OCTOBER 11 2010 www.energyintelligence-ng.

com

Nigeria's Energy Sector

50yrs after Independence

FRONT PAGE FEATURE

INSIDE AT 50, Nigeria is the most populous country reserves are spread over 250 small fields,
in Africa with a fast growing population of containing less than 50 million barrels each,
NATIONAL UPDATE around 150 million people. It is the 12th whilst high gas to oil ratios mean that large
NNPC, NAPE Resolve largest oil producer in the world, and the quantities of associated gas must be produced
Rift Over Conference pg2 largest in Africa. It along with the crude.
currently produces Nigeria currently flares
between 1.8 million to 2.1 T h e N i g e r i a n over 75% of gas
CORPORATE BRIEFS million barrels of crude g o v e r n m e n t a l s o produced. In fact, nearly
BP Pledges $20b GoM per day. Nigeria contains 10% of the total annual
an estimated 124 tcf of questioned Equatorial gas production of Africa,
Assets As Spill Collateral pg4 proven natural gas G u i n e a ' s s o l e was flared in Nigeria.
reserves (10m largest in The Nigerian energy
SPECIAL the world). With both ownership of the Zafuo paradox is that energy
Roadmap For Power associated and non- field (Block B). At issue exports keep the nation
associated gas reserves afloat while the lack of
Sector Reform (1) Pg12 the total could reach as is whether Zafuo is a energy domestically
much as 300 tcf. separate field, or part of constrains the economy
POWER & MINING Oil accounts for about
an oil structure that growing.
from diversifying and
BPE Woos Electricity Workers' 95% of Nigerian foreign
currency earnings and straddles the territorial
On Power Reform Pg9 nearly 60% of its GDP. Its
proven oil reserves are w a t e r s o f b o t h BACKGROUND
INTERNATIONAL estimated to be about 22.5 countries. Oil was discovered in
OPEC Likely To Keep billion barrels; Nigeria in 1956 at
approximately 2% of the Oloibiri in the Niger
Quotas Steady In Balanced world's total reserves. Most of the proven Delta after half a century of searching.
MarketPg 11
Cont. on pg 3
NATIONAL UPDATE
NNPC, NAPE Resolve Rift Over
Conference
THE dispute which has pitched the Nigerian National Petroleum
Corporation (NNPC) against the Nigerian Association of Petroleum
Explorationists (NAPE) has been resolved. The issue arose when
NAPE inadvertently used the photograph of the Group Managing
Director of the NNPC in its proposed forthcoming international
conference without authorisation. The NNPC had issued a swift
disclaimer distancing the corporation from the conterence.
The issue bothered the NAPE officials as the non participation of the
NNPC in the conference might adversely impact the success of the
conference. However, the two organisations, last week, were able to
resolve the issue amicably with the NNPC giving its total support to
the conference. In a statement, NNPC spokesman, Dr Levi Ajuonuma,
said: “The Management of the Nigerian National Petroleum
Corporation (NNPC), has pledged to continue its partnership with the
Nigerian Association of Petroleum Explorationists (NAPE), towards
the growth of the Nigerian oil and gas sector. Ajuonuma's reaction
came after a meeting with the executive of NAPE who visited the
corporation to brief its management about the Association's
forthcoming third Regional Deepwater Offshore West Africa
Conference and Exhibition billed to hold from November 14th to 18th ,
at the International Conference Centre, Abuja. Ajuonuma, who
praised NAPE as a renowned and respected industry professional
association, traced the history of cooperation between NNPC and
NAPE and called on industry stakeholders and members of the public
to approve support towards the successful hosting of the conference
and exhibition. “Having clarified from NAPE the circumstances
surrounding the event and advertisement carried in some newspapers
in which another person's picture was wrongly captioned as that of
our GMD, we wish to call on all stakeholders in the oil and gas
industry to discountenance the disclaimer we published a few weeks
ago and accord NAPE and its members all necessary support to ensure
the successful hosting of its third Regional Deepwater Offshore West
Africa Conference and Exhibition,” Dr Ajuonuma said.
Nigeria's Crude Oil Production Rose
1.5 % Last Year
NIGERIA'S crude-oil output increased 1.5 % last year, according to
state-owned Nigerian National Petroleum Corp.
Production rose to 780 mm barrels from 768.7 mm barrels a year
earlier, the Lagos-based company known as NNPC said. That's a daily
average of 2.14 mm barrels compared with 2.1 barrels. The increase in
oil output was due to a "more friendly working environment" in the
southern Niger River delta oil region, NNPC said. Attacks by armed
groups targeting the oil industry cut more than 28 % of the country's
oil output between 2006 and 2009. The attacks decreased after
thousands of militants campaigning for more local control of the
delta's energy resources accepted a government amnesty and
disarmed. Natural-gas production fell 19 % from a year earlier to 1.84
bn cfpd, NNPC said. Nigeria is Africa's largest oil producer and the
fifth-biggest source of US oil imports. Royal Dutch Shell, ExxonMobil,
Chevron, Total and ENI run joint ventures with NNPC that pump
most of the country's crude.
Nigerians Oil Workers Threaten
Strikes
A trade union of oil workers in Nigeria may strike against Exxon
Mobil for hiring more foreigners than mandated by state laws, a union
leader said. Nigerian President Goodluck Jonathan in April signed a
law that designates a certain number of jobs in the oil and gas industry
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NIGERIA ENERGY INTELLIGENCE
to Nigerians. PENGASSEN, the Petroleum and Natural Gas Senior
Staff Association of Nigeria, said foreigners were getting 13 percent of
the top management jobs at Exxon Mobil rather than the 5 percent
allocated by local laws. Jude Nwaogu, a union leader, told reporters
that labor advocates want Exxon Mobil to hire more Nigerians to take
the jobs of foreigners. "There are over 500 expatriates doing all manner
of jobs that nationals can do, like warehouse supervision, construction
supervision and so on," he said. Nigeria is the biggest oil producer in
Africa. Exxon Mobil is producing around 720,000 barrels of crude oil
and equivalent each day from 90 offshore sites through a venture with
state-owned Nigerian National Petroleum Corp. The Movement for
the Emancipation of the Niger Delta, Nigeria's main militant group,
has targeted oil infrastructure in the country, saying Nigerians aren't
getting their fair share of the oil revenue.
NUPENG Threatens To Shut Down
MTN Service Stations
AS the communications giant, MTN, is alleged to be owing members
of the Oil and Gas Supply Branch of the National Union of Petroleum
and Natural Gas Workers (NUPENG) N644 million debt, the union
issued a directive that its members should stop supplying diesel to all
MTN service stations. The union alleged that its members were
contracted by a company known as Private Network Nigeria (PNN)
Limited to service MTN sites in the country, saying that while the
contract lasted, not a dime was paid to the oil workers. The South-
West Zonal Chairman of the union, Alhaji Tokunbo Korodo, said that
the union had some weeks ago issued a directive that members should
stop supplying all the sites of MTN but because of the intervention of
Mr. Femi Falana, the telecommunications firm's lawyer, we stopped
the action. He said: “Falana is a man that we respect so much. So, when
he appealed that we go back to business, we did, believing that all will
be settled soon. It is, however, unfortunate that after weeks nothing
has been done to address the issue. “Initially, we restricted the
directive to Lagos, but now, we are going to extend it to every part of
the country. “The implication is that subscribers are going to suffer it,
as they may not be able to make calls as usual.” Korodo said that PNN
gave Local Purchasing Order (LPO) to their members and for over a
year, they have not been paid, adding that this has led to harassment
and threats by banks where they borrowed money. Korodo said that
several times, they had called for the intervention of MTN
management but they claimed to have paid the money to the PNN
management.
PENGASSAN Decries Oil Firms'
Attitude To NCD Act
PETROLEUM and Natural Gas Senior Staff Association of
Nigeria, PENGASSAN, has decried the care_free attitude of oil and
gas companies operating in the country to the provisions of the
Nigerian Content Development, NCD Act 2010, that deal with
succession, capacity and empowerment plans for Nigerians. The
workers union said there is the need to impress it on multinational,
national and indigenous oil and gas companies to comply with the
provisions of the Act, which seeks to increase indigenous
participation in the petroleum industry, particularly the upstream
sector. PENGASSAN insisted that the multinationals must adhere to
the provisions on succession, capacity and empowerment plans as
well as quota for expatriates in management and other positions.
Addressing members of the National Executive Council, NEC, in Port
Harcourt, Rivers state, President of PENGASSAN, Mr. Babatude
Ogun, further demanded the inclusion of its members in the Nigerian
Content Monitoring Development Board.
NIGERIA ENERGY INTELLIGENCE
Nigeria's Energy Sector 50yrs after
The discovery was made by Shell-BP, at the
time the sole concessionaire. Nigeria joined
the ranks of oil producers in 1958 when its
first oil field came on stream producing 5,100
bpd. Exploration rights in onshore and
offshore areas adjoining the Niger Delta were
then extended to other foreign companies.
Further exploration and production activities
was hampered between 1967 and 1970 when
the country was involved in a devastating
civil war caused by the attempted secession
of the eastern provinces from the rest of the
country. In 1970, the end of the Biafran war
coincided with the rise in the world oil price,
and Nigeria was able to reap instant riches
from its oil production. Total production
from Nigeria's oil fields has increased from
308 million barrels in 1970 to 703,495 million
barrels in 1991. The peak of its production
came in the 1980's when the total output was
753.5 million barrels per annum of which
93% was exported.
UPSTREAM
The upstream oil industry is the key to the
Nigerian economy and to the entire Nigerian
oil industry. The upstream sector is
controlled by NNPC through its subsidiaries,
and the joint ventures or production sharing
contracts with all foreign oil companies
operating in Nigeria. Typically, this translates
into rights to more than half of the oil
produced by each joint venture. Despite the
uncertain economic climate, Nigeria is still
seen as an attractive area for upstream
investment by international oil companies,
particularly in the offshore and deepwater
areas. Current problems in the sector stem
from the inability of NNPC to contribute
towards its share of upstream development
costs.
DOWNSTREAM
The downstream oil industry in Nigeria is
another key sector in the country's economy.
The country has 4 oil Refineries and
Petrochemical Plants. There are 8 oil
companies and about 750 independents all
active in the marketing of petroleum
products. Cross-border smuggling is an
ongoing problem and there are frequent
reports of large scale corruption in the
distribution and marketing chain. The
government through its 100% state-owned
national oil company, Nigerian National
Petroleum Corporation (NNPC) retains an all
encompassing control over the industry
through its shareholding in all the companies
involved and in the setting of wholesale and
3
retail prices.
The downstream oil industry is also
under close control of the NNPC, which
owns the countries four refineries. However,
lack of money has contributed to the current
state of disrepair of the downstream
infrastructure and is forcing NNPC to
recognise the logic of reducing direct state
involvement in the oil industry. The
government plans to deregulate the
downstream sector. For this to happen, the
heavy price subsidies on refined products
needs to be scrapped in order to allow prices
to become market related. This is likely to be
met with resistance from most Nigerians and
may prove problematic for a democratic
government to implement in simple and
swift manner.
GAS SECTOR
With proven reserves in excess of 120 trillion
standard cubic feet (tscf), Nigeria is more
endowed with natural gas than with oil. In
energy terms, Nigeria is a gas province, with
an oil rim. Gas offers significant investment
potential. Average annual production of gas
(mostly associated gas) is around 1,059
billion standard cubic feet with about 75% of
it being flared. Nigeria is the highest gas
flaring nation worldwide. A number of
factors, such as inappropriate gas pricing,
absence of adequate gas infrastructure, low
economic development and unstable
macroeconomic environment are responsible
for low gas utilisation in Nigeria.
At current rates of production, it is
estimated that Nigeria's oil reserves could
well be exhausted in less than 30 years. The
government therefore sees the need to
diversify and broaden the country's revenue
base. One of these areas is to exploit the
country's vast reserves of gas. The growing
concern about the utilisation of gas has
caused the government to introduce
associated gas clauses in recent production
sharing contracts signed with oil companies.
The main thrust of the gas policy is to
eliminate gas flaring and encourage
producers to make capital investment in the
production phase.
POWER SECTOR
About 43% of Nigeria's population have
access to electricity but experience frequent
disruptions and often rely on back-up
generators. Nigeria has plans to increase
access to electricity throughout the country.
Due to low tariffs and lack of maintenance,
the country's electricity supply remains
FEATURES
unreliable such that more than 90% of
commercial establishments have to rely on
expensive back-up diesel generators. Such
back-up generators can add as much as 25%
to the total costs of industrial enterprises. A
number of power stations are standing idle
through a lack of maintenance and spares or
grid problems. The capital is not available to
sustain their operation. This could be due to
low tariffs or poor bill collection. The
unbundling and privatization of the power
agency has been inconclusive since 1999
when the government embarked on it.
BORDER DISPUTES
Border disputes are part of the Nigeria
Energy Sector as most of its disputes revolve
around oil finds and reserves. In the case of
Bakassi Peninsula, both Cameroon and
Nigeria have claimed the 1,000-square-
kilometer (400-square-mile) area located in
the Gulf of Guinea believed to contain
significant reserves of oil. Several oil
discoveries have been made on the peninsula
and its adjoining waters. In February 1994,
Cameroon submitted the dispute to the
International Court of Justice (ICJ) for
settlement, and Nigeria later followed with
its own suit to the ICJ. The ICJ began formal
hearings in March 1998 which finally went
the way of Cameroon.
The Nigerian government also questioned
Equatorial Guinea's sole ownership of the
Zafuo field (Block B). At issue is whether
Zafuo is a separate field, or part of an oil
structure that straddles the territorial waters
of both countries. US.-based Mobil started oil
production from the field in September 1996
under a contract with Equatorial Guinea. It
also holds the lease on the Nigerian block,
OML 102, which lies just 3.5 kilometers (2
miles) north of the Zafiro field. Elf and
Nigeria claim that seismic data of the field
confirms that it extends into Nigerian
territory. Nigeria called for a determination of
the boundary between the two nations and
for the establishment of joint-field
development. In 1998, Elf drilled two wells on
OML 102 and announced a discovery called
Ekanga. Equatorial Guinea maintained that
the Ekanga wells were drilled in their
territorial waters in Block B. A way out was
the establishment of Joint Development Zone
between Nigeria and Equitorial Guinea.
CORPORATE BRIEFS NIGERIA ENERGY INTELLIGENCE

