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French Major Expands Gas Development Partnerships with Algeria

French major TOTALEnergies and Algerian state hydrocarbon company SONATRACH have signed a Memorandum of Understanding aimed at concluding a hydrocarbon contract in the north-east Timimoun region, under the aegis of Law n°19-13 governing hydrocarbon activities.

This Memorandum of Understanding outlines the realization of a work programme for the appraisal and development of gas resources in the North-East Timimoun region, in synergy with existing processing facilities for production from the Timimoun field, to reduce costs and emissions.

“This Memorandum of Understanding reflects our shared willingness to expand our strategic partnership with SONATRACH”, said Julien Pouget, Senior Vice President Middle East & North Africa, Exploration & Production at TotalEnergies.

The two companies had earlier in 1Q 2024,  extended their cooperation in the field of liquefied natural gas (LNG) by extending their contractual relationship until 2025.

By the terms of that deal, SONATRACH will be delivering two million tonnes of LNG to TOTALEnergies at the port of Fos-Cavaou, near Marseille, which will contribute directly to the security of energy supply in France and Europe.


Nigeria’s Gas Price Hike “The bulk of the debts accumulated by Gencos arose post privatization of PHCN”

The establishment of a new pricing framework for natural gas for strategic sectors such as Power is considered a win for upstream gas producers, but that in itself, doesn’t tell the whole story.

In the aftermath of the price announcement, Africa Oil+Gas Report caught up with Eberechukwu Oji, Chief Executive Officer of ND Western, the Nigerian independent firm whose Joint Venture with NNPC E&P Ltd (NEPL) is the largest supplier of natural gas to Nigeria’s domestic market.

Excerpts from the short conversation between Oji and Toyin Akinosho, publisher of AOGR …

AOGR The Government’s increase of the Domestic Base Price (DBP) to $2.42 per Million Metric British Thermal Units (MMBTU). This means increased price of the commodity for power Generation Companies (Gencos) to $2.42 per thousand cubic feet. The price of gas sold to Gencos had been at $2.18 since 2021. Is this good? Plus, no one said anything about willing seller willing buyer. This is still “Price Control”. Is it good or am I getting it all wrong?

Oji: The increment in the Domestic Base Price (DBP) from $2.18/MMBTU to $2.42/MMBTU for the power sector is indeed a positive development for upstream gas suppliers. While the price may not fully reflect the true cost of gas production, it indicates a positive response from the government and regulatory bodies to the concerns of upstream producers. With thermal energy accounting for a substantive portion of Nigeria’s power generation, incentivizing gas production is crucial for meeting the country’s energy needs. 

Regarding the concept of willing buyer and willing seller, it is our view that we need to be deliberate, as a country, to attain a free gas market as quickly as possible. That being said, the DBP directly applies to the regulated strategic sectors in line with PIA. Thus, agreements based on willing buyer/willing seller principles may not be directly affected by the DBP.

You are right, this is still price control. We need to move to willing buyer willing seller as quickly as possible.

Is it possible for you to put yourself in the shoes of Transcorp Power, or, say, Geregu Power? Is this not a little too high for these electricity generation companies?

Considering the perspective of Gencos, it’s understandable to anticipate potential challenges from the price increment, especially from electricity consumers. It’s crucial to recognize that the affected Gencos operate within a regulated value chain, with a tariff model that allows approved fuel cost as a pass-through. Thus, the gas price increment may not necessitate an adjustment to the Gencos’ cost component in the tariff model. However, the gas price increment may warrant an upward review of the consumer electricity tariff.

There is a lot of talk of Legacy debts (and Transcorp owes you a lot of that). Were these debts owed by the old PHCN before the takeover by the Private Gencos? Or were these debts incurred in the course of the last 11 years post privatisation?

The bulk of the debts accumulated by Gencos arose post privatization of PHCN. For most of our own customers, these debts dates as far back as 2014, post the privatization of PHCN.

This increase, which is really an incentive, is coming less than a month after the incentives rolled out on Non-Associated Gas, by the President. Wouldn’t you then call this a month of good tidings?

The recent increase in the DBP, coupled with incentives for Non-Associated Gas, reflects a positive trend in the Nigerian government’s prioritization of the gas sector. However, the gazette by the FGN on incentivizing Non-Associated Gas (NAG) production speaks to greenfield developments in onshore and shallow water locations. There is a need to seek clarity from the regulators on what this means for brown fields as we expect to have access to these incentives in order to fulfil the aspiration of the FGN in increasing the nation’s gas production. These efforts are warmly received by gas producers, underscoring the pivotal role of the gas sector in ensuring energy security, driving electricity generation, and fostering economic development.

