June / July 2014 Edition

NIGERIAN CONTENT: CHALLENGES ABOUND DESPITE RELATIVE SUCCESSES

NIGERIAN CONTENT ACT 4 YEARS ON: LAUDABLE ACHIEVEMENTS IN NIGERIAS

OIL & GAS SECTION

FEATURE

SOCIETY OF PETROLEUM ENGINEERS; NAICE 2014

+ NEWS, ARTICLES & MORE

CONTENT EDITORIAL4 Upstream

12 Midstream

14 Nigerian Content Act 4 Years On: Laudable Achievements In Nigerias

Oil & Gas Sector

20 Power

25 Industry Event

30 Interview with Engr. Wole Ogunsanya, MD/CEO Geoplex Drillteq Limited

8 Overview of the Nigerian Oil and Gas Industry Content Development Act 2010

18 Downstream

22 Nigerian Content: Challenges Abound Despite Relative Successes

Welcome to the April/May 2014 edition of Energy Mix Report. A lot has occurred in the last few years with regard to divestments in the upstream sector and the Nigerian E&P space is witnessing a gradual shift by the IOCs from onshore fields to more offshore plays.

This issue focuses largely on this shift and looks at the potential outlook and challenges facing Nigerias upstream sector going forward. As al-ways, there is a roundup of reports on the energy sector, insightful articles as well as an illuminating interview with Mr. Steven Fox, a partner at inter-national law firm Clifford Chance LLP.

I would also like to take this opportunity to re-mind you to visit our website (www.energymixre-port.com) and sign up for our e-newsletter, follow us on Twitter (@energymixreport) or like us on Facebook (Energy Mix Report) to ensure that you have access to the latest energy news in Nigeria and Africa as it happens on a daily basis.

Best regards,

Noma GarrickEditor

EDITORIAL TEAM

Publisher Editor Contributors Design/Layout PhotographyThe Energy Mix (Nigeria) Limited

TO CONTACT US REGARDING ADVERTS, ARTICLE CONTRIBUTIONS OR FEEDBACK

E-mail: info@energymixreport.com, Tel: +234 (1) 342 7912, +234 (0) 704 626 2338,

Follow us on twitter: @Energy Mix Report, Follow us on Facebook: E nergy Mix Report

CORPORATE OFFICE: First floor, 18 Moloney Street, Off King George V Road, Lagos Island, Nigeria.

DISCLAIMER: While we endeavour to ensure the accuracy of information in all the reports and articles within this publication and also utilise information from only the most reliable sources, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability or suitability with respect to the information within this publication. Any reliance you place on such information is therefore strictly at your own risk. Energy Mix Report is also not responsible for the opinions of its guest contributors and the views held in their articles.

Energy Mix Report and its logo are registered trademarks of The Energy Mix (Nigeria) Limited. This publication and its content are copyrights of Energy Mix Report. All rights reserved.

Noma Garrick Ike EbohKunle KalejayeFelix JaroEze Nwosu

Witts & Strattswww.wittsandstratts.com

Jide Odukoya

Oando Energy Resources completes acquisition of ConocoPhillips assets

Shell declares force majeure at its EA field in Nigeria

UPSTREAM

Chevron highlights ongoing operations on its deep water fields

Afren plans further drilling in three of its Nigerian oil fields

Nigeria oil production rebounds to 2.15 mbpd in JuneNigerias crude oil production rose by 200,000 barrels a day to 2.15 million in June, a Bloomberg survey of Organisation of Petroleum Exporting Countries (OPEC) pro-ducers showed. The gain in Nigeria was the second-biggest in the survey and the highest output since September. Figures for Africas biggest producer are volatile because of unrest and theft in the Niger River delta, the main oil-producing region. Production by the 12-member OPEC rose by 278,000 barrels a day to 30.223 million, according to the survey of oil companies, producers and analysts. OPEC ministers kept their output target unchanged at 30 million barrels a day on June 11 in Vienna. The group is sched-uled to meet next on November 27, 2014.

