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Nigeria Unlikely to Meet Mid Term International Targets for Universal Electrification

By Bunmi Aduloju, NAPREP Fellow

Nigeria has fallen far behind the main internationally set target for energy access, to which it had itself been an active participant, a review has shown.

The country’s current quantum of electricity delivery and its near-term prospect of Universal Electrification, do not come anywhere close to the 2030 targets of the Sustainable Development Goals (SDGs), set up by the United Nations, our review indicates.

17 Sustainable Development Goals (SDGs) were formulated bythe United Nations (UN) in 2015 to address the environmental, economic, political and social challenges facing the world. 

Sustainable Development Goal 7 (SDG 7) is a “blueprint to achieve a better and more sustainable future for all.”Specifically, Sustainable Development Goal 7.1 calls for “universal access to affordable, reliable and modern energy service.”

In the Sustainable Energy for All (SE4ALL) Action Agenda, Nigeria’s implementation tool for the Sustainable Development Goal 7 (SDG 7), the country has a goal to reduce share of the population living without electricity to about 10% and increase electricity generation to at least 32,000MW by 2030. 

Let us consider the current figures.

Electricity Access 

Eighty Five Million people lack access to grid connection electricity in Nigeria, leaving 43% of the population without electricity access. The country, in effect, has the largest energy access deficit in the world. Nigeria’s 206Million people share an installed capacity of 12,555MW, but only about 4,000MW is distributed to Nigerians on most days by the seven generation companies (GenCos). On the other hand, South Africa and Egypt, whose economies are second and third largest to Nigeria’s, in Africa’s GDP ranking and with population of 59Million and 85Million respectively, have installed capacity of 58,095 MW. This is way higher than Nigeria’s installed capacity despite Nigeria’s larger population.  

According to the Nigerian Electricity Regulatory Commission (NERC) in its 2020 second quarter report, Nigeria recorded 5, 316MW as the peak daily generation on the 20th of April, 2020. If on the 20th of April 2020, 5,316 MW was distributed to energy consumers, and 85million people do not have access to electricity, the remaining 121 million Nigerians got an average 44watts of electricity supply. Consequently, the average daily electricity supply that a random Nigerian has ever gotten is 44Watts.  

This explains the constant power outages in the nation. Whole communities frequently bear the brunt of the nation’s power supply incapacities.  In 2015, 444 communities spanning 18 local government areas reportedly lacked electricity in Edo State. Similarly, it was reported that residents of a particular Local Government Area in Ekiti State experienced total blackout for three years. 

Because Nigerians are not always entitled to 24-hour power supply, many businesses, homes and offices have had to fall back on petrol and diesel back-up generators. 

Nigeria ranks as one of the six top countries generating energy with back-up generators fuelled by high quantities of fossil fuel, according to the International Finance Corporation, World Bank Group in a report titled, The Dirty Footprint of the Broken Grid. Apart from the environmental degradation that ensues from the use of back-up generators, it poses outrageous health hazards to anyone who inhales its fumes, as its emission contains carbon monoxide. A handful of Nigerians have lost their lives to fossil-fuels powered generator fumes which could be averted if there is continual 24-hour power supply in the nation. 

Early in the year, two undergraduates reportedly lost their lives after inhaling generator fumes.

Renewable Energy, the Future of Improved Energy Access 

Renewable energy is top on the United Nation’s radar to provide widespread energy access to unreached communities, and it has proven to be a long-lasting solution to the electricity access problem in Nigeria and Sub-Saharan Africa at large, as only 47.7% have access to electricity in Sub-Saharan Africa. 

The Nigerian government insists that it is making efforts to provide electricity to provide direct support for rural electrification. As part of its Post-Covid National Economic Sustainability Plan, it proposed a Solar Home System (SHS) in 5Million homes which will serve about 25Million Nigerians in rural areas without access to the National Grid. This is a commendable approach to rural electrification. 

Segun Adaju, President, Renewable Energy Association of Nigeria (REAN) and CEO, Consistent Energy Limited, speaks glowingly of the government’s efforts to deploy renewable energy in the nation’s power delivery said, 

“Government has been part of the growth we have seen in renewable energy in the last three to five years through the rural electrification agency. There is now a 10 megawatts wind farm in the Kastina State. Also, Bayero University runs on solar now. Also, several hospitals are on solar, powered by the government.”

Renewable Energy to the Rescue

The generation capacity of renewable energy for power generation in Nigeria is relatively low, compared, again with South Africa and Egypt, the two economies with comparable GDP size to Nigeria.

These two countries each generates over 3,000MW of grid connected solar and wind power, whereas Nigeria generates less than 50MW from solar and wind technologies.

According to the US Energy Information Administration (EIA), “Nigeria’s generation capacity was 12,664 megawatts (MW) in 2017, of which 10,522 MW (83%) was from fossil fuels; 2,110 MW (17%) was from hydroelectricity; and 32 MW (1%) was from solar, wind, and biomass and waste.”

Since renewable energy will not dry up one day like fossil fuels, Nigeria should increase focus on developing the renewable energy sector for improved power generation. The increased contribution of renewable energy to the energy mix will allow for greater power generation. 

China is a perfect illustration of a country that has harnessed its renewable energy potentials for electricity generation. China has the world’s largest hydropower capacity with 356GW in 2019. With this advantage, it tops as the world renewable energy generation producer. 

Hydropower

Nigeria has water resources in the form of water falls and large rivers. With these natural potentials, hydropower serves as the most efficient renewable energy resource for power grid generation in the nation.

Nigeria’s 2015 National Renewable Energy and Energy Efficiency Policy (NREEEP)aims to harness hydropower production to ensure sustainability. It aims to generate 12,801MV of power from hydropower in 2030 and generate 30% in the energy mix.  

Similarly, in the Renewable Energy Master Plan (REMP), there is a plan to increase renewable electricity supply to 36% by 2030.

If these targets are met, Nigeria would speed up its energy access by 2030. If not, Nigerians will continue to suffer from electricity deficiencies. 

Solar

Another potential viable in the nation is solar. Solar energy has proven its ability to reach every nook and cranny of the country. It is safe to say that solar is the answer to the electricity access problem in the nation. Nigeria is blessed with abundant sunlight with about 2600hours of sunshine per year. Although Nigeria is increasing its prowess in this sector, the potentials are not fully harnessed. 

