Oil & Energy
Hostilities, Lawsuits Threatening Regular Power Supply In PH
The Port Harcourt Electricity Distribution Company (PHED) is seen since early 2020 to have taken bold steps aimed at subduing its challenges including perennial revenue loss and inadequate load from the national grid. The Disco is seen to rather initiate homegrown solutions so as to boost power supply in its four states of Rivers, Bayelsa, Akwa Ibom and Cross River.
This is said to be to support industrialisation and economic growth which only adequate power supply can push. PHED’s new Managing Director, Henry Ajagbawa, a professional chartered accountant with a doctorate degree to his belt, had informed newsmen that the Disco has worked hard with other partners to build a sub-station at Rumosi near Port Harcourt to boost power available for distribution, something that is not its duty.
The PHED under Ajagbawa has also confronted revenue loss by hiring over 355 workers to man the transformers and contend with customers to extract PHED’s revenue through effective bill distribution, monitoring and supervision. Revenue is said to have risen first from N1.8bn per month to N2.2bn and now N2.7bn. The loss per month has reduced to about N2.5bn.
The measures that plugged various loopholes through persons within and outside were diverting revenue or even stealing power seem to have annoyed some categories of persons. Now, apparently out of frustration, some have resorted to open physical attacks on PHED technicians (linesmen) trying to disconnect erring lines while some bypass consumers have rather taken to lawsuits to restore their stealing projects.
Most citizens have hailed this push by most Discos including the PHED seen to be working hard with the Federal Government in a renewed push to bring adequate power supply to Nigerians as a key factor for industrialization and economic growth.
The power sector is relatively one of the most challenged in Nigeria. The defunct NEPA, like many government owned and managed entities, was unable to make much inroad in resolving them which led to its unbundling and the subsequent privatization of the sector. GENCOS, TCN AND DICOS make up the present power sector in Nigeria today.
Since inception, the electricity distribution companies (Discos), in collaboration with the Federal Government, have made concerted efforts to sanitize the power sector and are determined to provide adequate power supply to Nigerians as power is considered a key factor for industrialization and economic growth.
This drive is, however, being hampered in Port Harcourt by a disturbing trend of hostility ranging from outright violence against PHED workers to lawsuits. More worrisome is the fact that most of these actions are carried out by people who are caught in criminal act relating to illegal connection, meter bypass or non payment of bills; persons that ought to be apprehended and prosecuted by law enforcement agents.
The most pervasive of these crimes is meter bypass, one that is embraced by most prepaid meter users. The very rich and elites are not left out in this act although they can well afford to pay for energy consumption. Sadly, this category of persons are conversant with the consequences of their action but still indulge in the act and would rather secure court injunctions against the company and pay their way through to evade prosecution rather than pay their bills.
The effect of this is that Discos lose a lot of money and are therefore unable to meet their obligations to the Gencos and the TCN for power generation and transmission. For instance, the Port Harcourt Electricity Distribution Plc (PHED) loses monthly revenue of N2.5 billion to energy theft alone. This, no doubt, impairs their operations and results in inadequate power supply.
Furthermore, it also hampers the Discos ability to replace obsolete items with new ones for effective distribution of power. The cost of procurement, installation, maintenance and repairs of their infrastructure is huge and so the loss of income to energy theft significantly affects their efficiency.
Consequently, anyone, no matter the status or social standing, who encourages energy theft, either by omission or commission, should be considered an enemy of the society because their action or inaction has far-reaching effect on the Nigerian economy and the nation’s collective goodwill. It is an economic sabotage.
Violence against staff is another menace bedeviling the Discos. Staff members, in many instances, have been attacked by the public/thugs for merely carrying out their duties. A recent case in point is the one involving a former Commissioner in Bayelsa State who unleashed his thugs on PHED staff. The staff members were beaten up and are still in the hospital where they are receiving treatment. Their crime is that they tried to carry out their duties to ensure service is delivered to Nigerians.
The new trend of attacks seems to come from those who can no longer easily steal electricity like before. Some even attack or visit vindictiveness on any electricity worker living in their midst who did not want to close his eye to bypass. A PHED engineer, Magnus Uchechukwu, suffered such and was eventually framed of murder charge and was detained for almost two months in the State CID by his co-tenants.
