Attracting Energy Investment into Nigeria
With over 36 billion barrels of oil and 200 trillion cubic feet of natural gas, Nigeria has emerged as one of Africa’s biggest energy sectors, attracting significant levels of investment and driving project developments across the entire energy value chain. However, with global capital expenditure tightening due to the COVID-19 pandemic and international finance trends shifting from fossil fuels to renewable resources, African hydrocarbon players such as Nigeria have found themselves competing for investment.
Speaking during the Nigeria country spotlight session at African Energy Week (AEW) 2021, key Nigerian players discussed how the country has positioned itself as an attractive investment destination in 2021 and beyond.
Panel participants included Dr Adedapo Odulaja, Governor of OPEC for Nigeria, and SA-IER, Ministry of Petroleum Resources of Nigeria; Akinwole Omoboriowo II, CEO, Genesis Energy; Kola Karim, Managing Director and CEO, Shoreline Energy International; Olakunle Williams, CEO, QSL-GP; Heine Melkevik, former Managing Director Equinor Nigeria and current Managing Director Business Development, Alta Trading UK Limited; and Lawal Musa, Energy Analyst at the Nigerian National Petroleum Corporation.
Through a complete sectoral restructuring, and by capitalizing on progressive legislature and national energy policies to accelerate investment post-COVID-19, Nigeria has made a strong case for investment. Notably, through the passing of the Petroleum Industry Bill (PIB) on 1 July 2021, Nigeria has taken significant steps to boost oil and gas output while enhancing the sector’s attractiveness for international investment. Comprising 16 Nigerian petroleum laws that outline the framework for petroleum activities, the PIB ensures an enabling environment for investors backed by a transparent and strengthened regulatory framework. At a time when the global energy sector is particularly competitive for foreign capital, the passing of the PIB serves to elevate Nigeria as an energy leader on the global stage.
“The reality is that Nigeria and Africa need more investment in the oil and gas space. The transition is good because you will invest in more renewables, but in order to industrialize we need to invest in oil and gas. It is a gradual and repetitive process. What will happen now is you will have a test again and again of the resolve and attitude of Nigeria. You need to take some risk, as this is a long-term game. The opportunities in Nigeria, from upstream to midstream to downstream are too big to ignore,” stated Melkevik.
Meanwhile, with the passing of the Petroleum Industry Act (PIA), Nigeria has enacted a complete overhaul of the administrative, regulatory and fiscal regime in the energy sector, restructuring key petroleum institutions in order to streamline processes and drive the country’s oil and gas industry expansion. As the country faces challenges of declining oil production from mature fields, coupled with the reduced capital expenditure climate brought about by the COVID-19 pandemic, the PIA aims to enhance the sector’s attractiveness for foreign investment, ensuring a market-driven regulatory environment that will accelerate the country’s industry developments.
“Oil and gas is 90% of Nigeria’s foreign exchange rate. When you talk of ranking and importance regarding the government of Nigeria, it is the industry. Now with the PIA, the world knows it is open for business. What we have seen is the level of engagement being more robust and the value proposition is becoming clear in the markets,” stated Karim.
“It is not that the PIA will be a gamechanger, it is already a gamechanger and the game is already changing. In the weeks to come, everyone will see this. A lot of investors and people who want to invest in the industry are already looking critical and taking more of an interest in it,” stated Odulaja.
“The PIA proved a clear regulatory framework. For any interested candidates, if you are applying for a license, the PIA provides clear requirements and a timeframe by which you must have an answer. Immediately after the passage of the PIA, implementation was put in place. Within the PIA there was a clause to incorporate NNPC within 6 months and this was done in 1 month. This is a journey. It is a transitional journey and the government is focused,” stated Musa.
With a regulatory environment that places an emphasis on stability and transparency, the country is bound to see an influx in foreign capital and international company participation. In addition to driving domestic industry growth, the PIB and PIA both set an incredibly high standard for other resource-rich nations looking at expanding their energy sectors and attracting investment.
In addition to modernized regulatory frameworks, Nigeria has turned to national energy plans to accelerate development across the country. Notably, through the Decade of Gas initiative – a national strategy that aims to position gas at the forefront of the country’s energy agenda – Nigeria is making significant progress to incentivize investment and spur development. The Decade of Gas initiative was launched in conjunction with the country’s National Gas Expansion Program, whereby large-scale project developments have taken off across the country. Projects including the $2.8 billion, 614Km Ajaokuta-Kaduna-Kano (AKK) pipeline connecting the eastern, western, and northern regions of the country, as well as the construction of $10 billion Nigeria LNG Train 7 have all been driven by the country’s gas policies.
“We have made huge progress. Statistics show we are doing less than 10% flares, so we are doing very well. Before the PIA we already had policies in place to reduce flaring. Obviously, we cannot completely reduce flares but under the PIA there is a clear direction and policy in place,” stated Williams.
“Investing in any country is a serious endeavor. The law is now in place, but it is a work in progress. My encouragement is that the law has been passed, there is sufficient capital in the country. There are a lot of hotspots and there are more opportunities than issues. The government has created this wonderful environment for Nigerians to thrive in the energy space. We continue to emphasize that gas is good, gas will enable Africa to industrialize. We have to think of our great grandchildren and make plans for them,” stated Omoboriowo II.
Oando Clean Energy Partners with Lagos State to Launch Electric Mass Transit Buses
Oando Clean Energy Limited has partnered with the Lagos State Government to launch electric mass transit buses in the city. The partnership aims to provide sustainable transportation options for commuters and reduce carbon emissions in the city.