Mr Segun Adaju urged the government to utilise the solar resources in Nigeria to solve the electricity access problem for rural communities.

“Solar power can be harnessed because of the country’s location. Instead of building massive power plants or grids, Nigeria should redeploy straight to distributed renewable energy like we have in the movement from telephones to mobile phones,” he admonished.

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


Africa Under Siege?


By Gerard Kreeft


Africa has abundant natural resources and the associated revenues could be an important motor for development. However, changing global energy dynamics mean that resource-holders cannot assume that their oil resources will translate into reliable future revenues. “

Source: World Energy Outlook Special Report, Africa, IEA, 2019 

The COP26 (UN Climate Change Conference) will be hosted by the UK Government  in Glasgow in November 2021. TheSummit is to accelerate action towards the goals of the 2015 Paris Climate Agreement.

As part of its Green Energy Roadmap the UK Government and the oil and gas industry reached a historic accord: companies will be allowed to continue oil and gas exploration in the North Sea, but the industry must cut its carbon emissions by 50%. Companies must pass a  ‘climate compatibility’ test if they want to continue working in the North Sea. The government  and industry have pledged up to £16Billion to help support 40,000 North Sea jobs. 

The compromise falls short of the total oil and gas exploration ban that was rumoured some weeks ago. Yet it is a stark reminder that in the UK portion of the North Sea, the oil and gas industry has become a sunset industry. These measures arepart of the UK Government’s commitment to be CO2 neutral by 2050. How long will it be before North Sea exploration and development is banned totally? Will the industry’s fossil fuel assets help buttress the energy transition to ensure that renewables are a mainstream fuel?

How well is Africa prepared to be CO2 free by 2050? What contribution can be anticipated from Africa’s oil and gas sector?

Should Africa be given dispensation and consequently more time to rid itself of CO2 emissions  beyond 2050? After all,emission levels in Sub-Sahara’s two major petro-economies- Nigeria and Angola- are negligible when compared to Chinaand the USA. Nigeria emits only 0.73%, Angola 0.25% vs China’s 28% and the USA 15%.  

Set this argument aside. Instead make the case for  national oil and gas companies  using their fossil fuel assets to buttress up their energy transition. Again turn to Sub-Sahara Africa’s two major national oil companies: Nigerian National Petroleum Corporation(NNPC) and Sonangol in Angola.

The case of Nigeria

At the recent AOGS (Africa Oil and Gas Summit)Energy Webinar Series  Energy Transition and the implications for Nigeria,  the main theme was: “Is Nigeria’s 40Billion barrels proved reserves(or parts of), at risk of being written off someday to be replaced by green energy assets in the portfolio mix of the major oil companies?”.

A key response was that Nigeria should align itself with the Paris Climate Accord and adapt steps for a Green Roadmap: key would be leveraging the oil and gas assets to finance the green economy.

Certainly the discussion that has raged around the Petroleum Industry Bill(PIB), which promises to be a framework for the hydrocarbon industry, is not encouraging. Toyin Akinosho, Publisher, Africa Oil + Gas Report, has delivered a resounding critique. The PIB  promises to be an award toNNPC for its  continuing incompetence. He cites the following examples:• NNPC is a joint venture that produces 45% of the country’s crude; and concessionaire in the Production Sharing Contract(PSC) arrangements, which delivers 39% of the crude.• NPDC the operating subsidiary of NNPC …”is a massive imcompetent wrecking ball, which has been gifted joint-venture participation in 10 mining leases(OMLs) all of them producing”. • NPDC is seen as a bright star within the NNPC’s portfolio. Why? Because the degree of its performance is in direct proportion with the help it gets from its partnership with private entities.• Tinkering with the legislative structure of NNPC will change little given that its shares  will continue to be monopoly control by the Government.

If NNPC is perceived of not having its own house in order how can it expected to be a leader in the Energy Transition? Does it make any sense to give the same driver, who drove the initial bus off the cliff, keys to drive the new bus?

The case of Angola

Since Joao Lourenco replaced Jose Eduardo Dos Santos as Angola’s head of state in 2017, Sonangol, the state oil company, has had a rocky ride. In the past Sonangol had two roles: that of concessionaire, a highly judicious key role which gave it the power and legitimacy it had achieved and being a state oil company with its responsibilities for exploration and development of the resources. The decision to strip Sonangolof its concessionaire role was then taken and given to the newly created ANPG (National Agency of Petroleum, Gas and Biofuels).

In the Angola of today power has become diffused: Sonangolhas been stripped of its concessionaire role and is loaded with a mountain of debt; and the International Oil Companies (IOC’s) have the freedom to explore and market their natural gas. Developing green energy is certainly beyond the competence of Sonangol.

In November 2019 a new National Gas Consortium (NGC) was established, led by ENI as operator in partnership with BP, Chevron, TOTAL and Sonangol for the exploration and production of natural gas. This was previously the exclusivedomain of Sonangol.

Currently a gas processing plant is being constructed toprovide natural gas to Angola LNG, the country’s sole LNG facility. Any excess natural gas would be used by the SoyoPower Plant, which is being expanded and could supply gas to Three Million households in the future. 

Angola is not a gas rich country: having only 27 TCF of natural gas reserves which pales in comparison to that of Mozambique  which has a gas reserve base of 100 TCF, third largest reserve base in Africa, after Algeria and Nigeria.

Developing a national gas strategy for the country’s industrial development is seen as a top priority. What role does Angola LNG’s future gas supply play in any national gas strategy?  Does it make any economic sense to be exporting natural gas when so little is known about Angola’s own future requirements?  What is the long-term planning for gas development and monetization? And how does this fit into the national development strategy?  If natural gas is viewed as the fuel of choice to help develop an  industrial corridor a strategy must be developed.

Green Shoots on the Horizon

In its African Energy Outlook, 2019, the International Energy Agency (IEA) paints a vivid picture of Africa’s current situation and how it could possible develop in the future. The Agency predicts, in its Africa Scenario that one-in-two people added to the global population between now and 2040 will be African. 