Maurice, said a lot of projects in development of Usan were carried out

BP Pledges $20b GoM Assets As in-country and the companies were Nigerian-owned. Among the
Spill Collateral beneficiary companies, are Nigerdock, which did some of the
fabrication and construction, Integrated Data Services Limited (IDSL),
THUNDER Horse moored semi-submersible (PDQBP) has a subsidiary of the Nigerian National Petroleum Corporation (NNPC),
pledged certain Gulf of Mexico assets as collateral for the $20 billion which did the detail design, Nadapo Energy, Globestart, Cameron and
Deepwater Horizon Oil Spill Trust, which was set up to pay legitimate Point Engineering, among others. He also noted that a lot of works on
claims arising from the April 20 incident. The pledged collateral umbilicals, flowlines, and risers (UFR) were going on in the Niger
consists of an overriding royalty interest in oil and gas production of Delta and were being done by the locals. Other companies were
BP's Thunder Horse, Atlantis, Mad Dog, Great White and Mars, Ursa involved in other activities. For instance, a company such as Socotel, is
and Na Kika oil and gas assets in the Gulf of Mexico (GoM). doing the coating of pipelines, while Hamilton and Schlumberger also
“The pledging of these assets underscores our commitments to the carried other jobs in the country. The floating production, storage and
Trust which we set up to pay all legitimate claims arising from the offloading (FPSO) vessel for the Usan field production, the company
tragedy,” said Lamar McKay, Chairman and President of BP America s a i d , wo u l d a r r i ve t h e c o u n t r y b y D e c e m b e r.
Inc. and BP's Gulf Coast Restoration Organization. Since the Macondo Maurice said: “Usan is a significant step change in Nigerian content
well was finally confirmed sealed on September 19, BP has been development, as the project has generated a remarkable increase in
completing the process of plugging and abandoning the well. This works done in Nigeria compared to previous projects involving all
includes removing portions of the casing and setting cement plugs. segments from engineering and construction to project management.
BP has also started the process of dismantling and recovering “Much of the project packages are being produced in the Niger Delta
containment equipment and decontaminating the vessels that were in (Warri, Port Harcourt, Onne and Rumuolumeni) and Lagos in Snake
position at the well site. The cost of the response to September 29 Island by Nigerian-based suppliers with Nigerian employees.
amounts to approximately $11.2 billion, including the cost of the spill “Usan demonstrates Total's ability to work with international partners
response, containment, relief well drilling, static kill and cementing, and national oil companies such as NNPC, Chevron, Esso and Nexen.
grants to the Gulf states, claims paid and federal costs. On August 23 The Usan field confirms Total as a leader in deep offshore technology”
processing of claims from individuals and businesses related to the The Usan field is located in Oil Mining Lease (OML) 138 in water depth
Deepwater Horizon incident transferred to the Gulf Coast Claims of between 750 and 800 metres, and about 100 km off Nigerian coast,
Facility (GCCF). south-south east of Port Harcourt, Rivers State.
The field is scheduled to begin production in 2012 with 180,000 barrels
Total's Boss Lists Obstacles To of oil per day (bpd) and production will last for 25 years. Although the
field was discovered in February 2002, actual drilling began in June
Investing In Refineries 2009 and the company targets first oil in four years from the time of
THE call for the construction of refineries by multinational oil drilling begun.The Usan project is a production sharing contract (PSC)
companies may not be feasible in the short term due to certain with the Nigerian National Petroleum Corporation (NNPC) as
identified consfraints against such projects. The out-going Managing concessionaire, Total as operator, Chevron, ExxonMobil and Nexen as
Director of Total Nigeria Plc, Mr. Dominique Thiolon, said it is difficult shareholders.
for oil firms to invest shareholders funds in new refineries in Nigeria.
He agreed that Nigeria has the internal market for petroleum
MRS Identifies Contributions To
products, which is about 13 million metric tonnes and also there is Development Of Economy
availability of crude to serve the refineries, but argued that the
business environment is difficult in terms of reliable policy, MRS, a leading player in the nation's oil and gas industry, has listed
infrastructure and security. Thiolon outlined the need for total its achievements and contributions to the development of the economy
deregulation of the downstream, in addition to the passage of the as it celebrates 15 years of operation and partnership with Nigeria.
Within the 15 years, the company has tremendously expanded its
Petroleum Industry Bill (PIB) currently before the National Assembly.
He decried the level of accidents on the roads, but nevertheless operation especially with the acquisition of the downstream
acknowledged the efforts of the government and the Federal Road operations of Chevron Nigeria Limited formerly (Texaco).
Safety Corps (FRSC), at checking the menace. The move was carried out in an effort to continually grow and expand
Thiolon expressed regret that he was unable to take the safety the oil and gas industry in Nigeria. The acquisition was described by
many industry watchers as a high quality acquisition as it applied to all
objective his firm to the envisaged level before his exit. He said: “My
main regret is that we have improved our performance in terms of the Chevron downstream assets in West-Africa. The acquisition is seen
as a big boost to Nigeria Content development. With the acquisitions,
safety in our operation but not to the point I was expecting. As you
the company has inherited a strong brand foundation as Texaco has
may know, safety is a key issue in our operation and unfortunately we
over 50 years presence in Africa and human capital of over 400
still think that has not been achieved, especially in the transportation.
dedicated, experienced and well-trained employees whom they
Nigeria remains a difficult country with too many accidents, too many
risks though we have seen some moves to make some profitable continually build on for future growth. MRS has become one of the
programmes, especially with the authority, FRSC and also with our major downstream petroleum products marketing companies in West
competitors in the sector to improve the general environment with Africa as a result of the acquisition. Currently, MRS is operating over
regard to competitive point that I was expecting. 416 retail outlets in Nigeria, which are supplied refined white products
from the company's two million-litre per day fuel terminal at Apapa
Usan Field Development Created and 15 million-litre per day capacity terminal with a jetty at Tin Can
Island, all in Lagos. The company also operates a fleet of 1000 trucks to
Multiple Jobs For Nigerians' complement product delivery to its various retail outlets in Nigeria.
THE development of Total's mega offshore field Usan, has created The company also operates over 130 service stations in Cameroun, 32
numerous jobs for Nigerians as well as capacity development. The i n To g o , f i v e i n B e n i n a n d 6 0 i n C o t e D ' i v o i r e .
Managing Director of Total Upstream Companies in Nigeria, Mr. Guy

