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The Future of Gas, Nigerian Economy and the Global Energy Transition

Section: GAS COMMERCIALISATION · October 16, 2024 · No comments |

By Tony Attah

Energy has always been in transition from very early days when the predominant sources of energy were mainly Manpower, Animal fats, Paraffin, Coal and more recently Oil and Gas.

Over time, we continue to witness energy transition in action, as we alter our preferences for different sources of energy, on account of economic, environmental, social, and geopolitical considerations.

We seem to have taken the evolution of energy for granted until the recent awakening realities of new science, and the greater awareness of the impact of continuing to burn hydrocarbons at the ongoing scale, especially on the back of huge, forecast growth in energy levels. We suddenly realize that we are endangering our planet and treading a very thin line between survival and our personal comfort. The effect of climate change is driving the acceleration of renewed focus on energy transition and consequently, this is fast changing the global energy mix and energy systems from fossil fuels to other cleaner sources.

Against the backdrop of the energy transition, the global population is forecast to grow by 25% from the current 8Billion to over 10Billion people by 2050! Africa alone will grow from its current 1.5Billion to about 2.5Billion, being about 67% population growth compared to the global average of 25%. This means that about half of the world’s expected population growth will come from Africa. The forecast is even more exciting when you focus on Nigeria. Our population is expected to leap from the current 200Million people to about 400 million, which is 100% population growth within the same time frame.

(Where dem go stay?)

Let us now overlay this population growth prognosis by predicted prosperity of more people in society, with the advent of technological improvements. More people will have access to phones and electronics that will require charging, more people will require air conditioning – heating or cooling, depending on where you are in the world. Mobility and travels will increase, more households will transit to the next level in economic advancement. On balance the global energy demand is projected to grow by about 40% in the same time frame. Now let us attempt to correlate the global average population growth of 25% with the global average energy demand growth of 40%.

Global energy demand is obviously going to outpace global population growth, but a closer look at Africa and Nigeria with population growth of 67 and 100% respectively, would suggest that the global energy demand projection may not be in tandem with what Africa and indeed Nigeria will need. Whether you see this as an opportunity or as a risk for Nigeria will depend on which side of the divide you stand. Bottom Line, the world will need more energy, Nigeria, and the rest of Africa will need it even more. About 50% of Africa, approximately 600Million people, do not have direct access to reticulated electricity and for Nigeria, we will not just talk about access to electricity but the juxtaposition of reliability, availability and more importantly affordability.

While it is true that the world will continue to need more energy, the world no longer needs it at all costs. The world now needs it Clean, Affordable and Available in abundance. This is the basic philosophy of the Energy Trilemma in the ongoing Energy Transition. The Energy Trilemma, is about Energy Security, Energy Affordability and Energy Sustainability which speaks to decarbonization, focusing on the environment and indeed climate change.

By implication of the Energy Trilemma, energy sources and energy systems have become quite topical, and fossil fuels have come under very sharp criticism to become the subject of many environmental and geopolitical policy debates. Despite the global outcry, recent events have proven that the global energy system is very fragile and delicate as evident in the fall out of the unfortunate war between Russia and Ukraine. It was projected that fossil fuels would take a backstage, while renewables would be front and centre. However, the recent disruptions in the energy systems have kept fossil fuels squarely back in the game and I believe this has also given Nigeria a new vista of hope and perhaps another opportunity to take advantage of our God given natural resources.

“REGULATORY HOLD UPS ACCENTUATE THE CRISIS: The fastest way of resolving the ongoing revenue crisis is to revitalize and galvanize the oil and gas sector by accelerating the implementation of the recently approved executive orders and the ongoing IOC divestments to restore confidence and stability in the industry.”

To satisfy the level of energy demand growth, it is expected that fossil fuels will continue to be dominant in the total energy consumed globally, with the balance in the energy mix coming from Renewables and Nuclear fission. This situation would speak to the Energy Trilemma with respect to needing more energy to meet the growing demand as well as balancing the sustainability priority of ensuring that whatever we do today in terms of our energy choices, we do not jeopardize the future existence of the next generation yet unborn. The energy transition and changes to energy mix would be largely regional, as there is no “one-cap-fits-all” solution. It is believed that the transition dynamics will be largely influenced by market balance, between demand, and supply, based on resource availability, investments, technology, and geopolitics as key enablers.

This is not a paper on climate change, but we can’t ignore the fact that climate change has driven more recent policies, governments’ speed of response, behaviors and geopolitics as we experienced in the many COP conferences especially the last COP 28 in the UAE, where the world, for the first time officially acknowledged fossil fuels as the root cause of climate change and the delegates were short of putting pen on paper to sign that fossil fuels, particularly coal, oil and gas should be eliminated from the global energy mix by the year 2050! That would have created another round of panic on the global energy systems with massive disruptive impact on energy stability.

While I am a keen advocate of a cleaner world, I am also a firm believer that human survival has got to count for something. Our current reality makes the push for 100% elimination of hydrocarbons, especially oil and gas, from the global energy mix by 2050, a very wishful and difficult task; but this debate could fundamentally end up being a battle between “Idealism and Pragmatism”! Suffice it to add that with the Energy Transition question, a lot will continue to change with respect to the global energy mix and global energy systems, hence little wonder why global energy integration has become intertwined with geopolitical power to the extent of becoming an instrument of economic and political weaponization, disrupting the balance of the European energy systems and global interdependencies with attendant market volatilities.

This has greatly challenged the status quo, and we may be seeing the redefinition and emergence of a new world order.

In his recent work “The New World Energy Map”, Daniel Yargin, a leading authority on energy, geopolitics and global economy, avers that “the World order can be linked to global power play and that there are different kinds of power. One type, is power of nations that is shaped by Economics, Military Capabilities and Geography by grand strategy with calculated ambition, depending on who you talk to. The other power is the one that comes from Oil and Gas, Coal, Wind, and Solar against the power that comes from policies that seek to reorder the world energy systems to accelerate towards Net Zero with decarbonization. Some environmental extremists will continue to unapologetically argue in support of Zero fossil fuel in the name of climate change.”

EDITOR’S NOTE: THIS PROJECT IS STILL HANGING: Evidence of failure: A section of the unattached pipe in the drawn out construction hangs above the head of Mele Kyari, the GCEO NNPC Ltd, as Audu Ibrahim, Executive Director, Projects, Nigeria Gas Infrastructure Company Ltd (NGIC), explains work progress on the OB3 Gas Pipeline Project to Kyari and other members of NNPC Ltd’s Senior Management during a facility tour. Photo provided by NNPC itself.

We knew of a world order where almost everything about energy was dependent on specific regions in the world like the “Middle East” and geopolitics responded to this as balance of power and balance of economy. This is what makes the subject of this discourse both exciting and frustrating at the same time. It becomes even more intriguing when taken in the context of the current situation in Nigeria and by implication the Nigerian economy.

