encouraging the utilisation of gas resources to foster economic growth and energy generation.
The proposed legislation aims to mitigate the environmental, health, and economic impacts of gas flaring, aligning Nigeria’s oil and gas operations with international climate change commitments.
Offenders, who violate the provisions of the proposed law, would face stringent penalties, including fines of $5 per 1,000 standard cubic feet of gas flared and potential suspension of operations for repeat violations.
Leading debate on the general principles of the bill, Benson said gas flaring has plagued Nigeria for decades, resulting to severe environmental degradation, public health crises, and economic losses while it environmentally, contributes to greenhouse gas emissions, global warming, and acid rain, exacerbating climate challenges.
The lawmaker said public health impacts of the practice are equally dire, as pollutants from gas flaring cause respiratory and cardiovascular diseases, particularly among residents of communities close to flaring sites.
According to him, economically, flaring results in the waste of a valuable resource that could otherwise be harnessed for energy generation or exported to generate revenue.
Benson insisted that the bill was designed to address those issues while bringing Nigeria in line with global standards such as the Paris Agreement on climate change.
“The bill provides for a comprehensive prohibition of gas flaring except in emergencies or when explicitly authorised by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
“Operators are required to submit and implement Gas Utilisation Plans, detailing how gas that would otherwise be flared will be captured, processed, or commercialised.
“Offenders, who violate these provisions, face stringent penalties, including fines of $5 per 1,000 standard cubic feet of gas flared and potential suspension of operations for repeat violations. Furthermore, the Bill ensures that communities affected by gas flaring are entitled to compensation and environmental restoration, creating a mechanism for redress.
“Transparency and accountability are integral to the enforcement framework of this Bill. Operators must submit regular reports on gas flaring incidents, which will be audited and made publicly available by the NUPRC. This approach ensures public oversight and stakeholder engagement, fostering trust and compliance.
“Nigeria’s adoption of this Bill positions the country to emulate such success, ensuring a balance between environmental stewardship and economic development.
“The implementation of this Bill will be overseen by the Nigerian Upstream Petroleum Regulatory Commission, which will monitor compliance through regular audits, enforce penalties, and facilitate gas utilisation projects in collaboration with operators and development partners.
“The Anti-Gas Flaring (Prohibition and Enforcement) Bill, 2024, is a timely and necessary response to one of Nigeria’s most pressing environmental challenges. Its provisions are both practical and forward-looking, addressing immediate concerns while laying the groundwork for a sustainable future.
“I urge all Honourable Members to support the Second Reading of this Bill as a demonstration of our collective commitment to environmental protection, public health and economic progress”, he added.
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Oil major, Shell, has restated its commitment to the development of Nigerian companies through contract awards and scaling up of expertise.
Managing Director, Shell Nigeria Exploration and Production Company ((SNEPCO) Limited, Ron Adams, made the remark while speaking at the Opening Ceremony of the 13th edition of the Practical Nigerian Content forum held in Yenagoa, Bayelsa State, with the theme “Deepening the Next Frontier for Nigerian Content Implementation”.
Represented by the Manager, Business Opportunity, SNEPCO’s Bonga South-West Aparo Project, Olaposi Fadahunsi, he said several benefitting companies had taken advantage of the patronage to expand their operations and improve their expertise and financial strength.
Adams said, “Shell companies execute a large proportion of their activities through contracts with third parties, and Nigeria-registered companies have been key beneficiaries of this policy aimed at powering Nigeria’s progress”.
He emphasized that Shell companies in Nigeria also continued to develop indigenous manpower through scholarship programmes with over 3,772 undergraduate and 109 Niger Delta post graduate scholarships since 2016.
“As we speak, beneficiaries of the 13th edition of the Niger Delta Post Graduate Scholarship awards are pursuing their studies in the United Kingdom. The employability rate of the scheme is high with over 98% of the graduates who won the awards securing employment in the oil and gas industry, academia and Information Technology, among other sectors, within one year of completing their studies”.
He commended the Nigeria Content Development and Monitoring Board (NCDMB) for ensuring compliance with the Nigerian Content Act saying “Nigerian content will continue to be an important part of Shell operations”.
The four-day conference hosted by the Nigerian Content Development and Monitoring Board (NCDMB) and participating companies reviewed progress on the development of Nigerian content pertaining to the implementation of the Nigerian Oil and Gas Industry Development (NOGICD) Act since it was enacted in 2010.
Shell companies in Nigeria are among the more than 700 oil and gas entities that participated in the forum with a strong message of support for Nigerian companies, having awarded contracts worth $1.98 billion to the businesses in 2023 in continuing effort to develop Nigerian content in the oil and gas industry.
The Nigerian National Petroleum Company Limited (NNPCL) has sold the first cargo of Port-Harcourt low sulfur straight run fuel oil (LSSR) to Dubai-based Gulf Transport & Trading Limited (GTT).
The company is expected to load the cargo in the coming days onboard the Wonder Star MR1 ship, signalling the commencement of operations at the plant and the exportation of petroleum products.
The ship would load 15,000 metric tons of the product, which translates to about 13.6 million litres.
Although the volume coming from the NNPC into the global market is still small, the development has the potential to impact the Very Low Sulphur Fuel Oil (VLSFO) benchmarks in the future, while changing the market realities for Atlantic Basin exporters into Nigeria and other regions.
The sulfur content of the export by NNPC stands at 0.26 per cent per wt and a 0.918 g/ml density at 15°C, according to Kpler, a data and analysis company.
The cargo was reportedly sold at an $8.50/t discount to the NWE 0.5 per cent benchmark on a Free on Board (FOB) basis.
Kpler reported that the development would help displace imports from traditional suppliers in Africa and Europe, as Nigeria’s falling clean product (CPP) imports are already decreasing, dragging imports into the wider West Africa region lower as well.