4
NIGERIA ENERGY INTELLIGENCE FOR THE RECORDS

Power Sector Reform & Steady

Electricity Supply

R
ECENTLY, a number of
events combined to draw public
attention to the state of the
energy crisis in Nigeria,
especially electricity. The Central Bank of
Nigeria (CBN) estimated that both corporate
bodies and individuals spent as much as
N1.66 trillion per annum to meet their
alternative energy requirements due to the
gross inadequacy of the Power Holding
Company of Nigeria (PHCN) to supply
electricity to all tiers of consumers in the
country.
The CBN said it had on its own provided
about N500 billion facility for investment in
the energy sector in line with the objectives of
the National Electric Power Policy, which
aims at encouraging private sector
participation in the energy sector as well as
ensuring affordability of power supply.
Almost simultaneously, echoes of the
privatisation of PHCN, especially its 11
distributing companies, were also in the
public domain. This was immediately unbundle the National Electricity Power of the private sector, in this case, we note that
reinforced by the unveiling of a roadmap for Authority into 18 successor companies as a electricity is equally a social good, especially
the power sector by President Goodluck result of the gross inefficiency of the sector. in a backwater under-industrialised
Jonathan. As indicated in the roadmap, the Indeed, efforts at remediation of the economy. This point should be noted by the
Federal Government would sell 51 per cent of problems of the power sector are worthwhile. Nigerian Electricity Regulatory Commission
its stakes in the PHCN with the exception of However, the pursuit of the privatisation (NERC) in its multi-year tariff order (MYTO)
the Transmission Company of Nigeria process should be based on sound criteria blueprint. And the Federal Government is to
(TCN). such as the one that the National Council on be commended for retaining its hold on the
Over the years, the epileptic power supply Privatisation (NCP) has already indicated, national grids by means of the transmission
in the country has come to symbolise the poor namely, efficiency improvement, which can company, thereby taking care of the national
state of social infrastructure in the country. result in the reduction of Technical security element of the power sector
The country has not only been able to Commercial and Collection (ATCC) losses. privatisation process.
generate power, also its capacity for The usual clientilism associated with a good In Nigeria, due to persistent policy failures,
transmission and distribution has been at its number of business transactions in the there are reasonable grounds for cynicism.
lowest point. This reality has exacted its toll country should be avoided. We hope these recent policy statements do
on the country's development as many The government shares the conviction not become empty slogans as has been the
manufacturing concerns, whether large, that revamping the power sector is only case with many government policy
medium or small-scale, have had to close possible within the dynamics of market pronouncements and that they do translate
down outright and in some cases, relocate to forces. While not opposed to the principle of into concrete performance output and
neighbouring states with relative power privatisation, we, however, share a number of deliverables. For sure, if the country is to
supply stability to reduce production cost concerns with the full privatisation of the address its development problems and
and ensure a favourable return on power sector, especially what may be the unleash the production capacities of its
investment. social cost to the average Nigerian consumer people, the power sector policies must be
Therefore, these developments served to as well as the national security. Electricity matched with commitment and unflagging
underline the country's problematic power should not be regarded as a mere commodity political determination.
sector as well as the unfinished business of for profiteering and accessible only to the
privatisation of the sector. As far back as highest bidder.
This is a Guardian Newspaper editorial
2005, the Federal Government moved to Although profit is an essential element

5
 FEATURE
Will Jonathan Distinguish Himself In Power Sector?
By Emeka Ugwuanyi
T
HE change is imperative.
The benefits are certain. The
p o l i c y i s c l e a r. T h e
legislation is in place. It is
time for action. Our agenda
is to see that this reform is
driven to a logical point of no return.
Completing the reforms; electrifying the
nation. We did it in telecoms, we will do it in
power.
"The cost of darkness is infinite. Defining
the roadmap; putting the customer in the
driving seat. The last lap is always the
hardest. But the prize is within grasp." These
were the exact words of the Presidential
Action Committee on Power (PACP) chaired
by President Goodluck Jonathan and Vice-
President Namadi Sambo as alternate
chairman, at the recent launch of the roadmap
for power sector reform in Lagos. Though
assertive and compelling, such statements are
not very uncommon to Nigerians, especially
when they come from political leaders.
Origin Of Reforms
Since the first electricity was generated in
Nigeria in 1896 in Lagos at the long-
abandoned Ijora 60kw power plant, Nigerian
has never been able to wheel into the grid
5000 MW of electricity despite different
reforms, which saw the Electricity
Corporation of Nigeria (ECN) transformed
into the National Electricity Power Authority
(NEPA) and to the current Power Holding
Company of Nigeria (PHCN).
The changes were efforts of different
governments towards achieving stable
power supply for Nigerians but that objective
has remained elusive ever since.
Power sector operators had noted that all the
milestones anticipated by the government in
the roadmap were achievable but only need
government's commitment and will. They
argued that if smaller neighbour West
African countries would pride themselves for
stable electricity supply to their citizens, why
shouldn't Nigeria do same especially with the
natural resources available to her?
Opportunities For Growth
The sub-regional programmes such as the
West African Power Pool (WAPP) and West
African Gas Pipeline Company (WAGPCo),
according to them, are some of the initiatives
6
NIGERIA ENERGY INTELLIGENCE
The Presidential Action Committee on Power, which he
chairs with his Vice President meets weekly to take stock
of performance and know areas that require immediate
intervention while the Presidential Taskforce on Power
chaired Prof. Barth Nnaji, the Presidential Adviser on
Power, oversees the daily activities, all the efforts are
targeted at ensuring that any success achieved in the power
sector doesn't deteriorate.
through which more endowed countries Jonathan had said at the unveiling of the
should help their neighbours but Nigeria is roadmap that South Africa would be
not optimising the opportunities despite the Nigeria's model, having over 40,000 mw
enormous resources it has, especially gas. generation for less than 50 million
Last year, the Federal Government made population. The President, it was learnt, has
fruitless efforts to achieve 6000 MW but was sent some Nigerians to understudy South
able to move to the next level in terms of Africa's success to replicate same in Nigeria.
generation capacity and available capacity He also assured Nigerians that the private
with rehabilitation of exiting generation sector would henceforth be driving the sector
plants. Available generation rose to about while the government has marshalled out
3680 MW and power improved significantly measures for conducive investment
but in less than two weeks supply dropped environment.
abysmally. Nobody including his critics was left in
Common excuses then were inadequate doubt of his passion for a drastic change in
supply of gas following pipeline vandalism power supply as he was continuously
allegedly occasioned security situation in the applauded during the roadmap unveiling
Niger Delta, and drop in water level which event.
adversely affected hydro power generation. The Presidential Action Committee on Power,
Although President Goodluck Jonathan, then which he chairs with his Vice President meets
was the Vice-President, he oversaw and weekly to take stock of performance and
superintended the power sector as the know areas that require immediate
chairman of the Presidential Steering intervention while the Presidential Taskforce
C o m m i t t e e o n Po w e r. H e s h o w e d on Power chaired Prof. Barth Nnaji, the
commitment and passion to enthrone stable Presidential Adviser on Power, oversees the
power supply but that couldn't be. Nigerians, daily activities, all the efforts are targeted at
however, were of the opinion that he couldn't ensuring that any success achieved in the
actualise his intentions because he was in power sector doesn't deteriorate.
charge. At the beginning of this year, strategic Some of positive decisions in the roadmap
steps were taken to address challenges in the is government's 100 per cent disengagement
country's energy sector petroleum and from generation and distribution and the
power- as there were no fuel and electricity private sector lead in transmission,
for the citizenry. addressing funding and liabilities issues as
well as provision of measures that would
Time For Action nurture the expected private companies into
Now that he is the President, he wants to stability, among others.
make his promises real by starting with the
unveiling the roadmap for power sector The Commitment
reform. Currently, there is remarkable The President said: "The availability of
improvement in power supply, an available reliable electric power to the homes and
generation has stood at 3800 mw for close to a
Continues on page 7
month.
NIGERIA ENERGY INTELLIGENCE
Will Jonathan Distinguish Himself In Power Sector?
Continued from page 6
businesses of our citizens has been one item in
our national life that we have approached
with so much hope and yet experienced so
much frustration over the past decades.
Various regimes, in the distant past, paid little
attention to the sector but in the recent
decades, subsequent regimes have put in
billions of naira to reverse the neglect and
mismanagement which has characterised the
sector.
"As President and Commander-in-Chief
of the Armed Forces, I and my Vice President,
are conscious that what we do with the
Nigerian electricity supply industry will go a
long way in determining whether Nigeria
remains in darkness or joins the rest of the
world in the race for development. Our
commitment is to bring an end to our nation's
stunted growth and usher in the fresh air of
prosperity by pursuing a new era of sector-
wide reform which is driven by improved
service delivery to every class of customers in
the Nigerian electricity sector.
"The full implementation of the Electric
Power Sector Reform has been a key priority
for this administration. We established the
Presidential Action Committee on Power
(PACP) to eliminate red tape and the often
over-bureaucratic and inefficient nature of
decision-making in government. The
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Presidential Task Force on Power is the engine
room that drives the vision of the PACP. The
Task Force has the mandate to develop the
Roadmap and provide monitoring to ensure
effective implementation of the plan. Their
activities will introduce a greater degree of
transparency to the way in which we
implement the reforms and greater
accountability on the part of those
responsible.
"Over the past two decades, the stalled
expansion of Nigeria's grid capacity,
combined with the high cost of diesel and
petrol generation, has crippled the growth of
the country's productive and commercial
industries. It has stifled the creation of the jobs
which are urgently needed in a country with a
large and rapidly growing population; and
the erratic and unpredictable nature of
electricity supply has engendered a deep and
bitter sense of frustration that is felt across the
country as a whole and in its urban centres in
particular.
Electricity consumers and the citizenry as
a whole demand a fundamental reversal of
the long and debilitating malaise which has
blighted the industry and, in doing so, bridled
the tremendous energy and creativity of this
great and populous nation.
"More particularly, they demand real and
immediate improvements in service levels.
"In response to this demand, the Federal
Government will not pretend that the task
ahead will be an easy one. But it is determined
to root out the canker which lies at the very
heart of the industry.
"It is important to note, however, that the
participation of the private sector is not an
end in itself. On the contrary, it is only the
means to the ultimate objective, that is, the
urgently needed improvement in the service
levels experienced by electricity consumers.
The establishment of an appropriate pricing
regime. For the sector to be financially viable
throughout the value chain, the end-user
tariff must at least be at a cost-reflective level.
"However, the tariff as it now stands is
significantly below what is necessary for the
sector. As a result, not only is PHCN
continuously unable to meet recurrent
expenditure requirements, it must
continually beg government for additional
money for short term and long term capital
expenditures. Further, and more importantly,
without a pricing regime that supports
financial viability in the sector, it simply
FEATURE
makes no sense for a private sector operator
to come into the market.
The Nigerian Electricity Regulatory
Commission will, therefore, be undertaking a
major review of the tariff regime which will
be completed before the end of the first
quarter of 2011 to replace the national
uniform tariff with a new genuinely cost-
reflective ceiling on end-user tariffs.
However, to protect against "rate shock"
and to ensure that low-income consumers are
provided with the "lifeline" tariff envisaged
by the framers of the original power sector
reform policy, there will also be much greater
price differentiation and the introduction of
an inclining block tariff whereby the rate paid
for electricity varies with a given level of
consumption.
"In accordance with the EPSR Act, the
electricity industry needs to transition to a
new model, where a government-owned
bulk buyer carries out contract management
and bulk trading (on behalf of the
distribution companies ) until such a time as
the industry has developed the settlement,
accounting, managerial and governance
systems required for successful bilateral
contracting.
‘The Nigerian Bulk Electricity Trading
Company PLC has now been incorporated
and over the next two months, this entity will
be appropriately resourced and established,
with the expectation that by October 2010, it
will be ready and able to start negotiating
appropriate power purchase agreements not
just with successor generating companies
and existing independent power producers
(IPPs) but also with potential new entrants
into the power generating market.
“In entering into a power purchase
agreement (PPA), independent power
producers (IPPs) will also require that there is
a creditworthy counterparty at the other side
of the table. However, it could take up to four
years before some of the distribution
companies become commercially viable and
are fully credit-worthy entities. Therefore, to
accelerate private sector investments in
power generation, the Ministry of Finance is
reviewing a set of options through which the
Federal Government may provide credit
enhancement to the bulk purchaser that will
enter into PPAs with the successor generation
companies and IPPs."
Culled from The Nation Newspaper
7
NEWS NIGERIA ENERGY INTELLIGENCE

