Wednesday, 27 June 2012


New electricity tariff will over-burden Nigerians, says group

FRIENDS-In-Progress, a non- partisan organisation comprising of Nigerians from all over the world has called on President Goodluck Jonathan to look into the new electricity tariff , which it described as over-burden on Nigerians.
In a statement made available to The Guardian, the group insisted that any increase in the energy tariff should only be contemplated when electricity generation and supply has improved substantially.
Also, it noted that it would only be meaningful when at least 50 per cent of the old  meters have been replaced with prepaid meters, which enables a more accurate measurement of consumption.
The group alleged that the current system of estimating usage is clearly unreliable, resulting in consumers paying more than the electricity consumed.
They warned that the new tariff would place further pressure on the finances of millions of already struggling families and businesses and further alienate the people from a government, which they believe has failed woefully in its sworn duty to protect them and improve their living standards.
The organisation also called on the president to stop the  energy saving bulb distribution project stating that providing free energy saving bulbs should not be a priority for now, especially in the light of the millions of naira that are likely to have been earmarked for the project.
According to the statement, saving bulbs at this time will definitely be considered as a pathetic and cynical attempt to band-aid the massive ill-effects of government as government can ill afford to do this at a time when a lot of work is being done to cut costs and reduce government spending.
The obvious solution would be for the relevant organisations within the sector to encourage the use of the bulbs by educating the populace on the benefits and advantages of energy conservation.
It is quite unbelievable that the government is even considering this increase when the power situation has not improved, despite the billions of naira invested in the sector, the group added.
The statement, therefore, advised the government to encourage private sector-led Independent Power Projects (IPP) and invest in improving the existing power infrastructure.
Once the electricity problem is resolved, they insist, the Nigerian economy would naturally experience a massive revival and this will reduce inflation and the dependence on foreign imports, while reducing pressure on Forex reserves.

Chevron to address claims over rig fire incident

CHEVRON Nigeria Limited, operator of the Nigerian National Petroleum Corporation NNPC/Chevron Joint venture, has unfolded plans to address letters of claims it received from lawyers and representatives of some communities in Bayelsa State and beyond over its rig fire incident.
The incident occurred at Funiwa 1A natural gas well on January 16, (about 10 kilometres) off the coast of Nigeria.
A statement from the spokesman of the company, Deji Haastrup said that the company will address each claim on its own merit, adding that an independent body, comprising of representatives of the NNPC, Chevron Nigeria Limited, Bayelsa State government, Department of Petroleum Resources (DPR) and Regional Development Committees (RDCs) of communities, is being set up for the purpose.
Other participants include National Spill Detection and Response Agency (NOSDRA) and Non Governmental Organisations (NGOs).
According to Haastrup, the body will review all reports of environmental and health assessment and evaluate each claim on its individual merit.
Chevron has shared information about the incident and what caused it. The company has engaged government officials, NGOs, and residents of communities, listening to their concerns and explaining what happened and how the company is responding.
CNL operates with the highest safety standards in the industry and is committed to operating in a safe and environmentally responsible manner. The safety of the people and the environment is one of our priorities, the statement added.
The company announced recently that it has sealed and abandoned the shallow water Funiwa 1A natural gas well after completing the drilling of a relief well.
It stated that production at the North Apoi field, which had been shut in as a precaution, has also been restored and the field is now producing approximately 2,000 barrels of oil per day.

