- Shale: Nigeria, Others Must Lower Costs
Members of the Organisation of the Petroleum Exporting Countries must lower production costs to compete better with shale oil producers, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has said.
Industry analysts have said the rising shale oil production in the United States could upend efforts by major producers including OPEC to bring global supply and demand for crude back into balance.
The US shale oil production for March is expected to rise by the most in five months, as energy companies ramp up drilling on the back of the recent rally in oil prices.
Kachikwu, in an interview with the CNBC Africa, also said he was confident that an output reduction agreed in November would see oil prices hold.
Nigeria, which relies on crude sales for around two-thirds of government revenue, saw its economy shrink by 1.5 per cent in 2016 – the first full-year contraction in 25 years – largely due to lower oil receipts.
Eleven of OPEC’s 13 members along with 11 non-OPEC countries agreed to make cuts for the first half of 2017, although Nigeria and fellow OPEC member Libya were exempt due to production setbacks suffered last year.
“OPEC members must lower production costs to compete better with shale producers,” said Kachikwu, quoted in a tweet on the CNBC Africa’s feed.
Kachikwu said he was “impressed with the work OPEC has done” and “confident prices will hold”, but added, “What is more fundamental is what OPEC countries can begin to do for themselves in term of costs, diversification.”
The November 30 agreement to cut production prompted oil prices to rise by $10 a barrel, although they have been trading in a narrow $3 range in the last few weeks.
But analysts say that a revival in the US shale production is likely to limit any major price recovery in crude oil.
The Secretary-General of OPEC, Mohammed Barkindo, on Monday in Abuja said OPEC members lost a cumulative revenue of about $1tn as a result of the crash in crude oil prices, describing the crisis in the oil sector as the worst ever in recent memory.
Crude oil prices crashed from over $100 per barrel in 2014 to as low as $23 in 2016, a development that threw many oil dependent countries into economic crisis.
The Group Managing Director, Nigerian National Petroleum Corporation, Dr. Maikanti Baru, said last week that unit technical cost of production had significantly dropped from above $70 per barrel in 2014 to about $27 per barrel as of 2016 ending.
He said efforts were ongoing to further drive down cost, adding, “But this cannot be achieved without the support, cooperation and collaboration of all stakeholders in the industry. It is worthy to mention that cost reduction will also serve as incentives for investors to grow reserves, increase profitability, thus leading to increased return on investment.”
The pace of the recovery in the US shale oil output is set to pick up steam this month as more crude-producing regions return to growth, according to the US Energy Information Administration’s latest drilling productivity report.
The EIA forecasts the US shale oil production in seven major regions will rise by a total of 80,000 barrels per day to 4.87 million bpd in March.
This is the third month in a row the agency has projected output to rise.
The increase is nearly double the 41,000-bpd climb the agency expected for February in its last report.
Labour, FG Agree to Suspend Strike for Two Weeks as FG Put Electricity Hike on Hold
FG Has Put Electricity Hike on Hold for Two Weeks and Announced Palliatives for Workers
The Nigeria Labour Congress and the Trade Union Congress have suspended the strike scheduled to commence today (Monday).
This followed an agreement reached with the Federal Government at a meeting which started at 8.30pm on Sunday and ended at 2:50am this morning.
After exhaustive deliberations on the issues raised by the labour centres, the meeting agreed to suspend the application of the cost-reflective electricity tariff adjustments for two weeks.
The Minister of Labour and Employment, Chris Ngige, read the five-page communique signed by the representatives of the government and labour.
The NLC President, Ayuba Wabba; and his Trade Union Congress counterpart, Quadri Olaleye, amongst others signed on behalf of Organised Labour while the Minister of Labour, Chris Ngige; Minister of State Petroleum, Timipre Silva; Minister of State Labour and Employment, Festus Keyamo (SAN); Minister of Information, Lai Mohammed; and the Secretary to Government of the Federation, Boss Mustapha and others, signed on behalf of the government.
Olaleye confirmed the development in an interview on Monday morning.
He said, “Definitely correct. We just left a press conference. We signed a document to suspend the action for two weeks for the government to implement those things that we agreed in the agreement. So, we are suspending for two weeks.
“We don’t need a notice again to re-convene if there is a need to do that.”
The parties agreed to set up a technical committee comprising Ministries, Departments, Agencies, NLC and TUC.
It would work for a duration of two weeks effective September 28, to examine the justifications for the new policy “in view of the need for the validation of the basis for the new cost-reflective tariff as a result of the conflicting information from the fields which appeared different from the data presented to justify the new policy by NERC; metering deployment, challenges, timeline for massive rollout.”
