Oil & Gas
The energy sector was among the worst hit sectors in the last seven years of the APC-led administration despite the promises made by President Muhammadu Buhari in 2015 and 2019, who has been serving as the oil minister, to improve the sector. The sector ended the year, 2022, with one of the worst petrol scarcity in decades, embarrassing oil theft cases and national grid crashes.
By Goddy Ikeh
UNFORTUNATELY, the oil and gas sector was not spared in the general breakdown of virtually every sector in the country during the administration of the All Progressives Congress, APC. So the situation is not different in the oil and gas sector, which has been facing multiple challenges, ranging from lack of functional refineries, oil theft and recently the exodus of international oil companies (IOCs) from Nigeria.
Speaking on the challenges confronting the Nigerian oil and gas industry, the Minister of State for Petroleum Resources, Timipre Sylva, stated that apart from oil theft, which has assumed a single major threat to both the oil industry and the Nigerian economy generally, the Nigerian environment was becoming too volatile for the operators in the oil industry, especially the IOCs.
Sylva told The Energy Year, a market intelligence organisation, recently in an interview that Nigeria’s situation had become, “precarious” because of the multitude of challenges besetting the oil sector. The minister noted that while Nigeria was tackling the challenges, the damage being done by vandals was eroding investors’ confidence in the nation’s oil and gas industry.
“Our biggest problem is the insecurity of our pipelines. There is a lot of pollution due to oil theft and pipeline vandalism, which has placed us in a precarious situation. It is one of the biggest reasons why IOCs leave Nigeria.
“They (IOCs) feel that our industry is becoming too volatile and a significant polluter. The criminals, who rupture our pipelines to set up illegal refineries, which are not regulated, are seriously damaging our environment.
“It is our duty to ensure that we can tackle this issue, which is mainly a question of law and order rather than production. Once solved, all the production that has been lost will get to our tanks, while restoring investors’ confidence in Nigeria,” he said.
In the same vein, the Group Chief Executive Officer of the NNPC Ltd, Mele Kyari, has attributed the failure of Nigeria to meet its OPEC oil production quota to oil theft which according to him, are carried out by government officials, security agencies and other members of the society.
Kyari said at the 49th session of the weekly ministerial briefly at the State House in Abuja that the oil theft menace involved every member of the society. He disclosed that stolen crudes and products had been found mostly in churches and mosques and there was a network of vandals working in collaboration with the oil thieves.
“When a fire outbreak happened in one of our pipelines, we discovered that some of the pipelines were actually connected to individuals’ homes. And not only that, and with all sensitivity to our religious beliefs, you know, some of the pipelines and some of the products that we found, are actually in churches and in mosques.
“That means that everybody is involved. There is no way you will take products, bring them in trucks in populated neighborhoods, load them, and leave without everybody else knowing about it. Everybody includes members of the community, members of the religious leaders and also and most likely government officials of all nature, including the personnel of security agencies,” Kyari said.
According to Kyari, the entire network of pipelines for petroleum products distribution in the country has been shut down as a result of the activities of vandals. He said that 295 illegal connections had been discovered and that oil companies were finding it difficult to operate efficiently. However, he said that a national reserve company would be established to manage the pipelines on a commercial basis to efficiently put them to use for the distribution of petroleum products across the country.
He said in managing this ugly menace and restore confidence of our partners in this hall, the Federal Government is taking the lead on the issue of security of our oil and gas infrastructures with a wider and forceful approach on the matter with the host communities participation identified as the critical stabilizing factor for a secured environment
“We will be deploying the use of technology with the provision of armoured drone for third level oversight. It is our hope that this plans we have instituted will help restore the confidence of all our partners and production to the 2016 highs in no distant time.”
But Kyari believes that the passage of the Petroleum Industry Act (PIA) 2021 will be able to address some of the challenges of the nation’s oil and gas sector.
According to him, the PIA will correct the anomaly of the past by entrenching the host communities as part owners of Oil and Gas infrastructures. He explained that the PIA has introduced a mandatory percentage of oil and gas companies’ (OPTS/Operators) total expenditure devoted to execute sustainable development projects for the host communities.
“With this, communal relations between oil and gas operators and host communities are reaffirmed by both the government and oil and gas operators to the welfare of the host communities, whilst recognizing the role played by such host communities to seamless oil and gas operations in Nigeria,” he said.
On the technical side, he said the regulator, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) have identified 3,453 shut-in strings that needs to be reactivated. This will be done after the integrated industry-wide study to reactivate these shut-in wells for short, medium and long term gains to boost production and guide investment planning.
“Through the Commission (NUPRC), we will be optimizing recovery factor via the EOR/IOR for candidate wells, revisiting and evaluating lease renewals obligations to facilitate production enhancement.
“We will refocus on our shallow waters production which are embedded with huge potentials for condensate production as we encourage investors to set-up condensate refineries as our stop-gap to meet Nigeria’s Premium Motor Spirit (PMS/Petrol) demand,” he said.
Perhaps these programmes of the Federal Government will check oil theft and renew foreign interests and investments in the country’s oil and gas industry. Commenting of the challenges facing the Nigerian oil and gas industry, especially as the country was unable to join other oil and gas producers to reap the high prices resulting from the Russia’s invasion of Ukraine, the former Managing Director of the NLNG, Dr. Godswill Ihetu, is optimistic that Nigeria could still catch up since the Russia-Ukraine war is not ending soon. In his analysis entitled “ Nigeria must step up its game to benefit from oil and gas prices spike” published by BusinessStandard, an online publication, Ihetu noted that “the scramble for African gas reminds one of the Berlin Conference of 1884- 1885 at which the Scramble for African colonization was decided.” He recalled that EU delegations had been in Algeria, Nigeria, Angola and Congo in search of additional gas supply sources.
