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NNPCL to Lead Africa’s Transition to Clean Energy

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NNPC - Investors King

The Nigerian National Petroleum Company Limited (NNPCL) has set itself up to lead Africa’s transition to a more sustainable energy source.

The Chief Executive Officer and Group Managing Director, NNPCL, Malam Mele Kyari, made this announcement during his lecture at the 30th Convocation of the Federal University of Technology Minna, Niger State.

The lecture titled “Energy Transition & Energy AccessibilityThe New Paradigm” focused on how NNPCL can transit to low-carbon energy and renewables.

According to Kyari, the national energy company is expanding its use of natural gas and infrastructure backbone from Ajaokuta in Kogi state to Kano via Abuja and Kaduna.

In addition, he stated that this massive pipeline will receive fuel from the Obiafu-Obrikom-Oben (OB3) and Escravos-Lagos Pipeline System (ELPS) gas pipelines through the Oben node in Edo State and transport 2 billion standard cubic feet of natural gas to power plants and industrial off-takers in Abuja, Kaduna, and Kano.

He went on to say that as a national oil company and a major participant worldwide, NNPCL is prepared to transition to renewable energy.

“We are taking a firm position in this transformation by institutionalizing the required enablers for success,” the GMD hinted.

As an Energy Company of Global Excellence, NNPCL has changed the NNPCL R&D Division into a Renewable Energy Division, Kyari stated.

He further said NNPCL welcomes collaborative relationships with academics and business professionals who may conduct fruitful research and innovation in the energy sector.

He asserts that oil will continue to play a significant role in the global energy mix of the present and the future.

However, Kyari pointed out that as the shift to less expensive energy picks up speed, particularly in developed nations, oil companies must continually boost operational effectiveness and cut costs to be competitive.

He said earlier in the presentation that Africa is particularly blessed with an abundance of sunshine, which may enable a significant development of renewable energy and place Africa on the map of the world’s energy-sufficient regions.

Kyari said “what Africa needs is energy transition that addresses energy poverty across the continent and supports the use of comparative and cheaper available energy resources in Africa” in light of the financial strain required to move at the same rate as the rest of the globe.

Benefits of the New NNPCL

Transparency and good governance

Nigeria’s oil and gas company, NNPCL, is set to be privatized with the sale of shares to the public, like Petrobras of Brazil and Aramco of Saudi Arabia. Prior to the transition, political interference, lack of transparency and accountability, and bureaucracy shrouded the activities of the Company. The new development must be approved by the government and endorsed by the National Economic Council on behalf of the federation.

Increased revenue to the government

The transition is expected to increase the revenue base of the government. NNPC would soon emerge as the fifth-largest gas-producing in the world, adding that the new legislation would provide business opportunities that would enable it to earn more revenue for the country.

Speaking on the development, Dr Muda Yusuf, Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), said the transition would now absolve the state-owned oil company from political interference and bureaucratic bottlenecks.

“We will see an NNPC that is independent and autonomous and an NNPC that would be decoupled or insulated from political interference and bureaucracy,” Yusuf said.

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Oil Prices Stable Amid Federal Reserve’s Talk of Interest Rate Tightening

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In a landscape where global oil markets often sway with the slightest economic shifts, stability can be a rare commodity.

However, amidst discussions from the U.S. Federal Reserve regarding potential interest rate adjustments, oil prices have remained surprisingly steady.

Brent crude oil, against which Nigerian oil is priced, gained 10 cents, or 0.1% rise to $82.00 a barrel, while U.S. West Texas Intermediate (WTI) crude oil edged up 7 cents to $77.64 a barrel.

The Federal Reserve’s release of minutes from its recent policy meeting unveiled deliberations on the possibility of raising interest rates to combat persistent inflationary pressures.

The minutes stated, “Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.”

Such discussions surrounding interest rates can have a profound impact on oil demand. Higher interest rates typically result in increased borrowing costs, potentially constraining funds that could otherwise stimulate economic growth and, consequently, oil consumption—particularly in the United States, the world’s largest oil-consuming nation.

Additionally, the Energy Information Administration’s report indicating a 1.8 million barrel rise in U.S. crude stocks last week, as opposed to an anticipated draw of 2.5 million barrels, added a layer of complexity to the market dynamics.

This unexpected increase in inventory weighed on market sentiment, despite ongoing efforts to balance supply and demand.

Furthermore, global physical crude markets have been grappling with subdued refinery demand and abundant supply, exacerbating the pressure on oil prices.

Analysts from Citi highlighted recent market softness, attributing it to weaker data encompassing rising oil inventories, tepid demand, and refinery margin weakness, compounded by the looming risk of production cuts.

Russia’s announcement that it surpassed its OPEC+ production quota in April due to “technical reasons” added another dimension to the market narrative.

The Russian Energy Ministry revealed plans to present a compensation strategy to the Organization of the Petroleum Exporting Countries (OPEC) Secretariat shortly.

Against this backdrop, anticipation mounts ahead of the OPEC+ meeting scheduled for June 1, where crucial decisions regarding production cut levels will be deliberated.