Nigeria was known as the Giant of Africa not because of the great footballing exploits of our Super Eagles or because we have the largest population in Africa. We were respected, trusted and even revered because we were on very solid ground with respect to our economy and geopolitical presence, at least in the West African Region, if not across all of Africa. In our hey days, this was largely underpinned by the growth in our Oil and Gas sector by way of not just reserves but more about what we were able to produce. The subject of what we have been able to do with the oil and gas revenues over time should challenge the true essence of our moral justification to continue to pretend to be the Giant of Africa.

Last week, I stumbled on a viral video on social media, where the speaker took a long swipe at Nigeria’s relevance in Africa and why anyone should continue to take us serious as “The Giant of Africa”. His argument was that all the indices on which a nation earns the reputation for regional leadership are fast ceasing to be associated with Nigeria and we are becoming largely inconsequential to our neighbours. There is no need for countries like Niger, Senegal or Ghana to care about us, as in his critique, we have very minimal impact on them both socially and economically. The main point he made which resonated with me was his assertion that Africa’s development is mainly held down by Nigeria’s lack of agility and ability to grow economically, noting that for Africa to get it right, Nigeria must first get it right! Your thoughts would be absolutely in order if you are currently thinking where did we get it wrong or as some people would brutally say in this era of social media – who did this to us?

I will not join issues with that speaker on why, when and who did what to Nigeria, but what’s clear to me is that, with the disruption in the European Energy systems, the overall pace of the energy transition is slowing down in deference to survival first, as the world comes to terms with the reality that Net Zero is not necessarily Zero Fossil Fuels. That said, we need to deploy more advanced technologies to achieve a balance in the pursuit of cleaner sources of energy which is what has given Gas, by far more prominence and the bragging right to be labelled as both a Transition and Destination fuel. Gas is cleaner, gas is available, and gas is a ready response to the Energy Trilemma.

A 2019 study by the International Energy Agency on “The Role of Gas, in Today’s Energy Transitions” concluded, that switching to natural gas has already helped to limit the rise in global emissions since 2010. It also identified the power sector as offering an immediate opportunity for major additional emissions reduction, if the economic and policy conditions were to be right. The report, however, conceded that the contribution of gas to energy transition will vary widely across regions and sectors over time.

“Our current reality makes the push for 100% elimination of hydrocarbons, especially oil and gas, from the global energy mix by 2050, a very wishful and difficult task; but this debate could fundamentally end up being a battle between “Idealism and Pragmatism”

As Nigerians we have yet another golden opportunity to get it right once and for all! Nigeria is so blessed with natural resources – over 37billion barrels of Oil and 210 TCF of Gas reserves, that puts us as Nos. 10 and 8 in the world respectively based on proven reserves. This was our place of pride, but we now know that the custodianship of reserves alone does not amount to anything beyond just potential, and Nigeria’s current situation is a classic proof that, “potential” alone means nothing if you cannot harness the value from it. With the emergence of other resource rich African countries like Angola, Mozambique, and more recently Senegal and Mauritania, we are no longer the darling bride of the market, against the backdrop of these emerging energy hubs offering better fiscals and simpler business environment to attract more investors. As they say, the dollar will always go where it will find best value! As long as our oil and gas reserves remain in the ground, they will continue to face the fast-paced risk and threat, occasioned by the clarion call to move away from fossil fuels and by implication no added value to our economy.

Distinguished ladies and gentlemen, we need to use what we have to get what we want, and we can borrow leaf from a country like Qatar, which was a predominantly fishing economy but has been able to transform into a global world player, boasting of one of the highest GDP per capita in the world, on the back of its gas reserves. The true value of our Oil and Gas is only about what we can produce and put to use locally or for export to earn the much- needed revenue, including foreign exchange, to rescue our economy. Gas is a game changer, and we must seek to be more deliberate and ambitious in a manner akin to what Qatar has done with its gas to be No.1 in the world of LNG at 77MTPA capacity; even though Australia with 89MTPA and the more recently United States of America with 100MTPA have both overtaken Qatar on the global LNG league table, albeit for the time being.

It is important to put it on record that we have never deliberately explored for gas in Nigeria and that all the gas reserves we have today, were accidentally discovered while actively exploring for oil. With our 210 TCF of gas reserves and scope to prove an additional 600Tcf, we have the potential to leapfrog to 800TCF and become No 4 just behind Qatar, based on reserves. The reality is that we started our “Gas to LNG” journey as a means of arresting gas flares and creating a revenue stream for the economy, just two years behind Qatar. We grew our ambition to build NLNG Trains 1 -3 and went on to add Trains 4, 5 and 6 between year 2000 and 2006. During this period in which the 6 Trains were built, we were deemed the fastest growing LNG country in the world by adding a new LNG Train every 18 months, until 2006 after taking the Train 6 FID and then everything came to a halt – trapped by the politics of expansion, lack of political will and dilemma between the brownfield NLNG Train7 development and growing new capacity through green fields like OK and Brass LNG, which have recently gained some mention in the news.

We built a world class facility in Bonny which has stood the test of time delivering world class value to the shareholders and for Nigeria, to the extent that NLNG dividend has found its way into the Nigerian National budget as one of the most reliable sources of foreign exchange earnings. This yawning opportunity should have been obvious to us that we needed to focus and grow more of this reliable cash machine. It eventually took over 13 years between 2006 and 2019 before we took the FID for Train7. I was personally very excited and grateful to be part of that history following which we went ahead to sponsor the “Decade of Gas” agenda, working with the Ministry of Petroleum Resources and NNPC as the much-needed catalyst to jump start our gas revolution, looking to create a conveyor belt of upstream gas developments and midstream LNG investments in Train 8, 9 and perhaps Train 10. While the Train 7 project will add about 35% capacity to move NLNG from the current 22MTPA to about 30MTPA, Qatar has also taken a very deliberate investment decision to add a whopping 30MTPA to its current 77MTPA to ensure it returns to No.1 when completed. Essentially, our whole NLNG capacity at 30MTPA by the end of 2025 when we commission Train 7, will be equal to Qatar’s incremental capacity project despite our massive gas reserves. Essentially Train 7 alone is no longer ambitious and we should now pull up our sleeves to actively pursue the development of our gas reserves as a matter of urgency and to borrow from the inspirational submissions of the IPPG chairman and the GCEO of NNPC during the 2024 NOG conference where they both contented that, Nigeria needs to declare a state of emergency in the oil and gas sector to be able to attract the much needed focus and drive, to unleash our upstream oil and gas resource base, which will enable more midstream development projects including the now famous Floating LNG projects. We have to take advantage of the slim window of opportunity, occasioned by the growth in energy demand and the disruption of the energy systems in Europe.

We need a vibrant and active oil and gas sector with ambition anchored on commitment and agility to quickly convert our potential reserves to value for our nation. For Nigeria’s economy to grow and recover from the current weak position and revenue crisis, the oil and gas industry must succeed, being the largest contributor to national foreign exchange earnings. For Nigeria to grow and achieve sustainable cross-sectoral diversification and industrial catalyzation, the oil and gas sector must grow, and we can confirm the correlation with a simple fact check on the times we have had economic booms being directly linked to when the industry enjoys a boom. It is thus, not out of place to say that the oil and gas industry is the nerve center, if not the brain box of Nigeria’s economy. The fastest way of resolving the ongoing revenue crisis is to revitalize and galvanize the oil and gas sector by accelerating the implementation of the recently approved executive orders and the ongoing IOC divestments to restore confidence and stability in the industry.

