- Fixing Nigeria’s Dilapidated Oil Pipelines
The outcome of a study commissioned by the Nigerian National Petroleum Corporation (NNPC) to determine the operational status of the country’s network of petroleum products pipeline it manages and how it can become commercially viable to the country was recently obtained by Investors King.
The report indicated that the lines are mostly broken-down and would need to be replaced or fixed with $12 billion and $1.1 billion respectively.
Initiated to amongst other objectives, come up with an intervention plan to transform government-owned downstream oil pipelines into a proper business with incentives to attract private sector participation, the study showed there was an urgent need to refurbish and get Nigeria’s oil pipelines to work economically and optimally.
Current Condition of NNPC’s Pipelines
The outcome of the study stated that product losses from vandalism on pipelines owned by the NNPC, as well as costs incurred by the corporation to repair them when broken have been enormous, and suggested they be segmented for either privatisation or commercialisation.
To buttress its findings, a September 2018 edition of the monthly operations and financial report of the NNPC, had explained that products theft and vandalism have continued to destroy value and put NNPC at disadvantaged competitive position.
The NNPC operations report had stated that between September 2017 and September 2018, a total of 1,883 vandalised points were recorded on the pipelines of the corporation.
Similarly, the corporation stated in another of its monthly reports that between January and December 2017, a total of 1120 vandalised points were recorded on its pipeline, thus indicating that theft of products and vandalism of its downstream assets have continued to affect negatively its value addition to the country’s oil and gas industry.
Findings of the Study
Though the extensive upstream crude oil pipelines owned by oil producing companies and downstream gas pipelines were excluded in its study, it however captured all of the existing products lines of the NNPC, but could not exactly state how well they are positioned to operate.
For instance, it stated that: “The exact mechanical condition of the network is unknown, and it would cost more than $12 billion to replace the entire network today, and more than $1.1 billion to repair and inspect it comprehensively.”
Furthermore, the study highlighted that that: “The pipeline network is a worthy investment that is currently vastly underutilised due to a myriad of problems.”
According to it, the Pipelines and Products Marketing Company (PPMC), a subsidiary of the NNPC, which manages the lines have been unable to make the most of the pipeline network, which traverses the country, and consists of 4,315 kilometres of multi-product pipelines and 701 kilometres of crude oil pipelines.
“The pipelines are operated by Products and Pipelines Marketing Company (PPMC), and are utilised to transport crude oil from Warri to the Kaduna refinery, and to transport refined products (i.e. premium motor spirit (PMS), automotive gas oil (AGO), dual purpose kerosene (DPK), and aviation turbine kerosene (ATK)) nationwide.
“The key challenges identified with PPMC operations of the pipelines under exclusive government ownership comprise, refinery operations: low availability of the refineries results in sub-optimal utilisation of the pipelines; security, pipelines vandalism, and theft of products: this is well entrenched in Nigeria; product pricing and downstream market regulations: these stifle private sector participation in the value chain, and related losses have been estimated at up to $15 billion per annum; poverty and chronic underdevelopment: this is partly responsible for the chronic incidences of vandalism and theft of products,” the outcome of the study explained.
It stated that while Nigeria faces challenges in its pipelines, pipeline transportation business has however been thriving in many countries, particularly the United States, thus indicating the country has remained largely behind in the modern approach to petroleum products distribution.
Nigeria, it noted still relies on expensive road tankers to take products across her length and breadth.
In its recommendation, the study stated that deregulating the downstream sector, and privatising or commercialising all its value chain such as the refineries; pipelines network; pumping stations; and product storage depots, would ensure that the sector operates in a sustainable manner, such that market realities will keep its long-term viability.
It equally did a comparative study of pipeline commercialisation models for possible adoption, along with policy recommendations developed for commercialisation with guidelines for implementation of the recommendations.
According to it: “For efficient management and to encourage competition, the products pipelines can be divided into three sections: The Western, Eastern, and Northern sub-networks. Additionally, the upstream segment for supply of crude oil to the Kaduna refinery can be managed as a dedicated crude oil sub-network.”
It however warned that before the commercialisation proposal is accepted for implementation, the country must endeavour to fix first its refineries and ensure they work well.
“Subsequent to their privatisation/commercialisation, fix/repair the four inland refineries and ensure they operate at optimum availabilities. If this is not achieved, it is unlikely that private investors will show a keen interest in acquiring/managing the pipeline network,” it explained.
Continuing on the actions to be taken, it said splitting the lines into segments could then be the next action to be implemented. It warned the government to avoid repeating the mistakes it reportedly made in the 2013 power sector privatisation exercise which perhaps included not getting the market governance processes right before launching out the market.