SacOil may get first production asset in Nigeria

UK listed independent oil and gas com-pany, Afren Plc has indicated that it plans to begin further development drilling at its Nigerian offshore Ebok, Okoro and Okwoko oil fields in the third quarter (Q3) of this year in a bid to ramp up oil reserves and production. The company, in its interim management statement for

the first quarter stated that installation of the Central Fault Block (CFB) extension platform has started on Ebok and is expected to be completed by the end of Q2 2014, with development drilling planned for Q3 2014 targeting additional reservoirs in the CFB.

It also noted that the Okoro field continued to perform well with gross production at the field averaging 15,648 bopd in the period, incorporating planned downtime. Furthermore, the Field Devel-opment Plans (FDP) for the Okoro Further Field Development and Okwok were approved by the Nigerian authorities. The Okwok wellhead jacket has also been fabricated and is currently in transit to the Okwok field area, with platform installation to be completed in Q2 2014 prior to development drilling planned for Q3 2014.

Operators, stakeholders worry over marginal bid round delayOperators in Nigerias oil and gas industry and other concerned stake-holders have expressed worry at the continued delay in the conduc-tion of bid rounds for marginal oil fields. This follows the failure of the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke to approve the holding of the bid round in March this year as initially planned, coupled with her failure to explain the reason(s) for the delay.

In November 2013, the Federal Government had announced the open-ing of the second marginal oil field licensing round, indicating that it would conduct the exercise in March 2014 and promising transpar-ency and accountability in the process. The announcement was made after many earlier cancellations and postponements. The Minister is still yet to give a definite date for the exercise, which is said to be critical to the development of the countrys indigenous oil opera-tions as well as the development of its hydrocarbon resources.

Offshore driller Seadrill has signed a five-year, $1.1 billion contract with Total for work offshore Nigeria at its Egina field, the company said recently. The contract, for Seadrills newly built ultra-deepwater West Jupiter drillship, is worth around $600,000 per day, including mobil-isation, according to calculations. The vessel will be delivered from Samsung Heavy Industries shipyard in Geoje, South Korea in August.

Seadrill signs $1.1 billion rig deal with Total

Oando Energy Resources (OER), a subsidiary of Oando Plc, has complet-ed the transaction with ConocoPhillips for the acquisition of its Nigeria upstream business for a total sales price, after customary adjustments, of $1.5 billion. ConocoPhillips Nigerian oil and gas businesses consist of onshore and offshore businesses. The onshore business consists of Phillips Oil Company Nigeria Limited (POCNL), which holds a 20% non-operating interest in Oil Mining Leases (OMLs) 60, 61, 62, and 63 as well as relat-ed infrastructure and facilities in the Nigerian Agip Oil Company Limited (NAOC) Joint Venture (NAOC JV). The other co-venturers are the Nigerian National Petroleum Corporation (NNPC) with a 60% interest and NAOC (20% and operator).

The offshore business consists of Conoco Exploration and Production Nigeria Limited (CEPNL), which holds a 95% operating interest in OML 131 located 70 km offshore in water depths of 500m to 1,200m.; and Phillips Deepwater Exploration Nigeria Limited (PDENL), which holds a 20% non-operating interest in Oil Prospecting Licence (OPL) 214 located 110 km offshore in water depths of 800m to 1,800m. The other co-venturers are ExxonMobil (20% and operator), Chevron (20%), Svenska (20%), Nigerian Petroleum Development Company (15%) and Sasol (5%). In June 2014, the Honorable Minister of Petroleum Resources for Nigeria approved the conversion of OPL 214 to OML 145 for an initial period of 20 years.

70 miles (113 km) off the coast of the central Niger Delta region, spans 45,000 acres (182 sq km) and is at a water depth of approximately 4,800 feet (1,463 m).