Nearly half of Africa’s 600Million people did not have access to electricity in 2018, while around 80% of sub-Sahara African companies suffered frequent disruptions leading to economic losses. 

The Africa Scenario is a plea for full access to modern electricity by 2030, tripling the average number of people gaining access per year from around 200Million to over 600Million. Grid expansion and densification is the least cost option for nearly 45% of the currently deprived, mini-grids for 30%, and stand alone systems for 25%.

LPG is used by more than half of those gaining access to clean cooking in urban areas in sub-Sahara Africa; in rural areas, home to the majority without access, improved cookstoves are by far the preferred solution. 

Although the African economy will grow four-fold by 2040, energy efficiency can limit primary energy to just 50%.

Current  electricity demand in Africa is 700 terawatt-hours(TWh) with only North Africa and South Africa accounting for over 70% of the total. In the African Scenario growth could reach 2300TWh. Much of the additional demand coming from middle and higher income households.

Solar is only 5GW, less than 1% of global installed capacity. In African Scenario solar overtakes hydropower and natural gas to become the largest electrical source in Africa in terms of installed capacity.

Tripling of the electricity demand requires building a more reliable power system and a greater focus on transmission and distribution to reduce power outages. Significant scale-up of investment in grids and generation is required given that Africa has 17% of the world’s population and just 4% of the global power supply.

Natural gas meets half of North Africa’s fuel requirements, but in sub-Sahara Africa only 5%. Gas will rise to 24% by 2040, mainly to power industry.

Green Shoots in  Nigeria

According to the African Scenario the Nigerian economy will triple and would require less energy demand if the energy mix were more diversified. Natural gas must meet a growing share of energy demand, supported by implementation of the Government Gas Master Plan.

Today 80% of power generation comes from gas, most of the remainder comes from oil with Nigeria the largest user of oil-fired back-up generators on the continent. Natural gas remains the main source of power, although there is a shift to solar energy as the country starts to pivot towards its large solar potential.

Provided that reliability and supply improve, the grid could become the optimal solution to provide almost 60% of people with access to electricity. Nigeria achieves universal access by stepping up efforts to provide off-grid solutions to those that live off-grid.

Nigeria is a major industrial producer and a large chemical exporter and will triple chemical products by 2040 with new methanol and ammonia plants.

The country has the 2nd largest vehicle stock in sub-Sahara Africa: the number of vehicles could grow from 14 to 37 Million by 2040 with only two-times more oil consumption if more stringent fuel standards were adopted.

Universal access is achieved through greater household access to gas networks and LPG in the main cities, and improve cookstoves in rural areas.

Green Shoots in Angola

The Government is pledged to having 60% of Angolan households access to electricity by 2025. According to Angola’s Ministry of Energy and Water the country will by then have an electrical capacity of 7.2 GW, four times the current capacity.

In December 2020 the Lauca Hydroelectric Power Station was completed and can now provide 2.7GW of electrical power to the national grid.  A second project, the Baynes Dam, is jointly being constructed by the Governments of Angola and Namibia and will provide 600 MW to both countries.

The Angolan government has partnered with Power Africa, a U.S. Government-led partnership coordinated by the U.S. Agency for International Development (USAID), and the African Development Bank (AfDB) to start a major transmission project, which aims to connect the central and southern power grids of Angola. 

The programme will create an interconnected national grid supplying north, central and south Angola to create a 60% electricity access rate by 2025. 

Power Africa will also be assisting the AfDB in connecting pre-paid meters. In December 2019, the government was granted a $500Million loan package from the AfDB to finance the program. The beneficiaries of the project include households, industries, businesses and small to medium sized enterprises in Angola, with the aim of increasing access to cheaper, more reliable and sustainable electricity.

Conclusions• The history of both NNPC and Sonangol is a checkered and toxic history. Can they provide the leadership in the energy transition in which oil and gas is promised to be a key element?• A national oil company-be that NNPC or Sonangol- have different agendas than the IOCs. Politics and national lobby groups is the mechanism that steers national oil companies, not shareholder value nor investment returnsthat are the main driving forces of the IOCs.• The IOCs are constantly juggling their portfolios in order to maintain profitability and low carbon emissions. They have no hesitation in abandoning assets which do not meet investor grade, leaving their national oil company partners scrambling. • Doesn’t it make more sense to start from a clean slate? In which renewable energy is marketed and produced without any attachments?• The IEA in its African Energy Outlook recommends that the developed countries should take the lead in providing financial assistance to countries less endowed and more vulnerable. For some time this has been an issue which many developed countries resisted, perhaps frightened of sounding paternalistic and seeming heavy-handed. • Yet given that Africa’s total emissions on a global basis are so negligible and its oil and gas assets will probably be discounted, the economics for accepting payment from the industrialized countries fits into this new market place of the energy transition.• Why not for for example let China write off a portion of Angola’s debt to China which totals some $25Billiongiven that China has more than one quarter of global emissions? This would allow Angola some breathing space and possibly set a precedent for other bilateral emission deals between China and  other African countries.

The author, Gerard Kreeft, holds a BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise. He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe. Kreeft hasDutch and Canadian citizenship and resides in the Netherlands. He writes on a regular basis for Africa Oil + Gas Report.


Nigeria Puts the Brakes on Ambitious Biofuels Refinery Plan

By Bunmi Aduloju, NAREP Fellow

It’s been 14 years since Nigeria gazetted its Biofuel Policy and Incentives, but the country can boast of next to nothing in domestic biofuel production. 

Nigeria, being heavily dependent on fossil-based fuels, took this bold step in June 2007 to reduce the rate of environmental pollution in the country, as recognised by the United Nations (UN) as a universal problem causing climate change. 

In essence, the world wants to cut off fuels that are bad for the environment and biofuels are in tandem with the demand for clean energy, producing less emissions than petroleum-based fuels. 

The world’s top five biofuel producers include those countries with comparable populations with Nigeria’s200Million people:  the United States (pop:330Million), produced 13 Billion gallons of biofuels in 2019. Brazil(pop: 212Million), produced 8.1Billion gallons of biofuels; Indonesia (pop: 273Million) output 2.3Billion gallons of biofuels and some of Europe’s, largest economies: Germany and France produced 1.2Billion and 0.9Billion gallons of biofuels respectively in 2019. 

