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Attracting Energy Investment into Nigeria

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green energy - Investors King

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.

Energy

Nigeria’s Power Sector to Get $7.5bn from $30bn African Electrification Initiative, Says Minister Adelabu

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Minister of Power Adebayo Adelabu has said that Nigeria is set to receive a portion of a $30 billion investment aimed at electrifying Africa.

During a visit to Splendor Electric Nigeria Limited, Adelabu revealed that the World Bank and the African Development Bank (AfDB) have committed to this ambitious initiative with Nigeria slated to receive approximately $7.5 billion, or 25% of the total fund.

The groundbreaking initiative is designed to extend electrification to an additional 300 million Africans over the next five years.

This large-scale project aims to address the energy deficit that has long plagued the continent and is expected to transform the power infrastructure significantly.

Adelabu expressed optimism about Nigeria’s role in the project, citing the country’s large population and ongoing power sector reforms as key factors in securing a substantial share of the funds.

“I want to inform you of the proposal or the intention, which is at an advanced stage, by the World Bank and the African Development Bank to spend about $30 billion to extend electrification to an additional 300 million Africans within the next five years. Nigeria is going to participate fully in this. I am confident that nothing less than 20% or 25% of this fund would come into Nigeria because of our population,” Adelabu stated.

The minister’s visit to Splendor Electric Nigeria Limited, a porcelain insulator company, underscores the government’s commitment to involving local businesses in the electrification drive.

The investment will focus on enhancing and upgrading power infrastructure, which is crucial for improving electricity access and reliability across Nigeria.

Despite the promising news, Nigeria continues to face significant challenges in its power sector. The country’s power grid has suffered frequent collapses, with the Nigerian Bureau of Statistics reporting less than 13 million electricity customers and frequent nationwide blackouts.

The International Energy Agency highlighted that Nigeria’s national grid experienced 46 collapses from 2017 to 2023, exacerbating the nation’s energy crisis.

To combat these issues, the government is also advancing the Presidential Power Initiative, a project in collaboration with Siemens, which aims to build thousands of new lines and numerous transmission and injection substations.

Adelabu noted that the pilot phase of this initiative is nearing completion and that Phase 1 will commence soon.

With over 200 million people and a chronic energy shortfall, Nigeria’s power sector is in urgent need of overhaul.

The additional $7.5 billion from the African Electrification Initiative represents a critical step toward achieving reliable and widespread electricity access.

The investment is expected to stimulate not only infrastructure development but also economic growth, creating opportunities for local companies and improving the quality of life for millions of Nigerians.

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Energy

Federal Government Announces Free CNG Conversion for Commercial Vehicles

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The Federal Government declared on Thursday that the conversion of petrol and diesel-powered commercial vehicles to run on Compressed Natural Gas (CNG) will be free of charge.

The announcement came after the government signed agreements with several companies specializing in the conversion of petrol and diesel vehicles to CNG.

Michael Oluwagbemi, the Programme Director/Chief Executive of the Presidential Compressed Natural Gas Initiative (P-CNGI), disclosed the details of the program to journalists in Abuja.

“Today we’ve just signed with five partners here in the FCT (Federal Capital Territory) participating in the Conversion Incentive Programme,” Oluwagbemi stated.

“The program is tackling the barrier to Nigerian commercial transport operators to convert from PMS (petrol) to gas. Most of them have said that the cost of conversion is expensive, and so what we are doing here today is basically to respond to that concern.”

Benefits for Commercial Transport Operators

The initiative primarily targets commercial transporters under various unions, including the Road Transport Employers Association of Nigeria (RTEAN), National Union of Road Transport Workers (NURTW), and the Nigerian Association of Road Transport Owners (NARTO).

According to Oluwagbemi, these unionized operators will receive conversion kits and installation services completely free of charge.

“This is going to be done through certified conversion workshops that we are beginning to identify. We’ve identified about 123 of them, and five are here with us today in Abuja. As we expand across the country, we will activate more of them,” he said.