It should be said that we cannot achieve the much-needed industrialisation and national development without unleashing the potential of the industry. We need to scale up Domestic gas development alongside gas for export. With the recently launched national programme on Compressed Natural Gas (CNG), we need to be more deliberate to include LPG and grow the national domestic gas capacity by at least doubling the current gross daily production level to about 5Billion cubic feet per day (5Bcf/d), in the near term. This will catalyse the power sector, unleash manufacturing by bringing down the cost of manufacturing by over 50%, thus stimulating the economy and creating the much-needed jobs and employments through large scale industries and SMEs.

No nation can develop and grow its economy without electricity! In other words, the growth of a nation will be largely underpinned by the growth and availability of electric power which in our case means the upscaling of Domestic Gas supply to release the available gas-fired power plants capacity. We are currently struggling with grid power supply and universal electrification in Africa where about half of the people are without direct access to electricity and in Nigeria, we also struggle with the entire electricity value chain-misalignment between Power Generation, Transmission and Distribution. The total Spinning reserve or generating Capacity in Nigeria, for over 200mln people, is just about 20,000 MW with only about 5,000MW available to the consumers. Whereas countries like South Africa with about 60 million people have over 50,000MW, Egypt has 60,000MW for 100mln people and Algeria has 22,000 MW for 45million people. Overall Egypt, Morrocco, Tunisia and Algeria have nearly achieved 100% electricity access for their people through very deliberate and focused policies and investments. We are way below the standard of 1000MW per 1 million people! This simple rule of thumb would of necessity require that Nigeria should have a minimum of 200,000MW power generating capacity, which based on a very rough calculation would amount to needing about $10billion per year for the next 20 years, to have a fighting chance of moving the needle on the much-needed catalyst for industrialisation and the emancipation of Nigeria’s economy.

A lot can be said and debated about what it will take to unleash Nigeria’s economy and the much needed industrialisation dream, but very little argument can stand the test of the fact that the availability and affordability of electricity are the main catalysts and perhaps the key energy solutions that will nearly fit all our issues including reducing corruption because technology can disrupt conventional models and ways of doing things and systems which are susceptible to corrupt processes and practices.

To underpin and future proof our economy from the vagaries of the energy transition and the changing energy dynamics we need to attract massive investments for gas development. These massive investments and the ready availability of gas will not only galvanize our economy, but it will also energize it. This will change the narrative on availability of power, availability of clean energy sources and availability of feed stock for gas-based industries.

For all of these to materialize, we will need to deploy what we have to achieve what we want. I make this statement carefully, noting that no nation can stand alone against the backdrop of the Energy Trilemma and the ongoing energy Transition. Therefore, the key economic growth opportunity must be hinged on massive gas development, specifically on deliberate new Gas Exploration to rebase our gas reserves. Essentially government needs to do everything including granting additional and far-reaching fiscal incentives and moratorium over and above the PIA fiscals focused on gas development, infrastructure and cost reflective pricing as the main pillars on which our industrialisation will be anchored. The potential 5bcf/d local market for gas is huge and we must therefore domesticate a significant part of the gas development to drive our national economy, consistent with the President Bola Ahmed Tinubu’s Renewed Hope and Decade of Gas agenda to under pin the economy with gas by 2030. This focus on gas via the recently approved executive orders on NAG development and the structural improvement of our ministerial portfolios to include the “Minister of state for Gas” is definitely in the right direction, however we may need to be more bullish to adjust our ministerial portfolios to focus on integrating Oil, Gas and Power but to also consider restructuring or consolidation to have a Minister of Energy to enable the full integration of the Oil, Gas and Power Ministries.

With the fierce urgency of now, developing and producing our oil and gas reserves, has got to be the main agenda going forward!! Suffice it to add that, we will need investors, and the investors would need to satisfy themselves that their investments would realise sufficient profitability in the face of mitigable risks, hence, they would require assurances and clarity on fiscal stability, sanctity of agreements and enabling regulatory policies to enjoy competitive returns in a guaranteed market like ours.

That said, I am not unaware of the attendant challenges and difficulties to attract finance to fund the industry against the backdrop of some tough choices already made by key financial institutions in the western world. This should spur us to develop and seek alternative home grown solutions including looking to be part of the solution to the energy crisis in Europe as well as reaching further to the East for new sources of funds even if we have to use the reserves as collateral. We should also look inwards, taking advantage of the great works that the Afrexim Bank is doing to keep Africa going by supporting new oil and gas investments. Afrexim Bank is the main leader in African projects financing offering home grown solutions to enable Africa to take a stand against the international castigation of Oil and Gas. The Africa Energy Bank recently located in Abuja will also be a key enabler and catalyst to accelerate our gas development opportunities. This would ensure security of supply thereby giving us a fighting chance of being able to take advantage of the growing global energy demand and energy gap before our oil and gas reserves become “trapped in transition” to make the harsh reality of the quote by the former Minister of Petroleum and Mineral Resources of Saudi Arabia, Ahmed Zaki Yamani who said “The Stone Age did not end for lack of stones, and the Oil Age will end long before the world runs out of oil”; but let me bring it even closer home with a key reminder that “There is still a lot of Coal in Enugu”.

This is the moment of truth.

Nigerians cannot sit on their hands, or continue to play the ostrich while the world moves on. We have 37Billion barrels of oil and 210Tcf of gas reserves which remain as just potential and not value adding as long as these reserves remain in the ground. The existential challenge to surmount the Trilemma and keep our economy afloat will require very deliberate focus on gas as Qatar as demonstrated with a clear and replicable template for us to copy. This could well be the golden opportunity for us to leap frog and unleash our economy, making it more robust, sustainable and resilient to survive the vagaries of the energy transition and the fast changing energy mix.

Distinguished ladies and gentlemen, we have plenty of gas to make this happen; Plenty of gas to unleash our economy!

Gas is Power as in Electricity
Gas is Food as fertilizer for Agriculture
Gas is Petrochemicals as feed stock
Gas is Industrialisation as catalyst for SMEs
Gas is Employment as in LPG for cooking
Gas is Transportation as in CNG
Gas is Political and economic Power

Indeed, gas can be everything and anything we set our minds to make it!

Please let me finish with an old quote of mine, that says “Nigeria has ridden on the back of oil for over 60 years, it is perhaps now time for Nigeria to fly on the Wings of Gas”!

Abridged version of a speech delivered at the Petroleum Club, Lagos Nigeria. Tony Attah (FNSE), former Managing Director Nigeria Liquefied Natural Gas (NLNG) Ltd, former MD, Shell Nigeria Exploration &Production Company (SNEPCO), is currently an Independent Energy Consultant.