As the national debate rages in Nigeria about removal on subsidy on crude-derived gasoline, and cleaner and cheaper alternatives are considered, infrequent mention is made of biofuels, not for cost, but for cleaner air.

Nigeria could also be a top producer of biofuels and even an exporter, since the nation is blessed with vast resources in energy crops and biodegradable waste used in their production. Regardless of the many advantages of biofuels, the  narrative is entirely different in the nation today. 

In 2019, Ibe Kachikwu, Former Minister of State for Petroleum, while speaking at a biofuel sensitisation workshop emphasised the economic value of biofuels. 

“I believe biofuel will soon become our foreign exchange earner, if we can put our minds and might into it. We can produce crude and fire gas but, ultimately, the only way to sustainably reach every nook and cranny and every citizen of our country with some level of energy supply, is to look towards natural resources such as solar, wind, water resources and biofuel,” he said. 

Biofuel Policy

In the National Biofuel Policy and Incentives published in 2007, a direct reference was made to the government’s mandate to the Nigerian National Petroleum Corporation (NNPC) to create an Automotive Biomass Programme in 2005 which would establish an environment for the take-off of a domestic fuel ethanol industry. 

With the Automotive Biomass Programme in place, the National Biofuel Policy and Incentives was gazetted in 2007 to further propel the domestic production of biofuels. It aimed to “achieve 100% domestic production of biofuels consumed in the country by 2020.” While the policy directed several bodies to contribute to this national outlook, the downstream petroleum sector and the agricultural sector have integral roles to play in the accomplishment of the programme. 

Unfortunately, there is a gap between the policy demand and actualisation as a result of several underlying issues. Nigeria still relies on importation of fuel ethanol, an additive for gasoline whilst still grappling with non-implementation of its biofuel policy.   

The World of Biofuels

Biofuels refer to “fuel ethanol and biodiesel and other fuels made from biomass and primarily used for automotive, thermal and power generation.” It’s main claim to preference over fossil-based fuels is its renewable and environment friendly chemistry. 

Fuel ethanol is blended with gasoline for more environmentally-friendly emissions and this blend has proven to improve the quality of fossil-based fuels by oxygenating the fuel thereby resulting in less carbon emissions and higher octane levels. 

For this reason, some countries are imposing a mixtureof transport fuels with biofuels in order to reduce greenhouse gas emission. In the United States, more than 98% of their gasoline is mixed with ethanol forming a 90% gasoline and 10% ethanol mix. 

In Nigeria, the biofuel policy projects a 90% gasoline – 10% fuel ethanol mix while a 20% blending ratio is to be deployed for biodiesel with the Nigerian National Petroleum Corporation (NNPC) enforcing the blending requirements. With the daily national consumption of gasoline estimated by the department of Petroleum Resources, DPR to be 38.2Million litres of gasoline per day, Nigeria would require 3.82 million of fuel ethanol per day to meet the fuel ethanol-gasoline blend goal. This is a huge responsibility for biofuel production in the country considering its present state. 

Fuel Ethanol Import, Bad for Domestic Production

In 2018, Nigeria spent $33Million on the importation of ethanol from the U.S and it was the second most imported agricultural product from the U.S into Nigeria, constituting about 48% of total ethanol import into the country, according to the United States Department of Agriculture (USDA), Foreign Agricultural Service (FAS). 

This speaks volume about the country’s capacity for the achievement of the 100% domestic production goal. Apart from Nigeria’s failure to achieve its stated goal, importation puts undue pressure on the nation’s economy and weakens local production initiativesWith over-reliance on foreign imported fossil-based fuels and its economic impact on the nation, it is wise to avoid trailing the same path with biofuels.

Despite Local Abundance, Crop Feedstock Derivatives Imported

Since crop feedstock used for the production of biofuels have to be cultivated in large scale, there’s been growing concerns about its competition with food production in the country, as all the biofuel feedstock cited in the policy are food crops except jatropha. Apart from that, Nigeria is capable of cultivating thedesignated biofuel feedstock, including oil palm, jatropha, cassava and sugarcane. 

Nigeria is the largest producer of cassava, producing about one-fifth of the world’s total production, according to the Food and Agriculture Organisation (FAO). “It is incongruous that the world’s largest producer of cassava spends $600Million annually to import cassava derivatives”, the Governor of the Central Bank of Nigeria (CBN), lamented at a meeting in 2019.

In

FOURTEEN YEARS AFTER, UNFINISHED PROJECTS. 

In 2012, Global Biofuels Ltd signed a ₤2Billion deal with the Nigerian Government for a biofuel production complex at Ilemeso, Ekiti state, Nigeria. TV

Similarly, Kogi State Government, under the leadership of Yahaya Bello signed a MoU with the Nigerian National Petroleum Corporation (NNPC) for the establishment of biofuel projects in the state.

Foreign investments and private sector investment have also been made since the policy was published in 2007.

The NNPC signed MoUs with State Governments for the building of fuel ethanol plants and cultivation of biofuel feedstock, some of which include Kogi, Kebbi, Gombe, Benue, Anambra, Cross Rivers and Ondo

Despite these initiatives, the NNPC has still not kicked off large scale commercial production of biofuels as directed by the policy. 

In press release after press releases and statements after optimistic statements , Maikanti Baru, former Group Managing Director (GMD) Nigerian National Petroleum Corporation (NNPC), -2016-2019- disclosed that the first large scale commercial biofuel venture asan alternative to fossil fuel was going to commence.

On the 28th of February 2018, he also revealed at the 39th Kaduna Trade Fair that NNPC was driving investment in renewable energy to develop biofuel production through the Renewable Energy Division in a press release.

Both reports were bound by the same promise to kick start large scale biofuel production with a bleak timeline for accomplishment.   

In 2021, the Gombe State Government reportedly expressed willingness to partner with the NNPC to actualise the sugarcane fuel ethanol project in the state in 2021.  In the same report, the Group General Manager, Renewable Energy Division (RED) of the Nigerian National Petroleum Corporation (NNPC), David Bala Ture, revealed that despite efforts to actualise the biofuel project in Gombe State, it had not come to fruition for the past 15 years. 