their own investigation into the Halliburton subsidiary's actions here.

N5.2bn Power Fraud: EFCC Several national anti-graft agencies have promised to aggressively
pursue those accepting bribes but corruption still permeates all levels
Re-arraigns 6 Top REA Officials of Nigeria's government, which is flush with oil revenues. Trials
SIX top officials of the Rural Electrification Agency, REA, were re- against top politicians and state governors drag on with no end in sight
arraigned before an Abuja high court sitting in Gudu over a 65-count in the country's plodding court system.
amended criminal charge bothering on conspiracy, fraud and criminal
breach of public trust. The Economic and Financial Crimes CAMAC Energy Inc. Enters
Commission, EFCC, is prosecuting them for allegedly collaborating
with three sitting lawmakers to siphon about N5.2 billion from the
Agreement to Acquire Contract
coffers of the establishment in the guise of paying over 65 alleged Rights Located Offshore Nigeria
fictitious companies that were purportedly awarded contract of Grid
Extension and Solar Electricity Project. The said project was funded
CAMAC Energy Inc. a US-based energy company engaged in the
from the 2008 Amended Budget of the REA. The six officials who took development and production of oil and gas in West Africa and China,
turns to enter plea of 'not guilty' to the entire charges preferred against announced today that it has entered into a binding Heads of
them by the anti-graft agency, yesterday, were the Managing Director Agreement (the "Agreement") with Allied Energy Resources Nigeria
of the REA, Samuel Gakpe, Permanent Secretary in the Ministry of Limited and certain of its affiliates ("Allied") to acquire all of Allied's
Power, Dr. Abdullahi Aliyu, as well as four directors in the remaining interest in a Production Sharing Contract (the "PSC") which
establishment, Mr. Simon Nanley, Engr. Lawrence Orekoya, relates to those certain Oil Mining Leases 120 and 121 ("OML 120" and
Abdulsalami Jahun Garba and Barrister Kayode Oyedeji. They were "OML 121") granted to Allied by the Federal Republic of Nigeria with
alleged to have used their different positions to fraudulently facilitate respect to oil and gas assets offshore of Nigeria (the "Non-Oyo
the withdrawal of monies from an account of the agency domiciled in a Contract Rights"). The Company previously acquired all of Allied's
Central Bank account number 010372014, at various times, and shared interest with respect to the Oyo Field, located in OML 120 (the "Oyo
same after deceiving the Federal Government into believing that it was Contract Rights") under the PSC in a transaction that closed in April
used to settle debts owed contractors that participated in the electricity 2010. Upon consummation of the transaction contemplated under the
project. Some of the alleged bogus companies that the EFCC insisted Agreement, the Company will have acquired Allied's full interest in
were used to perpetuate the crime, were listed as, Chief & Chief Nig. the PSC and recombined the Oyo field within OML 120. The
Ltd, Cambra Heights Investment Company Ltd, Skipper Electric Ltd, transaction is expected to close on or before November 30, 2010 and is
Sayuti Enterprises, Bukinn Moore Ventures, Construction Affairs Ltd, subject to certain closing conditions. The OML 120 block is located
Williards Engineering, Alistar Trading Ltd, Valexcon Global Ltd, Oliza directly east of OML 133 (containing the giant Erha Field) and north of
Investment, among 55 others. OML 121. It covers an area 916.6 sq. km in water depths ranging from
150m to 1000m. Covered by 3D seismic, this block has proven stacked
Former Nigerian President's Aide oil and gas reserves in the shallow (Pliocene) part of the Oyo Field
located within the OML 120 block, interests in which field the
Indicted Over Case Involving Former Company acquired from Allied in April 2010. The OML 121 block is
located directly south of the OML 120 block, and covers an area 887 sq.
Halliburton Subsidiary km in water depths ranging from 150m to 1000m. The OML 120 block
PERSONAL aide to former Nigerian President Olusegun Obasanjo has proven more than 90 feet of gas in the shallow (Pliocene) part of the
was charged in a six-count indictment accusing him of laundering Ebolibo-1 in the Ebolibo Field. The Ebolibo-1 well was drilled in late
money in a case involving massive bribes paid by a former Halliburton 2008. The deeper Miocene sequences in this block, where promising
subsidiary. A prosecutor alleged Adeyanju Bodunde was just member prospects have been identified nearby, are untested. Potential
in a "ring" of others surrounding the former leader of Africa's most recoverable reserves in seismically defined prospects are estimated to
populous nation, hinting that more charges may come in the case be in excess of 100 million barrels. Identified crude oil reserves
involving Kellogg, Brown & Root. Bodunde, who served as Obasanjo's potentials for both OML 120 and the adjoining OML 121 are estimated
personal aide before winning the 1999 presidential election and during at over 500 million bbls, with some exciting prospects having been
his presidency, pleaded not guilty. The charges center on $1.5 million identified in the deeper Miocene interval. In exchange for the Non-
Bodunde allegedly received between 2002 and 2003. Prosecutors say Oyo Contract Rights, the Company has agreed to an option-based de-
that money went toward government officials to ensure that KBR won risking consideration structure, whereby it will pay $5 million in cash
contracts to build liquefied natural gas facilities on Bonny Island, to Allied within 15 days of the closing of the transaction, and has the
Nigeria. Those facilities harness natural gas released during oil option to elect to retain these contract rights upon payment of
drilling. In February, KBR pleaded guilty in U.S. federal court in additional consideration to Allied upon the occurrence of certain
Houston in the case and agreed to pay more than $400 million in fines. milestones as follows: (i) upon commencement of drilling of the first
The company admitted authorizing and paying bribes from 1995 to well outside of the Oyo Field under the PSC, the Company may elect to
2004 for contracts in Nigeria, an OPEC member that is one of America's retain the Non-Oyo Contract Rights upon payment to Allied of $5
main suppliers of crude. Prosecutor Godwin Obla said KBR and its million, either in cash, or at Allied's option, in shares of Company
affiliates bribed government officials with as much as $5 million. Obla Common Stock; (ii) upon discovery of hydrocarbons outside of the
said charges will be filed soon against a dozen others who were Oyo Field under the PSC in sufficient quantities to warrant the
allegedly involved in the bribery ring. Judge Adamu Bello set bail set at commercial development thereof, the Company may elect to retain the
about $6,600, which Bodunde posted. His next court date is Dec. 16. Non-Oyo Contract Rights upon payment to Allied of $5 million in cash
The charges against Bodunde came after Nigerian officials promised or shares.

