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Gas To Power: Why The Darkness Will Linger

Shell-Afam-Power-Plant

Nigeria arrived at 2013 still a long distance away from an eight year goal: to get its public power utility and private suppliers, to put l0,000Megawatts (MW) of electricity into the national grid, every day.
The target was set around the time that the Electricity Power Sector Reform Act(EPSRA) was signed into law in March 2005, four long years after the bill itself was first presented at the National Assembly.
President Umar Yar’adua elected to moderate the vision of his predecessor. He wanted to get the nation plugged in to 6,000MW of electricity by December 2009 and increase the wattage 10,000MW by 2011, when his mandate was supposed to end.

None of these modest targets have been achieved. At the end of February 2013, Nigeria was generating 4,397MW at peak, and a minimum of 3,819MW. It’s not clear for how many hours of the day the peak is achieved.

The Niger Delta Power Holding Company boasts that it has completed installing four “power stations” (namely Olorunsogo, Omotosho, Alaoji and Sapele) with one thousand six hundred and eighty eight MegaWatt(1,688MW) capacity, between January 2011 and December 2012. Big deal. But something is extremely wrong if, with all that increased capacity in the last two years, all the nation is generating, today, averages 4,000MW.

Nigeria has struggled, between November 2012 and March 2013, with generating between 3,800MW and 4,500MW. It’s not an optimum state of affairs. But there is optimistic talk, especially among right-of-centre policy analysts, that with the sale of four government owned power plants to an equal number of consortia/companies, the true power supply revolution is about to begin. What about the short run? Where is the gas? How long will it take to get the gas supply right if you’d spent so long a time to get here?

President Goodluck Jonathan’s “Roadmap For Power Sector Reform”, launched in Lagos in August 2010, fixed the medium term as December 2013, when “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, 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.

Jonathan’s figures are that In the medium term (up to December 2013), the nation 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.

December 2013 is just nine months away. The total capacity of all NIPP plants installed is only 1,688MW installed, one third of the 4,775MW anticipated in the Roadmap. The PHCN plants are not producing more than 2,000MW, far less than half of the 4,500MW they were expected to produce by December 2013. And where are the other IPPS who are expected to deliver 3,000MW? They are: Agip’s 450MW at Okpai, Shell’s 660MW plant at Afam, Akwa Ibom State’s 190MW at Ikot Abasi and who else? Geometric in Aba? AES Barge in Lagos? Dangote’s Obajana Plant? All of these combined, currently do not produce 2,000MW.

Even if they are firing all cylinders(which they are not), the entire contribution of IPPs and NIPPs and PHCNs today all come to roughly  4,000MW.

Jonathan’s Power Reform Roadmap also says: ”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 mmscf/d) to support the targeted increase in actual generation capacity of circa 7,000 MW.

Translation: the government, as of August 2010, envisaged power generation of 7,000MW and “hoped” that 1.6Billion cubic feet of gas per day would be available to feed them.

This is itself a real challenge. Government has been able to construct some gas lines to some power plants and commenced crucial gas infrastructure projects, but it is struggling to deliver on all the infrastructure that will feed all its own power plants.

How did we get here?

The gas supply design was flawed from the start. The government did not ask for an “expression of interest” from contractors for gas supply projects until a full year after the award of contracts for 10 gas-fired power plants. But we are getting ahead of ourselves.

In March 2005, the same month that the power reform act was signed into law, the Obasanjo government awarded contracts to Shandong Power Construction(SEPCO) to build a 335MW power plant in Papalanto/Olorunsogo in Ogun State, and to the Chinese Machinery and Equipment Import and Export Company(CEEMCO) to build a 335MW plant in Omotosho in Ondo State. Rockson Engineering a Nigerian company, was awarded a contract to build a 378MW plant in Alaoji in Rivers State.

Six months later, the government dramatically awarded $414Million worth of contracts for the supply of turbines and electricity generation equipment to General Electric(GE), with a six year long (post installation) service agreement estimated at $118Million. The turbines were to be sited in Omoku in Rivers State(230MW). Gbaran/Ubie (Bayelsa State, 250MW)), Ikot Abasi(Akwa Ibom, 230MW), Sapele(Delta State, 500MW), Eyaen a.k.a Ihovbor(Edo State, 500MW),) Egbema(Imo, 250MW) and Calabar (Cross River, 250MW). The PHCN itself published these figures of “seven new Federal Government Projects in Niger Delta” in a flyer produced in late 2005.