Egypt’s Domestic Gas Market Hit by the War in Gaza

Section: GAS COMMERCIALISATION · October 11, 2023 · No comments |

By Toyin Akinosho

Egypt’s imports of Israeli gas fell almost 20% after Israel suspended production at the Chevron operated Tamar field, owing to the war with Gaza.

And that has affected the consumption in Africa’s largest domestic gas market.

Imports of piped Israeli gas slumped to 650 Million standard cubic feet per day (650MMscf/d) from 800MMscf/d, after the Israeli energy ministry instructed Chevron to halt production, due to the security situation. The Leviathan, Israel’s other major gas field, remains online.

Egypt had relied on Israel to keep natural gas consumption as high as 6.8Billion scf/d, as the former’s own production declined for the ninth consecutive month.

Egypt’s gas output reached an all-time high of 7.06Bscf/d in September 2021, but the numbers have continuously headed south, as the ENI operated Zohr, the country’s flagship gas field, battles unrelenting water infiltration problems.

Egypt used part of Israeli imports to satiate local demand while it exports the rest as LNG to earn foreign exchange.

Israel’s retaliatory launch of the siege of Gaza, after a massive attack from that coastal city, was the reason to cut supplies to Egypt from Tamar field.

“Israel has been a key energy partner during a difficult summer”, reports the Egyptian business website, enterprise.com. ”Egypt has been importing increased volumes of Israeli gas this year, helping to offset the ongoing electricity crisis that has triggered nationwide rolling blackouts for over two months”.

“This could keep our LNG terminals offline”, enterprise.com says in an editorial. “Uncertainty about the supply of Israeli gas could potentially delay the Oil Ministry’s plans to resume gas exports in October 2023”.

‘The Nigerian Government’s Chokehold on Gas Pricing Is a Major Disincentive’

Section: GAS COMMERCIALISATION · March 21, 2022 · No comments |

Sunday Okunbor, General Manager, Commercial at NDWestern Ltd, an E&P independent, is concerned about the Nigerian Government’s predilection for arbitrary price control in the domestic gas market.

“As government is prone to abrupt changes in the policies, we find ourselves strenuously adjusting and adapting”, he told Africa Oil+Gas Report ‘s Akpelu Paul Kelechi in an interview.

Okunbor advanced that his company is concerned about “how to survive the current price reduction that the government passed last year through the minister of petroleum resources, from $2.50 per thousand standard cubic feet (Mscf) to $2.18 per thousand standard cubic feet.

“It’s a been a major one for us plus the lingering debt that Power sector incurs as they offtake our gas. It is hurting to us”.

Allowing that “what is being owed the (NPDC/NDWestern) Joint Venture by the country’s power sector is over ₦100Billion”, he said “it’s a lot of money so and what that means is that we have to source for money elsewhere to continue running the business. it’s a major problem and we’re doing everything at the advocacy level and also trying to get the government to see reasons why this money actually has to be paid….”

Okunbor said that his company cannot trigger or exercise the terms of the contract because any attempt to do that will be seen as a sabotage against the government because cutting off gas to the thermal power plants “means that there won’t be power, there won’t be light to the populace and that’s what we don’t want to do. So, we find ourselves begging and at the same time, rendering services to these people without getting the necessary payment for the services”.

Below are excerpts of the full interview:

You handle the commercial side of the Natural Gas business for NDWestern. How has it been like?

The company started selling gas mainly to the power sector and then from there we enriched our portfolio, selling to the GBIs that is, the Gas Based Industries. Dangote Industries for example, uses our gas for fertilizer production.

How have government policies encouraged the business? Nigeria’s Minister of state for Petroleum has declared this decade as the decade of gas

It has been a very interesting time. As government is prone to abrupt changes in the policies, we find ourselves adjusting and adapting.

A major cause for concern is how to survive the current price reduction that the government passed last year through the minister from $2.50 per thousand standard cubic feet (Mscf) to $2.18 per thousand standard cubic feet. It’s a been a major one for us plus the lingering debt that Power sector incurs as they offtake our gas. It is hurting to us. What is been owed the (NPDC/NDWestern) Joint Venture is over ₦100Billion, it’s a lot of money so and what that means is that we have to source for money elsewhere to continue running the business. it’s a major problem and we’re doing everything at the advocacy level and also trying to get the government to see reasons why this money actually has to be paid.

Sunday Okunbor (pictured above): “For us, over 60% of our volume goes to power and you can imagine what that price drop would mean to our business. So it’s a major problem and in fact I can say it is a major disincentive for us to want to invest more in this gas business. Interesting enough, the (Oil Mining Lease (OML) 34 in which ND Western owns 45%, is a gas asset. The production that comes from that field is majorly gas and that is where all the investment is. So, if we’re not getting value for that gas, the owners of the business will not be incentivized’

We cannot exercise those terms of the contract because any attempt to do that will be seen as a sabotage against the government, because cutting off gas from the gas fired thermal plants means that there won’t be power, there won’t be light to the populace and that’s what we don’t want to do. So, we find ourselves begging and at the same time, rendering services to these people without getting the necessary payment for the services. So that’s basically my major highlight in the gas space in the industry since I joined.

Many analysts argue that the way to improve the domestic gas market in Nigeria is to fix the broken power sector. But there are other gas-consuming sectors in the economy: methanol plants, urea factories and merchandise centres like the Ariara market…

NDWestern wanted to have a kind of a robust portfolio, as to where our gas goes to, and we’ve been able to capture the three major sectors in the in the gas industry, which is basically the power sector which consumes the highest in terms of volume; the LDCs that’s the Local Distribution Industries or Companies, and then the GBIs as I mentioned. We wanted a situation where we are able to touch all the sectors and that’s why we brought Dangote in. This contract was executed late last year and the contract is operational as I speak. We Supply Dangote gas for their fertilizer plant. Supplying companies like Dangote could actually help us to balance out. Instead of giving gas to the power sector that doesn’t pay us regularly, it’s better to give it to Dangote who, from the information that we have gathered, pays regularly. For us, it is still early days and we cannot judge but we have started supplying since late last year and it’s been good. We believe, based on the information we gathered from Gas Aggregation Company of Nigeria (GACN, that Dangote would pay us promptly.

How many million standard cubic feet per day does Dangote Industries offtake?

I don’t know if this would affect the contractual obligation on our side, to put out the amount that we supply. Some of these are very sensitive in terms of volume, price and then other clauses in the contract because there are confidentiality clauses in the contract. I can only tell you we’re supplying volumes. These things are very sensitive. Once I quote it, it may get into the press and then before, you know, it’s everywhere and the question is how did this get out, because they are confidentiality non-disclosure Clauses in the contract.

The issue of government allowing a willing seller, willing buyer philosophy in the Nigerian gas market has been on the table for a while. And now government suddenly declares that prices should even be less. What other things are gas producers battling with?

The major challenge has been that we actually wanted a higher price based on our cost of producing this gas. The price should actually be higher than the $2.50. We’ve been on the $2.50 for close to 10 years and the expectation was that this price was supposed to go up but as the government would have it, it went down and also the users also, I’m sure they also were using their power to kind of press government for a reduction. I can tell you this has adversely affected the gas producers. Now, the first thing is that we don’t get enough payment. That’s the first problem. We are not getting our payment as and when due and we have this backlog of debts hanging on us.

