Oil & Energy
2011And Nigeria’s Oil Industry
The year 2011 witnessed a very stormy weather that is yet to be cleared in the oil/gas and energy sector. Although the year came with great hopes and benefits as the President Goodluck Jonathan –led administration ensured that petroleum products and power supply were available for the people.
However, the controversial issue of removal of fuel subsidy beclouded scenario which is yet to be resolved or settled as Nigerians are not yet convinced as to how the funds saved from the subsidy will be used.
More than 50 years ago, Nigeria began to witness oil exploration and exploitation, which is being sustained till date. As the years roll by one is moved to reflect on the development of the oil and energy sector of the nation’s economy.
The uncommon fast movement or shift from agriculture to petroleum has enveloped the country and the gamble of the adventure is now paying off. The country is eventually achieving the great success of its life in the oil and energy sector. The satisfaction and fulfillment the nation is enjoying are mainly derived from oil and gas her God-given resources.
It is, however, one’s waning regrets that the sector is experiencing a seeming down shift due to managerial ineptitude. It was the oil and gas as well as energy success that made the country a cynosure of the world. The relative peace in the Niger Delta in 2011 created a suitable environment for oil companies to increase their outputs of crude oil production.
The year 2011 recorded some paradigm shifts from what obtained in the past. The Federal Government took measures toward the implementation of reforms in the oil-gas and power industries during the year.
In partnership with joint venture oil companies, there were renewed efforts at creating improved and sustainable community relations with host communities of oil-producing Niger Delta region to enhance oil production after the amnesty programme was put in place for former militants that terrorised the region.
For the first time, the government mustered courage and the will to privatise the power sector by handing over two power generation plants to private investors. It also went into some collaboration to explore development of the gas sector in a manner that would retain substantial value in the country. Although the impact of some of the decisions government took currently may not have been felt, operators are of the opinion that such steps were bold enough to bring a change in the oil/gas and energy sector.
Upstream
The inability of the National Assembly to pass the Petroleum Industry Bill (PIB) into law was a major setback in implementation of the reform in the upstream sector of the petroleum industry. Despite efforts of the executive arm of the government to persuade the National Assembly to pass the bill into law before the last general elections, the legislators sat on it and unit now, its passage is not in sight.
Most of the reforms expected in the upstream sector and their implementation processes are tied to the bill, hence further investments in the sector seemed to be at a standstill. Exploration activities last year were almost at zero level as international oil companies (IOCs) were skeptical over embarking on exploration as the PIB on passage into law might be very unfavourable since inputs in the bill became contentious, especially the fiscal regime and the issues on acreage development, which after several meetings between government and the IOCs, remained unresolved. The IOCs claim that the fiscal aspects of the bill, if passed into law in the current state, would make exploration and production business very unprofitable.
However, oil production improved last year on the heels of sustained amnesty programme of the government, rising to 2.4 million barrels per day, though the country was depending on importation of petrol. The development brought back Nigeria to its position as number one producer in Africa.
In 2011, Shell Petroleum Development Company (SPDC) embarked on routine maintenance of the Bonga Floating, Production, Storage and Offloading (FPSO) vessel, which is used to produce oil from shell’s biggest oil field, Bonga field in Oil Mining License (OML) 118 with daily oil production in excess of 200,000 barrels. The Bonga FPSO was shut down in compliance with the requirement for maintenance. Also last year, Shell Nigeria Exploration and Production Company Limited (SNEPCo) found the source of oil leak from its Bonga asset offshore Nigeria.
Shell successfully sold its asset in Oil Mining License (OML.40) out of four blocks, which have been put on sale since 2010. Elcrest, a consortium of two firms comprising Eland and Starcrest emerged the preferred bidder for the oil blocks. Sale of Blocks 30, 34 and 42 is still being discussed with potential buyers.
Last year, the Nigeria National Petroleum Corporation (NNPC) and its joint venture partners, Shell, Nigeria Agip Oil company (NAOC), Total and ConocoPhillips, agreed to resume the execution of Bisemi – Samnabri Utilisation and unit Operating Agreement (UUOA), which was originally signed 19 years ago. The MOU would serve as a boost to the Gas Revolution Agenda. This agreement represents a significant step in the drive to support federal government’s (gas based) economic development aspiration as well as gas supply plan to facilitate investment decision on Brass LNG. The handover of operatorship of Egbema, Egbema-West and Ugada fields to the Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC, was completed also last year. The move was designed to further build up capacity of NPDC as a national upsetream company.
Downstream
The downstream operation, particularly the products marketing sector was substantially stable as the government and other operators of the sector were able to sustain supply and check scarcity. Besides insignificant scarcity occurrence in the first quarter of last year, which did not last a day, the market was flooded with petroleum products, although almost 100 percent of the supply was import – dependent.
The independent Petroleum Marketers Association of Nigeria (IPMAN), a major stakeholder in the downstrcan operation, early last year, had a problem within itself and got factionalised. One group pulled out from the company, NIPCO, where it has equity stakes and chose capital oil and gas limited as its base for receipt of products and conduct of other transactions.
Contrary to reports that politically –induced violence and anticipated resumption of militant attacks might adversely affect oil production last year, NNPC ensured that oil and gas industry operations and oil output were stable and improved upon, shooting production up to 2.3 million barrels per day (bpd) after dropping to a low of 1.7 million bpd in mid – 2009.