DPR, NCDMB seek compliance on expatriate quota, others

THE Department of Petroleum Resources (DPR) and Nigerian Content Development and Monitoring Board (NCDMB) have forged a partnership to ensure that compliance with Nigerian Oil and Gas Industry Content Development (NOGIC) Act 2010 by operators and oil service companies is met on expatriate quota management.
The collaboration, which is expected to be formally endorsed by the Minister of Petroleum Resources, Diezani Alison-Madueke, will see the two agencies hope to interface seamlessly, ensure industry compliance with section 33 of the NOGIC Act, minimise incidents of abuse and ensure optimal knowledge transfer to Nigerians from enforcement.
The committee is also to address the increasing incidence of staff disengagement by operators and design partnership model for critical information sharing between DPR and NCDMB to facilitate effective regulation of the industry.
It was also decided that the Act would be a key condition for participating in bid rounds and securing licenses, permits and approvals in the industry.
Managements of the two agencies, who agreed to ensure this at a meeting in Lagos recently, also set up a joint committee to design an interface model with regard to common mandates related to Nigerian Content development in the oil and gas industry.
The committee is expected to develop procedure for operationalising sections 3 and 7 of the NOGIC Act, which provides that compliance with Nigerian Content provisions, promotion of Nigerian Content development and submission of Nigerian Content Plan will constitute conditions for the award of licenses, permits and any other project in the oil and gas industry.
The Director of DPR, Osten Olurunsola commended NCDMB for the numerous achievements it had recorded within two years of its establishment, adding that Nigerian Content has been the shining light in the industry within the period.
He called for close collaboration between the two agencies, in a way that will be evident for stakeholders to see.
According to him, when we are seen working together, people will find it difficult to play one agency against the other and when we have issues, we will examine them.
The Executive Secretary, NCDMB, Ernest Nwapa maintained that the oil and gas industry can only make sustainable progress if all agencies of government connected with the sector have a common understanding.
Once there are conflicting signals from NCDMB, DPR and NAPIMS, there will be problems. We want people from our offices to be acting on the basis of a common understanding of the laws and government policies.
In a bid to build a common understanding for its mandate, Nwapa said the Board had engaged several ministries, departments and agencies connected with the oil and gas industry and Nigerian Content implementation and had recorded immense successes.
Some of these MDAs include Ministry of Interior, Ministry of Information and Technology, Ministry of Trade and Investment, Central Bank of Nigeria, Bank of Industry, NIMASA, NDDC and NIPC.
He advised agencies of government against having the erroneous impression that collaborating with each other will lead to encroachment into their mandates, adding that any success recorded through such efforts will always be jointly shared.

Stakeholders heighten concerns over declining oil reserves

STAKEHOLDERS in the oil and gas industry have raised alarm over the declining fortunes of the crude oil and gas reserves in Nigeria and called for quick passage of the Petroleum Industry Bill to mitigate the slide.
At the first Energy Policy Strategy Session organised by Emerald Energy Institute for Energy Economics, Policy and Strategic Studies of the University of Port Harcourt, in Lagos, recently, President of GWEST LLC Washington DC and a Visiting Scholar, Paul Michael Wihbey brought into bold relief the huge opportunity costs and market share for Nigerian crude oil and gas.
He noted that Nigeria for instance has declined from being the third largest exporter of crude oil to the United States, to being the sixth as of February this year, with volumes falling from over one million in the late 1990s to just 350,000 barrels in February.
He attributed the decline to factors ranging from uncertainties in the Nigerian environment as a result of the stalled reform law, to new advances like shale oil, which have made available over one million barrels a day in areas that had stopped producing oil in the U.S.
Wihbey also pointed out that Nigeria was not doing enough to achieve its production potential and was in essence committing economic suicide.
However, Chairman of Emerald Energy Resources Limited and former Presidential Adviser on Petroleum, Dr. Emmanuel Egbogah, countered that Nigerian crude oil and gas reserves was not about to finish and that using Enhanced Oil Recovery (EOR) estimation techniques for reserves, there could be 100 to 200 years more of production.
According to him, Nigeria is already developing as it needs all the resources to develop as the production to her optimum capacity gives Nigeria todays money, which is critical because nobody knows what value can be gotten from oil in the future, with advances in technology and renewable energy.
Egbogah had stated recently at an event that that many exploration experts believe that for every five barrels of oil already discovered to date throughout the world, some three more barrels are yet to be discovered in currently producing fields, as well as the Deep Seas, the Arctic and the Amazon basin.
This expectation, he said, can be extrapolated to many largely unexplored areas of the Niger Delta and Inland/frontier basins of Nigeria.
According to him, these discoveries will lead to additional reserves of about 40 billion barrels producible by conventional techniques, which brings the total quantities of ultimate oil recovery in Nigeria to 106 billion barrels with a grand total resources base of 302 billion barrels.
This will also bring the quantity of oil in Nigeria fields that represents the target for EOR technologies to about 196 billion barrels, he added.
Director of the Department of Petroleum Resources, Osten Olorunsola, in his comments expressed concern that for the first time in Nigerias history there was an actual decline in reserve estimates between 2011 and 2012 and wondered what will happen between 2014 and 2017 in terms of oil and gas production, since no major investments have been recorded in exploration in the last five years.
Olorunsola also noted that the trend in which international oil companies divest from Nigeria and invest in East Africa is not a good signal and calls for a buckling up on the part of Nigeria.
Other contributors, including Director-General of the Nigerian Institute of International Affairs, Prof. Bola Akinterinwa disagreed that unproduced oil was a disadvantage.
They argued that it was better to keep the oil in the ground than for the proceeds to be frittered away by corrupt politicians.
Additionally, Akinterinwa opined that when Nigeria becomes developed, it would need the raw materials and if they had been depleted, industrialisation may be stunted.