“Split the pipelines network into the indicated four segment sub-networks, i.e. Western, Eastern, Northern and Crude Oil, and privatise/commercialise each as distinct companies.
“Avoid the pitfalls associated with the privatisation of PHCN (Power Holding Company of Nigeria) assets in the electricity supply sector. Generate employment for the general public and the host communities via the pipelines privatisation/commercialisation process,” it stated.
Turning to pipeline vandalism, the study stated that its severity was higher in the south than in the north, and that there is a ‘market’ for both crude and refinery products tapped from the pipelines.
It equally questioned the capacity of the PPMC to secure the lines, saying: “Responsibility for pipelines rests with PPMC. However, it appears that PPMC do not have a unit capable of managing the entire spectrum of pipeline operations, particularly those related to technical maintenance.
“Even basic security surveillance of the pipeline RoW is severely compromised. The opportunities that these technical and security-related operations offer to engage the communities on the pipeline RoW – and thereby improve government presence therein – are not maximised. Instead, only a token effort is made.”
ECOWAS@46: Commission Seeks Trade Partnership With OPS To Deepen Intra-African Trade
The Economic Community of West African States (ECOWAS) in commemoration of its 46th anniversary has sought partnership with the Organised Private Sector (OPS) to deepen intra-African trade and lift millions out of poverty.
This was revealed yesterday by the president of the ECOWAS Commission, Mr. Jean-Claude Brou, at a webinar organised in collaboration with the Lagos Chamber of Commerce and Industry (LCCI) yesterday.
The theme of the webinar is “Optimising Sustainable Trade, Investment and Regional Economic Integration through Effective Partnership between ECOWAS Institutions and the Organised Private Sector”.
Jean-Claude, represented by Mr. Kolawole Sopola, Acting Director, Trade, ECOWAS, said the commission, in recognition of the private sector’s role, created a stronger framework to boost the sector’s capacity for enhanced trade.
He said that the commission had also adopted more than 100 regional standards with 70 others under development on some products.
Brou listed mango, cassava, textile and garments as well as information and communication technology among such products.
“The growing importance of informal trade compels the ECOWAS to create a framework expected to engender more availability and reliability of up to date information on informal trade.
“The framework also seeks to implement reform that is essential to eliminate obstacles to informal trade among others.
“It is important to improve investment, particularly, private investment, in all sectors and I stress that digitalization must be at the center of activities for economic recovery.
“Infrastructural deficit must be addressed as well as sustainable and cheaper energy for the competitiveness of products.”
“The commission is developing projects on roads, renewable energy and education, needed for private sector development; all these to lift millions in the sub-region out of poverty,” he said.
Dr. George Donkor, President of, ECOWAS Bank for Investment and Development (EBID) said that many western states showed numerous hurdles to overcome as countries continue to export raw materials, therefore maintaining low levels of development.
Donkor, however, said that reforms were already underway to accelerate the capacities of the Micro, Small and Medium Enterprises (MSME) to spur private sector development for intra-African trade.
He noted that the EBID 2025 strategy was aimed at ensuring that the private sector benefitted up to 65 percent of the $1.6 billion available facilities.
“A vibrant private sector is key in driving regional integration and securing its active participation and has the potential to create a win-win situation for all participants.
“Increasing credit to the private sector will enhance capacity and the EBID is ready with strategies to ensure that the sector’s capacity is boosted,” he said.
Also, Otunba Niyi Adebayo, Minister of Industry, Trade and Investment, said that collaboration across societal sectors had emerged as one of the defining concepts of international development in the 21st century.
He stressed the need for ECOWAS member states to work together as a bloc to take advantage of the opportunities in the African Continental Free Trade Area.
“Since the establishment of ECOWAS in 1975, various protocols and supplementary protocols regulating member countries conduct have been signed.
“Our world has limited resources — whether financial, natural, or human — and as a society we must optimize their use.
“The fundamental of a good partnership is the ability to bring together diverse resources in ways that we can together achieve more impact, greater sustainability and increased value for all.
“This is so because it emphasises the need to work together as a bloc to leverage and take advantage of the opportunities offered by the African Continental Free Trade Area.
“My Ministry will do everything possible to ensure that the vision of the commission is taken to the next level,” he said.
IMF Retains 2.5 Percent Economic Growth Estimate For Nigeria
The International Monetary Fund (IMF) has retained Nigeria’s 2.5 percent economic growth forecast for 2021.
The institution said this in its World Economic Outlook (WEO) for July titled “Fault Lines Widen in the Global Recovery” released on Tuesday in Washington DC.