A British High Court last year in London ordered the Shell Petroleum Development Company to pay compensation of more than $250 million ($410 million) to Bodo community in Rivers State after the company admitted liability for two oil spills in the community. Shell acknowledged that the two spills in 2008, were caused by operational failure.
In 2011, the statistician –General of the Federation said last year’s third quarter Gross Domestic Product (GDP) declined from 7.86 per cent in 2010 to 7.40 per cent and attributed the 0.46 per cent decline in growth to a fall in oil production by 0.34 percent in the third quarter as opposed to 5.08 percent in 2010.
Crude oil production with its associated gas component, for example, fell from 2.49 million barrels per day (mbpd) on average in the second quarter of 2011 to 2.36 mbpd on average in the third quarter. The drop in crude oil production in 2011 was as a result of operational constraints experienced by some of the major oil producers during the period under review.
In the third quarter of 2011, the organisation of Petroleum Exporting Countries (OPEC) agreed that first new production limit in three years in a deal that settled a six-month-old argument over output levels in Saudi Arabua’s favour. OPEC agreed a new supply target of 30 million barrels per day, which is roughly in line with current production.
The agreement caps output for all 12 OPEC members for the first half of the year, keeping supply near three-year highs, which is enough to build lean global inventories. When OPEC met in June last year, it failed to reach all agreement on higher supplies, leaving Saudi Arabia free to open the taps to compensate for lost Libyan supply.
Midstream
The Federal Government had in 2010 through NNPC agreed to partner with China State Construction Engineering Corporation (CSCEC), state governments of Lagos, Kogi and Bayelsa for the construction and operation of Greenfield Refinery in the three States. The refineries were designed to have a combined refining capacity of about 750,000 barrels per day, employ about 7,000 workers and planned to be jointly financed by NNPC, the state governments where they would be sited and the Chinese firms.
The government aggressively spearheaded moves for the take-off of the project in first quarter of last year but throughout the year, nothing was heard of the project until in October when the president in his Independence anniversary broadcast reiterated the federal government determination to build three new refineries. Considering the seriousness given to the project in 2010, which involved signing of MOUs and some milestones marked to be achieved within 2011, industry stakeholders and Nigerians were surprised that virtually nothing was done.
The existing refineries have been working, if at all, below 20 percent of installed capacities, although government sources said the four refineries work at 30 percent installed capacity. The private refineries including the Rivers State Treasure Oil Resources and the Amakpe refinery in Akwa Ibom State which were billed to come on stream last year had been in the cooler throughout the year.
Shedie Okpara
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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The European Union (EU) says it will end its five-year Agents for Citizen-Driven Transformation (ACT) programme aimed at enhancing the capacity of Civil Society Organisations (CSOs) in Nigeria, on April 14. Mr Damilare Babalola, the National Programme Manager, ACT, said this on Tuesday at a brief event in Port Harcourt. Babalola said that the conclusion of the programme would automatically mean an end for the 21 CSOs based in Rivers. He stated that the EU-funded programme, valued at 13.1 million euros, was executed by the British Council across 10 states, with a presence in the 36 states of the federation. “The programmes’ goals are to assist CSOs in becoming more credible, accountable and effective agents of change, for sustainable development in Nigeria. “The implementation focussed on providing capacity-building skills, referred to as capacity development support to CSOs, to enhance their effectiveness. “Additionally, it aimed to evaluate the regulatory environment for CSOs and promote strategic coordination among them and other key stakeholders in terms of collaboration and advocate, for appropriate legislation and regulations,” he explained. Babalola identified the benefitting states as Adamawa, Borno, Edo, Enugu, Kano, Lagos, Plateau, Rivers, Sokoto and the Federal Capital Territory (FCT). “The ACT programme commenced in 2019 and will officially conclude on April 14, marking the end of five-years of active implementation in the country. “Rivers was among the states where we initiated the programme during our phase two launch in 2020, and we are here to formally close the ACT programme in the state. “ACT has addressed significant challenges affecting the effectiveness and impact of civil societies, especially in creating an enabling regulatory environment,” he added. He expressed confidence that in spite of ACT’s departure from the country, civil society groups have gained sufficient capacity to effectively carry out their responsibilities in their respective focus areas within the communities. The programme manager noted that 273 CSOs benefitted from the programme across the country, with 233 CSOs receiving capacity-building training and 40 others trained to enhance regulatory conditions. In his remark, ACT Rivers Focal Person, Mr Temple Oraeki, emphasised the importance of CSOs collaborating with the state government and international donor agencies to advance their programmes and projects within the communities. “The 21 CSOs, comprising of eight community-based organisations and three network coalitions in Rivers, now serve as our ambassadors, equipped to make positive impact in society. “Therefore, we are leaving behind organisations that are credible partners for the government and international donor agencies to execute their programmes in communities,” he said. Gov. Siminialayi Fubara of Rivers, expressed the state’s readiness to engage with CSOs to implement government policies and programmes in the various communities where they operate. Represented by Diokuma Ismael, the Permanent Secretary of the Ministry of Culture and Tourism, Fubara lauded the EU and British Council for their interventions in the state. “The success of the ACT programme has undoubtedly enhanced the value of civil society organisations in the state and nationwide. “We are prepared to partner with the CSOs that have impacted communities, once all necessary documentations are concluded. “However, it is crucial for CSOs to adhere to proper regulations, to enable the government to identify with them for sustainable development,” he said. Fubara urged the civil society groups to align with the state government’s policy to drive positive change in the communities.