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Rebasing the Oil & Gas Sector

By Adedayo Ojo

By recalculating the way it reports Gross Domestic Product (GDP) using 2013 as base year, Nigeria found its economy had leaped by 89% to $510Billion from the 1990 figures. The change occasioned by a simple mathematical/statistical calculation is the good news.

In real terms, nothing may have changed for the “man in the street” and the overall economy.
But for the oil and gas sector, a lot has changed since the country calculated its GDP 24 years ago.

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Of Share Price and National Pride

What’s a listing on a stock exchange got to do with national colours?

Certainly more than meets the eye, if you ask the five South African companies who moved their primary listings from the Johannesburg Stock Exchange to the London Stock Exchange between 1997 and 2001. They were ‘pelted with stones’ from the media in South Africa.

“The companies motivated the move as being essential to their economic growth and they were supported by the South African government”, reports Karl Gostner of BusinessMap Foundation, which tracks foreign direct investment (FDI), “but they have nevertheless been treated with suspicion in media debates, and the moves to London were interpreted as signalling a lack of confidence in the South African economy”, he explains.

Billiton, then a mining and metals group, made the first move, in 1997. It was followed two years after by Anglo American, South African Breweries and the insurance giant Old Mutual. Dimension Data moved the LSE in 2001. The charges against these companies were legion. Some critics linked the listings to the precipitous fall in the South African currency, the Rand, between December 2001 and December 2003.

Billiton’s journey post LSE symbolizes, even more tellingly, the relationship between a company’s growth aspirations, its choice of stock exchange to list on, and national pride. When the former South African firm turned British company merged with Australia’s Broken Hill Proprietary Company Limited (BHP) to create the mining behemoth BHP Billiton, in 2001, the Australian government would not have the country’s largest bourse play second fiddle to London. The result is a dual listed company in an unusual arrangement. There is the BHP Billiton Limited, registered in Australia, which has equal financial share in the company, has a primary listing on the Australian Securities Exchange and is the largest company in Australia measured by market capitalisation. The UK-registered BHP Billiton Plc has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index.
With a market capitalisation of approximately $113.3 billion as of the last week of September 2013, it was the ninth-largest company listed on the London Stock Exchange. The Australian BHP Billiton Limited and the British BHP Billiton Plc are separately listed with separate shareholder bodies, but they operate as one business with identical boards of directors and a single management structure. The headquarters of BHP Billiton Limited, and the global headquarters of the combined BHP Billiton Group, are located in Melbourne, Australia. BHP Billiton Plc is located in London, United Kingdom

Seplat Petroleum’s dual listing on the Nigerian and London Stock Exchanges in April 2014 has its own hue of national colours. The company listed 25% of its primary shares on the two exchanges. Seplat decided against premium listing on the LSE, an act which denies it eligibility for the benchmark FTSE 250 index. “We want to establish that we are a Nigerian company, create that identity. We don’t want to start by being a UK company operating in Nigeria”, company officials insist.

Seplat has brandished the country’s national colours mostly by listing in Nigeria. It could have listed simply in London without listing in Nigeria. Just months before Seplat’s coming out party, Camac Energy, another E&P player company run by Nigerian founders, had announced its listing on the Johannesburg Stock Exchange. Headquartered in Houston, the United States, Camac Energy had earlier been listed on the NYSE MKT,  the premier U.S. equities market for listing and trading of small growth companies. Camac Energy is not listed in Nigeria, yet its entire crude oil production, (all 2,000BOPD of it) comes only from Nigeria

Less than a year earlier, Lekoil, also founded by Nigerians, listed on the AIM (formerly the Alternative Investment Market), a sub-market of the London Stock Exchange, which allows smaller companies to float shares with a more flexible regulatory system than is applicable to the main market. Lekoil owns assets in Nigeria and Namibia and is a partner in the Ogo-1 discovery offshore Nigeria, one of the five major discoveries in the world in 2013, but it is registered in the Cayman Islands.

National colours or not, the list of Nigerian owned E&P companies on any stock exchange at all is a short one. This is why it was big news when, three years ago, the news filtered into town that Petrolog Energy, a subsidiary of a Nigerian owed service company Petrolog, which began life as a mudlogging outfit, had listed on the Frankfurt Stock Exchange.

But a listing is essentially a commercial enterprise. Companies become members of stock exchanges for access to the cheapest capital possible. Lekoil raised enough funds on the AIM to finance the drilling of Ogo-1, which turned out to be a significant discovery. Those five South African companies vilified for their move to primary listing on the LSE had on their sights, the FTSE 100, a favourite with index tracker funds, which boosts levels of investment for companies. Besides, they felt that they had outgrown the South African market and needed to establish a global presence.