According to it, the slow rollout of vaccines is the main factor weighing on the recovery for Low-Income Developing Countries (LIDCs) which Nigeria is part of.
It also retained its 6.0 percent growth forecast for the global economy for 2021 and 4.9 percent in 2022, adding that though the global forecast was unchanged from the April 2021 WEO, there were offsetting revisions.
The IMF had at its 2021 Virtual Spring Meetings in April, projected a 2.5 percent growth for Nigeria’s economy in 2021, up from 1.5 percent it projected in January.
It said that in LIDCs, the overall fiscal deficit in 2021 was revised up by 0.3 percentage points from the April 2021 WEO, mainly because of the re-emergence of fuel subsidies as well as the additional COVID-19 and security related support in Nigeria.
“Still, at 5.2 percent of Gross Domestic Product (GDP), the overall fiscal deficit remains well below that of advanced and emerging market economies, reflecting financing constraints, about 60 percent of LIDCs are assessed to be at high risk of or in debt distress.
“The public debt-to-GDP ratio for 2021 is projected at 48.5 percent.
“Several LIDCs have announced an intention to restructure their debts and some have sought debt relief under the G20 Common Framework (Chad, Ethiopia, and Zambia),” it said.
On the global scene, the IMF said that uncertainty surrounding the global baseline remain high, primarily related to the prospects of emerging market and developing economies.
It added that although growth could turn out to be stronger than projected, downside risks dominated in the near term.
“On the upside, better global cooperation on vaccines could help prevent renewed waves of infection and the emergence of new variants, end the health crisis sooner than assumed, and allow for faster normalisation of activity, particularly among emerging market and developing economies.
“Moreover, a sooner-than-anticipated end to the health crisis could lead to a faster-than-expected release of excess savings by households, higher confidence and more front-loaded investment spending by firms.”
On the downside, it said growth would be weaker than projected if logistical hurdles in procuring and distributing vaccines in emerging markets and developing economies led to an even slower pace of vaccination than assumed.
The report added that such delays would allow new variants to spread, with possibly higher risks of breakthrough infections among vaccinated populations.
“Emerging market and developing economies, in particular, could face a double hit from tighter external financial conditions and the worsening health crisis, further widening the fault lines in the global recovery.
“Weaker growth would, in turn, further adversely affect debt dynamics and compound fiscal risks.
“Finally, social unrest, geopolitical tensions, cyber-attacks on critical infrastructure, or weather-related natural disasters, which have increased in frequency and intensity due to climate change could further weigh on the recovery.”
On ensuring a fast-paced recovery, the IMF said the highest priority was to ensure rapid, worldwide access to vaccines and substantially hasten the timeline of rollout relative to the assumed baseline pace.
According to it, the global community needs to vastly step up efforts to vaccinate adequate numbers of people and ensure global herd immunity.
This, it said, would save lives, prevent new variants from emerging and add trillions to the global economic recovery.
FG to Put an End to N360 Billion Annual Electricity Subsidy Payments in 2022 – Osinbajo
Vice President Yemi Osinbajo on Monday said the Federal Government will end an estimated N360 billion annual subsidy payments in the electricity sector in 2022. This represents a monthly subsidy payment of N30 billion.
Osinbajo disclosed this while speaking at the 14th Nigerian Association for Energy Economics/IAEE conference in Abuja on Monday.
At the conference titled “Strategic responses of energy sector to COVID-19 impacts on African economies“, the vice president, who was represented by Engr. Ahmad Zakari, the Special Assistant to the President on Infrastructure, said the federal government would be investing over $3 billion in the sector to strengthen distribution and transmission infrastructure across the nation.
He stated that the numerous efforts of President Muhammadu Buhari at ensuring the power sector plays a critical role in the growth of the nation’s social and economic well-being will materialise fully once the ongoing reform in the energy sector is complete.
He said: “Electricity tariff reforms with service-based tariff has led to collections from the electricity sector by 63 per cent, increasing revenue assurance for gas producers and stabilizing the value chain.
“It is anticipated that all electricity market revenues will be obtained from the market with limited subsidy from next year as reforms in metering and efficiency with the DISCOs continue to improve.
“Accelerated investment in transmission and distribution, over $3 billion will be out into this sub-segment of the electricity value chain that will put us on the path to delivering 10 gigawatts through the interventions of the Central Bank of Nigeria, Siemens partnership, World Bank and Africa Development Bank, and others.”
He said as the electricity sector continued to be stabilized, more power was needed for the country’s large population.
“That is why this administration continues to invest in generation to cater for our current and future needs,” he said.
Osinbajo charged the participants to come up with solutions to key energy challenges facing the country, especially with the COVID-19 pandemic and energy transition.
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