Sterling Bank Plc sacks 400 workers

Sterling Bank Plc has sacked 400 workers in a systematic mass retrenchment aimed at reducing overhead cost.
Investigations showed that 97 per cent of the retrenched workers were former staff of Equatorial Trust Bank Ltd. acquired by Sterling.
A source close to the bank said that the mass sack, which started about three weeks ago would also affect another 150 workers because of the consolidation of the two banks. He said that workers were thrown into the nations saturated labour market with only three months salary as severance package.
An Executive Management staff, who wants to remain anonymous said that the retrenchment was their best option toward sustainable growth and return to profitability.
He said that the workers were only victims of the economy, adding that they had to relieve them of their jobs to grow the bank.
Yemi Adeola, the Managing Director of Sterling Bank had at a recent annual general meeting, said that the business combination with former ETB had improved its scale and size.
Adeola said that the combination allowed the bank to leverage on the unique strengths of both banks to consolidate on overall market position.
According to him, 2012 would be another challenging operating year following current difficult global and local macro economic conditions.
``We see clear opportunities for reducing the banks cost-to-income ratio and increase revenues as the improved economic of scale arising from the business combination with ETB kick in,’’ Adeola said.
Meanwhile, Sterling Bank before the business combination grew its gross earnings by 49 per cent to N45.2 billion in 2011 compared with N30.4 billion in 2010.
The operating income in the period under review increased by 32 per cent to N27 billion from N20.4 billion in 2010.
Profit after tax increased by 11 per cent to N4.6 billion as against N4.2 billion in 2010.