The oil multinational also has a 30 per-cent non-operated working interest in the Usan Project, in 2,461 feet (750 m) of water, 62 miles (100 km) off the coast of the eastern Niger Delta region. Net daily production in 2013 averaged 28,000 barrels of crude oil and 3 million cubic feet of natural gas. Additional develop-ment drilling is planned through 2017. Meanwhile the Aparo Field and the Bon-ga SW Field which share a common geo-logic structure are planned to be devel-oped jointly. The structure lies in 4,300 feet (1,311 m) of water, 70 miles (113 km) off the coast of the western Niger Delta region. The proposed development plan involves subsea wells tied back to an FPSO vessel. Front-end engineering and design work began in the second quarter of 2013, and a final investment decision is expected in late 2014.

Chevron, in a recent report has highlighted some of its ongoing deep offshore operations. The Agbami field, in which Chevron has a 67.3

percent interest, is a subsea develop-ment with wells tied back to a floating production, storage and offloading (FPSO) vessel. A 10-well Phase 2 devel-opment program is expected to offset field decline and to maintain production capacity. Drilling, which started in 2012, is expected to continue through 2015. As of early 2014, four of the wells are producing. The next phase, Agbami 3, is a 5-well drilling program that began front-end engineering and design work in early 2014, with a final investment decision expected in the second half of the year. Drilling is scheduled to contin-ue through 2017. The Agbami field lies

According to several re-ports, SacOil Holdings Ltd is in talks to

buy what could be the South African oil and gas companys first production asset in Nige-ria, its Chairman Tito Mboweni said. The Johannesburg-based company has the possibility of an OML, or oil-mining license, for a project that is in the pro-duction phase in Nigeria, the continents largest economy and crude producer, Mboweni said in an interview. He howev-er declined to provide more de-tail on the stage of negotiations or the location of the asset.

Shell has declared force majeure at its EA field in Nigeria to repair equipment damaged by bad weather, suspending production of about 40,000 barrels of oil a day. According to an official statement, repairs were needed for a mooring platform that connects to a floating storage vessel. The EA field is located southwest of Warri in southern Nigeria, in water depths of around 25 metres. The closure of the oilfield has reduced the volume of Nigerias export to the world market but Shell did not say when it hoped to restart the flow of the EA blend in Africas top oil producer. It only recently lifted force majeure on the Forcados grade of crude oil that it had declared in March.

4 / ENERGY MIX REPORT www.energymixreport.com / 5

Indigenous oil firms to produce 500,000bpd by 2018 Seplat bossThe Managing Director of Seplat, Mr. Austin Avuru, has said that Nigerian wholly owned exploration and pro-duction companies operating in the upstream sector of the oil and gas in-dustry will produce 500,000 barrels of oil daily which represents about 20% of Nigerian output by 2018. The Seplat boss made this known at a Q + A session hosted by the Lagos Oil Club recently.

He further stated that Nigerian oil and gas companies will also be responsible for the production of 1.5 billion cubic feet of gas daily, about half of the total supply of natural gas in the domestic market within the same period. Accord-ing to him; while the ongoing divestments by the IOCs is transferring consid-erable asset holdings to Nigerians he also pointed out that these potential figures could only be attained and sustained by the Nigerian independents if they focus on a strong corporate governance structure, which allows for long term sustainability.

Mart Resources Inc. provides production and drilling update for its Umusadege field

UPSTREAM

Sahara Group announces new discovery in OPL 274, reserves up 100%

Mart Resources Inc. an international oil and gas company focused on production and development opportunities in the Niger Delta region of Nigeria, stated that the Umusadege field production during June 2014 averaged 6,793 bopd. It also stated that aggregate Umusadege field downtime during June 2014 was approximately 11.3 days due to (1) a shutdown of the Nigerian Agip Oil Company Limited (NAOC) export pipeline resulting from a lack of storage capacity at the Brass River export terminal due to export shipment delays, and (2) other operational interruptions resulting from general pipeline repairs and maintenance. There were two full down days during the month. The average field production based on producing days was 10,871 bopd in June 2014.