This is the backstory of many biofuel projects in the country. Some projects are abandoned, others are suffering from lack of cooperation from the various parties involved in the deal and some others, lack of technological advancement.  

An effective policy, however, will solve a number of these problems.

Although Nigeria has a biofuel policy in place, it has not fully implemented its policies since 2007. In fact, in 2010, the policy was reviewed by the Petroleum Products Pricing Regulatory Agency (PPPRA) and a number of committee members, to address the loopholes in the official gazette.  However, there has been no concrete agreement between the key players and the governmental bodies involved to utilise the policy’s directive and this has caused setbacks in the implementation of the policy.

The private sector has been making efforts to produce fuel ethanol and biodiesel but lack of proper infrastructure is deterring large scale production by private companies. 

Part of the challenge, argues Ejikeme Nwosu, Director, Lumos Laboratories Nigerian Limited, who has worked on conversion of waste to energy sources in the last 14 years, is the lack of infrastructure and grants to private initiatives for the production of biofuels. “The private sector is filled with masterminds ready to work with the sector once the policy is fully implemented and when the government pays more attention to them,” Nwosu explains.


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


Zimbabwe to Exempt Solar Energy Producers from Taxes for Five Years

The Zimbabwean government is looking to exempt Solar Energy investors from paying taxes for a period of five years.

“Whatever they produce in those five years, they will not have to pay taxes to the government”, Zhemu Soda, the Zimbabwean Minister of Energy, said at a recent hearing of the country’s parliament. “This is done to motivate those who want to invest in solar energy production so that the solar networks can be connected to the national grid.”

The measure, Mr. Soda said, will be in addition to the exemption of import duties on solar power equipment into the country, a policy that is already on course.

Zimbabwe imposes a 15% Value Added Tax on all purchases and this will not be removed, even for solar power equipment.

The entire electricity generation capacity attributable to renewable energy in Zimbabwe is 130MW, all of which is generated by Independent Power Producers (IPPs). The proposed incentives should benefit off-grid solar providers more. This is 7% of the country’s total installed capacity of 1 940 MW.

Zimbabwe’s Rural Electrification Agency (REA) wants more off-grid solar and wind generated electricity for the electrification of rural areas. The agency has already installed 372 PV mini-grids of 0.9 kWp each, totalling 334.5 kWp, in schools and clinics throughout the country. Other installations have been commissioned or commissioned by non-governmental organisations (NGOs) and some private developers.

 


The 10 Commandments of the Energy Transition

By Gerard Kreeft

 

 

 

 

 

 

 

 

  • Commandment 1: Petroleum Classification in Ruins

 In the summer of 2020 TOTAL wrote off $7Billion of its oil sands in Canada which was listed as “Probable Reserves”. The under-lying message was if probable reserves can be written off, how safe were the estimates of oil reserves that had depended on this SPE Classification? Which were also approved by the US Securities and Exchange Commission?

Reserves were classified as RRR, Reserve Replacement Ratio, the norm being 100% on an annual basis (see below.)

 

 

 

 

 

 

 

  • Commandment 2: The New Norm

TOTAL was the first major to classify other fuels, wind and solar, as part of its RRR count.

How was this done?

Simply put: Which fuels provided a better rate of return for the company and its shareholders. Being green has a better return on investment!

  • Commandment 3: Renewables are the new norm

 

 

 

 

 

 

 

Note: ETF  is an exchange traded fund which is a type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same as a regular stock.

  • Commandment 4: Maintaining Huge Dividends(?)

 Shell’s share price on February 23, 2021 was Euro 17; five years earlier on 9 June 2016 it was Euro 23.

Orsted’s share price February 23, 2021 was Euro 127; five years earlier on 10 June 2016 it was Euro 34.

Shell’s dividend yield is higher 3.53% in 2021; Orsted 1.4% dividend yield (2020).

The return on investment is not based on dividend but increased price of share: in the case of Orsted, a four-fold increase.

  

  • Commandment 5: Shareholders are waiting

The contradiction is shareholders wanting high dividends but also demanding green solutions.

Oil companies-BP, ExxonMobil, Shell have paid huge dividends +5% historically…but this cannot continue.

Yet green companies are paying comparable dividends:

Iberdrola return on investment 5%, 2021;

Enel return on investment 5.15%, 2020;

Engie return on investment 4.77%, 2019.

  • Commandment 6: Can the Oil Majors compete with the Green Competition?

 BP &Equinor partnering in the USA: Offshore Empire and Beacon Wind.

NortH2 Vision in which Shell and Gasunie have combined forces to create a mega-hydrogen facility, fed by offshore wind farms, which by 2030 could produce 3-4 GW energy and possibly 10GW by 2040, Netherlands.

BP & Orsted developing green hydrogen at BP’s Lingen refinery, Germany.

BP will spend US$ 5Billion per year to green itself;  by 2030 will have 50GW of net regenerating capacity, and planned pipeline of 20GW of green generating capacity.

Equinor’s  Dogger Bank, North Sea, will produce some 3.6 GW of energy, enough to light up 6Million households, is the company’s showcase project.

TOTAL  will have  35 gigawatt (GW) capacity by 2025, and hopes to add 10GW per year after 2025. That could mean an additional 250GW by 2050.

Enel in next 10years will be spending euro 190 billion on renewables and by 2030 have 145 GW installed capacity.

Orsted has an installed capacity of 10GW and build out to 15 GW.

RWE by 2022 will have 28.7 GW of installed capacity.

Engie spent Euro 7.4Billion on renewables and 33GW of installed capacity.

Iberdrola u to 2030 will spend Euro 150Billion on renewables and target of 93GW installed capacity.

  • Commandment 7: More Specialization

Upstream Shell has announced reducing exploration to 9 key hubs

BP reducing production to 40% of current  total;

Downstream: BP sale of petrochemical division to Ineos;

Expect more sales to ensure scales of economy and shoring up balance sheets;

Crossovers between Oil majors and New Energy players.

  • Commandment 8: Are major service providers capable of providing services to Green Sector?