As we have always advocated without incentivising upstream gas production, all the beautiful gas plans of the government collapses.

Editor’s note: The Nigerian government announced, the day after the gas price hike, that it had approved an increase of 300 per cent electricity tariff for Band A consumers in the country. Accordingly, power distribution companies (DisCos) will be allowed to raise electricity prices to ₦225 ($0.15) per kilowatt-hour from ₦68 for urban consumers this month effectively from April 1, 2024.

 

 


Heineken Lokpobiri, Nigeria’s Minister of State for Petroleum (Oil), to Speak at the Petroleum Club

PAID POST

The Nigerian lawyer and politician, Heineken Lokpobiri, will be the special guest of honour at the second of the four quarterly dinner lectures of the Petroleum Club of Lagos for 2024.

The Minister of State for Petroleum (Oil) will be speaking to the theme Policy design and implementation to tackle the challenges of lower for longer crude oil output

The Petroleum Club, a 17-year-old private club where industry leaders and the technical elite interact, unwind and share ideas on issues concerning the sector, reached out to Mr. Komolafe to deliver the opening dinner lecture.

The event, scheduled for Monday April 15, 2024 at the Metropolitan Club in Lagos, is “a special interactive evening with the Minister”, declares Austin Avuru, who has been Chairman of the Petroleum Club for the past year and half. “We are inviting the entire industry to engage the Minister. We are looking towards a robust engagement”.

The Petroleum Club’s quarterly dinner routinely hosts the government and public leaders of Nigeria’s hydrocarbon sector to open, informal, give-and-take-parleys with ranking private sector players. Gbenga Komolafe, the Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission, was guest speaker at the February 2023 dinner. Olu A. Verheijen, Special Adviser to President Tinubu on Energy, was the special guest at the end of year dinner in December 2023. Shubham Chaudhuri, the World Bank’s country director for Nigeria, was the special guest of honour at the December 2022 dinner.

Lokpobiri was appointed Minister of State for Petroleum Resources (Oil) by President Bola Ahmed Tinubu in August 2023. He is serving with Ekperipe Ekpo, who was appointed Minister of State for Petroleum Resources (Gas).

The two of Ministers of State have delivered lofty statements about the direction of the industry, but the sector has stubbornly remained  on the path of lower hydrocarbon output.

Mr. Lokpobiri has been an active politician since the dawn of Nigeria’s current fourth republic, having been elected member of the Bayelsa State House of Assembly from 1999 to 2003, and speaker of the house from June 1999 – May 2001. In 2007, he was elected to the Nigerian Senate for the Bayelsa West constituency in 2007 and was appointed to committees on Sports, Public Accounts, Police Affairs, Niger Delta and Millennium Development Goals.

He is considered to be a close confidante of President Tinubu.


“The Rise of Gas”; Valuable Knowledge Base, Compelling Narrative

By Afolabi Oladele

Charles Osezua’s The Rise of Gas: From Gaslink to the Decade of Gas, gives a magisterial account of Nigeria’s entry into the comity of oil and gas producing nations, beginning not from Oloibiri as many historians of the sector like to note, but from the Dahomey Basin and then Akata, close to Eket, all the way to the country’s chequered history of gas exploration, waste and utilisation.

The author’s story began with what now seems like a prophetic utterance when late Aret Adams ran into the younger man in Kaduna and called him “Gas Man.”

Aret Adams was speaking in prophetic tones, given Mr. Osezua’s pivotal role, not only in policy formulation driving the development of Nigeria’s gas resources, but more as a serial entrepreneur who has invested in the entire spectrum of gas production and utilisation.

For these reasons, the name, Charles Osezua, will be written in bright lights.

In this book, his account begins in the 1970s and runs its course up to 2023 when energy transition is making daily headlines.

Charles Osezua, author of ‘The Rise of Gas’

On Monday July 31, 2023, President Bola Ahmed Tinubu (BAT) unveiled his economic plan to the nation in the wake of the removal of the fuel subsidy. He declared in his speech that “We have made provision to invest ₦100Billion between now and March 2024 to acquire 3,000 units of 20-seater CNG-fuelled buses.”

What is CNG and what does it portend for the Nigerian gas industry and economy?

This book will provide you with the answers, narrating succinctly how the country could have been using CNG-fuelled vehicles almost four decades before President Tinubu’s pronouncement. It will also chronicle for you, in broad strokes the:

  • irony of a country constrained to import gas and deal with years and years of gas scarcity on account of flagrant flaring of gas; and
  • missed opportunities to harness the stranded gas due to several policy somersaults and reversals across different administrations, the most painful of which Charles Osezua details in Chapter 4 of this riveting book. Ibrahim Badamasi Babangida’s administration’s suspension of a federal government gazette set Nigeria’s gas industry and utilisation back several decades; and all this in spite of the evolution of a Gas Pricing Policy which was predicated on a comprehensive nine-month market survey conducted across all states of the federation, covering industrial clusters with clear data on the potential for gas utilisation.