It also noted that drilling operations have been completed on the UMU-3 side-track horizontal well. Total depth of the UMU-3 well is 8,549 feet and a sand screen completion has been installed in the 787 foot lateral section in the VI sand. Extended production testing is expected to commence shortly with results expected by the end of July. Further updates will be provided once testing is completed. Meanwhile, the rig is being moved to the UMU-4 well to execute a similar horizontal side-track, targeting the VII sand.

OurQuestTakesRoot.

From a leading energy solutions provider to Nigerias largest indigenous oil and gas producer, this significant milestone in the realisation of our

upstream ambition bears testament to our vision, resilience and focus.

We are committed to further expanding our portfolio of assets, whilst offering immense growth and investment opportunities.

We are Oando. We are proudly African.

Sahara Group has announced results of drilling and testing in OPL 274, where Sahara holds a 100% working inter-est. Saharas upstream affiliate Enageed Resources completed

the third well of a three-well onshore drilling program in the Edo State block and has demobilized its drilling rig, HPEB-187. Saharas CEO and MD Tonye Cole remarked Today marks an historic occasion for Sahara Group, for its upstream division and for the Nation. Success was achieved in doubling our certified 2P reserves in the Oki-Oziengbe South field and making a new commercial discovery with the Oluegi-1 exploration well.

Saharas successful drilling program followed a two year-long, two-phase, land-swamp 3D seismic survey in the 871 sq km license. Saharas seismic and drilling program achieved nearly two-million man-hours LTI-free oper-ation. Plans are next to tie-into existing facilities, allowing Sahara to begin first oil production. Four flow lines from Oki-Oziengbe South 4 and 5 well heads will take crude to the Oziengbe South flow station for crude process-ing. When completed and flowing, oil from Oziengbe S will join NPDCs 6 pipelines at Oredo and Ogharefe where it will enter the Forcados trunk line.

6 / ENERGY MIX REPORT

OVERVIEW OF THE NIGERIAN OIL AND GAS INDUSTRY CONTENT DEVELOPMENT ACT 2010 By Noma Garrick

Content Development and Monitoring Board (NCDMB) has been established to implement the provisions of the Act, make procedural guidelines and monitor compliance by operators within the industry (Section 4). There is also provision in the Act for a Nigerian Content Development Fund which is established for the purpose of funding the implementation of Nigerian content development in the Nigeria oil and gas industry (Section 104).

Preference for Nigerian Companies

The Act provides that Nigerian inde-pendent operators shall be given first consideration in the award of oil blocks, oil field licenses, oil lifting licenses and all projects contracts (Section 3(1)) and also notes that there shall be exclusive consideration to Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian personnel and capacity to execute contracted work (Section 3(2)). For the purposes of the Act, a Nigerian com-pany is defined as: A company formed and registered in Nigeria in accordance with the provisions of the Companies and Allied Matters Act with not less than 51% equity shares by Nigerians (Section 106).

Minimum Level of Nigerian Content

Nigerian content is defined in section 106 of the Act as the quantum of composite value added to or created in the Nigerian economy by a systemic development of capacity and capabil-ities through the deliberate utilization of Nigerian human, material resources and services in the Nigerian oil and gas industry. Section 11(1) of the Act states that the minimum Nigerian content in any project to be executed in the Nigerian oil and gas industry shall be consistent with the level set out in the Schedule to the Act. The Schedule goes further to list various activities in the oil and gas industry and sets out the desired level of Nigerian content in accordance with various units of measurement. There is however a caveat where there

is inadequate capacity domestically, as section 11(4) provides that the Minister may authorize the continued importation of any of the relevant items in the Sched-ule where this is the case for up to 3 years from the commencement of the Act.

Requirement of a Nigerian Content Plan

Section 7 of the Act provides that in the bidding for any license, permit or interest and before carrying out any project in the Nigerian oil and gas industry, an operator shall submit a Nigerian Content Plan to the NCDMB demonstrating compliance with the Nigerian content requirements of the Act. Upon a favourable review and assessment of the plan by the NCDMB the operator is then to be issued a Certifi-cate of Authorization to proceed with the project (Section 8). The proposed con-tents of the Plan are contained in section 10 of the Act.

