Factors that will shape energy industry in 2008

Stories by Martin Ayankola, Lagos

Basil Omiyi, Country Chairman, SPDCC

Since February 2006, Shell has shut in over 400,000 barrels in its western operations owing to the incessant attacks by Militants on its installations.

Altogether, Nigeria is shutting in over 500,000 barrels due to activities of the Militants and what government will do to bring back the lost production will be one of the key issues in the Nigerian energy Industry in 2008.

Already, the situation has started having an effect as Shell has begun to reappraise its investment portfolios in Nigeria. The Company had recently signified its interest to divest from some of its deepwater interests in Nigeria and also recently realigned its operations in Nigeria. Thus, the Niger Delta question and how it is being addressed will be a major issue for the Energy Industry in 2008.

Another issue that has generated Industry’s interest and that would still be there in 2008 is that of the gas flare down deadline. The Department of Petroleum Resources [DPR] has vowed to bring the hammer down on gas flaring Oil Companies by January 2008 and the Oil Companies have continued to maintain that the Federal Government had contributed to their inability to meet the 2008 gas flare down target through insufficient financial contributions to the joint ventures gas Projects and lack of peace in the Niger Delta which has denied them access to some of their facilities in some instances for more than a year. Will the hammer go down or not? That is a question that will be answered in the course of the coming year.

Also another key issue for 2008 is the plan by the Federal Government to review all the major agreements governing business in the upstream sub sector. Will there be a radical departure from the agreements of the past? The power sector will also be a key issue in the Nigerian energy Industry next year. Nigerians are looking forward to delivery of promises made by President Yar’Ardua to turn around the fortunes of the power sector in 2008. A lot of foot dragging has been observed this year and it is expected that concrete moves will be made to move the Industry forward in 2008.The Country has gas reserves of up to 180 trillion cubic feet but generates just about 3,300 megawatts against a demand in excess of 30,000 megawatts.

The President had said on assumption of office that he would declare emergency in the power sector, but he had spent the better part of the year collating information about the power sector. The Nigerian Electricity Regulatory Commission had licensed several Companies to generate electricity and it is expected that some of these Companies would begin actual construction of some of these Projects by 2008. In the downstream subsector, the key isssue is whether or not the Refineries would begin to work by 2008.

Nigeria currently has a refining capacity of 445,000 barrels but has been relying on importation of products because the Refineries have not been working. So it will be expected that the Refineries would begin to produce next year. Will the Federal Government increase fuel prices next year? That is also a question that will be answered in the coming year.

Energy problems in Nigeria: Way out

By Mufutau Adebowale

Mufutau Adebowale, President,
CIPSAN

EPLEPTIC supply of electricity is seriously hampering our economy as number of business owners depend on electricity for survival of their businesses across the country. Similarly high cost of fuel is also hampering our economy.In October of year 2000, I advocated the establishment of Petroleum Distribution Commision for the purpose of smooth supply of petroleum products accross the country. The incensant scarcity of the product was blamed on the fact that our retivering were mal-functioning. I made the following suggestions after careful diagnosis of the situation then I suggested that the commission should comprises of: .

Representatives from the major marketers and independent markete Petroleum products. A representative from the Council of Registered Engineers (COREN) A representative from Nigeria labour Congress. A representative from the Nigeria Police A representative from the Institute of Chartered Accountant of Nigeria (lCAN) A representative from the U. N. P. C. Petroleum Product in the country

I suggested that other emminent personalities be included in the commission. I also advocated for the Independent Marketers to be assisted to have a depot like the Major Marketer so that a kind of buffer stock would be maintained to ensure constant availability of Petroleum products in the country.

The Major Marketers and the Independent Marketers were to express their views based on the realities that associated with the distribution of the products accross the country. The representative from the Council of Registered Engineer was to identify the causes of non-serviceability of our refineries and ensure that Turn Around Maintenance was done efficiently and as at when due. Any unfounded claim by the N.N.PC engineers and other authority in the Petroleum environment was to be debunked at the committee meetings.

“The representative from the Nigeria labour congress was to witness the situation and get carried along so that labour unrest leading to economic catastrophy was avoided. The Senior Police Officer was to see to the cases of vandalization of pipe lines and proper solution to be adopted at the meetings would be arrived at. The member from ICAN was to evaluate the cost implication of policy issues to be adopted.

Obasanjo’s administration took to my advice concerning the commission and this is commendable. The committee on Petroleum Supply Distribution Commission was established. Again in 2004, the Independent Petroleum Marketers Association (IPMAN) had their very big fuel storage Jetty.

Performances Appraisal
The committee on Petroleum Supply Distribution performed for below espection. The Commission was transformed into Petroleum Product Pricing and Regulatory Agency PPPRA. The Agency became very powerful and counter productive using achaic (from acheaology) and obsolute economic analysis to formulate policies.