The book outlines the sad and disheartening story of the nation’s years of burning money that predated the Gas Master Plan.

It is also the story of a young man from “a small village in Ekpoma, with a father who was a farmer and a mother who was an energetic farm produce trader,’ who rose to the pinnacle of Nigeria’s gas industry, undeterred by the failures of national policy.

Driven by what he witnessed as a young man, the tongue of flame leaping into the air in Ugbelli, he was inspired to pursue a course of study that would help address what appeared to be an anomaly. He went on to study Natural Gas Engineering in the US.

On completion of his studies, he joined the Nigerian National Petroleum Corporation (NNPC) where he rose to become a champion, focused on the articulation of policies to monetise the country’s enormous gas resources, starting with the elimination of gas flares, and enhancing the terms for gas development.

Engineer Osezua was years ahead of his time, as the nation is only now waking up to address the issues, he raised regarding gas being the future revenue earner for the country. Many of his works are documented in articles and position papers. These gave him the moniker, Gas Man.

He left NNPC, and his entrepreneurial passion took him first to being part of the group that birthed the Lagos Business School and subsequently, the creation of ground-breaking gas utilisation companies amongst which are great successes like Gaslink and Egbaoma Gas Processing plant.

Gaslink is discussed extensively in this book, and its transformational impact on the seven industrial areas of Lagos provides proof of what could have been replicated on the national scale where Nigerian industries provided with reliable energy supply and feedstock would have produced a range of petrochemical products including fertilizers, ammonia, etc.

The book is funny in parts, tear-inducing in others but at the end, what emerges is composite of what has held Nigeria back for decades thanks to the short-sightedness of our leaders and Policymakers.

This book is a valuable knowledge base for everyone involved in the gas value chain, from students to oil industry workers technocrats and policymakers as we proceed with the transition agenda.

As Chinua Achebe once wrote, “a man who does know where the rain began to beat him cannot say where he dried his body.” Engineer Charles Osezua in this book has shown us where the rain began to beat us and where and what we must do to begin to dry our body as a gas producing nation.

Above is the foreword to the book.

“The Rise of Gas”, published by Radi8,  is set for a public presentation on Tuesday, April 9, 2024, at the Nigerian Institute of International Affairs (NIIA) in Lagos, Nigeria.

About the reviewer, Afolabi Oladele: Following a successful career with 25 years’ experience in the oil and gas industry, primarily with the Nigerian National Petroleum Corporation (NNPC), Mr. Oladele joined African Capital Alliance (ACA) in 1999, retired from ACA after 21 years and worked with many of ACA’s investee companies in several value-adding roles along with full responsibility for the firm’s investor relations. He continues to sit on the Boards of ACA’s oil and gas portfolio as well as financial services companies.

 

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Vacancy: The Crude Oil Refinery Owners Association of Nigeria (CORAN)

PAID POST

CORAN is looking to employ an Executive Director who will be responsible for overseeing, planning, organizing, directing, coordinating, and implementing CORAN policies, programmes, directives, and strategic plans as determined from time to time by the CORAN National Executive Committee, NEC, Chairman, and Secretary

Job Description: Executive Director (CORAN)

The Executive Director of the Crude Oil Refinery Owners Association of Nigeria (CORAN), under the supervision of the Secretary and the leadership of the association’s Chairman, will be responsible for overseeing, planning, organizing, directing, coordinating, and implementing CORAN policies, programmes, directives, and strategic plans as determined from time to time by the CORAN National Executive Committee, NEC, Chairman, and Secretary.

 The Executive Director will perform the following duties:

  • He/she shall co-ordinate and oversees the day-to-day general administration and management of CORAN National Secretariat.
  • Manage and administer the Secretariat, human resources, financial and other resources effectively to achieve the objectives of the CORAN.
  • Coordinate and ensure the effective and efficient implementation of CORAN strategic plan, programmes, policies, decisions and resolutions of National Executive Committee, BOT and the AGM,
  • Prepare preparations and represent the Association in high level meetings in regulatory agencies, Government agencies and Private sector, and professional bodies to present and articulate the CORAN positions
  • Develop programmes, initiatives and projects that relate to the regulatory, representative, re-engineering and public interest roles of the CORAN.
  • Review and recommend approved plans and budgets to the Chairman and Secretary during the annual planning and budgeting cycle.
  • Prepare and propose an annual plan and budget to the Chairman and Secretary for presentation at the CORAN National Executive Committee.
  • Manage research and development of policies, working papers, memoranda of understanding, briefs, idea notes, and other materials for CORAN Leadership.
  • Create business development, sponsorship, and advertising activities to generate revenue for CORAN.
  • Promote professionalization of the National Secretariat to better serve local private refineries.
  • Assist CORAN governance structures and platforms, including committees and forums in organizing and implementing their programs, strategies, priorities, and goals.
  • Facilitate and promote collaboration and partnership with external stakeholders, local and international organizations and Development Partners, donors etc
  • Manage and ensure smooth transition from one outgoing CORAN. leadership/administration to an in-coming administration.
  • Ensure continuity and consistency of programmes and policies of successive CORAN administration.
  • Ensure the timely monitoring and evaluation of programmes, policies, plans and milestones using the necessary monitoring and evaluation mechanisms and tools.
  • To carry out any other duties and assignments that may be assigned by NEC, chairman and Secretary from time to time

Requirements:

The ideal candidate should have a minimum of 7 years’ experience in administration and management.

Qualification:

  • First degree – BSc or HND
  • An advance degree such as M.Sc. in Business Administration will be an added advantage.

Contact:

Qualified candidates should send their CV and cover letter via email to info@coran.ng in PDF format not later than two weeks from the date of this publication.


Jean-Jacques Rousseau in conversation with Shell

By Gerard Kreeft

 Shell’s return to the courtroom in the Netherlands to appeal the 2021 decision, which ruled that the UK major must reduce its CO2 emissions 45% by 2030, is raising eyebrows within the oil and gas industry.

Investors and green activists alike are watching with keen interest.

Shell continues to maintain that the court has no jurisdiction within Shell’s boardroom and that this is a private company matter.

Is that so? Perhaps time to go  back to Jean-Jacques Rousseau.  For Rousseau, writing in the mid-18th century, the notion of the common good, achieved through the active and voluntary commitment of citizens, was to be distinguished from the pursuit of an individual’s private will.

As Rousseau explained, the general will is the will of the sovereign, or all the people together, that aims at the common good—what is best for the state as a whole.

The heart of the matter for Shell is that the company has continued to argue that this is private( company) matter, not one involving the the common good.

Yet the 2016 Paris Climate Agreement, which was signed by 195 countries, agreed to try and prevent an average global temperature rise of under the 2 0C and hopefully 1.5 0C, is the clearest example of a common good.

There are, internationally, some 200 court cases against companies involving climate related issues, according to the Columbia Law School. And to go by the swirl of press reports focused on this case,  all eyes are on what the court in the Netherlands will decide on.

 Shell’s vision

The chief obsession of Wael Sewan, Shell’s CEO since January 2023,  is to drive up the company share price.

Despite his robust efforts, the share price has barely moved—it was $65 at the start of April 2019 vs $64 in February 2024.

In Mr. Sewan’s view, Shell must mimic Chevron and ExxonMobil. While the Shell share price has remained virtually unchanged Chevron has seen its share price in the same period  increase 23 percent and ExxonMobil 25 percent.

Shell’s total capex for the period 2023-2025 is between $22Billion-$25Billion per year, of which some 80 percent is earmarked for hydrocarbons. Not unlike Chevron and ExxonMobil.

Sewan is attempting to change Shell’s narrative: that Shell is in the business of producing hydrocarbons, instead of also selling the illusion that its new energy policy matters. Europe’s oil majors, Including Shell, have seen their share prices flounder. Why? Because of their duality of messaging.  The European oil majors in the period April 2019-February 2024(with the exception of  TOTALEnergies and Equinor), have seen their share prices underperforming badly:

BP  down from $44 to $36;

Eni down from $36 to $31;

TotalEnergies was up from $56 to $65 ;

Equinor was up from $22 to $25.

The messaging of Chevron, ExxonMobil and now Shell is that they are oil companies, much in the tradition of John D. Rockefeller. This clarity of messaging is resonating with Chevron and ExxonMobil  shareholders.

 Alignment with the Paris Accord?

According to Mark van Baal, founder of Follow This Shell’s updated strategy has moved the company even further away from Paris Alignment.  According to van Baal “The ball is now in the investors’ court. They have the voting power to enact change.”
Earlier this year, 27 institutional investors with $4.6Trillion in AUM(assets under management) co-filed a climate resolution with Follow This at the oil and gas major.
Other claims have followed:

In February, environmental charity ClientEarth filed a case with the UK High Court, arguing that Shell’s continued investment in fossil fuel projects was a breach of directors’ duties to promote the company’s best interests.