“Algeria and Egypt have recently signed new gas deals to supply Europe. Even the undeveloped offshore Mediterranean gas fields of Israel and Greece have become potential supply sources. In Nigeria, new interest has been rekindled in the long suspended Trans Saharan pipeline project designed to supply gas to Europe through Algeria, as well as new gas supply project to Europe through Morocco.
“The Nigeria LNG is already supplying gas to some European countries, Italy, Spain, Portugal, and France. At least 40% of its production goes to Europe. As part of the European quest for new gas supplies, Samuela Isopi, European Union ambassador to Nigeria led a delegation to the NNPC last April. Even the NLNG was approached directly for additional LNG import into Europe,” he said.
He lamented that unlike other oil producers, Nigeria is not benefitting from the oil and gas demand spike and price windfall revenues. According to him, Nigeria’s ability to increase both oil and gas production has been degraded by lack of investment over the years, oil theft, crude oil pipeline vandalism and sabotage.
In addition, he stated that investments in oil and gas projects have been stalled in recent years, while investors waited for the Petroleum Industry Bill (PIB) to be passed into law. “We cannot meet our OPEC crude oil production quota. Gas production has diminished to the point that we are not supplying enough gas to NLNG for processing up to the level of installed capacity. LNG export has reduced as a consequence,” he said.
In the power sector, the state of affairs was not different as the collapse of the national grid has become a regular occurrence. Despite the promises made by President Muhammadu Buhari in May 2015 during his inauguration for the first term in office, the power sector had not improved. In his inaugural speech on May 29, 2015, Buhari said: “No single cause can be identified to explain Nigerian’s poor economic performance over the years than the power situation. It is a national shame that an economy of 180 million generates only 4,000mw and distributes even less.
“Continuous tinkering with the structures of power supply and distribution and close on $20b expanded since 1999 have only brought darkness, frustration, misery, and resignation among Nigerians. We will not allow this to go on. Careful studies are under way during this transition to identify the quickest, safest and most cost-effective way to bring light and relief to Nigerians.”
With less than five months to the end of the second term of President Muhammadu Buhari’s administration, the power sector has not made any remarkable progress with power generation not exceeding 4000mw, while the collapse of the national grid has become a regular occurrence.
But despite the cries of power consumers in the country who lament over daily blackouts and the hardship of manufacturers, who purchase diesel at astronomical prices to power their plants, the Presidency claims that the nation has experienced some positive changes in the power sector in the last seven years.
For the presidential spokesman, Femi Adesina, there has been improvement in power supply situation in Nigeria under the government of President Muhammadu Buhari.
Adesina stated on Channels Television’s programme that the power situation has improved when compared to what is obtainable in the past.
He explained that the government’s agreement reached with Siemens has resulted in some transformers and power equipment coming to Nigeria as part of a bid to ensure a better power supply.
“Nigerians can’t say there has been no improvement in the supply of electricity since the inception of this administration. I just told you that some transformers came into the country under the Siemens deal recently. That doesn’t tantamount to saying there is no movement, there is some movement and it will translate to better power for the country,” Channels Television report quoted Adesina as saying.
However, President Buhari pledged recently in Abuja that Nigeria remains dedicated to the partnership with Siemens and the German Government to improve electricity generation in the country.
Receiving officials of Siemens Energy AG at State House Abuja, Buhari urged them not to relent in ensuring that government’s commitment to Nigerians in delivering the Presidential Power Initiative, PPI, is fulfilled.
The Nigerian Leader told the President and Chief Executive Officer, CEO, of Siemens Energy, Christian Bruch, the CEO of Siemens Africa, Nadia Haakansson, and the CEO of Siemens Nigeria, Seun Suleiman, that the outcome of the collaboration will deliver critical business enablers and opportunities to engage young enterprising Nigerians in various endeavours. He welcomed the training of 200 Nigerian engineers on network development studies under the initiative, stating that this represents ”a very important up skilling and knowledge transfer process”.
Buhari added that he was looking forward to the 5,000 engineers who would have been trained by the end of the programme.
Recounting his promise to Nigerians earlier in this administration to improve electricity supply by resolving capacity deficit across the sector’s value chain, the President lauded the German Government, through the former Chancellor, Angela Merkel, for graciously supporting the country, leading to the signing of a Memorandum of Understanding with Siemens.
”A plan to deliver capacity improvements of 2,000 Megawatts in the transmission-distribution interface is now firmly the focus of PPI Phase.
”The PPI remains a priority project for our Administration and Nigerians believe in the value that the Siemens’ brand can deliver.
”On our part, nothing is spared to ensure we improve the lives and livelihoods of our citizens,” he said.
President Buhari expressed delight at some notable progress on the implementation arrangements of the PPI, adding that the first batch of two power transformers already delivered by Siemens would be commissioned in November 2022.
”I have been reliably assured that 10 Power Transformers and 10 Mobile Substations would have been completely delivered and installed by May 2023,’’ he said.
Although the energy sector performed poorly in 2022, the news administration in 2023 should pay special attention to the energy sector because of its critical roles in driving growth of the country’s economy. Surely, Nigeria cannot be competitive without addressing key constraints to private investment, lack of petroleum products due to the absence of refinery capacities, unreliable power supply, protectionist trade regulations, poor access to finance, and low digitalization.
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Tags: All Progressives Congress Dr. Godswill Ihetu Femi Adesina Mele Kyari NLNG NNPC Ltd NUPRC Timipre Sylva