8
NIGERIA ENERGY INTELLIGENCE
BPE Woos Electricity Workers' On
Power Reform
BUREAU of Public Enterprises (BPE) has underlined the need for
the support of stakeholders for the ongoing power sector reform
agenda by the Federal Government. The Director-General of BPE, Ms
Bolanle Onagoruwa, who stated this at a workshop on power reform
organised in Lagos for energy correspondents, debunked claims that
the government did not formally inform the unions of the intention to
privatise the Power Holding Company of Nigeria (PHCN). Onagorua,
who was represented at the workshop by the Acting Director, Electric
Power, Mr. Chigbo Anichebe,stated that the reform programme
commenced in 1999, when the Electric Power Implementation
Committee (EPIC) was inaugurated. This, she disclosed, culminated
in the development of the National Electric Power Policy 2001; the
enactment of the Electric Power Sector Reform Act 2005 and
establishment of Power Holding Company of Nigeria (PHCN) to
reinforce the repeal of the now defunct NEPA Act. The new Act, she
explained, gave rise to the creation of 18 successor companies in three
categories, viz: generation (six companies); transmission (one
company); and distribution (11 companies).
Stressing the need for support, Onagoruwa, said the power shortage
in the country, despite the Federal Government's frequent financial
intervention is fast becoming intolerable for the nation, saying that
available information indicated that all the plants in the unbundled
PHCN are in poor condition with several of the units and supporting
services completely broken down. She said there are capacity
constraints in the transmission and distribution networks requiring
significant investments, which only private sector involvement can
guarantee through modern technology and management, adding that
despite the massive investment by the Federal Government, the
transmission and distribution capacity is still below 4,000MW.
The reform, she noted, also resulted in the establishment of three
agencies to cater for various interests in tandem with the provisions of
the Power Policy and the Power Act. For instance, the Nigerian
Electricity Regulatory Commission (NERC) was established to
regulate the entry and operations of the private operators in terms of
tariff and service delivery.
NERC Hinges MYTO's Success On
Stability Of Power Sector
NIGERIAN Electricity Regulatory Commission (NERC) has
predicated the success of the Multi-Year-Tariff-Order (MYTO) on the
stability and sustainability of the reform currently going on in the
power sector. The Multi-Year-Tariff-Order is the unified way of
determining total industry requirement obtained by measuring it
against performance improvements and standards. It is what is used
to set wholesale and retail prices for power consumers and producers.
NERC'S Head, Market Competition and Rates Division, Haliru Dikko,
said, for the tariff order to be successful there should be continuity and
consistency of policy of the reform process. Dikko, who delivered a
paper titled: “MYTO and other Regulatory Issues,” at workshop
organised by the Bureau of Public Enterprises in Lagos for energy
reporters, stated that there is need to deepen the reform process and
the anticipated gains so that the tariff regime could be favourably
enhanced. This, according to him, is required to sustain market
transition for attainment of full competition among investors in the
sector. He listed the inadequate privatisation of the successor
companies of the Power Holding Company of Nigeria (PHCN),
administration of subsidy, non viability of the successor companies
and the debate on the establishment of a uniform tariff in the power
sector as some of the contending issues that the reform would have to
POWER & MINING
confront to guarantee the success of the MYTO. “A lot of things would
have to be taken into considerations if the MYTO is to be successful.
First is the need for the successor companies of PHCN to attain full
corporate status so that they could be able to compete favourably with
their private entrants. This is necessary as it is now a fait accompli that
private investors are definitely going to be actively involved in the
sector because PHCN as it stands is unable to meet the power
demands of the people There is also a need for proper administration
of the subsidy and resultant shortfalls in revenue collection so that
end user customers can be able to benefit from the subsidies to avoid
rate shock. To this end, the release and disbursement of the subsidies
must be done in a transparent and timely manner. Other issue that
should also be looked at is that of the non viability of some successor
companies. This has been responsible for investors' refusal to sign
take off agreements with the distribution companies of the PHCN.
“The failure of the distribution companies to collect billed revenues as
well as the inability of investors to take advantage of the incentives
inherent in the MYTO is also raising great concern and so must be
addressed too.”
Committee Identifies Hindrance To
Efficient Power Supply
PRESIDENTIAL Task Force on Power (PTFP) has pointed out
decay in power infrastructure and huge gap in investment, as major
impediments hampering power supply. The PTFP, stated this at a
workshop on power reform in Lagos. It said power supply over the
years has been hampered by limited generation, transmission
capacities, obsolete and unreliable distribution network. It added that
a bloated and inefficient work force have also contributed to the
hurdles in meeting the national power demand which is
approximated at 10,000-15,000MW. PTFP's Head, Regulatory and
Transactions Monitoring Unit, Mr. Eyo Ekpo, said it is disappointing
that the country has been unable to meet the highly suppressive
power demand requirement despite the huge potentials at its
disposal. He noted with dismay why the generation level has
remained static and declining in the face of rising load demand. “I
simply don't find it amusing that the generation capacity has
continued to stick to its dismal level even when all factors should have
pointed to the contrary. This problem has apparently trickled down to
the transmission and distribution arms of the sector. The
manifestation is the perpetual power failure and shortage being
witnessed across the nation. But in all fairness, I think this is simply
unacceptable if we consider the fact that countries like South Africa,
Egypt and Ghana enjoy better generation capacities in spite of the
head start over them, Ekpo said.”
Joy As Chile Miners Reach Surface
Hope dawned with the new day as a red, white and blue capsule lifted
miners from the dark bowels of the earth into the light. For 69
harrowing days, the 33 miners trapped in the San Jose gold and
copper mine in Chile waited for their ascent to freedom. And as the
first of the lot made the bumpy ride to the surface through half a mile
of rock, the jubilant cries of a nation rang out. Eager family members
and anxious strangers from around the world bit their lips in
anticipation as the rescue began in the intense chill of the desert night.
Sixteen minutes later, they broke out in cheers and chants of "Chile!"
as Florencio Avalos was the first to step out from the "Fenix" capsule,
named for the mythical bird that rose from ashes. In the capital,
Santiago, hundreds wept and embraced as they watched the rescue on
a flickering big screen TV set up in a square. Corks popped and
champagne flowed at the Chilean embassy in Washington. The scene
repeated itself as more and more miners arrived. Around the world,
people -- unrelated to the miners -- sat glued to their television sets.
9
NEWS
Ukraine Goes To Court Over
Gazprom Deal
UNDER the complicated deal, Naftogaz bought $1.7 billion in debt
owed to Gazprom by an intermediary company RosUkrEnergo and
then took 11 billion cubic metres of gas from the intermediary, saying
it was collecting the debt. However, RosUkrEnergo has since
challenged the move in a Swedish arbitration court which ruled in
June that Naftogaz was a breach of contract by taking the gas.
Naftogaz is now due to return the gas, worth about $2.8 billion
according to the price Ukraine currently pays for Russian gas, and pay
penalties to RosUkrEnergo, a company jointly owned by Gazprom
and Ukrainian tycoon Dmytro Firtash. Analysts say the cash-
strapped government cannot afford a straightforward cash
settlement. If the prosecutor's suit is successful, it could make the
settlement easier by making Gazprom return $1.7 billion to Naftogaz.
Gazprom declined to comment on the lawsuit. The prosecutor's office
said in a statement the case would be heard by the commercial court of
capital Kiev on 21 October
Iran Ups Its Reserves Cache
IRAQ claimed it had overtaken Iran. Coming ahead of an OPEC
meeting, one analyst said the two countries were in a "bidding war"
over reserves, which is usually a consideration including other criteria
such as production capacity when it comes to allocating quotas. Oil
Minister Massoud Mirkazemi told a news conference Iran had 150.31
billion barrels of reserves, up from a previous estimate of 138 billion
barrels and added that figure would be revised even higher soon. Iraq
raised its proven oil reserves figure by a quarter to 143 billion barrels,
surpassing Iran and putting it behind only Saudi Arabia in terms of
conventional crude, and third after Venezuela if unconventional
reserves are counted. Amrita Sen, an analyst at Barclays in London,
told the news agency that the rival claims by Iran and Iraq "looks like a
bidding war". During the Iran-Iraq war in the 1980s OPEC meetings
were dominated by Iraq demanding an output quota equal to Iran's.
The situation was only resolved after the war when some OPEC
members gave up some of their shares for Baghdad to have an equal
quota. Iraq said its revised figure would help it get a higher OPEC
quota in the future. It is exempt from the quota system while it
recovers from years of war. OPEC's meeting is not expected to set new
quotas or alter output targets. Mirkazemi said Iran's production
capacity was 4.2 million barrels a day but was pumping less due to its
OPEC quota. The Islamic Republic is under increasingly tough
economic sanctions due to concerns about its nuclear programme but
it remains the world's fifth-largest oil exporter.
Petronas Sells Ethiopian Assets To
Southwest
SOUTHWEST said it had agreed to purchase 100% of Petronas'