NGO Global Witness filed a case against Shell in the US, alleging that the firm had misled investors by overstating its investments in renewable energy.

Shell has also faced pressure from Norges Bank Investment Management,  following a series of destructive oil spills in the Niger Delta region.

 Mixed bag

Shell’s updated energy transition strategy confirmed progress on Scope 1 and 2 emission reductions, with the company announcing a 31% decrease as of 2023, compared with 2016 levels – over halfway towards its goal of halving those by 2030.

In addition, Shell had reduced its net carbon intensity across Scopes 1 to 3 by 6-8% by 2023 compared to 2016 levels, though it is targeting a 9-12% reduction by 2024 and a 9-13% by 2025.

Many experts have welcomed Shell’s pledge to reduce customer emissions – also known as Scope 3 – from the use of its oil products by 15-20% by 2030, compared to 2021 levels.

Shell’s Scope 3 emissions amounted to 517 million tonnes of CO2 equivalent last year, down from 569 million in 2021.

Despite this progress, Shell has continued to lay much responsibility for Scope 3 emissions at its clients’ door:

“Reducing the net carbon intensity of the products we sell requires action by both Shell and our customers,” the group said in its 2024 strategy. “While we encourage the uptake of low-carbon products and solutions, we cannot control the final choices customers make.

Support from governments and policymakers is essential to create the right conditions for changes in demand.”

Note:

Essentially, Scope 1 are those direct emissions that are owned or controlled by a company, whereas Scopes 2 and 3 are indirect emissions: a consequence of the activities of the company but occur from sources not owned or controlled by it.

Shell has chosen to scrap its 2035 target to reduce the net carbon intensity of its products by 45%, due to “uncertainty in the pace of change in the energy transition”.

Carbon Tracker’s Maeva O’Connor expressed disappointment that Shell’s strategy focused on emissions intensity, rather than absolute emissions reduction: Intensity targets can be met simply by changing the energy mix in an oil and gas producer’s portfolio,” she explains. “If they add renewables into the mix, their energy intensity comes down – even if they are still producing the same volume of oil and gas, and therefore the same amount of emissions as before.”

 Follow the money

While emissions intensity vs absolute emissions reduction are important indicators of how a company is aligned with the Paris Climate Accord, more telling is a company’s  allotment of its capital budget. This indicates where the real money is being spent.

Shell’s total capex for the period 2023-2025 is between $22Billion-$25Billion per year, of which some 80% is earmarked for hydrocarbons. Not unlike Chevron and ExxonMobil. In other words, these three companies are only earmarking 20% of their annual capital budgets on low carbon solutions.

TOTALEnergies’ capital expenditures for the period 2022-2025 is anticipated to be between $14Billion-$18Billion per year: “a third will be in low-carbon energies, about 30% will be dedicated to the development of new oil and gas projects, and the remainder devoted to maintenance of the hydrocarbon portfolio. In other words, the hydrocarbon budget will be approximately $8Billion-$11Billion and the renewable budget will be $5Billion in 2023. By 2050 TOTALEnergies will be on track to have 50% of its energy mix in renewables + 25% in “new molecules”(green fuels). The remaining 25% would be comprised of oil and gas including LNG.

Equinor has indicated that it will be spending more than one-half of its capital spending on low carbon energy by 2030 to become a leader in offshore wind technology.

Conclusion + Final Remarks

It’s painful to watch the ensuing drama knowing full well how it will end. The end game will see Rousseau’s common good prevailing. Perhaps the court will seek some minor compromises to appease Shell—but the message will be that the stick instead of the carrot will be Shell’s outcome—if it does not meet its 2030 goals.

Such a message is also a sobering one to the oil and gas industry shareholders and investment community.

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.  Gerard has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report, and contributes to IEEFA(Institute for Energy Economics and Financial Analysis). His book The 10 commandments of the Energy Transition is now on sale at  Bookstorehttps://books.friesenpress.com/store/title/119734000211674846/Gerard-Kreeft-The-10-Commandments-of-the-Energy-Transition

 


Why? NUPRC Yet to Publish Details of Frontier Basin Exploration Development Plan

By Adeniyi Adeoloye

The Frontier Exploration Fund section of Nigeria’s Petroleum Industry Act (PIA) 2021 was a -hot button issue during the final arguments leading to the passage of the PIA by the National Assembly.

The major contention was the money voted.

That 30% of state hydrocarbon company NNPC Limited’s profit oil and profit gas (as in the production sharing, profit sharing and Risk service contracts) goes to the Fund, aroused strong emotions from many industry watchers and the political class, particularly along the north-south divide. However, the fervour soon ebbed after assent of the bill by former President Muhammadu Buhari.