Another big challenge confronting the Discos is incessant court cases against them by the rich and elites in society. Cases abound where they secure all manner of injunctions which all but compel the Discos to supply them free energy. The question then is, who pays for that? Should Peter be robbed to pay Paul? Also, are the Discos obliged to pander to the whims and caprices of the rich and influential? The judiciary is complicit in this regard and their action undermines the Federal Government’s resolve to fix the power sector.
Fixing power is a collective effort but could be easily undermined. As much as the Discos are expected to operate in accordance with global best practices, the public, on the other hand, is required to shun illegal and pernicious acts that are inimical to the power sector transformation. Payment of bills is, in fact, sine qua non and a duty the public owes the society.
Harassment, intimidation and oppression of PHED staff are not a way to resolving issues. Observers point to the mechanism in place for conflict resolution in the sector where aggrieved customers are encouraged to exhaust the dispute resolution window before recourse to the courts. It means well in all related issues.
Observers said there should be a clarion call for the public to partner with the Discos for improved service delivery in the power sector to foster a complementary growth in the economy. Resort to physical violence and lawsuits is not in the best interest of the public.
Chukwu, a journalist, writes from Port Harcourt.
The Federal Government has expressed optimism in attracting more investments by International Oil Companies (IOCs) into Nigeria to foster growth and sustainability in the energy sector.
This is as some IOCs, particularly Shell and TotalEnergies, had announced plans to divest some of their assets from the country.
Recall that Shell in January, 2024 had said it would sell the Shell Petroleum Development Company of Nigeria Limited (SPDC) to Renaissance.
According to the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, increasing investments by IOCs as well as boosting crude production to enhancing Nigeria’s position as a leading player in the global energy market, are the key objectives of the Government.
Lokpobiri emphasized the Ministry’s willingness to collaborate with State Governments, particularly Bayelsa State, in advancing energy sector transformation efforts.
The Minister, who stressed the importance of cooperation in achieving shared goals said, “we are open to partnerships with Bayelsa State Government for mutual progress”.
In response to Governor Douye Diri’s appeal for Ministry intervention in restoring the Atala Oil Field belonging to Bayelsa State, the Minister assured prompt attention to the matter.
He said, “We will look into the issue promptly and ensure fairness and equity in addressing state concerns”.
Lokpobiri explained that the Bayelsa State Governor, Douyi Diri’s visit reaffirmed the commitment of both the Federal and State Government’s readiness to work together towards a sustainable, inclusive, and prosperous energy future for Nigeria.
While speaking, Governor Diri commended the Minister for his remarkable performance in revitalisng the nation’s energy sector.
The Federal Government has assured investors in the nation’s gas sector of the security and safety of their investments.
Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, gave the assurance while hosting top officials of Shanghai Huayi Energy Chemical Company Group of China (HUAYI) and China Road and Bridge Corporation, who are strategic investors in Brass Methanol and Gas Hub Project in Bayelsa State.
The Minister in a statement stressed that Nigeria was open for investments and investors, insisting that present and prospective foreign investors have no need to entertain fear on the safety of their investment.
Describing the Brass project as one critical project of the President Bola Tinubu-led administration, Ekpo said.
“The Federal Government is committed to developing Nigeria’s gas reserves through projects such as the Brass Methanol project, which presents an opportunity for the diversification of Nigeria’s economy.
“It is for this and other reasons that the project has been accorded the significant concessions (or support) that it enjoys from the government.
“Let me, therefore, assure you of the strong commitment of our government to the security and safety of yours and other investments as we have continually done for similar Chinese investments in Nigeria through the years”, he added.
Ekpo further tasked investors and contractors working on the project to double their efforts, saying, “I want to see this project running for the good of Nigeria and its investors”.
Earlier in his speech, Leader of the Chinese delegation, Mr Zheng Bi Jun, said the visit to the country was to carry out feasibility studies for investments in methanol projects.
On his part, the Managing Director of Brass Fertiliser and Petrochemical Ltd, Mr Ben Okoye, expressed optimism in partnering with genuine investors on the project.