The announced reduction of price from that $2.50 to $2.18, effective August 2021, means is that, the revenue that you already taught you have, and that have you projected into the future in terms of forecasting, has now been reduced to that price that has been given. And also, that does not change the payments pattern. So it’s a major setback, to all gas producers, mostly to those that are supplying to Power

For us, over 60% of our volume goes to power and you can imagine what that price drop would mean to our business. So it’s a major problem and in fact I can say it is a major disincentive for us to want to invest more in this gas business. Interesting enough, the (Oil Mining Lease (OML) 34 in which ND Western owns 45%, is a gas asset. The production that comes from that field is majorly gas and that is where all the investment is. So if we’re not getting value for that gas, the owners of the business will not be incentivized in any way to want to put in more money, so that’s the major challenge to us.

The industry has associations that can try to help push your case to the government. Are you guys trying to do that in any way right now?

I’m actually part of a team working in IPPG (an association of indigenous Nigerian Exploration and Production (E&P) companies with a current membership of twenty-five(25) companies) to see how we can push our advocacy as regarding gas price. We would do all we can, in terms of talking to those people that can change things or that can make things to happen to see why we should be incentivized. If government is not even willing to change the price, let it give us other things that can cushion the effect of this price and that’s what we’re asking.

We may not be able to act to make them change the price immediately but they should give us other incentives that can help cushion it. About 30 or 40% of those power plants that are heavily indebted to us are owned by government. Government retained about 20 or 30% of those are those power plants as their own when they privatized them. Government should be able to do something about those debts and that’s why we said if they are not able to pay or if there are other ways, they should incentivize the gas suppliers so that they are able to continue doing this business and push in more gas to power this country. We need gas to make this country work.

What other incentives would you want to see?

There are several others that we’ve looked at; it could be the area of us bringing in equipment. So all those others equipment that we use for maybe drilling or for our wellheads, or anything else that has to do with oil and gas equipment coming in, there should be a tax waiver or all they shouldn’t be any import duties on those so that that, alone, you can count on as something that you can hold on to reduce your cost. Two, we can look at it from the area of royalties. We still pay royalties on these invoices that I told you have not been paid. We have actually paid government royalty for those invoices even though we’ve not received payments. I’m sure you’ll be surprised to hear this.

We believe that those debts should actually be used to reduce royalty payments to government and that would be in major a major incentive to us, if the government is able to do that.

Let us talk about the AKK. There are a lot of people who say opportunities abound with the AKK as industries will spring up along with the AKK. . Are you lining up to be a feedstock supplier into the line?

We see opportunities in the north as regards to this AKK projects. We attended the last summit that was done and we’ve actually started getting enquiries from people that are planning to develop or put their business in those places. So we’re reviewing those opportunities now and the plan is that, at some point, we will start negotiating most of these volumes that will be going there. So for us, as part of our Global plan to kind of you know, put our foot also in the North through the AKK project, we actually started with that and we have plans to grow our volumes. So for you to go that way, definitely you need to increase your volume. So you know that we have about 600MMscf/d capacity. We’re not fully utilizing those capacity. But again, we need to drill more Wells.

Sunday Okunbor oversees the commercial side of the gas business at NDWestern, the Nigerian independent whose Joint Venture with state firm NDPC is the largest indigenous supplier of gas to the country’s domestic market. Okunbor has over 20years of professional working experience in the oil and gas industry, starting with Shell Nigeria Gas Limited, through Pan Ocean Overseas, to NDWestern, which he joined in 2013.

Why Aje Field Cannot Yet Supply Gas to Lagos

Section: GAS COMMERCIALISATION · January 10, 2022 · No comments |

It would seem a no-brainer that the Aje gas and condensate field, which reached first oil in May 2016, should have advanced to the stage of supplying natural gas to Lagos by mid-2021.

The field is strategically located 24 kilometres offshore Lagos where it should benefit from increasing local energy demand, particularly for gas which is viewed as a replacement fuel for diesel and commands a premium.

“But gas projects take…Read more…

Will Nigeria’s LPG Demand Buckle under the Weight of the Country’s Forex Problems?

Section: GAS COMMERCIALISATION · May 18, 2021 · 1 comment |

By Bunmi Aduloju, NAREP Fellow

…Some say that growing in-country LPG production should mitigate these concerns, but..

When Vitalis Obinna, an LPG retailer and dealer in gas cylinders and accessories in Festac Town, a western suburb of Lagos, Nigeria, caught sight of a figure advancing towards his shop, he jumped to his feet with an anticipatory flash of excitement. Surrounded by other LPG retailers at the location, a new customer would mean more sales for the day. Soon, his interaction with this reporter took a turn of business reality.

“Since last year, business has been very dull,” he said. ‘But when the year began, it became really bad. There’s been no profit in cooking gas. We buy gas for about ₦4300 and sell it for about ₦4500.

“Before now, we used to make profit of at least ₦600 on 12.5kg of cooking gas but now, our profit is ₦150 to about ₦200 for 12.5kg of gas.”

Asides a drop in profit, he also has to put up with reduced customer patronage.

“Before the price increased, I used to refill at least 10 cylinders everyday but now, I hardly refill three cylinders. In fact, when I think some customers are going to refill their 12.5kg cylinders, you would be surprised that they will only buy ₦500 worth of cooking gas,” he added.

Nike Kazeem and Christiana Sikiru, both petty traders (selling provisions and groceries) in makeshift stalls, express concern about the increased price of the product in the first quarter of 2021.

Whereas Mrs. Kazeem, who says she’s been using LPG for decades, has resorted to kerosene stove to cook for her family in the meantime, Mrs. Sikiru switched to cooking gas in January “because she found that “Kerosene dries up quickly.” She said that the increase was a normal trend with commodities. “There has been an increase in price but I understand that things are now expensive,” she explained.

Fluctuations in LPG Price Lead to Regional Distortions

According to the National Bureau of Statistics (NBS), the national repository for statistics in Nigeria, the average cost of refilling 12.5kg cylinder of cooking gas was ₦4,117.55 in January, and ₦4,363.51 in February but it fell to ₦4,359.23 in March.

The average price for refilling 5kg LPG cylinder increased from ₦1,949.02 in January to ₦2,018.91 in February and inched up again, in March, to ₦2,057.71.

In 2021, the total average price for refilling 12.5kg in Q1, stood at ₦12,900.28. However, in 2020, the total average price for refilling LPG cylinder was ₦12,542.04.

Eyono Fatai-Williams, General Manager, NLNG responding to a Thisday enquiry about the increasing price of Liquefied Petroleum Gas (LPG) in January replied that the dependence on imported LPG had put undue pressure on the price of the commodity.

In the same vein, two LPG stakeholders gave a similar account for the increase.