Preference for Bids with NigerianContent

The Act in sections 14, 15 and 16 provides for the consideration of Nigerian content in the evaluation of bids and for advan-tage to be conferred on bidders on the basis of the level of Nigerian content. Where bids are within 1% of each other at commercial stage, the bid containing the highest level of Nigerian content shall be selected provided the Nigerian content in the selected bid is at least 5% higher than its closest competitor (Section 14).

Furthermore The award of contract shall not be solely based on the principle of the lowest bidder where a Nigerian indige-nous company has capacity to execute such job, the company shall not be dis-qualified exclusively on the basis that it is not the lowest financial bidder, provided the value does not exceed the lowest bid price by 10% (Section 16).

The Act also sets up a procedure for mon-itoring bids for projects valued in excess of $1,000,000 by the NCDMB. Operators are required to submit to the NCDMB quarterly, for approval all advertisements for invitation to tender, prequalification criteria; technical bid documents, pro-

Prior to the enactment of The Nigerian Oil and Gas Industry Content Development Act 2010 (popularly referred to as the Nigerian Content Act), the Nigerian oil industry was originally the exclusive preserve of the International Oil

Companies (IOCs) and other expatriate companies in areas ranging from exploration and production, trading as well as service operations.

Reports in 2008 highlighted the fact that although the oil and gas industry accounted for 90% of Nigerias revenue, it contributed less than 38% to the Nations GDP. In other words, the absence of local capacity in the industry had resulted in the repatriation of the majority of the $10 billion yearly average industry spend into foreign bank accounts abroad. An expatriate workforce largely dom-inated the local strategic positions in the industry and most of the industrys lucrative contracts were carried out in foreign fabrication yards, ultimately leading to adverse effects on labour creation and the growth of the domestic economy as a whole.

Attempts by previous administrations to introduce local content policies were ineffective and impotent largely as a result of the absence of an appropriate legal frame-work to drive such policies. The Nigerian Oil and Gas Industry Content Development Act 2010 was therefore signed into law on April 22nd 2010 and aims to increase indigenous participation in the oil and gas industry by prescribing minimum thresholds for the use of local services and materials and to promote the transfer of technology and skill to Nigerian labour in the industry.

It has been four years since the Nigerian Oil and Gas Industry Content Development Act 2010 was enacted into law. This piece looks at some of the core features of the Act as well as gives an overview of the Acts key provisions.

General Aims and Major Provisions of the Nigerian Content Act

General Application

The Nigerian Content Act applies to all regulatory authorities, operators, contractors, sub-contractors and other entities involved in any project or activity in the oil and gas industry (Section 2) and takes precedence over all other existing enactments and laws in respect of all operations and transactions pertaining to Nigerian content carried out in or connected with the Nigerian oil and gas industry (Section 1). The Nigerian

8 / ENERGY MIX REPORT www.energymixreport.com / 9

posed bidders list etc (Sections 17-24).

Establishment of a Project Office Locally

Section 25 of the Act refers to the estab-lishment of a project office within the catchment area where the project is to be located by the operator or other body submitting a Plan. While the Act refers to the establishment of a project office where applicable, it does confer power on the NCDMB to require that a project office is maintained.

Preference for Nigerian Personnel in Employment and Training

Section 28(1) of the Act provides that Nigerians shall be given first consider-ation for employment and training in any project executed by any operator or project promoter in the Nigerian oil and gas industry. The Act further requires that the Nigerian Content Plan submitted by any operator or project promoter for any project shall include and Employ-ment and Training Plan which complies with Section 29 of the Act. The Act also obligates operators to provide training to Nigerians where Nigerians are not employed because of their lack of training and to provide a succession plan for a Nigerian to understudy an expatriate for a maximum period of 4 years (Section 30 and 31(1) respectively).