“Seplat’s listing might just be a gate opener for other Nigerian E&P companies”, says Abdulrazaq Isa, executive director of Waltersmith Petroman, with operated production of 4,300BOPD. “If the local investing public is impressed by their overall performance in the next one year, other E&P companies will begin to list”. Isa says that “a properly run, professionally managed E&P company with good portfolio should be able to deliver very remunerative returns to shareholders”.

And what’s a good portfolio?

“ Waltersmith Petroman has estimated recoverable reserves of 34Million Barrels, from its Ibigwe marginal field and the equity in OML 34, in the western Niger Delta. If in the next 24-36 months the company can build that to 100MMBO, and have production of 8-10,000BOPD, then it would have a good prospectus to present, for listing on the Nigerian Stock Exchange.

This is what matters to Mr. Isa. This may also be what other Nigerian companies also see; they haven’t listed because they haven’t seen any of their ‘kind’ on the Nigerian stock exchange. For many companies, the primary colour is the colour of money.


Power Outage

By Adedamola A. Adegun
Nigeria’s electricity mix still ranks as most imbalanced amongst the MINTs.

The electricity supply situation in Nigeria has evolved considerably in the last decade, so much that an observer has aptly named it the ‘decade of power’.By 2002, the incessant power shortages, inefficiencies of a government monopoly, a rapidly growing economy and a dearth of investments in the sector had brought the electricity supply industry to its knees. Infact, from 1990 – 2001(a whole decade), not a single mega watt of generating capacity was added to the electricity grid while the available capacity dwindled rapidly.

However, after a return to democracy, a splurge of investments bygovernment and a comprehensive reform programme was established, installed generation capacity1has been scaled up from about6000 MW (4 Gas Fuelled & 3 Hydro Powered)2in year 2002to about 13,700MW(25 Gas Fuelled & 3 Hydro Powered) in 2013 – a very significant growth in gas fired generating capacity.

Given the circumstances as at then, government’s focus on developing gas fired generation capacity was a no-brainer. An average gas plant can be constructed and commissioned relatively quickly – within three (3) years, construction costs compared to other fuel sources are quite competitive, gas flaring would be considerably reduced and the long term availability of gas were guaranteed. But these advantages have now created a different challenge for the country. We have built an electricity mix that is mono-fuel dependent and a fragile energy infrastructure system which Nigeria considering its security and political peculiarities cannot afford.


Hardly would any day pass since the conclusion of the Phase I privatization without the problem of gas supply being recanted by government and its agents. There seems to be a real challenge with getting the power plants around the country to run due to gas supply issues. About 20% of gas fired generating capacity is ‘left on the table’ due to gas availability. Gas pipelines and infrastructure are being continually sabotaged.Several power plants are down because of gas supply constraints and other technical faults.There are uncertainties and increasing regulation around gas prices. The whole eastern part of the country gets a dismal 300MW of electricity because of gas supply constraints.  The consequence of all of these is a significant drop in power supply far worse than the PHCN days.

By now in other climes, a ‘state of emergency’ would have been declared on the issue of gas supply security because it has morphed into a serious danger to the nation’s economy. Moreover, it would be naïve to ignore the core underlying challenges which include the lack of a robust energy policy, an unreliable/inflexible gas infrastructure (pipelines, underground gas storage) and a disproportionate dependence on gas for electricity generation. Infact,if the major arterial gas pipeline, the Escravos – Lagos Pipeline is sabotaged today, at least seven (7) major power plants (mostly located in the high demand centers of the south west) with installed capacity of about 3500MW would be knocked out of the grid completely. Nigeria’s electricity supplyis too exposed to gas.


The challenge of finding a balanced energy mix is universal and very germane for every country’s economic prosperity. Various governments try to enact laws and establish policies around the natural resources available, the variety of energy needs and the economic, social, environmental and geopolitical situation. The overarching aim is to achieve a useful balance and control over energy security and also limit exposure to a mono-fuel and its attendant risks. Most developed/emerging countries have succeeded and continue to evolve and Nigeria must follow suit. The current narrow focus on gas fired generation even with the abundance of natural gas must be carefully balanced.

It’s noteworthy that other nations with bigger gas resources than Nigeria have pursued a balanced electricity mix. The chart below shows the current electricity mix of Nigeria and other very populous member nations of the Gas Exporting Countries Forum (GECF), the ‘OPEC’ of gas exporters.