interests in Blocks 3&4, 11&15, 12&16, 17&20 and the Calub & Hilala
contract area. All of the blocks are located south-east of Addis Ababa,
in the Ogaden Basin, the largest proven hydrocarbon bearing
sedimentary basin in Ethiopia, with proven gas reserves of 2-4 trillion
cubic feet. SouthWest chief executive Tewodros Ashenafi said the
acquisitions provided the company with an opportunity to expand its
exploration and production activities in the country. “We intend to
develop these new blocks together with our existing blocks as quickly
10
NIGERIA ENERGY INTELLIGENCE
as possible and to work on developing transport solutions for
hydrocarbons in the Ogaden Basin,” he said. The transaction is
expected to be completed during the first quarter of next year
Power Supply: FG Assures Of
Additional Gas Supply
THE Minister of Petroleum Resources, Mrs Diezani Alison-
Madueke, has reassured investors of additional supply of 60 million
cubic feet of gas per day by Pan Ocean Oil Corporation to the power
generating stations of the Power Holding Company of Nigeria
(PHCN), to ensure stable power supply. The move was part of the
implementation of the power sector road map unveiled in September
by President Goodluck Jonathan, to achieve stable power supply by
2013. Mrs Alison-Madueke, while addressing journalists in Vienna,
Austria, ahead of her first appearance at the meeting of the
Organisation of Petroleum Exporting Countries (OPEC) today, said
gas production and supply had reached an all-time-high. She noted
that with the conclusion of negotiations, Pan Ocean would supply
additional 60mmcf/d of gas into the domestic market as soon as the
power sector was ready. The petroleum minister said the increase in
gas supply was made possible as a result of the conclusion of the
implementation of its reform of domestic gas pricing and review of
gas-to-power pricing. According to her, a new framework for the
negotiated pricing arrangement between wholesale local distribution
companies and end-user manufacturing industries had also been
concluded and was now being implemented. Alison-Madueke, who
heads the Nigerian delegation to the conference, in a report on third
quarter highlights of achievement in the oil and gas sector, said
following the effort on the refinery revitalisation and domestic
production of products, the Warri, Kaduna and Port Harcourt
refineries were now operational.
Nestoil Pipeline Contract Completion
Strengthens Confidence In Local
Firms
THE successful completion of the rehabilitation and construction of
pipeline projects for Shell Petroleum Development Company (SPDC)
by Nestoil Limited may have reinforced the confidence of
international oil companies in indigenous oil service operators. For
the much-touted local content development in the oil and gas industry
to be successful, it would require indigenous companies to build a
track record of sustained activities in their areas of specialisation and
untainted integrity which could earn them the confidence of the
financial sector. Pundits say it will be very difficult for local firms to
attract the assistance of financial institutions if their activities are not
focused and sustained. Sustenance of achievements, they insist, is
needed to enable the local firms move beyond the shores of the
country or even compete for oil and gas contracts in neigbouring oil
producing countries. In line with the Federal Government
commitment to build oil production capacity needed to boost the
nation's revenue, the completion of the pipeline project has enhanced
the evacuation of 600,000 barrels per day (bpd) of crude oil from 14
flow stations by Shell. The host communities were economically and
socially empowered through community development projects,
restoration of the environment and development of indigenous
manpower.
NIGERIA ENERGY INTELLIGENCE
OPEC Likely To Keep Quotas Steady Oil Rises As Japan Cuts Rates, Dollar
In Balanced Market Falls
OPEC ministers gave their strongest indication yet that they will OIL prices rose building on a week of gains after Japan unexpectedly
leave oil-production quotas unchanged at this week's meeting as
faltering growth in some of world's biggest economies stifles demand.
The market is "very well-balanced," Saudi Arabian Oil Minister Ali Al
Naimi said as he arrived in Vienna for meeting of the Organisation of
Petroleum Exporting Countries. Shokri Ganem, chairman of Libya's
National Oil Corp, said in London there's no need to alter quotas,
echoing comments made by Qatari Oil Minister Abdullah Al Attiyah
in an interview. Growth in oil demand will be uneven next year, with
the International Energy Agency forecasting a 4.3 per cent increase in
China and a 0.8 per cent reduction in Europe's five biggest countries.
OPEC, which supplies 40 per cent of the world's oil, is benefiting as
prices stay above the $70-to-$80-a-barrel band that Al Naimi
reiterated is "ideal." Algerian Oil Minister Youcef Yousfi said in
Algiers that oil prices of $90 to $100 a barrel are "reasonable"
considering current output levels. China has become the world's
largest energy user, having overtaken the US, the head of the
International Energy Agency said.
White House Blocked Gulf Of Mexico
Oil Spill Data
THE White House admitted that it blocked the release of information
about how bad the Gulf of Mexico oil spill could have become. The
presidential commission explained how government staff were told
that the National Oceanic and Atmospheric Administration (NOAA)
wanted to release some of its long-term, worst-case spill models for
the Deepwater Horizon accident in late April or early May. However,
the White House Office of Management and Budget blocked the
release of the information. The commission criticised the decision,
saying it could have improved public confidence in response to the
accident. "Staff were told that the Office of Management and Budget
denied NOAA's request," the commission said in a draft report on the
amount of oil spilled. The decision to block the release of the estimates
arose at the same time BP was being criticised for failing to provide
accurate information on the amount of oil leaking from its well. The
commission said "disclosure of those estimates, and explanation of
their role in guiding the government effort, may have improved
public confidence in the response" to the spill.
Oman Uses Advanced Technology To
Enhance Oil Field's Production
THE first full-scale Enhanced Oil Recovery (EOR) project in the
south of Petroleum Development Oman's (PDO) concession was
officially opened in Marmul in the Al Wusta region. Dr. Mohammad
Bin Hamad Al Rumhi, Oil and Gas Minister, formally opened the EOR
project. “This is a historic occasion for the company as it represents a
new chapter in the company's development, as this is the first full-
scale enhanced oil recovery," said PDO's new Managing Dir-ector
Raoul Restucci. "The new project aims to add a further 8,000 barrels
per day of oil production from the Marmoul reservoir," he added. He
pointed out that the company's oil production had achieved high rates
with the use of traditional technologies. "After 20 years of production
the Marmoul output started falling, but our sub-surface studies
showed that there was still plenty of oil left in the ground," he said.
INTERNATIONAL BRIEFS
lowered interest rates, raising expectations of further boosts for other
major economies. US crude for November rose 20 cents to $81.67 a
barrel by 0746 GMT, not far below Monday's peak at $82.38, the
highest price since August 6. ICE Brent for November gained 15 cents
to $83.43. "The oil price strength is very largely a response to the
weaker dollar," said David Wech of JBC Energy. Central banks in
Japan, the United States and Britain have been under political
pressure to do more to support economies showing only tepid
recovery from the worst recession in decades. Oil had slipped earlier
yesterday on forecasts for gains in US crude and gasoline inventories
and technical analysis signalling the rally to a two-month high was
overdone. US crude oil inventories probably rose last week by 600,000
barrels, while gasoline stocks were expected to have gained 100,000
barrels as refinery utilisation dropped.
Production By Dana Gas & Crescent
Rises In Iraq
DANA Gas, the UAE-based upstream oil and gas exploration
company, and its partner Crescent Petroleum, said their joint gas
production capacity in Iraq's northern Kurdistan has reached 200
million cubic feet per day. The project partners, who were joined last
year by OMV of Austria and MOL of Hungary in the Pearl consortium,
have so far invested over $850 million (Dh3.121 billion) under
contracts signed with the Kurdistan Regional Government (KRG) in
April 2007, making it the largest energy investment by any company
in Kurdistan. Current gas production ranges from 160 million to 180
million cubic feet per day to meet the prevailing demand of the two
gas-fired power stations at Erbil and Chemchemal, with a combined
capacity output of 1,250 megawatts, thereby providing almost
continuous electricity to the communities of the Kurdistan region. In
total, over 72 billion cubic feet of gas and 3.3 million barrels of liquids
have been produced since the start of production in October 2008,
providing billions of dollars of savings in fuel costs for electricity for
the Kurdistan Regional Government and the people of Iraq.
Oil Companies Pledge To End Iran
Investments To Avoid Sanctions
ENERGY giants Total SA, Royal Dutch Shell, Statoil and Eni have
pledged to end their investments in Iran. The pledges fall in line with
tough new energy and financial measures the US Congress imposed
on Iran in June, which came atop UN Security Council sanctions
imposed earlier the same month to curb Iran's nuclear ambitions. "I
am pleased to announce that we have received commitments from
four international energy firms to terminate their investments and
avoid any new activity in Iran's energy sector," Deputy Secretary of
State James Steinberg said, calling the move "a significant setback to
Iran." Steinberg said the move makes the companies eligible to avoid
US sanctions. The companies "have provided assurance to us that they
have stopped," or taken steps to stop business with Iran, he said.
“However, some international oil companies have not yet committed
to any new activities in Iran's petroleum sector. And for this reason the
State Department is launching investigations into those companies,"