The members of the committee include the Minister of State Labour and Employment, Festus Keyamo (SAN) as Chairman; Minister of State Power, Godwin Jedy-Agba; Chairman, National Electricity Regulatory Commission, James Momoh; Special Assistant to the President on Infrastructure, Ahmad Zakari as the Secretary.
Other members are Onoho’Omhen Ebhohimhen, Joe Ajaero (NLC), Chris Okonkwo (TUC) and a representative of electricity distribution companies.
The committee’s terms of reference are to examine the justification for the new policy on cost-reflective electricity tariff adjustments; to look at the different DISCOs and their different electricity tariff vis-à-vis NERC order and mandate; examine and advise government on the issues that have hindered the deployment of the 6 million meters, among others.
“During the two weeks, the DISCOs shall suspend the application of the cost-reflective electricity tariff adjustments,” the communique noted.
It also noted that the FG has fashioned out palliatives that would ameliorate the sufferings that Nigerian workers may experience as a result of the hike in cost electricity tariffs and the deregulation of the downstream sector of the petroleum industry.
The palliatives will be in the areas of transport, power, housing, agriculture and humanitarian support.
The meeting also resolved that the 40 per cent stake of government in the DISCO and the stake of workers should be reflected in the composition of the DISCO’s boards.
It agreed that “an all-inclusive and independent review of the power sector operations as provided in the privatization MoU to be undertaken before the end of the year 2020, with labour represented.
“All parties agreed on the urgency for increasing the local refining capacity of the nation to reduce the overdependency on importation of petroleum products to ensure energy security, reduce cost of finished products, increase employment and business opportunities for Nigerians.”
To address this, the parties resolved that the Nigerian National Petroleum Corporation should expedite the rehabilitation of the nation’s four refineries located in Port Harcourt, Warri and Kaduna to achieve 50 per cent completion by December 2021, while timelines and delivery for Warri and Kaduna will be established by the inclusive steering committee.
“To ensure commitment and transparency to the processes and timelines of the rehabilitation exercise, the management of NNPC has offered to integrate the national leadership of the Nigeria Union of Petroleum and Natural Gas Workers and Petroleum and Natural Gas Senior Staff Association into the steering committee already established by the corporation,” the communique stated.
It added that a validation team comprising the representatives of the NNPC, Nigeria Extractive Industries Transparency Initiative, Infrastructure Concession Regulatory Commission, NUPENG and PENGASSAN would be established to monitor progress of the rehabilitation of the refineries and the pipelines/strategic depots network and advice the steering committee periodically.
It also said that post-rehabilitation, NNPC shall involve the PENGASSAN and NUPENG in the process of establishing the operational model of the nation’s refineries.
The statement added, “The Federal Government will facilitate the delivery of licensed modular and regular refineries, involvement of upstream companies in petroleum refining and establishing framework for financing in the downstream sector.
“NNPC to expedite work on the Build, Operate and Transfer framework for the nation’s pipelines and strategic depots network for efficient transportation and distribution of petroleum products to match the delivery timelines of the refineries as agreed.”
The government and its agencies agreed to ensure delivery of 1 million CNG/LPG AutoGas conversion kits, storage skids and dispensing units under the Nigeria Gas Expansion Programme by December 2021 to enable delivery of cheaper transportation and power fuel.
A governance structure that will include representatives of organized labour shall be established for timely delivery.
To cushion the impacts of the downstream sector deregulation and tariffs adjustment in the power sector, the FG agreed to announce in two weeks a specific amount to be accessed by workers with subsequent provision for 240,000 workers under the auspices of NLC and TUC for participation in agricultural ventures through the Central Bank and the Ministry of Agriculture.
The timeline will be fixed at the next meeting.
The meeting further resolved that the FG will facilitate the removal of tax on minimum wage as a way of cushioning the impacts of the policy on the lowest vulnerable.
The government would also make available to organized labour 133 CNG/LPG-driven mass transit buses immediately and provide to the major cities across the country on a scale up basis thereafter, to all states and local governments before December 2021.
“On Housing, 10 per cent to be allocated to Nigerian workers under the ongoing Ministry of Housing and Finance initiative through the NLC and TUC,” the communique disclosed.
GE and Niger Delta Power Holding Company (NDPHC) Successfully Restore up to 360MW in Nigeria Amidst COVID-19 Pandemic
Power GE safely completed service interventions on three GE 9E gas turbines at the Niger Delta Power Holding Company (NDPHC) power plants in Calabar and Sapele, Nigeria; With compressive safety measures due to COVID-19 in place, GE and NDPHC quickly ensured both employee safety and on-time project execution; Outages were executed on time and the restored power will enable NDPHC to provide the equivalent electricity needed to power up to 2 million Nigerian homes.