“Gas price is highly seasonal. LPG is a global commodity and during the winter seasons, prices are usually high and then, they go down towards the end of the summer. Then again, by the end of 2020 and early 2021, because of forex changes in Nigeria, it took the prices higher than normal,” says Mr. Bashir Koledoye, Managing Director, Dharmattan Gas and Power Products Ltd, adding that the prices “will continue to drop until the summer”.

Fatai Ogungbenle, Head, Business Development and Sales (LPG), Kwale Hydrocarbon Nigeria Limited, an independent downstream gas company, agrees that the increased price of LPG is tied to the seasonal demand for LPG in Europe during the winter seasons.”

“Europe has more of sustained cold season this year because of global warming. It added to the issue of high demand in Europe and part of America, making us to price highly. But in few weeks to come, I think the price of LPG may likely decrease a bit. But the downside to it is the exchange rate. If nothing is done to it, we may experience this for a longer time more,” he explained.

“I can remember vividly that a truck of gas in November 2020 was ₦4 Million to ₦4.2 Million. But now, it is around ₦5.5 Million to ₦5.6 Million for over a period of about 6 months,” he added.

Nor is the higher price restricted to the gas molecules alone. The cost of the equipment too is rising. Vitalis Obinna said that he sells a 6kg gas cylinder with an accompanying burner for ₦11,000, a 30% jump increase from ₦8,500 which he sold the two equipment just five months ago, in December 2020

Koledoye explains that “demand dips with higher prices, but because Nigeria is rapidly adopting LPG, the effect is not significant”. He admits that there are challenges with the Forex situation, “but increase in in-country LPG production is expected to reduce this problem very soon”. In general, he feels comfortable with the way the market is now.

In Q1 2021, 55.7% of LPG consumed was imported. This contrasts with 58.4% of LPG consumption, which was imported in Q1 2020, according to the Petroleum Products Pricing Regulatory Agency (PPPRA), a monitoring and regulatory agency of petroleum products in Nigeria. In both quarters, importation took the lead.

Apart from the price volatility of LPG in Nigeria and enormous dependence on imported products, the price in each State in the country is largely determined by the landing cost of the product.

In March 2021, Cross River State paid the highest for cooking gas at ₦4762.65 and Zamfara State, ₦3,749.06, accounting for the lowest.

Similarly, Lagos paid ₦4,435.45 to refill 12.5kg cooking gas cylinder.

Cross River state residents paid the highest price in the nation for 12.5kg LPG in Q1 2021, with a sum of ₦14,407.89 while Kaduna paid the lowest with ₦10,900.79 in total.

Different Retail Prices

An LPG retailer at New Site, Satellite Town, a sprawling housing estate in the west of Lagos, who pleaded anonymity, says that LPG price varies among retailers too.

“The price of cooking gas differs depending on who we buy from. If we buy at a high cost, we sell at a high cost. If we buy at a lower cost, we sell at a lower cost. The gas station sold 12.5kg of cooking gas to me at ₦4,500, I sell it at ₦4,600.”

“The business of LPG has always been a good business but it is just that now, it is not really yielding money like it used to. Last year, it was sold to us at ₦4,000 naira but since January, it increased”, he added.

Abundant Resources, Lack of Utilization

Nigeria has the largest gas reserve in Africa. As of June 2020, Nigeria’s proven gas reserve was 203.16 Trillion cubic feet (Tcf), according to a report by the Department of Petroleum Resources (DPR) .

In the report, Sarki Auwalu, the director of DPR, said that even with this huge proven gas reserve, gas utilisation was only about 5.5%.

Mr. Ogungbenle of Kwale Hydrocarbons expressed dissatisfaction at the underutilisation of Nigeria’s gas potential.

“For domestic use of LPG, we are doing less than 25%, far below what we can do,” he said.

Some of the challenges that the domestic LPG market is faced with include uneven terminal distribution, lack of adequate transport facilities and administrative charges on the domestic sales of LPG, although deregulated.

INTERVENTION PLANS

Nigeria’s federal government set up the LPG Penetration Framework to encourage the use of LPG in households, power generation, auto-gas and industrial applications in order to attain five million Metric Tonnes of local consumption of LPG in 2022, according to the Federal Ministry of Petroleum Resources (FMPR).

The government’s objective of attaining Five million MT of LPG consumption by 2022, puts the national consumption target of LPG at an estimated 83.33 thousand MT per month from 2018 to 2022.

In 2021 Q1, only March’s LPG consumption met this monthly target at 87, 199.846 Metric Tonnes (MT).

Even though the calorific content of Liquefied Petroleum Gas (LPG) is higher than kerosene and other cooking fuels, LPG is more capital intensive than most cooking fuels in Nigeria.

This initial cost of switching to LPG is a contributing factor to the 43% population without access to clean cooking, as at 2018.

The LPG Gas Expansion Plan was introduced to increase the consumption of LPG in the nation, as the domestic energy mix consist of 60% firewood, 30% kerosene, 5% LPG, 5% charcoal.

With plans to increase usage of LPG, the federal government will be injecting 10Million cylinders in ten years to the market, according to Dayo Adeshina, Programme manager of the national LPG expansion plan, during a sensitisation workshop on LPG adoption and implementation for industry stakeholders, in Lagos.

This story was produced under the NAREP Media Oil and Gas 2021 Fellowship of the Premium Times Centre for Investigative Journalism.

ENI Set to Re-Start the Damietta LNG Plant in Egypt

Section: GAS COMMERCIALISATION · December 1, 2020 · No comments |

By Bunmi Aduloju

Italian player ENI says it has signed a series of agreements with the Egyptian government, two of the country’s state hydrocarbon firms and a Spanish firm, paving the way for the restart of the Damietta liquefaction plant in Egypt by the first quarter of 2021.

The state hydrocarbon firms include the Egyptian General Petroleum Corporation (EGPC) and the Egyptian Natural Gas Holding Company (EGAS). The Spanish company is Naturgy.

The agreements culminate in the amicable settlement of the pending disputes of Union Fenosa Gas and SEGAS with EGAS and Arab Republic of Egypt and the subsequent corporate restructuring of Union Fenosa Gas itself, whose assets will be shared between the partners ENI and Naturgy.

The liquefaction plant’s owner is the company SEGAS, which is 40% owned by ENI through Union Fenosa Gas (50% ENI and 50% Naturgy). The plant has a capacity of 7.56Billion cubic meters per year, but has been idle since November 2012.

The agreements, signed on December 1, 2020, are in line with the ones finalized last February and take into account the evolution of the energy scenario, allow to reinforce ENI’s strategic objectives in terms of growth of its LNG portfolio, in particular in Egypt, where the Company is the main gas producer, and are of primary importance for all parties involved to resolve all pending disputes.

“The operation, subject to the authorization of the European authorities and subject to the fulfilment of certain conditions precedent, allows to strengthen the presence of ENI in the Eastern Mediterranean, a key region for the supply of natural gas, an important resource for the energy transition”, ENI says in a statement.