he said.
11
SERIALIZATION
Roadmap For Power Sector Reform (1)
- The Recent Presentation By The Jonathan Administration On The
Sector-wide PlanTo Achieve Stable Power Supply
F ORTUNATELY, key early
milestones have been achieved in the
implementation of the EPSR Act. The
creation and unbundling of the Power
Holding Company of Nigeria (PHCN) have
been important first steps. This now needs to
be followed by the corporatisation,
commercialisation, and eventual
privatisation of the successor companies, the
inflow of a large volume of private sector
investment through the creation of new
power generation and distribution entities
and the subsequent development of a
competitive electricity market. At the same
time, a realistic, properly considered and
sustainable plan for service delivery in the
short and medium term that dovetails with
the structural reform imperative must be
Pursued.
Over the coming year, the Federal
Government will fast track these structural
reforms by: removing obstacles to private
sector investment; clarifying the
government's strategy on the divestiture of
the PHCN successor companies; and
reforming the fuel-to-power sector.
Removing Obstacles to Private
Sector Investment
The sections below outline the steps which
the Government is taking to catalyse the
inflow into the industry of private sector
investment and accompanying managerial
and technical expertise. It is important to
note, however, that the participation of the
private sector is not an end in itself. On the
contrary, it is only the means to the ultimate
o b j e c t i ve i . e . t h e u r g e n t l y n e e d e d
improvement in the service levels
experienced by all electricity consumers.
The establishment of an appropriate
pricing regime. For the sector to be
financially viable throughout the value
chain, the end-user tariff must at least be at a
cost-reflective level. However, the tariff as it
now stands is significantly below what is
necessary for the sector. As a result, not only
is PHCN continuously unable to meet
recurrent expenditure requirements, it must
continually beg government for additional
monies for short term and long term capital
12
expenditure. Further, and more importantly,
without a pricing regime that supports
financial viability in the sector, it simply
makes no sense for a private sector operator
to come into the market.
The Nigerian Electricity Regulatory
Commission will, therefore, be undertaking a
major review of the tariff regime which will
be completed before the end of the first
quarter of 2011 with a view to replacing the
national uniform tariff with a new genuinely
cost-reflective ceiling on end-user tariffs.
However, to protect against “rate shock” and
to ensure that low-income consumers are
provided with the “lifeline” tariff envisaged
by the framers of the original power sector
reform policy, there will also be much greater
price differentiation and the introduction of
an inclining block tariff whereby the rate paid
for electricity varies with a given level of
consumption.
The Establishment Of A Bulk
Purchaser
In accordance with the EPSR Act, the
electricity industry needs to transition to a
new model, where a government owned bulk
buyer carries out contract management and
bulk trading (on behalf of the distribution
companies ) until such time as the industry
has developed the settlement, accounting,
managerial and governance systems
NIGERIA ENERGY INTELLIGENCE
required for successful bilateral contracting.
The Nigerian Bulk Electricity Trading
Company PLC has now been incorporated
and over the next two months this entity will
be appropriately resourced and established,
with the expectation that by October 2010 it
will be ready and able to start negotiating
appropriate power purchase agreements not
just with successor generating companies
and existing independent power producers
(IPPs) but also with potential new entrants
into the power generating market.
The provision of FGN Credit
Enhancement
In entering into a power purchase agreement
(PPA), independent power producers (IPPs)
will also require that there is a creditworthy
counterparty at the other side of the table.
However, it could take up to four years before
some of the distribution companies become
commercially viable and are fully credit-
worthy entities. Therefore, in order to
accelerate private sector investments in
power generation, the Ministry of Finance is
reviewing a set of options through which the
Federal Government may provide credit
enhancement to the bulk purchaser that will
enter into PPAs with the successor
generation companies and IPPs. As it will
take a few years for IPP projects to be up and
running, by which time the structural reform
process will have gained significant traction,
the liabilities to which the Federal
Government may be exposed, were it to
provide some form of backstop to the PPAs,
will be negligible.
Creating An Efficient And
Motivated Workforce
Progress with the reforms has, hitherto, been
frustrated by the operational and financial
risks to potential acquirers of successor
companies posed by the government's failure
to reach an agreement with the labour unions
on the settlement of outstanding arrears (of
salaries, pensions and other benefits) and on
severance pay. Recognising that the faithful
implementation of the reforms will result in a
Continues on page 13
NIGERIA ENERGY INTELLIGENCE
Roadmap For Power Sector Reform
Continued from page 12
much larger, more dynamic sector with
industry participants enjoying significant
profits, consumers enjoying better service
delivery and, most importantly, workers
enjoying better conditions of service; the
Federal Government has recently engaged in
active dialogue with the leaders of the labour
unions. This dialogue is finally bearing fruit.
Indeed, the Government's expectation is that
a comprehensive agreement on all
outstanding issues will have been negotiated
by the year end.
Operationalising The Nigerian
Electricity Liability
Management Company
(NELMCO)
NELMCO was established as a government
Special Purpose Vehicle to assume and
manage extant assets, liabilities and other
obligations that could not be easily
transferred from PHCN to any of the
Successor Companies. The Federal
Government is working to ensure that
NELMCO is made fully operational without
further delay and that any uncertainties with
regard to the transfer of residual liabilities are
removed. In the process thereof, the Federal
Government will also make clear to investors
the complementary roles to be played (in the
management of legacy liabilities) of both
NELMCO and the Bulk Purchaser.
Contracting Out The
Management Of The
Transmission Company Of
Nigeria (TCN)
Investors will be reluctant to make large-scale
investments in the upstream and
downstream sectors of the electricity
industry unless they are confident that
commensurate investments in the midstream
sector will also take place. As such, the
management of TCN will be contracted out to
a private company which has both the
requisite project management and technical
expertise. The tender process for this has
commenced.
Clarifying And Strengthening
The Licensing Regime
FEATURE
The PHCN successor thermal generating plants will be privatised
via the sale of a minimum of 51% equity to core investors that clearly
demonstrate the technical and financial ability to operate and
expand each plant. Care will be taken, by working closely with
NERC, to ensure that a monopoly or oligopoly of market power in
the generation sector is not acquired through these divestitures. The
NIPP plants will be managed under Operation and Maintenance (O
& M) contracts now being prepared by the Niger Delta Power
Holding Company (NDPHC),
Electricity asset investments involve high overall strategy or “philosophy” in respect of
fixed costs with a long duration and investors the divestiture of the 18 successor companies.
expect the life of the licence to be more or less Accordingly, the divestiture approach set out
in line with the period required to recover in this Roadmap can be summarised as
their investments, typically 20 25 years. follows:
However, the EPSR Act provides for licenses
that shall not exceed ten years duration The Hydro Power Generating
although NERC may extend, on a rolling
basis, the validity of the licenses for
Plants
The strategy adopted by the BPE is to grant
additional five year periods. To provide
concessions for the operation of Kainji, Jebba
greater comfort to investors, mechanisms are
and Shiroro. This approach is principally
being developed that will assure them of
predicated on the magnitude of the capital
renewal/extensions of their license provided
requirements and water rights issues
they meet the necessary conditions.
associated with these plants; but it also
reflects the link between the sustainable
Strengthening The Nigerian management of hydro power and the
Electricity Regulatory development of the country's agricultural
Commission resources.
NERC plays a critical role in issuing
operating licences and regulating the sector. The Thermal Generating Plants.
More importantly, it provides confidence that The PHCN successor thermal generating
a level playing field will subsist and that rules plants will be privatised via the sale of a
will be followed and enforced. In recognition minimum of 51% equity to core investors that
thereof, the Government has taken decisive clearly demonstrate the technical and
action to resolve the leadership vacuum at financial ability to operate and expand each
NERC and establish a credible leadership plant. Care will be taken, by working closely
therein. with NERC, to ensure that a monopoly or
oligopoly of market power in the generation
Clarifying The Government's sector is not acquired through these
divestitures. The NIPP plants will be
Strategy On The Divestiture Of managed under Operation and Maintenance
The PHCN (O & M) contracts now being prepared by the
Successor Companies Whilst the government Niger Delta Power Holding Company
is committed to resolving each of the specific (NDPHC), the parent company of these
obstacles to private sector investment plants. The Mode and strategy for their
outlined above, it is also conscious that subsequent divestiture will then be
potential investors in the sector are looking communicated once these plants have been
for a clear indication of the government's
Continues on page 14
13
FEATURES NIGERIA ENERGY INTELLIGENCE