Ride Share Operators Included

In addition to unionized commercial transporters, ride share operators such as those working with Uber, Bolt, Lag-Ride, and Move will also benefit from the program. These operators will receive a 50% discount on the conversion equipment and free installation.

Furthermore, the arrangement allows them to pay for the remaining costs in installments, eliminating the need for upfront payments.

“We hope to add more ride share operators soon. Lag-Ride has already signed up, and we are going to send the agreement next week,” Oluwagbemi added.

Impact on Transportation Costs

Through this program, the government aims to reduce transportation costs for Nigerians. Oluwagbemi highlighted that over 20,000 kits will be available in the next three months, distributed across 25 states with existing CNG capacity.

This initiative is part of a broader palliative program funded by the National Assembly, which has allocated additional resources for the acquisition of more kits later this year.

“The agreement we signed today ensures that the savings from the conversion will be passed on to ordinary Nigerians. We will begin to see some impact in terms of reduced transportation costs,” Oluwagbemi noted.

Monitoring and Enforcement

To ensure the success of the program, the government has implemented a robust monitoring mechanism.

The Nigerian gas vehicle monitoring system will oversee the conversion process and ensure compliance with agreed pricing reductions.

“We have a very strong monitoring mechanism around conversion and the enforcement of reduced pricing for Nigerians. The framework of the agreement includes significant pass-on of savings to ensure the purpose of the palliative is achieved,” Oluwagbemi emphasized.

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CNG to Save Nigerians 40% on Fuel Costs, Says NNPC

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Oil and Gas

The Nigerian National Petroleum Company Limited (NNPC) announced on Thursday that the use of Compressed Natural Gas (CNG) in automobiles will be 40% cheaper than using Premium Motor Spirit (PMS), commonly known as petrol.

The announcement was made during the inauguration of 11 new CNG stations across Abuja and Lagos, part of an ambitious plan to establish 100 such stations nationwide within the next 12 months.

The NNPC’s initiative aims to provide Nigerians with an affordable alternative to petrol, leveraging the country’s abundant natural gas reserves of approximately 209 trillion standard cubic feet.

Huub Stokman, Managing Director of NNPC Retail Limited, highlighted the significance of this development, noting that the expansion of CNG stations represents a major step in diversifying Nigeria’s energy mix and making fuel more accessible and economical for the populace.

“Adding CNG to NNPC stations provides Nigeria with an affordable alternative to existing fuel products. CNG will be about 40% cheaper than petrol in Nigeria. And with continued investments, it could become a significant part of our energy mix,” Stokman stated during the inauguration event in Abuja.

The NNPC has committed to launching over 100 CNG sites within the next year, supported by the establishment of two mechanical training centers combined with conversion centers in Abuja and Lagos.

These centers will facilitate the transition to CNG by providing necessary skills and resources for vehicle conversion and maintenance.

Mele Kyari, Group Chief Executive Officer of NNPC, underscored the company’s dedication to enhancing CNG infrastructure.

“We are constructing six CNG mother stations across the country between now and December, and we are also building three LNG (Liquefied Natural Gas) stations in Ajaokuta. This initiative aims to bring gas closer to consumers, reducing transportation costs and making fuel more affordable,” Kyari said.

The rollout of CNG stations aligns with President Muhammadu Buhari’s initiative to promote sustainable and locally sourced energy solutions.

The new CNG facilities are designed to meet global best practices, ensuring safe, reliable, and efficient service to all customers.

The Executive Vice President of Cleanergy Innovation Ltd, Shettima Imam, emphasized the importance of this collaboration in achieving significant milestones in Nigeria’s energy sector.

The deployment of CNG is expected to provide substantial financial relief to car owners, who have been benefiting from government petrol subsidies ranging between N6 million and N9 million per annum.

With the switch to CNG, an average car owner could save approximately N12 million annually.

“This initiative is not just about providing cheaper fuel; it is about utilizing Nigeria’s natural resources to create a more dynamic and inclusive energy sector,” Imam added.

“The CNG stations are a testament to what can be achieved through collaboration and innovation.”

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