Following the enactment of the PIA, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the upstream regulator, formulated and gazetted several regulations aligning with the omnibus law. Among these regulations, the Frontier Basin Exploration Fund regulation is one that provides the window on the operational framework of the Fund.

On May 24, 2023, nearly 21 months after the PIA came into force, an opportunity to gain insight into the workings of the Frontier Exploration Fund emerged when NUPRC published the Frontier Basins Exploration Administration regulation. The objectives of this regulation are to “provide the general rules for the exercise of the Commission’s responsibilities with respect to frontier basins in Nigeria pursuant to section 9 of the Act”, and also to “provide a procedure for the administration of the Frontier Exploration Fund”; as well as to “attract investment to the frontier basins in Nigeria”.

Per the regulation, NUPRC is expected to “issue an annual Frontier Basin Exploration and Development Plan (the FBED Plan)”. Noting that the inaugural FBED Plan will be produced and published on the website of the Commission within three months of the regulation’s commencement, with expiration on the 31st December, 2023. Subsequently, the FBED Plan will be issued and published on January 1 of every year that follows. However, a look on the Commission’s website 3 months after the regulation was made, that is: August 2023, and later on January 1, 2024 showed no presence of the FBED Plan. Instead a strategy document released by NUPRC on January 1, 2024 titled “NUPRC Regulatory Action Plan 2024 & Near Term (2024 – 2026)”, highlighted the implementation of the Frontier Exploration Fund as part of its action plan to grow reserves and production, but lack details on the FBED Plan.

The FBED Plan as a document is supposed to contain the Commission’s exploration strategy for managing frontier acreages for the year under review. In addition, review of exploration work program in the frontier basins submitted by NNPC Limited, proposed expenditures from the Escrow Account that houses the fund, promotion of exploration activities, information on frontier basin petroleum resources, planning analysis for unassigned acreages, and outlining proposed drilling or testing operations that the Commission has requested NNPC Limited to undertake.

An inquiry to NUPRC seeking clarification on the FBED Plan as contained in the regulation up to the time of publishing this piece got the response “we are working on your request”.

Prior to the Frontier Exploration Fund, there was a division (Frontier Exploration Service) at NNPC, the predecessor entity to NNPC Limited, responsible for prospecting activities in frontier basins. Since the PIA came into force, this responsibility has been transferred to the regulator that now oversees the Frontier Exploration Fund.

In response to queries on the funding sources deployed in frontier basins, Olufemi Soneye, Chief Corporate Communication Officer of NNPC Limited stated that “Before the enactment of the Petroleum Industry Act (PIA) on August 16, 2021, Frontier Exploration activities in Nigerian Frontier Basins, including the Benue Trough and Chad Basin, were directly funded from the Federation Account. Post the PIA implementation, effective August 16, 2021, funding for frontier exploration operations shifted to Section 9 of the PIA. This involves 30% allocation from NNPC Production Sharing Contract (PSC) profit oil and gas, alongside service contracts”.

Soneye additionally expressed that “The initial exploration of the Kolmani field in Gombe/Bauchi States was funded through the Federation account. However, it now adheres to the PSC governance structure led by NEPL in collaboration with NNDC, spanning OPLs 809/810 in the Gongola Basin of Upper Benue Trough. Presently, as per PIA provisions, NNPC Ltd collaborates with NUPRC for Frontier exploration activities in basins without commercial hydrocarbon discoveries. The 2024 Frontier Exploration budget has been sanctioned by NUPRC in accordance with PIA provisions. Hence, the ongoing exploration in Nasarawa State – Middle Benue Trough (Ebenyi-1 well Drilling) and Borno State – Chad Basin (Wadi-2 well Drilling) are funded through the Frontier Basins Exploration Fund per PIA provisions. The Bauchi-Gombe Kolmani Integrated Field Development Project follows the PSC structure led by NEPL & NNDC”.

For clarity, NNDC (New Nigeria Development Company Ltd) is a company with roots from 1949 and later incorporated in 1965 to play development finance role in the northern states, and Nigeria as a whole.

The bottom line is that NUPRC’s failure to publish the specifics of the FBED Plan, as outlined in the regulation, has created an information gap on frontier prospecting operations spending, especially with the drilling campaigns in Nasarawa State, Borno State, and the ongoing “development” initiatives in Bauchi State by NNPC Limited. The lack of transparency becomes more apparent given the non production of the 2022 annual report from the state-owned enterprise, a document that would have showed the expenditure figures. For “regulatory certainty and predictability”, it is crucial for the regulator to follow the provisions outlined in its regulation.

