Oil & Energy
Encouraging Local Participation In Oil And Gas Industry
Being an address presented by the Executive Secretary, Nigerian Content Development and Monitoring Board, Engr. Ernest Nwapa at an enlightenment Forum on September 29, 2011 in Port Harcourt.
It gives me great pleasure to be here today at this event, one of the series of enlightenment progammes of the Nigerian Content Development and Monitoring Board (NCDMB) to keep oil producing states and communities abreast of opportunities in the oil and gas sector. The enlightenment events are aimed at constructively engaging the oil-bearing states and communities on the fundamentals of the Nigerian Oil and Gas Industry Content (NOGIC) 2010 Act, signed into law on April 22, 2010 by President Goodluck Jonathan.
The antecedents of the NOGIC 2010 Act are still vivid, especially to indigenous oil and gas operators and the oil-bearing communities. The story of the industry hitherto can be surmised as almost foreign, dominated with very little space available to qualified indigenous professionals and businesses. There was certainly less space for the participation of oil-bearing communities.
The former environment was characterized by:
(i) Excessive importation of goods and services at the expense of local participation resulting in otherwise avoidable impoverishment and alienation of the people. A major contributor to the Niger Delta situation;
(ii) Performance of the mega-projects of the industry abroad thereby eliminating opportunities to develop human and infrastructural capacity in Nigeria. – Capacity constraints in turn, limit the industry’s ability to perform sufficient work scope in Nigeria when designing, procuring and fabricating facilities, plants and assets or for after-sales support in the operations and maintenance phase;
(iii) Our estimates that over 150 times more jobs are created in other countries than in Nigeria on the back of Nigerian projects at the expense of national development. Apart from the obvious negative impact of unemployment on the economy, the nation is denied opportunities for industrialisation and technology transfer;
(iv) In absolute terms, less than 20% of $18bn average annual industry spent was retained in Nigeria.- such prolonged capital flight is a major factor for low economic performance, insignificant impact of the sector on national GDP and poor levels in local infrastructure investment despite heavy government expenditure in the sector.
Although some discretionary allocation of oil blocks were made by the military government to indigenous operators to promote the presence of Nigerian companies in the upstream in 1993, government also took the bold move to break the detrimental mould of low Nigerian upstream participation in 2004 by evoking the latent policy on Marginal Fields to admit Nigerian entrepreneurs. By that action, some 24 discoveries classified as Marginal Fields which had been left unattended for upward of 10 years and above were allocated to 31 indigenous companies under a strict technical and commercial evaluations.
Though the exercise is now often classified as a success, it was obvious that the composite in-country value addition to the oil and gas operations in Nigeria needed to be taken beyond the Marginal Fields to encompass the entire Exploration and Production value chain to meet expectations for significant growth. The establishment of Nigerian Content Division (NCD) by the Nigerian National Petroleum Corporation (NNPC) in 2005 for the first time gave a formal structure to Nigerian Content issues and significantly positioned the policy for more holistic application in the industry. NCD also came up with focused directives and formally established Nigerian content base for every contract in the entire value chain of oil and gas operations. It further became the bridge to link the major operators with indigenous service companies on Nigerian Content issues.
The benefits of the NCD directives on the industry were clearly evident, especially in areas of domiciliation of Front End engineering design (FEED) fabrication and capacity building, especially in the engineering sector. The prescriptions on domiciliation of fabrication works significantly increased project work scope thereby boosting activities in hitherto dormant fabrication yards. Structured certification and training of welders and pupilage through work attachment were part of the significant achievements of the NCD initiatives.
Distinguished ladies and gentlemen, notwithstanding the NCD strides, it also became obvious that the challenges of developing and nurturing Nigerian Content beyond fringe participation required a focused statute. That necessitated the promulgation of the NOGIC Act, 2010 and the prompt assent of the President, Dr. Goodluck Ebele Jonathan to the Act on April 22, 2010.