GE (NYSE: GE) today announced the successful rehabilitation of three 9E.03 gas turbines, at three Niger Delta Power Holding Company’s (NDPHC) Power Plants in Calabar and Sapele, Nigeria. These operations reduced the risk of unplanned downtime of its power generation equipment, enabling the plants to reliably secure and restore the supply of up to 360 megawatts (MW) of electricity to the national grid, the equivalent electricity needed to power approximately two million Nigerian homes. Despite the challenges posed by the COVID-19 pandemic, GE and NDPHC worked together to swiftly implement safety procedures to ensure a safe and on-time execution.
“Being Nigeria’s largest electricity generating company, with a total installed capacity of 4.0 gigawatts (GW), representing about 35% of Nigeria’s generating capacity, we are committed to strengthening Nigeria’s power sector, despite the unexpected logistical challenges of the COVID-19 outbreak,” said Chiedu Ugbo, Managing Director, NDPHC. “GE’s efficiency to mobilize local teams on-site with the required technical skills and expertise, as well as GE’s global supply chain scale was crucial to ensure the timely and safe completion of the outages at the sites and help us achieve our goal.”
The outages involved stage three bucket changeouts on three 9E gas turbines as well as additional combustion inspections. Engineers from GE and FieldCore, the field services execution company owned by GE, worked together and in close collaboration with NDPHC to implement additional safety measures and reduce the risk of exposure to COVID-19, including frequent disinfections at the site, physical distancing, standard passive and active temperature screenings for personnel, and the use of personal protective equipment such as masks and gloves.
“We are committed to supporting power plant operators like NDPHC to be able to provide reliable power with exceptional support and services from GE throughout these uncertain times, while ensuring and maintaining the health and safety of our employees and suppliers.” said Elisee Sezan, CEO for GE’s Gas Power business in Sub-Saharan Africa. “The successful rehabilitation of the power generations assets at Calabar and Sapele plants will help increase the 9E gas turbines’ efficiency, while lowering emissions and providing essential power for industrialization, healthcare facilities, homes, schools and businesses.”
This year, GE’s 9E gas turbine fleet celebrates 40 years of operations globally. The 9E is a robust, proven platform that delivers high availability, reliability, and durability while lowering the overall cost-per-kilowatt. It has a large installed base of over 650 units in the world located primarily in Asia, China, Europe, Africa and the Middle East.
GE has been collaborating with energy stakeholders to deploy innovative technologies tailored to respond to the needs in the region since the 1950s with reliable baseload and flexible emergency power. In 2018, the company celebrated its 100th power plant in Sub-Saharan Africa and today, up to 17 GW of gas power generation on the grid runs on GE gas turbines. GE delivers across the entire energy ecosystem from generation to transmission and distribution and throughout Nigeria, GE-built technologies are supported by local service and maintenance teams from the company to ensure access to reliable and sustainable energy.
Power Generation Hits 4,312MW, 16 Plants Record Increase
Electricity generation in the country rose by 979.2 megawatts on Sunday to 4,312.1MW as 16 power plants saw an increase in their output.
The number of idle plants dropped to nine as of 6am on Sunday from 11 at 6am on Saturday, when power generation stood at 3,332.9MW, according to data obtained from the Nigerian Electricity System Operator.
The plants that did not generate any megawatts of electricity as of 6am on Sunday were Afam IV & V, Sapele II, Alaoji, Olorunsogo II, Ihovbor, Gbarain, Ibom Power, AES and ASCO.
Sapele I and Omotosho II, which were idle as of 6am on Saturday, generated 36MW and 26.1MW on Sunday.
The nation generates most of its electricity from gas-fired power plants, while output from hydropower plants makes up about 30 per cent of the total generation.
Generation from Kainji, Jebba and Shiroro hydro plants, which stood at 182MW, 289MW and 412MW, respectively as of 6am on Saturday, rose to 305MW, 300MW and 450MW on Sunday.
Electricity generation from Egbin, the nation’s biggest power station, increased to 454MW as of 6am on Sunday from 304MW on Saturday.
Other plants that recorded increases in their outputs on Sunday were Delta (gas), Omotosho I, Olorunsogo I, Geregu II, Odukpani, Okpai, Azura-Edo, Afam VI, Omoku and Rivers IPP.
The amount of power generation capacity left unused fell to 3,005.9MW as of 6am on Sunday from 3,558.9MW on Saturday.
Gas constraints and low load demand by the distribution companies hampered the generation of 2,019.7MW and 986.2MW respectively on Sunday, according to NESO.
The system operator put the national peak demand forecast at 28,290MW; installed generation capacity at 12,910.40MW; available capacity at 7,652.60MW; transmission wheeling capacity at 8,100MW; and peak generation at 5,420.30MW.
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