Adeniyi Adeoloye, a petroleum geoscientist based in Calgary, Canada, is a consulting Editorial Associate with Africa Oil+Gas Report.

 

 

 

 


Gas Price Hike: Nigeria Nods Again to Upstream Producers’ Demand

By Lukman Abolade

Nigerian oil and gas upstream producers won the second major incentive in one month, when the government announced the establishment of a new pricing framework for natural gas for strategic sectors such as Power, Commercial, and Gas-Based industries.

The country’s Midstream & Downstream Petroleum Regulatory Authority (NMDPRA) set a new price for natural gas sale to electricity producers at 24 American cents per Million Metric British Thermal Units (MMBTU), or thousand standard cubic feet (Mscf) higher than what had obtained, since the last price regime announced by a former Deputy Minister of Petroleum in 2021.

Under the new pricing regime, the NMDPRA set the Year 2024 Domestic Base Price at (DBP) at $2.42 per Million Metric British Thermal Units (MMBTU).

This means increased price of the commodity for power Generation Companies (Gencos) to $2.42 per cubic feet. The price of gas sold to Gencos had been at $2.18 since 2021. For commercial gas, the government increased the price from $2.50 to $2.92 per cubic feet.

The gas price hike comes exactly a month after the gazetting of President Tinubu’s executive orders, granting tax credit incentives for Non-Associated Gas (NAG) greenfield developments in onshore and shallow water locations, with first gas production on or before 1st January, 2029.

As a debate erupted around the affordability of the new gas prices by electricity generation companies, who are owing gas suppliers a huge amount of debt, the government announced, the day after the gas price hike, that it had approved an increase of 300 per cent electricity tariff for Band A consumers in the country. Accordingly, power distribution companies (DisCos) will be allowed to raise electricity prices to ₦225 ($0.15) per kilowatt-hour from ₦68 for urban consumers this month effectively from April 1, 2024.

By some estimates, government and private electricity producers owe gas producers ssome $ 1.3billion.

This raft of incentives is clearly meant to boost investment in natural gas development, and unlock more from the 200Trillion cubic feet estimated reserves, stored in the prolific Niger Delta basin.

Nigeria has grappled over the years with a stubbornly low quantum of electricity supply (between 3,500MW and 5,000M for a population of 200Million people), largely attributed to challenges thrown up by the national grid. The Transmission Company of Nigeria (TCN) has identified several factors contributing to this situation, notably including reduced gas supply and incidents of vandalism.

Nigeria has 26 Grid connected electricity generating plants, with installed capacity of of 12,199MW, out of which only 3,957MW, or less than 32%, was generated in February 2024, according to the Nigeria Electricity Regulatory Commission(NERC). Although 22 gas-fired electricity plants made up 84% of the installed capacity, they delivered only 50.2% of the power generated during the month. Four hydroelectric plants, which make up just 16% of the capacity installed, produced 49.8% of the power.

Part of the reasons alluded for low generation by gas-fired plants is “shortage of gas”. Some consider this argument to be a stretch, but it is a key reason why government thinks there should be more incentives for gas production.

Farouk Ahmed, Chief Executive of  NMDPRA, explained that “The Domestic Base Price at the marketable gas delivery point under Section 167 (1) and other provisions of the PIA shall be determined based on regulations which incorporate among such other matters, the following principles: the price must be of a level to bring forward sufficient natural gas supplies for the domestic market on a voluntary basis by the upstream producers; the price shall not be higher than the average of similar natural gas prices in major emerging countries that are significant producers of natural gas; lowest cost of gas supply based on three tier cost of supply framework; market related prices tied to International Benchmarks”.

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Petroci in the Market for Jack Up Rig

Cote d’Ivoire’s state hydrocarbon company, Petroci, is asking interested companies to participate in the Request for Information for Provision of Jack-Up Rigs for the purpose of gas development on the Kudu, Eland, and Gnou (KEG) project.

Project Overview:

Location: Approximately 20kilometres offshore from Assouinde, Southeast Ivory Coast.

Project Focus: Extracting, transporting multiphase fluids, and processing onshore gas at an Onshore Processing Plant (OPP).

Anticipated Production: Predominantly gas, condensate, and a limited amount of oil.

The choice of the type of drilling unit to be used will largely depend on the operating characteristic, limitations and availability of rigs, environmental conditions and ultimately economics. You are requested to confirm availability to provide services as per the attached schedule.

RFI Details:

Reference: RFI KEG-0001

Submission Deadline: 04th April at 03:00PM GMT

Submission Method: Email to: akoutouan@petroci.ci.