Specifically, the NOGIC Act gave teeth to the fundamental aspirations of government for strong Nigerian E and P Sector and a virile indigenous service sector. The statute further established the process for Nigerian Content in all segments of the oil and gas value chain by prescribing minimum Nigerian Content benchmarks for the listed activities in contracting process. The Act also established the Nigerian Content Development and Monitoring Board (NCDMD) as the regulating body of Nigerian Content in the oil and gas industry. NCDMB headquarters is located in Yenagoa, Bayelsa State, in line with prescriptions of the law that mandates siting the body within the Niger Delta.
Whereas the headquarters’ office covers operation activities in Rivers and Bayelsa States, NCDMB has also established offices in Owerri to cover Imo and Abia States and in Warri to cover Delta and Edo States. Plans are at advanced stages to also establish offices in Akwa Ibom State, Cross River and Ondo States for complete coverage of all the oil and gas producing states.
Distinguished ladies and gentlemen, without pre-empting other speakers, please allow me to dwell briefly on the operational strategies and some programmes in place by the Board for implementation of the NOGIC Act.
First, we fully understand that successful Nigerian Content policy should be run on the back of projects. We are also aware that ample opportunities had been lost by Nigeria in the past by not leveraging on the multi-billion dollar upstream projects to develop capacity and grow indigenous participation. In line with the stipulations of the Act, therefore, the Board always ensures that no Invitation to Tender (ITT) goes out in the industry without explicit minimum Nigeria Content stipulation and that no tender gets pre-qualified without approved Nigerian Content plan.
Secondly, we understand the roles of competent skills in meaningful local participation, especially given the complex operational environment in the oil and gas industry. Training and curriculum development are required to grow in tandem with the industry needs to keep abreast of opportunities.
The Board has, therefore, set up elaborate programmes to ensure that annual training budgets in the industry are effectively utilized in ways that would add real values to the skills of our teeming youths, especially from the oil and gas communities. The Board has also met with the Oil and Gas Trainers’ Association of Nigeria (OGTAN) to deliberate on how to further enhance the industry training process to move beyond spending to adding the required values, in real terms, to our teeming youths and practitioners in the industry. Oil and gas companies had been put on notice that manpower training would henceforth be a vital index of the Nigerian Content performance.
Thirdly and corollary to the foregoing, the Board is decisively committed to structured attachment policy in the industry, especially for sub-surfacing and engineering graduates to enable young Nigerians gain relevant experience to qualify them for positions in the industry. I was particularly pleased to show case, at the anniversary of the NOGIC 2010 Act held recently in Abuja, some of the university graduates that have successfully passed through the NCDMB attachment training schemes and are gainfully employed in the industry. The future of Nigerian participation in the industry lies in its teeming youths. The Board is committed to ensuring the realisation of Nigeria’s potentials, especially in the oil bearing communities.
Distinguished ladies and gentlemen, past experiences have shown that the best way forward to realising the full potentials of Nigerian oil and gas resources is through peace and sustainable development of the communities. Establishment of the Board is a strong indication by government that it is indeed serious about growing indigenous capacity and improving local participation in the oil and gas industry. By providing that, the Board headquarters should be located in the Niger Delta as the law intends the oil-bearing communities to be the main focus of its activities.
We are here today to tell you about the activities of the Board since inception and also listen to your suggestions, especially on how the state and the oil-bearing communities can be better served. I am sure, we shall leave here mutually fulfilled that we have achieved our objectives.
I thank you for listening.
Oil & Energy
Savannah To Take Over Stubb Creek Field in Nigeria
Savannah Energy PLC has signed agreements to take over Sinopec International Petroleum Exploration and Production Company Nigeria Ltd. (SIPEC), the British company’s co-venturer in the Stubb Creek oil and gas field in Nigeria, for $61.5 million.
SIPEC owns a 49 percent interest in the proven onshore asset in the Akwa Ibom State, which sits on the southern coast of the Western African country.
Savannah affiliate Universal Energy Resources Ltd. operates Stubb Creek with a 51 percent interest.
London-based Savannah, in a Press Release, said it has now inked separate share purchase agreements (SPAs) with the Chinese and Nigerian owners of SIPEC—Sinopec International Petroleum Exploration and Production Corp. (SIPC) and Jagal Ventures Ltd., the completion of which will result in Savannah taking full ownership of Stubb Creek, SIPEC’s principal asset.