Diageo targets lower energy costs in Nigeria

U.K.-based Diageo plc has contracted Clarke Energy, an authorised distributor and service partner for GE Energy gas engines, to install turnkey combined heat and power (CHP) plants at its Guinness breweries in Ogba and Benin City, Nigeria to lower energy costs and increase production.
The plants will each feature a natural gas-powered Jenbacher J620 gas engine and a backup diesel engine from a different supplier.
GE on Tuesday announced the brewery CHP projects at the Africa Energy Forum
2012 in Berlin, Germany.
Diageo, which was established by the merger of Guinness plc and Grand Metropolitan plc in 1997, operates three Guinness breweries in Nigeria.
Its brand, Guinness Foreign Extra Stout, has been brewed in Nigeria since 1962.
Nigerians drinks more Guinness than the brand's home country of Ireland, making the country the world's second-largest market for Guinness, behind only the United Kingdom.
The new Ogba and Benin City projects represent the fifth and sixth Jenbacher CHP engines that Diageo has installed since 2008 at its Guinness Nigeria plc brewing operations to help lower energy costs and help keep pace with the steady growth in demand for its products.
In 2008, Diageo first installed a Jenbacher J620 cogeneration unit at its Guinness Ogba brewery, where the system was connected to a waste-heat boiler to produce steam for the brewing process. The second installation in 2010 was configured to use the exhaust heat directly into an absorption chiller to provide a source of cooling for the plant. Also in 2008, Diageo installed its first two Jenbacher J620 cogeneration systems at its Guinness Benin City brewery. In addition to producing steam, the Benin City brewery's Jenbacher unit was connected to an absorption chiller to create chilled water from the engine's exhaust heat.
GE's Jenbacher Type 6 engines offer numerous advantages: reliability, efficiency and robustness, with high power density and low installation costs. In addition, the pre-combustion chamber layout helps the engine achieve maximum efficiency with low emissions, while its unique design and optimized components support an extended service life and reduce maintenance and overhaul costs. Given the current price difference between natural gas and diesel fuel in Nigeria, using gas to power a high-efficiency Jenbacher engine can save a customer 78 percent compared to diesel fuel.
Henry Ohenhen, electrical/automation manager-Benin, Guinness Nigeria plc noted that previous installations have increased Diageo's confidence in GE Energy engines.
"GE's Jenbacher gas engines are supporting our efforts to incorporate energy efficiency technologies to increase productivity. The performance of our previously installed Jenbacher gas engines, in terms of reliability, productivity and efficiency, has been tremendous," he said.
"The proven capabilities of GE's gas engines and Clarke Energy's comprehensive, local after-sales service support have given us significant competitive advantages, helping us to develop the most modern and advanced breweries in Africa. This latest installation will help support our growth and expansion goals."
The Ogba and Benin City breweries are expanding their existing CHP plants to generate even more reliable electricity and steam while using cleaner-burning, less-expensive natural gas as the primary fuel. The new, ecomagination-approved Jenbacher J620 CHP units are scheduled to be fully installed, tested and in operation by the first quarter of 2013.
"This is an opportunity to realize significant operational cost savings, and we can typically expect a gas engine like the one being installed in Lagos to pay for itself within just 18 to 24 months," said Patrick Regan, global sales leader for GE Food & Beverage Solutions. "From a financial point of view, the case to use gas as a primary fuel is hard to dispute, given the current natural gas price point versus more traditional fuel sources such as diesel. More breweries are choosing to install gas engines in their facilities as a result of their increased reliability, efficiency and overall return on their investments, not to mention the positive environmental impact of cleaner emissions and reduced CO2 footprint."
In addition to showcasing GE's successful focus on the food and beverage sector, the Diageo projects illustrate how GE's comprehensive suite of distributed power solutions--ranging in size from 100 kW to 100 MW--are helping customers worldwide to generate more reliable, on-site electricity and heat.
"With the upcoming installation of the latest Jenbacher system in Ogba and Benin City, we are pleased to be able to support the long-term growth of Diageo's iconic brands," said Alex Marshall, group marketing manager for U.K. and Nigeria-based Clarke Energy, which provides full-service sales, engineering, installation and maintenance services for GE's Jenbacher gas engines product line.
Guinness Nigeria plc, a subsidiary of Diageo, was incorporated in 1962 and the following year opened its Ogba brewery in Ikeja, Lagos. Ikeja was the first Guinness brewery to be built outside of Ireland and the United Kingdom.
Steady growth in Africa's demand for Guinness Stout and Harp Lager prompted the opening of more breweries in Nigeria. In 1974, the company built its second brewery--Benin City--that originally produced Harp but was later expanded in 1978 to also make Guinness. In 1982, Guinness expanded its brewery at Ogba to also brew both Harp and Guinness. In 2004, a third Guinness brewery was opened at Aba in Abia State to further increase production capacity.
The CHP projects underscore how GE is helping Nigeria promote economic growth, employment and educational opportunities. Aligning with Nigeria's goals for growth through its Vision 2020 initiative, GE and the federal government of Nigeria in 2009 signed a landmark "Country to Company"
agreement to foster partnerships and drive critical infrastructure projects across the country.