“The participation of Union Fenosa Gas in the Damietta plant (80%) will be transferred 50% to ENI and 30% to EGAS. The resulting shareholding of SEGAS will therefore be ENI 50%, EGAS 40% and EGPC 10%. ENI will also take over the contract for the purchase of natural gas for the plant and will receive corresponding liquefaction rights, thus increasing the volumes of LNG in its portfolio by 3.78Billion cubic meters per year, which will be available on an FOB basis, with no destination restrictions”., the company explains.

As regards Union Fenosa Gas’ assets outside Egypt, ENI will take over the commercial activities of natural gas in Spain, strengthening its presence in the European gas market.

The agreement comes at an important moment, when also thanks to the fast time to market of ENI’s natural gas discoveries, especially the ones in the Zohr and Nooros fields, Egypt has regained its full capacity to meet domestic gas demand and can allocate surplus production for export through its LNG plants.

Key To Successful Stakeholder Relationship Management In The Oil And Gas Industry

Section: GAS COMMERCIALISATION, Gas Monetization · December 27, 2019 · No comments |

By Jimmy Ahmed

Introduction

Since the 1980s, some major changes relating to the management of Safety, the Environment and Stakeholder Relations have been taking place in the Petroleum Industry, resulting in poor and unhealthy business relationships between Oil and Gas Companies and the various stakeholders in the Industry. Safety and environmental management are now very well integrated into all aspects of the business processes and operations. One key area that is still undergoing embedment and yet to be fully integrated into venture management, and which has the potential to add lots of value to the business towards sustainability is Business and Stakeholder relationship management. The Industry has since realised that the growing costs of managing the fall outs and negative reputation that the poor stakeholder relationships were having on their Business and profitability was unacceptable. This was the advent of “Business Sustainability”, the effective management and coordination of financial, social and environmental (the three pillars of sustainability) risks, obligations and opportunities. The impact of these changes on the Industry has not only been seen in the quality of and increased manning levels but also in the increased costs associated with managing these new focus areas of the Business, albeit, leading to more responsible and sustainable outcomes. This article focuses on one aspect of managing these changes, Stakeholder Relationship Management.

The more successful companies that become Partners of Choice, and clinch better oil and gas deals with major resource holders, are those with a good reputation on having built and are maintaining sustainable relationships with host governments and other stakeholders; relationships based on trust, respect and a win-win mindset. It is therefore fair to say that ‘any relationship that is not based on a ‘win-win’ formula will not be sustainable and will end up in ‘Acrimony’.

Many companies in those days felt they knew what the society and stakeholders needed without the need for effective engagements and consultations. In some cases, the Companies were already operating in the countries before the Independence of those countries, so adapting to the new system with local host governments was a novel idea. Over time, friction in the relationships developed, between the Companies on the one hand and the governments, the host communities, Non-Governmental Organisations (NGOs) etc. on the other hand, leading to major reputational issues, high down time and production losses in the business. Something needed to give or be done to change the dynamics. Chief Executives who should be spending most of their time managing the business were spending almost 100% of their time managing crisis, mostly caused by poor relationships with their Business Partners, Host Governments, host communities, NGOs, Regulatory authorities and the NOCs.

What Changed and why?

With increasing oil prices, increased profitability of the Industry and increased social and environmental awareness of the impact of the industry on society and the environment came “lots of interest and pressure” from Resource owners, (mostly Governments), Non-Governmental Organisations (NGOs), Business Partners in Joint Ventures and host communities. These interests and pressures were of a varied nature, from demanding: a bigger share of the profits by resource owners and host governments, more transparency from Business Partners, more inclusiveness by host communities and more sustainable social and environmental practices by the industry.

The following are some of the issues and root causes of the changes:

Lack of shared objectives and goals, lack of trust, and unmet expectations on the part of Stakeholders and Business Partners. Governments are committed to their people to provide social services while oil and gas companies want to invest in projects that will deliver the highest returns on investments for their shareholders.
Changes to Petroleum fiscals Laws and Regulations by Host Governments and Resource owners mostly targeted at resource control and increasing Government take.
Structural Tension caused by irreconcilable differences between the current reality versus the visions and goals of the Partners in the business relationship. Creating appropriate action plans to move all Parties from where they are, to where they want to be, often times increases the tension, requiring lots of formal and informal meetings and engagements. For example, in some developing countries, the Governments want some of their gas resources utilised for local/domestic consumption and power generation at gas sales prices much lower than oil and gas companies can get from exporting the gas. Governments also expect the oil and gas companies to spend their resources on domestic gas projects that do not rank high in Operating Companies’ economic project list.
Outdated fiscals, Petroleum Laws and Regulations requiring review in the light of changes that have taken place in the business environment over time. The fiscal terms of some of the contracts were incentivised and put in place to attract investors during periods of high-risk investments with the companies bearing all the risk. Companies wants to stretch the duration of incentives while resource owners feeling that the investor has more than recouped the invested capital, hence the need to remove/reduce the incentive earlier granted.
Increased Commercial disputes and mistrust between Business Partners in Petroleum Ventures leading to Arbitrations and court cases caused by perceived lack of transparency of the Operator and perception of Operator making ‘profit from cost’ using their home offices or proxy companies.
Host Communities impacted by the activities of the Industry agitating for more inclusiveness, sometimes in violent ways, alleging not being carried along by the Operators. Expectations of Industry to replace or act as governments in the Communities where they operate to provide infrastructure needs etc. mostly in developing countries.
NGOs constituting themselves into Industry “ombudsmen”, to ensure that the industry operated responsibly, ethically and in a sustainable manner for the benefit of society.
Perceived arrogance of oil and gas companies and their staff in dealings with host government officials and external stakeholders.

A recognised best practice to manage and foster Business Sustainability is Stakeholder Engagement. It leads to organisations learning from customers, employees, host communities, Host Governments, Partners etc. The engagements are not unidirectional, only pushing out messages, but form the basis for gathering business intelligence, understanding the business environment, other Parties’ positions and needs, finding common grounds and involving stakeholders or taking their needs too into decision-making. These engagements also help to build mutual trust in the relationships between the Companies and their various stakeholders.

The Petroleum Industry already had relatively small in house Teams or Departments and or external groups (Legal Firms and Lobbyists) that managed what was in those days referred to as External Relations or Public Affairs. These were mostly small teams of a few staff, often perceived to be “dead woods”, headed by a middle level Manager, mostly managing Corporate social events, with no voice at all in senior Management. They also led the organisations in managing these engagements with their limited understanding of the discourse at the time, sometimes supported by lobbyists, particularly when it came to proposed changes to Petroleum, Environmental, Safety or Fiscal Laws and Regulations with potential to impact the profitability of the Companies. These teams were essentially “Door Openers or Gate keepers”! That was the level of attention the companies felt this aspect of their businesses needed at the time.