“The SIPC SPA will see Savannah Energy SC Limited (a wholly owned subsidiary of Savannah) acquire a 75 percent equity interest in SIPEC for cash consideration of US$52 million, payable on completion and subject to customary adjustments for a transaction of this nature from 1 September 2023.
“The Jagal SPA will see Savannah Energy SC Limited acquire a 25 percent equity interest in SIPEC for cash consideration of US$7.5 million (without adjustment), payable on completion, plus US$2 million in deferred cash consideration payable in eight equal quarterly installments post-completion”, it stated.
Savannah simultaneously released an independent analysis showing gross proven and probable (2P) oil and condensate reserves of 11.9 million stock tank barrels (MMstb), as well as a gross best contingent gas estimate (2C) of 515.3 billion cubic feet (Bcf), in Stubb Creek as of January
It also holds an 80 percent interest in Accugas Midstream Business, which owns and operates the Uquo central gas processing facility and 260-kilometer (161.6 miles) pipeline network. The processing facility has a declared capacity of 200 million cubic feet a day.
SIPEC meanwhile had an estimated 8.1 MMstb of 2P oil reserves and 227 Bcf of 2C gas as of yearend, while its oil production is estimated to average 1,400 barrels per day (Kbpd) this year.
“Savannah’s Reserve and Resource base will increase by approximately 46 MMboe [million barrels of oil equivalent] following completion of the SIPEC Acquisition.
“It is anticipated that, within 12 months following completion of the SIPEC Acquisition, Stubb Creek gross production should increase by approximately 2.7 Kbopd to approximately 4.7 Kbopd through implementation of a de-bottlenecking program”, it said.
Oil & Energy
NNPCL Lists Transparency, Accountability, Others, As Transformation Drivers
The Executive Vice President, Gas, Power and New Energy, Nigerian National Petroleum Company Ltd, Olalekan Ogunleye, has identified transparency, accountability, research, technology and innovation as key drivers of the ongoing transformation in the company.
Ogunleye disclosed this while speaking during a Panel Session hosted by the NNPC Ltd at the ongoing 2024 CERAWeek Conference in Houston, the United States.
Ogunleye, whose session addressed the theme, “Africa’s Energy Future: Access, Investment & Sustainability”, said under the current leadership of Mr. Mele Kyari, the Company has institutionalized the use of modern technology to drive its operations, a development that has created tremendous value for the company in its quest to compete with its global peers.
He said with the coming of the Petroleum Industry Act (PIA) in 2021, NNPC Ltd has today transformed into an integrated commercial entity that is focused on transparency and accountability, two core values that are vital towards the Company’s quest to float an Initial Public Offer (IPO) at the stock exchange.
“Over the last five years, the NNPC Ltd has been pushing the agenda of transparency, accountability and performance excellence. I am glad to say that we are setting very high standards, and this is a journey that we are all committed to going forward”, Ogunleye stated.
He further observed that transparency and accountability have a commercial component to them, because they can make any organisation attractive to its partners and potential investors.
He said currently, the NNPC Ltd is working assiduously to become IPO-ready, stressing that once that is done, the IPO would be phenomenal and successful.
Ogunleye, who described the future as exciting for the NNPC Ltd, said as the biggest energy company in Africa with the biggest resources and largest market, the Company remained committed to delivering value to its shareholders by relentlessly improving its processes in line with global best standards.
He said gas would continue to be an important resource for Africa because it is the surest tool for economic development and for delivering better living standards for the teeming population on the continent.
Ogunleye called on all gas players to sustain the advocacy for gas as a major energy source that will be utilised to develop the economic and industrial fortunes of the continent.
According to him, gas is a top priority for NNPC Ltd because the Company is at the forefront of Nigeria’s gas commercialization efforts and flare elimination.
“Gas has come to stay. It is going to be part of the energy mix for us in the long term. We shall continue to be at the forefront of accelerating gas development and commercialisation in Nigeria”, he added.
Oil & Energy
Africa’s Energy Leap From Fossil Fuels To Renewable Powerhouse
The African continent is at a critical turning point. The region’s energy demand is set to skyrocket, just as climate change is starting to impact local livelihoods in earnest.