It has been using yesterdays techniques in solving todays problems leading the entire country to match backwards. We are the sixth largest oil producing country in the whole world and we still depend on importation of fuel. We do not need intercountry price comparison. China is not Nigeria, Japan is different from Nigeria. These are industrialize country that their citizen can afford to pay any price for petroleum product.

Although our economy is growing but we lack development. We are making a lot of money from export of Petroleum products but not industries. We depend on foreign countries for importation of virtually every item. From cooking stove, to wrist watch, from mirrow-glass to stappler and now we import fuel. Our dependency syndrome is killing our economy. Another serious problem we have in this country is mis-guided advice to the government. Our highly place government officials and appointed government advisers are over-fed and too lazy to go out and familiarise themselves the realities of things in the society. They just give advices to the federal and state governments without actually diagonising the problems underneath.

When the fuel prices were increased in June, transporters across the country increased their fares and refused to revert to the former when the fuel prices increases was dropped by the government. If there is another price increase now, the situation would be outrageous as commuters would be made to face more hectic time, due to further increase in transport fare. The inflation would become dangerously high because our economic activities are tried to transportation. Market men and women, farmer, school children, workers and applicants spend a lot of money on transportation daily.Invariably, transport cost would shoot-up the prices of the generalities of goods and service.

The way out this imbroglio is not far fetched. First of all, we have to take cognizance of the fact that there is much more to the ethos behind the incensant fuel price increase.Before the year 2000 June fuel price increase, a litre of petrol was selling at twenty naira and the scramble here and there to build filling stations were not evident.

For some four years now, filling station are being built indiscriminately everywhere in the country. Why is it so? A sizeable filling station gulps a lot of money. Filling Station involves a huge capital investment which can not be recoupped from profit generated in less than twenty years. The pertinent questions now are, people building filling stations everyday in spite of the fuel prices increase occassioned by importation of the product? Why are the refineries not activated? Who are the policy formulators in the petroleum industry?

The only option is to put the refineries in perfect working order. It is either the break down of the refineries is deliberate in order to justify coutinous importation on fuel or the engineers and the maintenance crew at the refineries are not capable. The only option now is to put the refineries in a perfect working order.

My own findings confirms that competent maintenance engineers that can deliver the goods are no more available at the refineries. There is a clear difference between having a qualification and having the ability to perform. The engineering crew available in the 90s that were maintaing the refineries adequately are largely from a particular tribe in the country. Where are they now? It is now up to the federal government to investigate this claim and make a trade-off between serviceability of the refineries and slavish implementation of quota system of employment federal character.

’Electric Supply in the country is epliptic. It has been so far a long time now. It appears there is no effective solution to the problem. From year to year billions of naira are being expended on provision of electricity supply but the:problems have not to a significant extent.

In July year 2002, I, under the auspicies of CIPSAN suggest to the National Electricity Power Authority (NEPA) that it should concentrate more on electricity generation and allow consultants to market its services because the organisation was mostly concerned with revenue accumulation at the expense of supply of electricity.My suggestion was accepted and its gave birth to the adoption of Revenue Circle Management by NEPA which resulted into a tremendious success, for Ijora, Surulere, Orile and Yaba district.

Presently, the Power Holding is performing below standards because of the underlisted problems:­

(a) Shortage of skilled workers: In the localities and communities, especially a Lagos, Ogun and Oyo the generalities of the work force of the Power Holding are students with National Diploma and those that are on industrial attachment. These people are only proficient in disconnecting of electricity and distribution of bills. How much are they being paid as salaries?

(b) Inadequate infrastructures and tools:- There are no tools, no motor vehicle, no ladders at most outlets in the localities. Sometimes Power Holding rent ladders from elecctricians in some communities.

(c) When there are major faults, the landlord association or community leaders spend days or weeks to initiate and effecting solution based on the Special conditions specified by the Power Holding Officer in the affected place.If the conditions are not met, no solution to power supply the officers are impertubed.

(d)At many localiities, unkilled indipendent electricians,under the directive of illiterate community leaders tamper with transformers to switch on and off power on rotation basis.

The top hotchers and decision makers in Power Holding Company appears to be too far from the grassroot they are supposedly serving.. In that case, the quality of information and solution they recommend to the federal government in bound to be faulty, unreliable and ineffective.

The government should compel senior officers in Power Holding Company to go out to the grass root and get farmiliarized wtih the problems in the field. Their findings will honestly help in arriving at a permanent solution to electricity probem in the country.

Adebowale is the President, certified institute of Purchasing & Supply Admini- strations of Nigeria (CIPSAN).