Roadmap For Power Sector Reform

Continued from page 13
commissioned.

Throughout the reform period, the Government is

The Transmission Company of
Nigeria
determined to apply its energies with equal and
The Transmission Company of Nigeria will commensurate force to the service delivery imperative.
be handed over to a credible private sector
company under a five year management
More particularly, our focus is on service delivery that is
contract. The key, therefore, to the successful sustainable; service delivery that is carried out in a well-
commercialisation of the national grid is the
appointment of a contractor with the skills
managed and monitored manner and for which outputs
required to manage the huge and complex can be properly evaluated; and service delivery for which
programme of construction and
rehabilitation that will be required over the those directly responsible can be held truly accountable.
coming decade.

The Distribution Companies
All the distribution companies are expected
to be privatised, based on a core investor sale
of a minimum of fifty-one (51) percent of the
government's equity in the companies. The
sale methodology will emphasize the
reduction of technical and commercial losses
and increased efficiency of collections.
Accordingly, in addition to their offers for
ownership of a minimum of fifty-one percent
of the companies, bidders will be expected to
submit proposals that reflect information on
their strategy for meeting the efficiency
targets that will be specified in the Request
for Proposals.
Reforming the Fuel-to-Power
Sector
Finally, the Federal Government is also
conscious of the need for complementary
reforms in the upstream fuel-to-power sector
and in the gas industry in particular.
Significant reforms of the gas industry have
already taken place over the past 12 months
and these reforms should have a direct and
positive impact on the electricity industry in
the years to come. Nevertheless, during the
course of the coming year, the Government
will introduce additional incentives to attract
the tens of billions of dollars of private sector
capital which the industry will require over
the coming decade.
Improving Service Delivery
Throughout the Transition
Whilst it is the Government's intention that
14
the Nigerian Electricity Supply Industry
should be principally owned and controlled
by the private sector, this transition cannot
happen overnight. Thus, for an interim
period, the Federal Government of Nigeria
through its parastatals will continue to retain
direct accountability for service delivery
across large parts of the electricity value
chain. In view of the above, consumers (and
the citizenry as a whole) have a right to know
what level of service delivery is expected of
these parastatals during the transition
period. Moreover, the Federal Government
recognises that electricity customers are keen
to see immediate improvements in service
levels and will not be satisfied with the mere
promise that these improvements will
materialise after the sector has been
reformed.
Thus, throughout the reform period, the
Government is determined to apply its
energies with equal and commensurate force
to the service delivery imperative. More
particularly, our focus is on service delivery
that is sustainable; service delivery that is
carried out in a well-managed and monitored
manner and for which outputs can be
properly evaluated; and service delivery for
which those directly responsible can be held
truly accountable. In addition, as a radical
departure to the established way of doing
things, we are committed to adopting a more
participatory and inclusive approach to the
reforms. This will mean carrying the general
public along every step of the way by
ensuring that progress against objectives will
be made clear and transparent.
In the short term, we must clearly ensure
a substantial increase in the total quantum of
power delivered to electricity consumers
across the country. In this regard, we are
committed to ensuring that the average
number of hours of electricity supplied to
consumers increases noticeably over the
coming year. The second and equally
important objective is to ensure that the
supply of power will not only be significantly
greater than ever before but that it will also be
much less erratic and unpredictable.
To that end, the targeted increases in
generation, transmission and distribution
capacity will be combined with a deliberate
change in the practices of the System
Operator. This change will mean that instead
of despatching all the available generating
capacity all of the time, the System Operator
will aim to keep power generation and
d i s t r i b u t i o n s t e a d y a n d r e l a t i ve l y
predictable. In addition, the Government is
also urging the System Operator and the
various distribution companies to undertake
more strategic and more predictable load-
shedding practices. In the medium term (by
December 2013), even though there will by
then be a substantial reduction in the
Government's funding and managerial
direction of significant elements in the
electricity value chain, our expectation is that
the total quantum of power delivered to
electricity consumers across the country
should be at least twice the current level. This
ambition reflects expected outputs from the
planned completion of projects which have
already been budgeted and for which the
government will retain direct accountability,
Continues on page 15
NIGERIA ENERGY INTELLIGENCE
Roadmap For Power Sector Reform
Continued from page 14
namely: the completion of all the overdue
NIPP projects (for generation, transmission
and distribution); the completion of the
outstanding (and already budgeted) PHCN
projects; and the completion of the
outstanding (and already budgeted) NGC
investments in the gas supply and
transportation industry.
Our specific objectives and associated
activities are spelt out in detail in this
Roadmap and encompass goals in the four
key areas of fuel-to-power, generation,
transmission and distribution. In addition,
there are auxiliary objectives which cut across
all four sectors and these, include in
particular: the compilation, processing and
disclosure of industry statistics which are
essential for strategic planning; and the
development, training and incentivisation of
the human capital upon which the success of
the whole industry depends.
Fuel-to-Power
In view of the high capital costs and long lead
times required to develop commercial power
generation through solar, wind, nuclear and
biomass, the Federal Government will focus
its development efforts on hydro, coal and
natural gas. The potential of natural gas, in
particular, will be prioritised and incentives
will be provided to investors to exploit this
resource to its fullest potential. In the short
term, work to implement the National Gas
Masterplan will be accelerated. In the period
up to April 2011, it is expected that there will
be enough gas supplied to power producers
(circa 1,636 mmscfd) to support the targeted
increase in actual generation capacity of circa
7,000 MW.
In the medium term, available generation
capacity is projected to outstrip the available
gas supply to power producers. As such,
additional support and incentives will be
required to attract private sector investment
into the gas sector so as to enable
international oil companies and other
investors to produce stranded gas locked up
in various fields especially in the eastern axis.
Generation
In the short term, the Federal Government is
committed to rehabilitating circa 1,000 MW of
generating capacity at existing PHCN power
In the medium term (up to December 2013), we can expect: a modest
increase in the total power generation capacity of the existing PHCN
power stations (which would bring the total to just under 4,500
MW); the addition of 4,775 MW from the NIPP plants; and a
substantial (3,300 MW) increase in power generation capacity from
IPPs, all by December 2013. As such, the medium term expectation is
that 14,000 MW of power generation capacity will be available by
December 2013.
stations and adding an additional 1,266 MW 2011 above its current limit of circa 4,500 MW
of generating capacity from new NIPP power equivalent. In practice, however, it is highly
stations. The strategy from the beginning of unlikely that an increase of this magnitude
next year will be to maintain for every part of will be realisable by April 2011. On the
the country, the current allocation of power, contrary, the Government's projected targets
and then begin to allocate a significant for April 2011 are that the “true deliverable”
portion of the additional power that will transformation capacity will rise by just over
come from the NIPP and other IPP projects to 10% to about 5,000 MW equivalent (even
key industrial cities in the country. Where though the total nominal 330kV
possible, additional power from other IPPs transformation capacity is projected to rise
will be domiciled in the local domain where to 5,995 MW equivalent). These figures
the power is produced. reflect the fact that the transmission network
In the medium term (up to December is still a weak link in the electricity supply
2013), we can expect: a modest increase in the chain. Moreover, even with the completion of
total power generation capacity of the the extant PHCN and NIPP transmission
existing PHCN power stations (which would projects (for which funds have already been
bring the total to just under 4,500 MW); the provided), the gap between generation
addition of 4,775 MW from the NIPP plants; capacity and the capacity of the grid is
and a substantial (3,300 MW) increase in expected to widen considerably over the
power generation capacity from IPPs, all by coming three years.
December 2013. As such, the medium term It is all the more imperative, therefore,
expectation is that 14,000 MW of power that new investments are pushed forward as
generation capacity will be available by rapidly as possible. To that end, the TCN
December 2013. Although the Government is management contractor will be responsible
determined that the vast majority of all new for significant investments in the expansion,
power plants should be financed and built by reliability and stability of the network
the private sector, it also acknowledges that infrastructure. In addition, the Federal
there is a case for some limited involvement Government plans to build a new super
by the FGN in the financing of renewable transmission network, which amongst other
forms of power generation e.g. hydro (or things will help to evacuate power from the
other renewables) and in stimulating proposed Mambilla hydro power plant.
production of power from coal. Given the Government's commitment to the
introduction of a genuinely cost-reflective
Transmission tariff, a substantial portion of these capital
To ensure that this increase in generating investments will be recovered through the
capacity is not left stranded for lack of revenues generated by the electricity market
itself i.e. by the transmission use of system
evacuation capacity, there would be a need
for a 30% increase in the “true deliverable” charges paid to the Transmission Company
transformation capacity of the country's of Nigerian (TCN).
330kV network between July 2010 and April
To be continued in the next edition
15
NEWS
20th World Petroleum Congress Promoted
At Major Saudi Oil & Gas Event
20th World Petroleum Congress organising committee chose the
Saudi Oil and Gas Exhibition SAOGE 2010, held in Dhahran from 10-
12 October, to promote the 20th WPC. Under the patronage of His
Royal Highness Prince Mohammed bin Fahd bin Abdul Aziz,
Governor of the Eastern Province, SAOGE 2010 was attended by more
than 260 companies from 34 countries and almost 8,000 visitors. The
event attracted the leading companies of the oil and gas industry in a
country that promises to play a major role in the 20th WPC and will
send a large contingent of participants to Doha in December 2011. The
20th WPC was promoted on the Qatar Petroleum stand, which won the
“Best Stand” award of the SAOGE 2010 exhibition. Scores of visitors
and exhibitors visited the 20th WPC display to register interest in the
event. With the Call for Papers for the 20th WPC open until January
2011, the focus was also on the promotion of the technical programme
to SAOGE attendees, mostly engineers and petroleum technicians. In
addition, a delegation of the 20th WPC organising committee led by
Rida Nazim Agha, Manager for General Services at Qatar Petroleum
and member of the Qatar Organizing Committee for the WPC, met
with representatives of Saudi Aramco to discuss the details of the
company's participation at the 20th WPC. Saudi Aramco will play a
Lukoil Says Near Certain Ghana
major role at the event, with a large exhibition stand and delegation.
Africa Soon World's New Oil Frontier Assets Commercial
THE profile of the African hydrocarbons market is set to change as
emerging African oil and gas companies acquire marginal oil and gas
assets from multinational groups. Africa is fast emerging as an
investment destination of note. Robin Vela, CEO of JSE-listed oil and
gas company SacOil, says that by 2020 Africa will account for 20% of
global oil and gas discoveries. “There is a scramble for African
acreage,” Mr Vela says. Africa is the new frontier, he says. Upstream
activities, which entail the search for, recovery and production of
crude oil and natural gas, are known for their high costs and
complexities. Add the fact that known oil and gas locations in Africa
are not in the most stable of countries. Stories coming out of the
Nigeria's Delta region are enough to send a chill down a prospective
investor's spine. But the rewards in the upstream market can make the
financial risks and complex challenges worthwhile, and
multinationals Shell, Total, Chevron, Agip and ExxonMobil have been
exploring for oil and gas in Africa for decades. Now smaller, so-called
indigenous oil and gas companies are getting their piece of the cake.
Unlike the multinationals, which have head offices in overseas
countries, these emerging players, which see a role in the upstream
market, are local companies set up and run by Africans. Some, such as
SacOil and Oando , are listed on the JSE listings that come in handy
when these companies want to raise cash for their ambitious projects.
Most importantly, these companies know the upstream market in
Africa well and realise their own limitations.
Oil Firm Under Investigation For
N4.5bn Tax Evasion
A foreign oil and gas exploration company, PGS exploration Nigeria
Ltd, has been dragged before the Economic and Financial Crimes
Commission, EFCC for allegedly evading payment of tax amounting
to N4.5 billion due to the Federal Government. The allegation formed
part of the accusations levied against the oil exploration company by a
NIGERIA ENERGY INTELLIGENCE
Niger Delta development watch group, Oil and Gas Integrity Watch
Group (OGIWG) in its petition to the anti graft agency, accusing the
firm of carrying out explorations in some part of the region, but
allegedly failed to remit necessary tax due to the government. The
alleged sum, was said to represent taxes expected to be paid to the
Federal Government by the oil firm from contracts executed between
1999 and 2009 put at about $400million. Investigations revealed that
already, the Federal Inland Revenue Services, FIRS has swung into
action to unravel the truth about the alleged tax evasion by the
company. The group in their petition said “Our impeccable
information revealed to us that the sum of between $350,000,000 and
$400,000,000 was realized by PGS Exploration Nigeria Ltd from the
sales and data related services rendered to various oil companies, both
local and foreign. The company therefore became obliged to pay to the
Federal Government of Nigeria to the tune of about $30,000,000, Tax as
there was no waiver…”Attempt to confirm the veracity of the
allegations against the company was not welcomed as its officials
turned down entreaties to meet with them. When Vanguard visited its
office located at plot 15, Eletu Ogabi, Lagos on the 14th of September,
2010 at about 1p.m the most senior security officer on duty, one Victor
assisted our correspondent by putting a call to the Human Resources
Manager, through his secretary but all to no avail, as the secretary
refused admittance.
LUKOIL said its project in Ghana will almost certainly turn
commercial. Dmitry Timoshenko, VP of Lukoil Overseas said, "We are
almost certain that we will have commercial development," at a press
conference in Moscow with Ghana's Energy Minister Joe Oteng-Adjei.
The company is partnered with US independent Vanco and Ghana's
GNPC on the Cape Three Points Deepwater. The partners have drilled
one well so far on the license and are expected to complete the
analyzing of seismic and drill one more well over 2011-2012. Reserves
at the field have not yet been determined, but Timoshenko said that for
the operation to be profitable it would need between 150 and 250
million barrels of oil. "Around 150-250 million barrels is a good
number to begin development," he said, adding that Lukoil Overseas,
has a 56.6% share in the license. The company is interested in
participating in other projects in Ghana as well. "We will continue to
look into practically any opportunity to participate in new projects in
Ghana," Timoshenko said
SacOil enters Nigeria's oil, gas market
LISTED oil and gas company SacOil has begun a joint venture with
Energy Equity Resources to gain a foothold in the important Nigerian
oil and gas market. The agreement, which the companies announced
in Johannesburg yesterday, gives SacOil an opportunity to tap into
production and near-production oil and gas fields in Nigeria. “Nigeria
is the market to be in if you are looking for production and near-
production assets,” SacOil CEO Robin Vela said.SacOil was formed
after the South African Mineral Resources Corporation ( Samroc )
bought the South Africa Congo Oil Company, which had oil
concession rights in the Democratic Republic of Congo, in 2008 to gain
a foothold in that country's oil industry. Samroc then moved to the
JSE's oil and gas sector and changed its name to SacOil. Mr Vela said
Nigeria has oil and gas resources that are accessible to emerging
companies such as SacOil.