African countries are among those most vulnerable to climate change despite having contributed the least to the climate crisis.
Faced by a sharp population growth, and a need to develop local and national economies, Africa also must simultaneously contend with the urgent imperative to keep emissions in check. It’s a tall order.
Indeed, Africa is a perfect example of what is known as the energy trilemma: the tricky problem of creating enough energy while also keeping that energy sustainable and affordable.
What makes Africa’s situation so unique and so dire is the intense scale of each of these trends. The continent has some of the most underdeveloped energy grids on the globe, and is also facing the biggest population boom anywhere on Earth.
Africa has the fastest growing population in the world, expected to double between now and 2050. This means that, by midcentury, a quarter of the global population will be in sub-Saharan Africa. This presents a massive energy and infrastructure gap in the coming decades.
Currently, about 600 million people across Africa completely lack access to electricity. Furthermore, for a great many of those who do have access, it is not reliable or stable, as power failures and rolling blackouts are a common occurrence.
Such intermittent electricity is common in urban areas, while in rural areas establishing any form of grid connectivity can present a major challenge.
African energy demand is expected to increase by a third over the next decade as sub-Saharan Africa grows, develops, and industrializses.
To meet this demand, power generation capacity will have to increase by a factor of 10 by 2065. But to advance toward such goals without breaking climate pledges and more generally counteracting global progress toward decarbonization, Africa has to “leapfrog” over what is normally the next phase of development in a poor nation’s economic journey.
Unlike other nations in history which have enriched themselves and developed their economy by burning massive amounts of cheap and abundant fossil fuels with abandon, countries developing now do not have the same option.
Luckily, Africa is a goldmine of potential renewable energy resources.
“The continent is extremely rich in natural gas (considered to be a stepping stone away from dirtier fossil fuels like coal and oil), as well as abundant sunshine, wind, and highly sought-after rare Earth minerals such as lithium and cobalt which are essential components of renewable technologies including photovoltaic solar panels and lithium-ion batteries for electric vehicles and renewable energy storage”, Oilprice reported in July of 2023.
It’s just a matter of securing sufficient investment, fostering a supportive political environment, and establishing trans-national intra-African energy sharing agreements to be able to tap all of that green energy potential. If managed properly, clean energy could benefit the African economy enormously while helping to solve the riddle of the energy trilemma.
According to a new database of planned and installed renewable energy capacity across Africa, the continent is well on its way to achieving its ambitious energy “leapfrogging” goals.
In fact, figures show that if all planned additions are carried out without issue, some African nations could totally decarbonize by midcentury.
The Renewable Power Plant Database Africa, built by a renewable energy scientific modelling team from Rwanda and Germany, is the first comprehensive overview of renewable energy plants in Africa to include key details such as their geographic coordinates, construction status and capacity (in megawatts), allowing for more accurate and sophisticated modelling.
Such modelling shows that some of the countries with the most advanced renewable energy sectors and plans (such as Nigeria and Zimbabwe) already have enough clean energy projects lined up to conceivably transition away from fossil fuels as soon as 2050.
Furthermore, 76% of Africa’s electricity demand could be supplied by renewable sources by just 2040 in a scenario in which all clean energy plants in the pipeline are built as planned, and existing hydro-, solar and wind power plants are used to their full capacity.
This 76% would be composed of 82% hydropower, 11% solar power and 7% wind power.
However, the heavy dependence on hydropower in the short term is not a good long-term solution as periods of drought pose serious energy security risks.
“We conclude that combining the advantages of hydropower with wind and solar would be a more sustainable alternative to hydropower alone”, the Database team states, adding, “And that hybrid solutions would be the best option’.
Despite Africa’s many challenges, it stands to be one of the most important players in the global energy industry going forward. Its climatic and ecological characteristics and relatively low population density compared to other key regions gives it a major advantage as a hydro, wind, and solar powerhouse.
If built out according to plan, its clean energy output will be formidable. And as the continent develops, its massive workforce could make it a clean energy manufacturing source to reckon with.
Zaremba writes for oilprice.com concessional and semi-concessional.
By: Haley Zaremba
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