Today, on www.nidelpower.com, the website of the Niger Delta Power Holding Company of Nigeria(NDPHCN), there’s a list of 11 power plants in various stages of completion. One power plant has been removed; the Ikot Abasi NIPP power plant has been curiously replaced by Ibom Power, which is a 190MW project of the Akwa Ibom State government(since completed). Some of the planned capacity has been escalated. Alaoji is now assigned a nameplate capacity of 1,074MW, of which only 225MW, which is even lower than the original 335MW, has been completed; Calabar’s planned nameplate capacity is now 561MW, but it is still under construction; Egbema’s would be capacity is now 338MW, but it is still under construction; Gbarain and Omoku are to produce 225MW each, not really different from the original capacity assigned to them, but they are still under construction. The Ihovbor plant in Edo State is being commissioned, as I write, with 450MW available, although, originally, it was meant to produce 500MW. So, four out of seven power plants under the Niger Delta scheme, awarded eight years ago, are still under construction and one is only just being commissioned. Of the three power plant contracts awarded earlier than the Niger Delta scheme, Alaoji is completed, but at 110MW less than what it was originally planned to and 849MW less than what the government itself later decided it should produce. The government has done better with Olorunsogo. It planned 335MW originally, escalated it to 750MW, but has 562.5MW available(ie completed). At Omotosho, the government scaled up the planned capacity from 335 to 500MW, but has commissioned 450MW. There’s a Geregu Plant (a second phase, an add on to the one built in early 2000s), which is planned to generate 434MW, but currently has available 144.7MW.

This is a very mixed result and when all is added and subtracted, it is negative. This is the background against which James Abiodun Olotu, CEO of NDPHC, reportedly declared that all NIPP projects would be completed by the end of 2013.

These collectively will be the defacto providers of power to Nigeria between 2013 and 2015, as the new owners of Geregu(1st Phase), Sapele(earlier phase), Ughelli and Egbin get down to the nitty gritty of doing business in Nigeria.

So where is the gas coming from?

NIPP authorities have often come across as being befuddled themselves by the process by which gas gets fed into power plants. If they don’t strive to own it, we’d all be in the dark for a longer while. This is what they often say:“Inadequate gas supply has been a major challenge in executing some of the NIPPs but we have been assured by the Minister of Petroleum Resources Diezani Alison-Madueke, Minister of Finance, Dr Ngozi Okonjo-Iweala and all stakeholders including the International Oil Companies (IOCs)”. Such statements don’t mean anything. They could be interpreted as saying: “No, ours is just to construct power plants, we don’t want to know whether the plants get to work”.

Omotosho and Olorunsogo are being fed, through spur lines from the Escravos Lagos Gas Pipeline System, which takes gas from Shell, Seplat, Niger Delta Western and Chevron fields in the Niger Delta, to Lagos. The spur lines to the two power plants were only completed in 2012. The ELPS system itself is being debottlenecked, but there are always security issues and yet, for all you know it is gas from the ELPS that is the most guaranteed of all the proposed gas supplies to the NIPPs.

Agip is expected to supply 50 Million standard cubic feet a day(50 MMscf/d) to the 225MW Omuku Thermal Plant, when completed. The gas is coming from its Obiafu/Obrikom fields. The company currently supplies 75MMscf/d of gas to the 450MW power plant it constructed in Okpai, in Delta State. Now it is working on expansion of gas supply into the gas line from its Obiafu/Obrikom fields in the east to Seplat Petroleum’s Oben field in the west. The gas line christened OB-OB gas line is under construction. It wouldn’t be completed before 2014. This crucial infrastructure will link the gas cluster in the west to that of the east of the country.