Jonathan sends NNPC management packing

Andrew Yakubu was yesterday named the new managing director of  the Nigerian National Petroleum Corporation (NNPC) after a rejuvenated president just back from Brazil, sent Austen Oniwon,  its group managing director and three other executive directors packing.
The action of government is seen as a bid to strengthen the ongoing reforms and transformation of Nigerias petroleum sector, and in furtherance of efforts to achieve greater transparency and accountability in government.  It comes in the wake of the recent sack by president Jonathan of the National security adviser, Andrew Owoye Azazi and minister of defence, Haliru Bello.
The NNPC has been embroiled in many controversies in recent times , including its controversial role in the N1.7 trillion oil subsidy fraud; its role in the early stages of the Petroleum Industry Bill (PIB) which is yet to see the light of day; its failure to remit crude oil revenue to the Federation Account and its general lack of transparency in its accounting system.
The statement announcing the sack of the management noted that Jonathan commended them for their service to the nation and urged the new management to cooperate fully with the new managing director.
The former Group Managing  Director, Oniwon, and Michael Arokodare (outgoing Group Executive Director (Finance and Accounts), Philip Chukwu, out-going Group Executive Director (Refineries & Petrochemicals), and Billy Agha, out-going Group Executive Director (Engineering & Technology) are to proceed on retirement.
President Jonathan has also approved the appointment of Victor Briggs as the new Managing Director of the Nigerian Petroleum Development Company (NPDC).
Yakubu, an engineer, is an indegine of Kaduna State and a fellow of the Nigerian Society of Engineers (NSE). He joined the NNPC in 1980 and has held many positions in the corporation including been managing director of Warri Refining and Petrochemicals Company, and Group Executive Director, Exploration and Production.
Other members of the new management team include: Bernard O.N. Otti Group Executive Director (Finance and Accounts); Abiye Membere Group Executive Director (Exploration and Production); Peter S. Nmadu Group Executive Director (Corporate Services); Anthony Ogbuigwe Group Executive Director (Refineries & Petrochemicals); Attahir B. Yusuf Group Executive Director (Commercial & Investments) and David Ige Group Executive Director (Gas & Power).
Commenting on the development last night, Oladiran Fawibe, chief executive officer of International Energy Services, said that the appointment of the new group managing director is a welcome development. He described him as very competent with good understanding of the industry.
According to Fawibe, NNPC is not the problem of the industry, but the various obstacles mounted by the federal government. He noted that unless NNPC is allowed to operate as a commercial venture, the expected reform in the industry will have no effect.

Nigeria fritters foreign reserves as Angola builds

Nigerias position as the country with the second largest Foreign Exchange (FX) reserves in Sub- Saharan Africa (behind South Africa), is in danger, as Angola is set to overtake it in the near future.
Angola, which produced around 1.7 million barrels per day (mbpd) of crude oil in 2011, compared to 2.1 mbpd for Nigeria, has managed to increase its FX reserves by 132.4 percent, from $12.5 billion in October 2009 to $33.1 billion in May 2012.
In the same period (2009 2012) Nigerias FX reserves fell by 16.4 percent, moving from $45 billion to $37.6 billion.
The difference between Angola and Nigeria is obviously the direction in fiscal policy, Samir Gadio, emerging markets strategist at Standard Bank London, said in an e-mail reply.
Unless the Sovereign Wealth Fund (SWF) is effectively launched in the near term in Nigeria, and fiscal excesses and inefficiencies (including the fuel subsidy) seriously addressed, Angola will probably overtake Nigeria as the Sub-Saharan Africa country with the largest FX reserves, excluding South Africa.
Gadio notes that if fiscal savings in the Excess Crude Account (ECA) had fully resumed in 2010 after the global economic crisis and other structural imbalances had been tackled, Nigerias aggregate FX reserves would be hovering around $60-70 billion today, suggesting leakages of over $30 billion.
This would have helped smooth the boom and bust oil cycles, restored Naira (NGN) confidence and ensured a more viable FX framework, he said.
The prospect of Angola overtaking Nigeria in reserve accumulation is not just symbolic, but highlights the damage the fuel subsidy scam and other fiscal leakages are having on the country.
A detailed report by the House of Representatives ad-hoc committee on fuel subsidy, recently alleged fraud totaling the equivalent of N1.07 trillion (about $ 6.8billion). Payments totaling N2.6 trillion ($16 billion) in fuel subsidies were made in 2011 through a fraudulent process, the committee said.
The ECA which contained $20 billion in 2007 now holds around $5 billion, despite years of record oil prices.
The level of the external reserves is important for macro-economic stability because the Central Bank of Nigeria (CBN) uses the reserves to defend the local currency, and for attaining its price stability mandate.
The CBN has been increasing its dollar sales at the bi-weekly auction to $300 million from 04 June and to $400 million from 13 June, FBN capital analysts wrote in a note to clients on June 15.
Analysts say the CBN still has some ammunition ($37.2 billion of overall FX reserves, including CBN reserves), that can be used to support the Naira, to prevent a disorderly depreciation of the exchange rate.
However, they say if aggregate reserves were to fall to $30 billion, on the back of falling oil prices, a devaluation would probably become unavoidable.
Oil prices have slipped in recent months, from $110 a barrel to below $80 a barrel on Monday.
For the moment, it is the external risks that loom large, said Razia Khan, in an email reply to BusinessDay.
Even emerging from a period of relative strength in oil prices, Nigerias FX reserves have risen only very modestly to $37 billion.
In view of global risks, and Nigerias new susceptibility to potential outflows, much still needs to be done to rebuild the economys external buffers.
The approval by state governors of the federal governments proposal to launch the SWF would probably help forestall that scenario by reducing leakages and bringing increased confidence to the local currency.
The council has agreed with the federal government to go ahead to implement the Nigeria Sovereign Investment Authority with an initial fund of $1 billion, Rivers State Governor Rotimi Amaechi told reporters yesterday.
The SWF is to replace the ECA, where Nigeria saves oil revenues over a benchmark budget price, currently $72 a barrel.
Nigeria was one of only three OPEC member states not to have a SWF.
The government has said the fund will provide a firmer legal basis to ring fence Nigerias oil savings.
It has three main aims: saving money for future generations, providing financing for badly needed infrastructure, and starting a stabilization fund to defend the economy against commodity price shocks.