Where we are today

As the realisation of the need for very strong and effective business and stakeholder relations management grew in the Industry, Relationship Management teams in these companies grew beyond imagination, in some cases with more staff than some Technical(Petroleum engineering and Exploration) departments put together! While those functions were in the past staffed mostly with “staff that were no longer needed in core functions”, today, those functions are staffed with the brightest and best, high potential staff. – ‘High flyer high potential’ technocrats and staff that should be busy managing Assets or Business Functions to improve the bottom line and grow the business are now sent to manage these Relationships. In some cases, as development assignments for the high potential staff, in preparation for senior management roles, same as with a stint in Safety Management.There is also a Stakeholder Relationship management staff on most senior management teams, and /or top management meetings.

These changes to the way Stakeholder relations are managed have also increased the cost of doing business but the very positive impact of these costs on sustainability and profitability are now also very obvious. Besides increased staff costs, Corporations are having to spend more on logistics too, including the use of private jets and company guest houses by Executives outside of operational bases, to attend numerous and sometimes very unnecessary impromptu crisis management meetings with various stakeholders within countries and globally. Some of these costs and inconveniences can be avoided by having structured engagement plans and programmes in place. The cost benefit analysis of these increased spending is now clearly seen as having positive impact on the profitability and sustainability of the business.

Suggestions and Recommendations

Companies will have differences in their understanding and management of their stakeholders but one aspect comes out as best practice today which is, that it is not an area to be neglected as a core aspect of managing non-technical risks to achieve sustainability of the business.

Effective management of stakeholder relations should not be put at the back burner but must be built into the business and venture processes from inception (feasibility stage of the project) right through to project abandonment.
Carry your stakeholders along in whatever you do to always have a shared understanding and build trust. Engage proactively with all stakeholders and do not decide what you think is good for them. The relationships and engagements must also be maintained and carried out in an ethical manner and based on mutual respect.
NOCs and resource owners are getting smarter and wiser, trying to get more or claw back value from their resources, so ensuring fair deals in win-win business relationships throughout the venture life will create a “goodwill credit” for the companies during difficult economic periods or for consideration in new ventures.
The era when Relationship Management positions were filled with “Dead woods” or people the company did not know what to do with is long gone and any company that does not understand that will lose a lot of value. The Business and Stakeholder Relations teams should have a mix of core Business staff (Senior Technical professionals versed in the Key business processes who can more convincingly engage stakeholders and are empowered / trusted to make some key decisions)and staff skilled in interpersonal and People skills. The teams should also be represented in the top management of the companies with a seat at top management meetings where business deals and issues are discussed. Organisations and companies that have realised the value these positions bring to the business have elevated them to the levels of Executive Directors.
Even in small companies or ventures with Partners, the importance of ensuring that all Parties are kept happy with timely and transparent information, to guide their decision making, for approvals of business plans and budgets should not be underestimated.
If critical skills and knowledge gaps exists in the capacity of your venture Partners, particularly with the ‘senior’ partners, mostly National Oil Companies (NOCs), the Operator should have a skills and knowledge acquisition programme in place to bridge the gaps and make them competent to fully understand the Business processes and be effective Partners. This can save valuable time in removing bottle necks in your achieving timely targets.
If contracts are meant to be reviewed periodically, all Parties MUST ensure that these reviews happen as planned or delays agreed in formal engagements, to avoid problems that could arise from perception of a party deriving undue benefits from the delay.Some contracts may give undue advantage to a party in the venture at some stage of the project, but ensuring that contract review clauses are adhered to in a timely manner will help to sustain the relationship and enhance trust.
For small companies who need to manage staff numbers, they need to identify critical stakeholders and develop appropriate relationships management strategies, i.e. whether and which stakeholders the company would directly manage, and/or use consultants to manage others.

Jimmy Ahmed is a Non-Technical Risk Management Consultant in the Petroleum Industry. He retired as an Executive Director of Shell Pet. Dev.Co. of Nigeria Ltd.

Egypt Connects 300, 000 More Homes to the Gas Grid

Section: GAS COMMERCIALISATION · December 2, 2019 · No comments |

By Mohammed Jetutu, in Cairo

The Egyptian Government reports it has connected around 305,500 housing units to natural gas between July and September 2019, bringing the number of households connected to the natural gas grid to 10.4Million.

Tarek El Molla, the Minister of Petroleum, says that natural gas was delivered to 178 commercial consumers as well as three factories, during the three month period, while 4,613 cars were converted to run on natural gas, reaching a total of 288,400 converted cars.

Even so, local consumption of natural gas and petroleum products declined by 5.2%, compared with the same period a year before, recording around 19.6Million tons.

The consumption of natural gas represents around 63% of the total local consumption of all petroleum products (diesel, kerosene, gasoline, etc), yet it declined by 4.9% compared with the same period a year before. This is due to the drop in natural gas consumption in power stations by 6%.

Oil Companies Work towards the Industrial State

Section: GAS COMMERCIALISATION, Paid Post · October 7, 2019 · No comments |

PAID POST

Nigeria’s hydrocarbon sector has largely been about extraction of crude oil for export and importation of petroleum products for consumption.

And when the authorities talk about diversification of the country’s economy, the focus isn’t always about diversification within the hydrocarbon industry itself.

“We should include talk about diversification within the oil industry”, says Ebi Omatsola, founding Chief Executive of Conoil.

This kind of thinking is already enshrined in the draft National Oil and Gas Policies, widely circulated in 2016, but not gazetted.

One company that has actively interrogated the industrial economy through its hydrocarbon assets is Niger Delta Petroleum Resources (NDPR) Limited.

Layi Fatona, who just left the mantle of the CEO, explains in this video.

Angola Needs to Drill More Oil Wells to Produce Gas

Section: GAS COMMERCIALISATION · September 11, 2018 · No comments |

By Sully Manope, in Soyo

Angola’s LNG plant has dropped in production as a result of reduced amount of natural gas that come from the crude oil platforms that supply it.

It sounds intriguing, but the plant relies entirely on associated gas: natural gas which cohabits in the same reservoirs as crude oil.

ALNG’s production capacity is 5.2 Million Tonnes Per Annum (5.2MMTPA). The train can process up to 1.1 billion cubic feet of natural gas per day,

Diamantino Azevedo, Angolan Minister of Mineral Resources and Oil is quoted by Angolan state news agency Angop, as saying that additional investments are needed in drilling more oil wells in the country, in order to increase the natural gas that is channelled to ALNG plant “to reach the installed production capacity.” The minister reportedly added: “This is a challenge that Angola LNG and the country have to take on, in order to achieve capacity and maintain project stability over a long period of time”.

The immediate challenge to Mr. Azevedo’s wish is the immediate status of Angolan rig count. Angolan rig activity figures had crashed from robust 22 in September 2015 to 4 in August 2018, according to the August /September 2018 edition of the monthly Africa Oil+Gas Report.

Angolan LNG has had its fair share of challenges since it came on line in 2013. Barely a year after commissioning, it faced an extended plant shutdown of more than two years from April 2014 to June 2016 to fix a number of design issues that caused an incident on 10 April 2014

That situation led Chevron, the operator, to create an internal project management system to better track contractors and subcontractors on major projects. Chevron is the largest stakeholder in the facility, holding a 36.4% interest, with partners that include Sonangol, 22.8%, and BP, ENI and TOTAL, with 13.6% each.