*Addax was expected to supply about 45MMscf/d of gas from Adanga Field in Oil Mining Lease(OML)123, directly to the Calabar IPP. For sixyears, the NNPC and Addax disagreed over this. The project was caught in the challenge of interpreting the Production Sharing Contract(PSC) agreement between the two companies. It wasn’t until late 2012 that the government finalized an alternative agreement with Frontier Oil, to supply 150MMscf/d of gas to the Calabar plant. Gas from Frontier Oil’s Uquo field in Eket,  will be transported via a proposed 40km Accugas line(owned by Septa Energy) to Oron, from where an Oron to Calabar line(supposedly under construction by Kaztech), will deliver the gas at the Calabar Power Plant. In March 2013, the completion of Calabar Power Plant, the Eket To Oron Line and Oron To Calabar lines are uncertain.

Addax was also to provide 30MMscf/d of gas to the Egbema Plant via a 10km pipeline from its Izombe field in Imo State. It’s not certain that Addax is going to do this and it’s not clear who is doing it.

*Shell is expected to provide 40MMscf/d from its Gbaran/Ubie Integrated gas project, into the Gbaran/Ubie Power station under construction. Shell’s Gbarain Ubie gas processing plant has been completed two years ago. Completion date for the Gbarain Power Plant is uncertain, so also is the fate of the short, 5km gas line from the gas processing plant to the power plant. Shell is also to supply 30MMscf/d of gas to Alaoji, from the Shell eastern cluster, which includes gas from Obigbo North field. Imo River field and Alakiri field and to which the 240MMscf/d Okoloma gas project has been added. There was headline news about the inability of the contractor to complete the pipeline, and it was awarded to another contractor. The new Sapele plant is also expected to be receiving gas from the ELPS.

*TOTAL was not asked to supply gas for any of the NIPP projects. The company officials say they have commenced proceedings towards EPC tender for the construction of a 440MW Independent Power Project in Obite, located a Rivers State, in the east of the country. S me 70MMscf/d of gas from Obite and Obagi fields, in OML 58, will feed the power plant. The French super major has not taken a  Final Investment Decision on this IPP and it isn’t clear when the project will come on stream.

*Chevron once broke the grounds for a 780MW a Power Plant in Agura in Lagos state. But the initial enthusiasm for
that project has cooled and no one is talking about an engineering phase, let alone an investment decision. Chevron has a larger gas supply commitment for domestic use than any other company apart from Shell. It supplies over 200MMScf to the Escravos -Lagos pipeline, the main natural gas transport infrastructure for the country’s domestic supplies in the country.

Most of these companies, apart from Shell have never been part of the gas supply chain to Nigeria’s electricity infrastructure. It wasn’t until 1995, that Chevron showed up as a company of reckoning in the local gas supply market. Agip came later.

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Part 2

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6 comments

  1. Endi says:

    The main problem confronting the reengineering of the Power sector is insincerity. Projects are listed as completed when its just one turbine mounted while others are listed as ongoing when its only camping facilities for expatriates is being built.

  2. Endi says:

    Typo: … expatriates that has been built.

  3. Dario says:

    I’m extremely impressed with your writing skills
    as well as with the layout on your blog. Is this a paid theme or did you modify it yourself?
    Anyway keep up the nice quality writing, it’s rare to see a great
    blog like this one these days.

  4. It’s an remarkable post in favor of all the web users; they will
    take benefit from it I am sure.

  5. TY Moses says:

    Great write up. It would be interesting if the writer can revisit the IPP Plants to check if the issues listed in this report have been resolved. My guess is that the situation would still be the same, as not much would have changed, despite the fact that the IPP plants now have new owners. Instead of sitting down twiddling their thumbs and waiting endlessly for the government and IOCs to construct the promised gas pipelines, isn’t it possible in the interim to use multiple, specialised trucks to freight the gas to these pipelines from the nearest source? This arrangement is known as a “virtual pipeline.” Just a thought.

    • TY Moses says:

      Great write up. It would be interesting if the writer can revisit the IPP Plants to check if the issues listed in this report have been resolved. My guess is that the situation would still be the same, as not much would have changed, despite the fact that the IPP plants now have new owners. Instead of sitting down twiddling their thumbs and waiting endlessly for the government and IOCs to construct the promised gas pipelines, isn’t it possible in the interim to use multiple, specialised trucks to freight the gas to these IPP Plants from the nearest source? This arrangement is known as a “virtual pipeline.” Just a thought.

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