Crude oil prices recently logged their second monthly gain in a row as OPEC+ extended their supply curb deal until the end of Q2 2024.
The gains have been considerable, with WTI adding about $7 per barrel over the month of February.
Yet a lot of analysts remain bearish about the commodity’s prospects. In fact, they believe that there is enough oil supply globally to keep Brent around $81 this year and WTI at some $76.50, according to a Reuters poll.
Yet, like last year in U.S. shale showed, there is always the possibility of a major surprise.
According to the respondents in that poll, what’s keeping prices tame is, first, the fact that the Red Sea crisis has not yet affected oil shipments in the region, thanks to alternative routes.
The second reason cited by the analysts is OPEC+ spare capacity, which has increased, thanks to the cuts.
“Spare capacity has reached a multi-year high, which will keep overall market sentiment under pressure over the coming months”, senior analyst, Florian Grunberger, told Reuters.
The perception of ample spare capacity is definitely one factor keeping traders and analysts bearish as they assume this capacity would be put into operation as soon as the market needs it. This may well be an incorrect assumption.
Saudi Arabia and OPEC have given multiple signs that they would only release more production if prices are to their liking, and if cuts are getting extended, then current prices are not to OPEC’s liking yet.
There is more, too. The Saudis, which are cutting the most and have the greatest spare capacity at around 3 million barrels daily right now, are acutely aware that the moment they release additional supply, prices will plunge.
Therefore, the chance of Saudi cuts being reversed anytime soon is pretty slim.
Then there is the U.S. oil production factor. Last year, analysts expected modest output additions from the shale patch because the rig count remained consistently lower than what it was during the strongest shale boom years.
That assumption proved wrong as drillers made substantial gains in well productivity that pushed total production to yet another record.
Perhaps a bit oddly, analysts are once again making a bold assumption for this year: that the productivity gains will continue at the same rate this year as well.
The Energy Information Administration disagrees. In its latest Short-Term Energy Outlook, the authority estimated that U.S. oil output had reached a record high of 13.3 million barrels daily that in January fell to 12.6 million bpd due to harsh winter weather.
For the rest of the year, however, the EIA has forecast a production level remaining around the December record, which will only be broken in February 2025.
Oil demand, meanwhile, will be growing. Wood Mackenzie recently predicted 2024 demand growth at 1.9 million barrels daily.
OPEC sees this year’s demand growth at 2.25 million barrels daily. The IEA is, as usual, the most modest in its expectations, seeing 2024 demand for oil grow by 1.2 million bpd.
With OPEC+ keeping a lid on production and U.S. production remaining largely flat on 2023, if the EIA is correct, a tightening of the supply situation is only a matter of time. Indeed, some are predicting that already.
Natural resource-focused investors Goehring and Rozencwajg recently released their latest market outlook, in which they warned that the oil market may already be in a structural deficit, to manifest later this year.
They also noted a change in the methodology that the EIA uses to estimate oil production, which may well have led to a serious overestimation of production growth.
The discrepancy between actual and reported production, Goehring and Rozencwajg said, could be so significant that the EIA may be estimating growth where there’s a production decline.
So, on the one hand, some pretty important assumptions are being made about demand, namely, that it will grow more slowly this year than it did last year.
This assumption is based on another one, by the way, and this is the assumption that EV sales will rise as strongly as they did last year, when they failed to make a dent in oil demand growth, and kill some oil demand.
On the other hand, there is the assumption that U.S. drillers will keep drilling like they did last year. What would motivate such a development is unclear, besides the expectation that Europe will take in even more U.S. crude this year than it already is.
This is a much safer assumption than the one about demand, by the way. And yet, there are indications from the U.S. oil industry that there will be no pumping at will this year. There will be more production discipline.
Predicting oil prices accurately, even over the shortest of periods, is as safe as flipping a coin. With the number of variables at play at any moment, accurate predictions are usually little more than a fluke, especially when perceptions play such an outsized role in price movements.
One thing is for sure, though. There may be surprises this year in oil.
lrina Slav
Slav writes for Oilprice.com.