Section 32 provides that expatriate man-agement positions are limited to 5% in respect of each project carried out by an operator as may be approved by NCDMB. Section 33 also requires that all applica-tions for expatriate quota must first be re-ferred to NCDMB and approval received before applications are made to any other Government agency. The Act requires in Section 34 that a Labour Clause be in-

serted in projects or contracts whose total budget exceeds $100 million, mandating the use of a minimum percentage of Nigerian workers as may be stipulated by NCDMB. Finally all operators and com-panies operating in the Nigerian oil and gas industry shall employ only Nigerians in their junior and intermediate cadre (Section 35).

Research and Development Requirements

Sections 36, 37, 38 and 39 deal with the R & D requirements of the Act and require operators to submit a programme for the promotion of education, attachments, training, research and development in Nigeria.

Technology Transfer Requirement

Section 43 of the Act provides that each operator must have a programme for the promotion of technology transfer into Nigeria in relation to its oil and gas ac-tivities. Furthermore section 44 provides that the operator is required to submit to the NCDMB annually a plan setting out a programme of planned initiatives aimed at promoting the effective transfer of technologies from the operator and alliance partners to Nigerian individuals and companies. An operator is required to fully support the transfer of technology initiative by encouraging and facilitating the formation of joint ventures, partner-ing and the development of licensing agreements between Nigerian and foreign contractors (Section 45).

Other provisions to ensure and improve the transfer of technology include section 48 which provides that the Minister may grant tax incentives for foreign and indigenous companies which establish facilities, factories, production units or other operations in Nigeria for purposes of carrying out production, manufac-turing or for providing services and goods otherwise imported into Nigeria. Another provision is section 41(2) which states that; international or multina-tional companies working through their Nigerian subsidiaries shall demonstrate

that a minimum of 50% of the equipment deployed for execution of work are owned by the Nigerian subsidiaries.

In Country Requirements

Section 53 of the Act provides that all operators, project promoters and contrac-tors engaged in the Nigerian oil and gas industry must carry out all fabrication and welding activities in the country. Section 52(3)(f) also provides that all op-erators, contractors and sub-contractors shall maintain a bank account in Nigeria in which it shall retain a minimum of 10% of its total revenue accruing from its Nigerian operations.

Use of Indigenous Insurance, Legal and Financial Services

Section 49, 51 and 52 provide for the use indigenous insurance, legal and financial services respectively where practicable.

Submission of Content Performance Report

An operator is required to submit an an-nual Nigerian Content Performance Re-port covering all its projects and activities for the year under review to the NCDMB within sixty days of the beginning of each year (Section 60).

Joint Qualification System

Section 55 and 56 provide for the establishment and maintenance of a Joint Qualification System (JQS) which shall constitute an industry databank of available Nigerian content levels and capabilities.

Offences and Penalties

An operator, contractor or subcontractor who carries out any project contrary to the provisions of the Act, commits an offence and is liable upon conviction to a fine of 5% of the project sum for each project in which the offence is commit-ted or cancellation of the project entirely (Section 68).

Section 28(1) of the Act provides that Nigerians shall be given first consideration for employment and training in any project executed by any operator or project promoter in the Nigerian oil and gas industry.

Argus Africa LPG 2014 16-17 SeptemberThe Clock Tower Conference Centre Cape Town, South Africa

LPG/NGLilluminating the markets

Market ReportingConsulting

Events

60+ Companies AttendingNetwork with delegates from Ghana, Uganda, Alergia, Nigeria, South Africa, Sudan, Oman and many more. Register today to secure your place. argusmedia.com/africa-lpg

Confirmed Companies Include:

Supporting partners

Bag Sponsor

Exhibitors

Learn, network and do business with key influencers from across AfricaThe Argus Africa LPG conference will bring together key market participants, government representatives and potential investors in LPG to tackle the challenges limiting wider LPG penetration in Sub-Saharan Africa.