Up to 2023 there is a major decrease forecast in the various components including seismic, subsea, well services, EPCI,drilling, and maintenance and operations.

Share prices of the major service providers- Baker Hughes, Halliburton and Schlumberger- have tanked:

in December 2016 Baker Hughes’s share price was $65, December 2020 $21;

Schlumberger in December 2016 $85, December 2020 $21;

Halliburton December 2016 $55, December 2020 $19.

Halliburton talks about further digalization of its services on its website. It also talks of lower capital intensity and being committed to technologies that reduce emissions/environmental footprint.

Olivier Le Peuch, CEO Schlumberger, recently announced a major strategic restructuring creating four new divisions- Digital & Integration, Production Systems, Well Construction, Reservoir Performance.

Within the confines of the E+P bubble, both major service companies continue on with what they anticipate what the IOCs are dictating: belt tightening, a reduced head count, with the hope for a better tomorrow. Simply re-shuffling the deck chairs on the Titanic.

The one exception is Baker Hughes, who have recently unveiled a forward looking strategy focused on CCS(Carbon Capture Storage), Hydrogen, and Energy Storage.

 

 

 

 

 

 

 

 

 

 

 

 

Key themes for the Energy Transition.

  1. Marine Contractors:

Heerema: becoming focused on offshore wind projects

Technip Energies- entailing LNG, sustainable chemistry and decarbonization- has been spun off creating new innovative options.

  1. New Energy Service Providers

Siemens Energy has operations in 90 countries offering a full project cycle of servicesL generation, transmission and storage from conventional to renewable energy.

Cummins operates in 51 countries in Africa and market leader in fuel cel land hydrogen production technologies. Cummins began developing its fuel cell capabilities more than 20 years ago.

  • Commandment 9: National oil companies must justify their investments

If national oil companies follow their current course, they will invest more than $400Billion in costly oil and gas projects that will only break even if humanity exceeds its emissions targets and allows the global temperature to rise more than two degrees centigrade 2 oC.

Either the world does what’s necessary to limit global warming, or national oil companies can profit from these investments. Both are not possible.

State oil companies’ investments could pay off, or they could pave the way for economic crises across the emerging and developing world, and necessitate future bailouts that cost the public. Some oil-dependent governments in Africa, Latin America and Eurasia are making particularly risky bets with public money.

Many national oil companies have incentives to continue spending big on new oil and gas projects. As a result, company officials might not, on their own, change course to account for the energy transition away from fossil fuels toward green energy, nor make investment decisions that serve the interests of citizens.

See “Risky Bet National Oil Companies in the Energy Transition”, David Manley and Patrick R.P. Heller,  Natural Resource Governance Institute

  • Commandment 10: Putting together an Energy Roadmap

The challenge to meet!

The author, Gerard Kreeft, holds a BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada). He is an Energy Transition Adviser and  was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Kreeft has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report.

 

 


In Angola, Sun Africa Constructs Seven Solar Projects Totaling 370MW

Sun Africa and M Couto Alves, part of the EPC conglomerate, on behalf of Angola’s Ministry of Energy and Water, are developing seven solar power projects in Angola.

Hitachi ABB Power Grids will supply the main electrical infrastructure to connect the project to the country’s transmission network.

The initiative is being financed under the Swedish Export Credit System (the Swedish Export Credit Corporation and Swedish Export Credit Agency), which aims to raise investment in Swedish sustainable technology globally

The initial stage of the project will include the construction of a

  • 188 MW solar power plant in Biopio in Benguela Province.

“This is one of the largest and most significant photovoltaic projects delivered,” says Niklas Persson, the managing director of Hitachi ABB Power Grids’ Grid Integration business unit. “We are contributing pioneering technology to enable MCA to integrate more renewables and electrify rural areas, while maintaining a stable network. Our role is to develop the project from idea to energisation – ultimately shaping a reliable and sustainable energy future for Angola.”

Six other solar power plants will follow, including

  • 7MW plant in Benguela in Benguela province,
  • 01MW plant in Saurimo, Luanda Sul, another
  • 91MW solar facility in Luena, Moxico,
  • 65MW solar plant, in Cuito, Bié,
  • 99MW plant in Bailundo, Huambo province, to electrify homes in the southern African country.
  • 20MW plant in Lucapa, Lunda Norte

Hitachi ABB Power Grids’ scope of work will include the design, main power equipment supplies, testing and commissioning of the project. It is based on an in-depth grid impact study into the customer’s unique requirements to determine in advance the best way to achieve the integration of the Angolan government’s renewable energy programme.

Financing and development partners include ING Bank, SEK, EKN, DBSA and KSURE, and the Swedish and US governments.

Angola is Africa’s seventh largest nation, with approximately 30-million inhabitants and a rapidly growing economy.

The project supports the UN’s Sustainable Development Goal 7 – ensuring that all people have access to affordable, reliable, sustainable and modern energy for all. The initiative will also help to increase the share of renewable energy in the global energy mix.

 


How TOTAL Is Enhancing the Energy Transition in Africa

By Gerard Kreeft

French oil and gas giant TOTAL  continues to attract attention  in how its core business model is changing the industry: providing a blueprint how to transition an oil company to an energy company and at the same time guaranting financial success to its shareholders. The repercussions will be certainly  felt in Africa, where TOTAL’s future growth is expected. Now the company produces approximately 1/3 of its oil and gas production (approx 900 000Barrels of Oil Equivalent per Day (BOEPD)) on the continent and by 2030 is expected to grow by one-third.

Important is to note how TOTAL will grow. Patrick Pouyanné, TOTAL’s chairman and chief executive, now says that by 2030 the company “will grow by one-third, roughly from 3Million BOEPD) to 4Million BOEPD, half from LNG, half from electricity, mainly from renewables.” This, according to IEEFA (Institute Energy Economics & Financial Analysis), is the first time that any major energy company has translated its renewable energy portolio into barrels of oil equivalent. So, at the same time that the company has slashed “proved” oil and gas from its books, it has added renewable power as a new form of reserves.

Adding Reserves

In the summer of 2020 Total announced  a $7Billion impairment charge for two Canadian oil sands projects. This might have seemed like an innocuous move, merely an acknowledgement that the projects hadn’t worked out as planned.