Source: Wikipedia (List of Power Plants) & Enipedia

Note that Russia is the most developed of the quartet and also has the biggest gas reserves in the world but it has the most balanced electricity mix – gas, hydro, coal and nuclear contributing adequately. Iran, also arguably the more developed of the remaining trio has managed to achieve a better balance of its electricity but Egypt just like Nigeria has a disproportionate dependence on gas for its power supply. Egypt is suffering badly from this imbalance.Power cuts and rationing is now the order of the day due to gas supply/production constraints just like Nigeria. The government has resorted to draconian diversions of gas meant for export by International Oil Companies (IOCs)3.Qatar, a smaller country and ally  is sending ‘LNG bailouts’ to Egypt4. It’s a crisis. Infact, the government of Mohamed Morsilost the people’s confidence and was easily overthrown by the military because of the acute power shortages that hit the nation especially during the hot summer months5.If Egypt had managed to diversify its electricity base earlier, the impact of gas shortages would have been minimized. The lessons for Nigeria is, no matter how abundant your resources are; don’t depend on it solely for your electricity. Establishing a balanced energy mix is a matter of national security.

Let’s take a further look at our economic ‘peers’, the MINT countries’ (Mexico, Indonesia, Nigeria & Turkey) energy mix.

Source: Wikipedia – List of Power plants.

Nigeria’s electricity mix still ranks as most imbalanced amongst the MINTs, underscoring the humongous work ahead for the nation’s energy policy makers. It is very critical.

Many other developed nations have very susceptible electricity generation mix but the protection the energy sources get from government is usually enormous. France is a good example as the country is just one nuclear accident away from possible electricity emergency. The country has about 60 nuclear power plantsgenerating about 80% of its electricity needs. Protecting the nuclear industry means that France will continue to invest and risk lives in Uranium rich countries like Niger and fight wars to protect its supply lines (Mali).Little wonder some government officials are campaigning vigorously for ‘clean fracking’6 despite adverse public opinion. South Africa also generates about 95% of its power through coal. But there is a possibility that baring very extensive investments in infrastructure, the cheap coal resources left would only be enough for just about half a decade7. In reaction, government is planning to amend the country’s mineral and petroleum law to constrain the export of certain ‘strategic’ resources’ like coal. Truly, many are the challenges of a mono-fuel dependent country.


If diversification of the electricity mix is imperative and essential for economic growth and prosperity, then what are the options?


Hydro power currently supplies about 16%8of worldwide electricity needs and is the most popular of all ‘renewable’ energy sources. Hydro power is well understood, is clean energy, has longer economic lives and less susceptible to sabotage. Nigeria used to be keen on hydro power and was a key element in the old days of ‘National Plans’ but over time we seem to have abandoned this very important resource. It is time to return.

By world standards, the existing hydro power stations in Nigeria are just medium sized. The total installed capacity of all the three operational hydro stations (Kainji, Jebba & Shiroro) is less than 2,000MW (with far less available capacity) while the biggest dam in the world, the Three Gorges dam located in China is 22,500 MW. Its high time Nigeria re-energized its hydro power strategy to deliver on the much needed megawatts and also diversify the electricity mix. The Zungeru & Mambilla hydro power stations are huge projects that have been in the pipeline for almost three (3) decades. Infact, both projects were an integral part of the 1982-2002 national plan. The world has changed a lot since then but these projects have now become more critical than ever.

Funding models and environmental expectations could have changed over the years but China with over 2,000 dams is still very much in the business.To ramp up hydro capacity, urgent and decisive measures must be taken to remove the usual policy, commercial and technical encumbrances that frustrate projects in Nigeria. It won’t be out of place if we generate about 25 – 30% of our electricity from hydro in the near future.


  • There are 2300 coal fired power plants worldwide. About 600 are in the US, 620 in China. – World Coal Association.
  • China & India builds four coal fired power plant every week.9
  • In 1973, about 38% of worldwide electricity was generated from coal but it has increased to 41% in 2011 – International Energy Agency.
  • South Africa, the biggest economy in Africa generates about 95% of its power from coal.

It’s inconceivable that Nigeria would ever fulfill its economic potentials without adopting coal as part of its electricity generation mix. The only coal fired power plant in Nigeria today is a derelict 10MW power plant in Oji River, Enugu State. Coal has a ‘brand deficit’ and is usually discouraged by the many supranationals and aid agencies that swarm the developing world but it is still one of the most important energy resources in the world. It is cheap, abundant and very reliable for base load electricity. Without much delay, Nigeria urgently needs to establish a sound commercial and environmental framework to support the growth of coal energy.I am aware that NERC has licensed some coal power plants but the body language of the commission’s CEO in recent times does not imply that coal will be taken seriously.

To address the environmental issues, it’s important to note that we have a ‘late mover’ advantage because building our coal plants in this generation gives us the opportunity to accept only cleaner and more environmentally friendly coal plants. Its also noteworthy that at the peak of indiscriminate gas flaring in year early 2000s, we were not even among the top 40 countries emitting CO2 in the world. Nigeria emits less carbon per capita than countries like Germany, Pakistan, Venezuela, Canada, France, even the United States. Infact, the UK (Population –63 Million) emits CO2 six (6) times ofNigeria. If Nigeria targets a 10 – 15% range for coal power, it definitely would hardly increase our carbon footprints.