Global mood, oil fears weigh on Nigeria markets - Analysts

Nigerias beleaguered naira, bonds and stock markets are likely to see little relief in coming months, as jittery investors, worried it could be hit by falling oil prices, continue to sell off positions. The naira has lost 4 percent since April, as offshore investors exit bonds, while its main stock index is struggling to rise much above its 21,000 point support level.
The recent sell off has been spurred by fears that world oil prices could fall below the $72 a barrel price on which the government has based its 2012 budget, Reuters reports. Oil, Nigerias main export commodity, has fallen to around $90, compared with its peak of almost $126 earlier in the year, on concerns about a weak global economy and crisis in Europe.
The underlying problem is Nigerias great dependence ... on oil earnings. It cuts to the heart of most investor exposure, said Razia Khan, head of Africa Research at Standard Chartered. For as long as there is concern that oil earnings could be at risk, then Nigeria is unlikely to see a scaling up of foreign portfolio investor flows, she told Reuters.
Nigeria was a darling of frontier investors, with one of the best performing stock markets in 2006/07. At its 2008 peak, it traded $100 million a day. Now it barely manages $16 million. Bonds too are seeing lower foreign interest, with a resultant climb in yields - the most liquid three-year is trading at 15.5 percent, up from 11.23 percent a year ago.
Traders say foreign investors are not panic-selling short term debt, but that when it comes up for maturity, they are taking their money back, rather than reinvesting it. Treasury bill positions that were being rolled over are sold. Global markets are in generally cautious mood.
The main reason for the exit (of foreign funds) is higher global risk aversion ... stemming from concerns over Europes debt crisis and a weaker global economy, said Stuart Culverhouse, chief economist at brokerage firm Exotix. This flight to safety is not unique to Nigeria., he said.
It is not likely to change any time soon, however. We cant just expect the euro zone crisis to end in a few months, this is a long-standing issue, said Samir Gadio, emerging market strategist at Standard Bank.
It has the potential to result in intermittent increased financial market volatility, which would hurt Nigeria. Nigerias index is still trying to recoup losses of almost 17 percent, sustained in 2011 - a 22 percent loss in dollar terms, thanks to naira weakness.
Were oil prices to fall further to an average of $80 through 2012/13, Nigerias current account surplus would narrow ... (and) ... an acceleration in portfolio and other banking sector capital outflows is likely to gain further momentum, said Andrea Masia, analyst at Morgan Stanley.
This exodus of capital may also lead to significant currency weakness, potentially forcing USD/NGN to 170 naira. That might compel an adjustment of the central banks 150-160 target band. Naira/dollar eased to a 22-week low of 163.68 two weeks ago, on strong demand by investors repatriating funds, but bank intervention has since lifted it to 162.45 naira to the dollar.
With foreign reserves of around $37 billion and a low debt to GDP ratio of around 16 percent, Nigeria has some leeway to keep defending the naira at current levels, but nobody knows how long it might have to do so.
Index Summary
BusinessDay Afrinvest-30 Index
26-Jun-12
25-Jun-12
change
Index Points
1,062.43
1,062.31
0.01%
P/E
11.7x
11.7x
P/BV
1.8x
1.8x

Dividend Yield(%)
4.6
4.7

BA-30
NSE ASI
YTD change
7.28%
2.97%



 

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