The electric buses, produced in partnership with Yutong Bus Co Limited, are equipped with air conditioning and Wi-Fi for passenger comfort. Oando Clean Energy has also provided charging stations and spare parts to ensure the effective operation of the buses.
The partnership was formalized through a Memorandum of Understanding (MoU) signed between Oando Clean Energy and the Lagos Metropolitan Area Transport Authority (LAMATA). LAMATA is responsible for planning, implementing, regulating, and franchising sustainable integrated public transport in Lagos.
According to the MoU, the electric buses will be deployed as part of a larger Electric Vehicle (EV) Infrastructure Ecosystem that includes charging stations and other supporting infrastructure. This initiative is aimed at attaining a sustainable road transport system in Lagos State and bridging the gap in the current mass transit bus system for the increasing number of Lagos commuters.
Oando Clean Energy’s strategic vision is to decarbonize the transport system in Nigeria and strengthen the socio-economic impact of transportation within the country. The company aims to transition the current combustion mass transit buses to electric over the next seven years, starting in Lagos State and eventually across the country.
The launch of the electric buses in Lagos State is aligned with the Nigeria Energy Transition Plan (NETP) and supports the Government’s roadmap for EV implementation across Nigeria. The partnership also aims to boost local capacity in the medium term through the construction of EV assembly plants.
Apart from reducing carbon emissions and providing sustainable transportation options, the initiative is expected to lead to improved air quality, enhanced public health, and the employment of at least 3,000 new drivers and an additional 2,000 workers to support bus maintenance, depot management, etc. The initiative is also expected to result in estimated economic cost savings of US$2.6bn (3.6% of Lagos’s GDP).
The launch of the electric mass transit buses is a significant step towards achieving a sustainable transport system in Lagos State and Nigeria as a whole. It is expected to serve as a model for other African countries seeking to transition to sustainable transportation systems.
AKK Gas Pipeline: NNPC Ltd Invests Over $1bn in One of Nigeria’s Largest Projects
The Nigerian National Petroleum Company Limited (NNPC Ltd) has invested over $1 billion in the Ajaokuta-Kaduna-Kano (AKK) gas pipeline project. This project is one of the largest projects undertaken by NNPC Ltd in recent years.
The AKK gas pipeline project is a 614-kilometer pipeline that will transport natural gas from Ajaokuta in Kogi State to Kaduna and Kano states.
Mele Kyari, the Group Chief Executive Officer of NNPC Ltd, announced that the project has not stopped for a single day since its commencement, despite the lack of third-party financing.
He added that NNPC Ltd has continued to fund the project, and the company has so far spent over $1.1 billion on the project from its cash flow.
Kyari stated that the AKK gas pipeline project is one of the most massive projects undertaken by NNPC Ltd, and it is of immense value to the country and the socio-economic growth of Nigeria.
He assured the Nigerian public that NNPC Ltd would deliver the project as planned. According to him, the project will create employment opportunities and boost the economy of Nigeria.
Kyari disclosed that NNPC Ltd currently owes no single dollar to its contractors, and the company has paid all their invoices.
He said that there are over 30 sites that are active today in the AKK gas pipeline project, and NNPC Ltd is optimistic that it will deliver the project.
The Vice President of Nigeria, Prof. Yemi Osinbajo, said that the AKK gas pipeline project was 43% completed last week. Osinbajo spoke through the Secretary to the Government of the Federation at a function in Abuja, where he reiterated that the project was a major project of the regime of President Muhammadu Buhari.
President Buhari inaugurated the AKK gas pipeline project in July 2020. During the inauguration, it was announced that the Bank of China and Sinosure, a Chinese export and credit insurance corporation, were to fund the $2.8 billion facility. However, NNPC Ltd has continued to fund the project without third-party financing.
Unauthorized Meter Use by Electricity Consumers Causing IBEDC an Average Loss of N130 Million Monthly
Unauthorized meter use by some electricity consumers in Ibadan is causing the Ibadan Electricity Distribution Company (IBEDC) an average loss of N130 million monthly.
This was disclosed by the commission after it lamented that illegal meters of about 15,000 existing in its network across the state have caused heavy revenue loss.
Investors King understands that these unauthorized meters used by some residents of the state are reported to consume energy, meanwhile, the IBEDC does not generate any revenue from it.
Commenting on the issue, the IBEDC regional head for Osun. Engr. Oluwatoyin Akinyosoye while speaking at a town hall stakeholder meeting in Osogbo, stated that in a bid to curb this menace, the company has stopped the installation of the illegal meters which use cards to load electricity since 2013.
In his words,
“To us as a company, this is a huge loss in our revenue because these illicit meters consume energy on our network, but the revenue is not coming to us. If we can curb these illicit meters, we know that we can plunge back the revenue to our purse to serve our customers better. These illicit meters were gotten through the backdoor, unknown to us till now. Most of these meters are the ones that you have to use a card for before you can load.
“As a company, we stop the installation of these types of meters since 2013. So, any other one installed between 2013 till now are illicit meters”.
Mr. Akinyosoye further urged those still using the unauthorized meter to report at the company’s office to address the issue, warning that those who fail to do so, would have their supply disconnected and be prosecuted.
It is however interesting to note that the Ibadan Electricity Distribution Company (IBEDC) is the largest electricity distribution company in Nigeria. Since it began operations in 2013, it has delivered electricity to millions of Nigerians across several states which include Oyo, Ogun, Osun, Kwara, and parts of Niger, Ekiti, and Kogi.
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