The inclusion in the 2014 budget proposal of a proposed feasibility studies in various parts of Nigeria is thus a welcome development.Coal resources are abundant in Nigeria, construction of a typical plant can be done in reasonable time and the operating costs are relatively cheap. What are waiting for?


There is no universal standard for a country’s electricity mix but diversification and balance considering the availability and cost of energy resources is key.Proper planning and the awareness that achieving the most appropriate electricity mix takes time is key for Nigeria’s energy policy makers. Furthermore, the commercial, legal and technical framework must be continually attuned to stimulate and sustain investment in diverse energy resources. Without such, our hopes of becoming a great and prosperous nation might never be realized.

1This article will focus on installed capacity because of data reliability. Data for available capacity is too dynamic and unreliable.

2 Source: Presidential Task Force Presentation at Investors Forum, Wikipedia.





7 Forbes AfricaMagazine – November 2013 Edition,31287,en.html

NDDC: The Necessity of a Rebirth

By Adedayo Ojo

Adedayo Ojo“Akwa Ibom state has some of the best and brightest Nigerian professionals in the oil & gas industry today. Why can’t one of them be seconded to run NDDC? The upstream sector of the Nigerian oil industry is arguably the most efficiently run business sub sector in Nigeria, yet a significant percentage of the management cadre is made up of  Nigerians. Can’t we get one of them to run NDDC? Governor Akpabio pleasantly surprised many when he recently named a technocrat from the banking sector as Secretary to the state government. Why can’t we get him to do the same thing with NDDC?”

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The Mogul Hauls In The Cash

Nasir El-Rufai

By Nasir El Rufai

Not all manoeuvres in BPE’s universe were as covert as the vice- president’s alleged stake in Sadiq Petroleum. When the time came to put National Oil (Nolchem) on the auction block, the attempted bid rigging and kickback schemes could not have been more open.

National Oil was the former Shell Nigeria downstream business in which the government had bought a majority stake though Shell remained technically a partner and shareholder.

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A Mercenary in The Niger Delta

In late July, 2012, The Guardian of Lagos published a story regarding concerns about the acquisition of 45% participating interest in Nigeria’s Oil Mining Lease(OML) 30, a producing acreage by Shoreline Natural Resources Limited. The sellers are Shell, TOTAL and Eni(known as Agip in Nigeria).

The story essentially expressed misgivings that Heritage Oil, the British company which is a 45% shareholder  in Shoreline Natural Resources Limited, is run by Tony Buckingham, a former mercenary who is linked to the planners of the abortive coup attempt in Equatorial Guinea in 2004 and was part of a crack military unit named Executive Outcomes, described by Britain’s leading media houses as “not simply guns for hire…but the advance guard for major business interests engaged in a latter day scramble for the mineral wealth of Africa, including oil, gold and diamond mining ventures…and offshore financial  management services”.

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Deregulation or Subsidy Removal?

The twin issues of appropriate pricing of Petroleum products and the (non) functioning of the downstream infrastructure (Refining and Petroleum Products distribution) have dogged the path of every Nigerian minister of Petroleum since 1992.
The then very influential Petroleum Minister, Prof. Jibril Aminu lost his job in June 1992 in response to public agitations over Petroleum products scarcity. That was the first real sign of crises in the downstream sector. Over the nearly twenty year period, no lasting solution has been implemented.

At the core of the crisis is the state of the downstream infrastructure. Our four refineries as well as the distribution network (consisting of 19 storage depots and interconnecting pipelines) were all built between 1978 and 1988. They ran efficiently in their first five to ten years, largely because they were new facilities. The first signs of decay arising from a poor maintenance culture were noticed in 1992. Since then, these facilities have steadily degenerated to the point of near-zero performance today.

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Poverty and deprivation: Where the story falters

Ross Alabo-George’s  essay titled Poverty And Deprivation: Why The North Is Poor, a recent contribution to the debate on the Nigerian Question, is an instant hit. It has circulated so many times on the internet that it has arrived my personal email inbox, from different, unrelated sources, at least five times in the last one month.

The piece is structured in two parts. First it poses the hard questions to the country’s Northern Leadership: what have you even done with the largesse you have received from the central purse, which you have superintended for a longer period in our history, than any other regional bloc?

Second, it looks at some of the economic spoils that Northerners with access to power have supposedly grabbed to themselves and specifically lists oil and gas assets owned by Northern elites. It is this part of the essay that I fault. It is not just full of inaccuracies in most of the cases it cites, its premise and conclusions are also flawed.

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