Yet it opened a Pandora’s box that could change the way the industry thinks about its core business model—and point the way towards a new path to financial success in the energy sector. While it wrote off some weak assets, it did something else: TOTAL began to sketch a blueprint for how to transition an oil company into an energy company.

Each of the oil and gas majors spilled red ink last year, and most took significant write-downs. But TOTAL’s tar sands impairments were different. The company wrote off “proved reserves,” or oil and gas that the company had previously deemed all-but-certain to be produced. Proved reserves long stood as the Holy-of-Holies for the oil industry’s finances—the key indicator of whether a company was prepared for the future. For decades, investors equated proved reserves with wealth and a harbinger of long-term profits.

Because reserves were so important, the Reserve Replacement Ratio, or RRR—the share of a company’s production that it replaced each year with new reserves—became a bellwether for oil company performance. The RRR metric was adopted by both the Society of Petroleum Engineers and the U.S. Securities and Exchange Commission. An annual RRR of 100% became the norm. But TOTAL’s write-off showed that even “proved” reserves are no sure thing, and that adding reserves doesn’t necessarily mean adding value. The implications are devastating, upending the oil industry’s entire reserve classification system, as well as decades of financial analysis.

How did TOTAL reach the conclusion that “proved” reserves had no economic value? Simply put, reserves are only reserves if they’re profitable. The prices paid by customers must exceed the cost of production. Given current forecasts that prices would remain lower for longer, TOTAL’s financial team decided those resources could never be developed at a profit.

TOTAL’s strategy is based on the  Sustainable Development Scenario(SDS) for medium/long term,  developed by the International Energy Agency (IEA). Taking the “Well Below 2 Degrees Centigrade” SDS scenario on board, TOTAL has in essence taken on a new energy  classification system. By embracing this strategy TOTAL is the only major to have seen the direct benefit of using the Paris Climate Agreement to  expand its renewable energy base.

On the renewables front, TOTAL has confirmed that it will have a 35 gigawatt (GW) capacity by 2025, and hopes to add 10GW per year after 2025. That could mean an additional 250GW by 2050.

A key to TOTAL’s success is its willingness to devote capital to projects at an early stage. Its renewable investments include:

  • 50% portfolio of installed solar activities from Adani Green Energy Ltd., India;
  • 51% Seagreen Offshore Wind project in the United Kingdom;
  • Major positions in floating wind farm projects in South Korea and France.

Expect that TOTAL will also expand its renewable portfolio in Africa in the coming months.

Renewables in Africa

This could prove to be a double-edged sword for TOTAL and Africa: stimulating new renewable energy and oil and gas projects- if they have a high return on investment. TOTAL’s lead in taking on board renewables as part of its reserve count, will surely set a precedent for other renewable projects in Africa, helping the continent move forward with the Energy Transition.  Projects  not meeting this investment grade will not be treated so kindly.

Yet the increased speed of the Energy Transition is not necessarily good news for Africa. The greening of Europe, for example, could in the short and medium term have a boomerang affect in Africa. The major oil companies including Shell, TOTAL, BP and Equinor could in fact reduce oil and  gas activities in Africa.

Are  Africa’s oil and gas assets competitive and worthy of development if compared to other global projects? Why? Simply because the oil and gas majors are choosing  low carbon prospects and natural gas projects on a massive scale,  leaving many potential prospects in doubt. A prime example is TOTAL’s mega-large LNG project in Mozambique is expected to cost at least $20 Billion and produce up to 13Million tonnes of LNG per annum.

Energy scenarios released by both BP and TOTAL are predicting a sharp decrease of oil production, adding to the view that exploration budgets of the majors will not be a priority item. Instead as TOTAL has explained, low cost, high value projects are the goal: Squeezing more value out of its various African assets, especially in Nigeria and Angola to ensure a prolonged life cycle.

The Norwegian energy research  company Rystad, reminded the investment community, in September 2020, that the oil and gas majors are actively pruning their oil and gas assets, stating: “The world’s largest oil and gas firms could sell or swap oil and gas assets of more than $100Billion in order to adjust and transform to cleaner sources of energy”.

The Rystad Energy Study covers a wide geographical spread  and includes  ExxonMobil, BP, Shell, TOTAL, ENI, Chevron, ConocoPhillips, and Equinor. The eight companies may need to divest combined resources of up to 68BillionBOE, with an estimated value of $111Billion and spending commitments in 2021 totalling $20Billion.

The key criteria for determining whether a major oil company would benefit from staying in a country are the company’s cash flow over the next five years, the potential growth in its current portfolio, and its presence in key E&P growth countries towards 2030. Based on this, Rystad claims that majors may seek to exit about 203 varied country positions and, as a result, reduce their number of country positions from 293 to 90.

How will renewables and  oil and gas prospects in Africa be judged? Do the various state oil companies have the management skills to properly assess their energy transition scenarios?  Do they have highly qualified, independent consulting companies providing them with advice ?

Many of Africa’s new fledging  state oil companies, have been proxies to the international oil majors. In the process, they haven’t developed technical knowledge, capability and expertise to manage and implement oil and gas projects. Being hostage to the whims of the oil majors is no formula to ensure that a country’s oil and gas assets are to be developed. Certainly not, when the window of opportunity to develop oil and gas assets  could be closing within the next 20-25 years.

There is the stern warning and key conclusions coming from a recent report authored by  David Manley and Patrick R.D. Heller for the Natural Resource Governance Institute:

  1. “If national oil companies follow their current course, they will invest more than $400Billion in costly oil and gas projects that will only break even if humanity exceeds its emissions targets and allows the global temperature to rise more than 2 o
  2. “Either the world does what’s necessary to limit global warming, or national oil companies can profit from these investments. Both are not possible.
  3. Investments by State oil companies could pay off, or they could pave the way for economic crises across the emerging and developing world, and necessitate future bailouts that cost the public. Some oil-dependent governments in Africa, Latin America and Eurasia are making particularly risky bets with public money.
  4. Many national oil companies have incentives to continue spending big on new oil and gas projects. As a result, company officials might not, on their own, change course to account for the energy transition away from fossil fuels toward green energy, nor make investment decisions that serve the interests of citizens.
  5. Governments—through finance and planning ministries, presidential offices and public accountability bodies—must act to promote a more sustainable economic path.
  6. Governments should understand the extent of national oil companies’ exposure to decline in oil and gas prices;
  7. Revisit rules on cash flows into and out of state-owned companies.
  8. Require or incentivize lower-risk investment decisions .
  9. Benchmark and measure national oil company performance, improve corporate governance, and report consistently to citizens.”