RFI Components:

  1. Technical Questionnaire

Supplier Financial Health Questionnaire

Due Diligence (CDD) Questionnaire

RFI Confidentiality Requirements

Contact for Queries:

For any queries or clarification, please contact Ange Didier KOUTOUAN, PETROCI CI-523/CI-525 Project Manager, at akoutouan@petroci.ci.

Immeuble Les Hevéas – 14 Bd Carde, BP V 194 Abidjan Côte d’ivoire

Mob  :+225 07 77 28 96 00  / 05


Procurement: Core or Support Function?

By Blessing Adagbasa

Most organizations operate with a Procurement department tasked with acquiring goods and services essential for their production and service delivery. From basic necessities like stationery to crucial inputs such as raw materials and key service providers, the Procurement department’s responsibilities span a wide spectrum. Its role is pivotal in ensuring organizational success.

Within any organization, various functions collaborate to achieve business objectives. The primary functions typically revolve around generating revenue or facilitating the organization’s income generation process. These functions often include manufacturing/production, sales, and marketing. Conversely, support functions are not directly involved in revenue generation but exist to provide necessary services to the core functions.

Given this framework, the question arises: should the Procurement function be classified as a core or support function? To answer this, it is essential to analyze the roles of core functions and compare them with the traditional and evolving roles of procurement.

Production Input Sourcing: The production function is fundamental to organizations as it takes raw materials and converts them into finished products, a process that remains consistent across different types of businesses. Subsequently, the sales and marketing functions focus on distributing these final products to customers and securing payments. Given this, the production function is widely acknowledged as a core function in most organizations.

If production is considered a core function, it is crucial to recognize the inception of the production process. Typically, the production process begins with the procurement of raw materials and necessary services. The sourcing of inputs marks a critical initial stage in production, and the Procurement function assumes responsibility for procuring and delivering these production inputs. Therefore, Procurement emerges as an indispensable function within the production process and is inherently core to the business.

Cost Reduction and Margins Optimization: Let us examine another crucial aspect of the Procurement function: cost optimization. For organizations to maintain competitiveness and enhance profit margins, the Procurement function must secure goods and services at prices that confer a competitive advantage in the market. Managing input costs stands out as a primary value proposition of procurement, directly influencing the bottom line.

Efficient input cost management, facilitated by procurement, holds the potential to reduce the overall cost of production. Consequently, such cost reductions often translate into improved business profits. It is undeniable that maximizing profitability ranks as a central objective for many businesses, underscoring the significance of effective procurement practices in achieving this goal.

Business Continuity and Security of Supply: The threat of supply shortages presents a substantial risk to business continuity. Procurement professionals play a critical role in mitigating this risk by actively seeking alternative sources to minimize operational disruptions caused by supply chain interruptions or the unavailability of essential materials and services needed for production.

To ensure the security of supply, procurement professionals employ various commercial strategies. These strategies may include establishing alternative sources of materials or services, securing advance commitments from suppliers, and implementing other proactive measures to maintain a steady flow of resources into the production process. By adopting such strategies, businesses can better safeguard against the adverse effects of supply shortages and enhance their resilience in the face of unforeseen disruptions.

Legal and Regulatory Compliance: In most countries, regulatory frameworks are in place to set guidelines for the production and distribution of goods and services within their jurisdictions. Many of these regulations also extend to the sourcing of materials and services necessary for the production process. The Procurement function plays a crucial role in ensuring compliance with these regulations and implementing processes to mitigate identified risks within the supply chain.

Procurement professionals are responsible for understanding and adhering to the applicable regulatory requirements governing the sourcing of materials and services. They establish and enforce procedures to ensure that suppliers meet these regulatory standards and that all procurement activities align with legal and compliance obligations.

By proactively addressing regulatory compliance and risk management within the supply chain, Procurement helps safeguard the organization against potential legal liabilities, reputational damage, and operational disruptions. This ensures that the production and distribution of goods and services proceed smoothly within the boundaries of the established regulatory framework.

In summary, Procurement is indispensable to the core operations of a business, and organizations aiming for sustainable success must recognize it as such. Viewing procurement as an integral part of the business, rather than merely a support function, is essential for achieving business objectives effectively.

Procurement should be given a seat at the table during strategic decision-making processes, as it directly influences the bottom line by managing input costs that impact overall profitability. By acknowledging the pivotal role of Procurement and prioritizing its involvement in key business discussions, organizations can optimize their operations from the outset, ensuring a solid foundation for success. In essence, the journey of a business begins with Procurement, highlighting its significance in driving long-term prosperity and growth.

Adagbasa is a Procurement Manager in the Nigeria Energy Sector

 

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