Despite uncertainties surrounding the meeting’s outcome, industry experts foresee challenges in significantly tightening the market in the near term, potentially leading to a rollover of existing voluntary cuts.

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Electricity Subsidy Surges to N628.61bn in 2023, Discos Earn N1.08tn

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Amidst ongoing debates regarding Nigeria’s power sector and the financial dynamics surrounding it, the latest data from the Nigerian Electricity Regulatory Commission (NERC) has revealed significant figures concerning electricity subsidy and the earnings of power distribution companies (Discos).

According to the data obtained from NERC, the Federal Government’s expenditure on electricity subsidy soared to a staggering N628.61 billion in 2023.

This substantial subsidy expenditure indicates the government’s continued financial support to ensure electricity affordability for consumers across the nation.

Simultaneously, power distribution companies amassed a total revenue of N1.08 trillion during the same period.

This substantial revenue underscores the financial capacity of the Discos despite ongoing challenges within the power sector, including issues related to infrastructure, metering, and service delivery.

Analysis of the figures provided by NERC reveals a consistent increase in electricity subsidies throughout 2023.

In the first, second, third, and fourth quarters of the year, subsidies on power amounted to N36.02 billion, N135.23 billion, N204.6 billion, and N252.76 billion, respectively.

This steady rise in subsidy expenditure reflects the government’s commitment to bridging the gap between the cost-reflective tariff and the allowed tariff.

Conversely, power distribution companies witnessed notable revenue growth over the same period.

Despite concerns raised by consumers regarding service quality and reliability, Discos reported earnings of N247.09 billion, N267.86 billion, N267.61 billion, and N294.95 billion in the first, second, third, and fourth quarters of 2023, respectively.

This substantial revenue generation highlights the financial viability of the Discos within the current regulatory framework.

The surge in revenue by Discos has prompted calls from various stakeholders for improved service delivery and accountability within the power sector.

Consumers have expressed dissatisfaction with the quality of service provided by Discos, emphasizing the need for enhanced operational efficiency and infrastructure investment to address prevailing challenges.

In the absence of cost-reflective tariffs, the Federal Government continues to bear the burden of electricity subsidies to ensure affordability for consumers.

These subsidies primarily target power generation costs payable by Discos to the Nigerian Bulk Electricity Trading company, thereby supporting electricity generation and supply across the country.

Commenting on the subsidy expenditure for the fourth quarter of 2023, NERC highlighted the government’s policy to harmonize exchange rates and maintain end-user customer tariffs at approved rates.

This policy direction contributed to the increase in subsidy obligations, reflecting the government’s efforts to stabilize electricity prices amidst economic uncertainties.

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Port-Harcourt Refinery Set to Commence Operations by July End, IPMAN Discloses

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The Port-Harcourt refinery with a capacity of 210,000 barrels per day, is poised to begin operations by the end of July.

This announcement comes after several postponements and delays that have plagued the refinery’s revival efforts.

Chief Ukadike Chinedu, the National Public Relations Officer of the Independent Marketers Association of Nigeria (IPMAN), revealed this optimistic timeline on Monday.

According to Chinedu, the refinery’s revival is expected to stimulate economic activities, reduce petroleum product prices, and ensure adequate supply in the market.

The refinery, located in Port-Harcourt, comprises two units: an older plant with a refined capacity of 60,000 barrels per day and a newer plant with a capacity of 150,000 barrels per day.

Despite previous setbacks and delays, the Minister of State for Petroleum Resources, Heineken Lokpobiri, announced the mechanical completion and flare start-off of the refinery in December last year.

However, the refinery’s journey to resuming operations has been marked by challenges and setbacks. It shut down in March 2019 for the first phase of repair works, following the government’s engagement of technical advisors to oversee the refurbishment process.

Despite assurances from NNPC Limited’s Group Chief Executive Officer, Mele Kyari, in March 2024, stating that operations would commence within two weeks, the refinery faced further delays.

In an exclusive interview, Chinedu emphasized the extensive turnaround undertaken at the refinery, suggesting a complete overhaul rather than mere rehabilitation.

He expressed confidence in meeting the July deadline, citing round-the-clock efforts to ensure readiness for operations.

While acknowledging previous delays, Chinedu remained optimistic about the refinery’s imminent revival, emphasizing its potential to enhance competition in the petroleum sector and reduce product prices.

He pointed out that the refinery’s operationalization aligns with the impending commencement of petrol production by the Dangote Refinery, further emphasizing the potential benefits for Nigeria’s energy landscape.

However, Femi Soneye, the Chief Corporate Communications Officer of NNPC Limited, highlighted regulatory approvals from international bodies as the remaining hurdle to the refinery’s operational commencement.

Soneye reiterated that mechanical completion had been achieved, with all necessary infrastructure in place, awaiting regulatory clearance to commence operations.

As Nigeria navigates its energy transition and seeks to bolster local refining capacity, the imminent revival of the Port-Harcourt refinery signifies a significant milestone towards achieving energy sufficiency and economic growth.

With hopes pinned on the July deadline, stakeholders remain vigilant, anticipating the refinery’s long-awaited resurgence.

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