Some key conclusions

  • Recently IRENA (International Renewable Energy Agency) and AfDB (African Development Bank) have jointly announced support of low carbon projects to enhance the energy transition. IRENA in its Global Renewable Outlook states the sub-Sahara Africa could generate as much as 67% of its power from indigenous and clean renewable sources by 2030. In the energy transition this would increase welfare and stimulate the creation of up to 2Million green jobs by 2050.
  • Certainly public-private partnerships should be part of this mix. Governments to ensure a broad basis of support and energy companies who have the know-how and project management skills. A key bonus for oil/energy companies is knowing that renewables can be added to the reserve count.
  • “TOTAL hasn’t abandoned oil and gas, and its hydrocarbon investments may prove problematic over the long term. But its renewable investments will add ballast to the company’s balance sheets, keeping it afloat as it carefully chooses investments, including oil and gas projects, with a high economic return.
  • Meanwhile, its competitors that stick to the old oil industry business model will have no choice but to continue to develop hydrocarbons—even if their “proved” reserves ultimately prove to be financial duds.”

Note: Portions of this article have  originally been published  on the site of IEEFA (Institute Energy Economics & Financial Analysis)https://ieefa.org/ieefa-is-oil-giant-total-an-emerging-leader-of-the-energy-transition-shows-how-to-pivot-from-an-oil-company-to-an-energy-company/

Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Kreeft has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report

 


Egypt Prepares Tender for Last Phase of Africa’s Largest Wind Power Project

Egypt’s New and Renewable Energy Authority is preparing to issue a tender for Build, Operate and Maintain the 120 MW capacity Jabal Al-Zeit 3 ​​wind power plant.

It is the third of the three wind power plants in the Jabal al-Zeit wind station, whose total planned capacity is stated to be 580MW, with a production rate of 2MW per turbine. The station is located on a 100-acre site in District 3 of Jabal el-Zeit, along the western side of the coastal road of Hurghada, in Egypt’s Red Sea Governorate.

The first project, Jabal Al-Zeit 1, with 250MW capacity, was commissioned in February 2020; it includes 120 turbines. The second, Jabal Al-Zeit 2, whose construction was only just completed, has 110 turbines. Contract for the operation and maintenance of that second wind farm has gone to Siemens Gamesa.

The third, while the third Jabal Al-Zeit 3 ​​wind power plant will work with 60 turbines and has 120MW capacity.

Three companies, including Siemens Gamesa, Vestas and Volatalia, have informally expressed interest to bid. But they have to wait for the tender to be launched in the second quarter of 2021.

The government’s plan is that, after construction and inauguration, the period of operation and maintenance of the plant will be between five and seven years, and the period can be extended for another year in agreement with the New and Renewable Energy Authority.

The New and Renewable Energy Authority had announced its intention to establish a subsidiary company to maintain and operate wind projects, but it changed the course after studying its feasibility.

The agency decided, instead, to launch tenders to select companies to undertake the operation and maintenance for a specific period, or for an investor to establish the company himself, owning it in full, and undertaking the maintenance of the authority’s stations through a contract between the two parties for a period of 5 to 10 years, provided that the investor gets the fees for operating and maintaining the stations. The Renewable Energy Authority owns two wind stations, the first in Zafarana with a capacity of 550MW, which includes about 700 turbines of different capacities, the second in Jabal Al-Zeit 1 with a capacity of 580MW.

 


New York City Pension Funds Pull Out of Fossil Fuel Holdings

New York City’s largest pension funds have voted to initiate full fossil fuel divestment, selling off an estimated $4Billion of holdings in fossil fuel corporations, such as ExxonMobil.

The city’s announcement fulfills its commitment to divest from fossil fuels.

NYC’s pension funds, valued at $239Billion, are the largest municipal pension funds to divest globally.

The city’s divestment commitment, made in 2018, inspired further action worldwide. It was followed by commitments from many other large funds, including the City of London, the Norwegian Sovereign Fund, and the New York State Common Retirement Fund. Today’s announcement confirms the City’s commitment to divest from fossil fuels within five years.

Divestment has exploded over the past decade from a symbolic action by small college endowments into a worldwide movement that has led to over $14Trillion worth of investment funds divesting or committing to divest from the oil, gas or coal industries.

In order to fulfill the Paris climate agreement’s goals of staving off catastrophic climate change, all major finance of fossil fuels and deforestation must end by 2030.


Morocco’s Tender for 400MW Solar Project Ends January 31

Submissions for Morocco’s tender for the construction of the first phase of the Noor PV II complex will wrap up on January 31, 2021.

Moroccan Agency for Sustainable Energy (MASEN) called for expressions of interest (EOIs)  for the 400MW project in 2020.

Noor PV II Solar complex involves six locations: Sidi Bennour (48MW), Kelaa sraghna (48MW), Taroudant (36MW), Bejaad (48MW), El Hajeb (36MW) and Ain Beni Mathar (184MW). The given capacity is in direct current (DC).

Winning bidders will be announced in the second quarter. The contracts are due to be signed in the third or fourth quarter of 2021.

Morocco’s Noor solar programme was introduced back in 2009 with the goal of adding at least 2,000MW of solar PV across the country, supporting the Kingdom’s target of growing the proportion of renewables in its installed power mix to 52% by 2030.

Construction of the first phase of the project – Noor I – began in 2013, and reached completion in 2016. On 4th February 2016, King Mohammed VI chaired the commissioning ceremony at the first plant, and officially launched the construction of phase II and III of the solar complex.

While Noor I and Noor II use concentrated solar power (CSP) technology to generate electricity with the help of 12-metre-tall mobile parabolic mirrors, Noor III will introduce a technological variation of CSP technology, by using a solar tower. The fourth phase will use photovoltaic technology.

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