Featured speakers:

Lanyard Sponsor

Muzi Mkhize, Chief Director, Hydrocarbons Policy Department of Energy, Republic of South Africa

Blaise Edja, Global General Manager LPG Oryx Energies

Abayomi Awobokun, CEO Oando Marketing

Said Akretche, Chief Executive Naftal

Oryx Energies Petredec Department of Energy Total Easigas Rubis Energie Strategic Energy Energy Regulatory Commission Transnet Port Authority Global Alliance for Clean Cookstoves Oando Downstream AlHussami Companies Camel Fuels WLPGA Petroleum Institute of East Africa National Energy Regulator of South Africa Fogs Norton Rose Fulbright NNPC Disa Gas SAPIA SAOGA Standard Bank National Gas FBN Capital Nile Petroleum Gunvor Glencore Oil Tanking Mauria Reatile Gaz Geostock Amtrol-Alfa Hexagon Ragasco B.B Energy Gas Equipment Manufacturers Avanti Gas Fuel Trade Ghana Makwande Energy Trading E1 Corporation Gas To Health Initiative Aiut Hulamin Sunrise Energy Royale Gas Naftal and many more...

Energy Mix Report readers are eligible for an additional 20% discount off the conference rate. Simply quote AEM20 when booking.

10 / ENERGY MIX REPORT

MIDSTREAM

Nigeria expresses intent to meet EUs long term gas supply security

Commercial viability doubts stall $4bn South-North gas pipeline

The Federal Government has stated its determination to meet the long-term gas supply security of the European countries. It said the move was part of measures to expand the countrys gas market across veritable frontiers. The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, said the country was ready to explore its gas poten-tial to the fullest.

She spoke after holding discussions with the EU Energy Commissioner, Gnther Oettinger, at the sideline of the 11th European Union-OPEC Energy Dialogue Ministerial Meeting in Brussels, Belgium.

A statement from the Group General Manager, Public Affairs of the Nigerian National Petroleum Corporation (NNPC), Ohi Alegbe, stated that the discussions focused on the role Nigeria can play in supporting the EUs energy sector priorities, and particularly the long-term securi-ty and diversification of gas supplies.

A lack of commercial viability has stalled the $4 billion South-North gas pipeline which is designed to take-off from Calabar through Ajaokuta and terminate in Kano according to a BusinessDay report. The proposed pipeline is supposed to be part of the Trans-Sahara gas pipeline, the purpose of which is to flow gas to Europe from Niger Delta.

The core problem is that there are appar-ently no off-takers for the gas which would pass through the 1,500 kilometres pipeline, even if it was constructed. The volume of gas available must be enough to support the investment on the gas. The price of gas from the pipeline is also said to be between $5 and $6 per 1,000 standard cubic feet (SCF/D). However there are no investors who would be ready to risk putting down money for such a project yet.

Govt plans new gas price for Gencos, othersMinister of Petroleum Resources, Mrs Diezani Alison-Madueke, has indicated that the ministry is working with relevant agencies in the energy sector to ensure that the pricing for gas is made as competitive as possible in the next three to four months. The Gas Pricing Framework, when unveiled, will stipulate a price regime for gas to the power sector, fertiliser and steel, petrochemical as well as for domestic use, among others. The minister made this known at the maiden Bayelsa State Investment and Economic Forum, inYenagoa.

The Chairman/CEO, Nigerian Electricity Regulatory Commission (NERC), Dr Sam Amadi also corroborated this and noted that the current prices are considered inadequate to encourage local firms to produce for domestic use. The proposed price regime is ex-pected to bring the local price nearly at par with the international market rates. Amadi stated that the Ministry of Power, NERC and other relevant stakeholders were working to ensure that the price comes out before September, adding that the Commission had no doubt that companies in the oil and gas sector would comply with the policy.

Nigeria may lose global market share due to non-take-off of LNG projects - Expert

Power firms owe N25bn Gas companies

MIDSTREAM

The delay in reaching the final investment decision (FID) for the Olokola Liq-uefied Natural Gas (OKL-NG), Brass LNG and NLNG Train 7 projects may lead to Nigeria losing a large share of the high-demand Asian LNG markets as

competition from other exporters increase. Both LNG plants situated in Brass in Bayelsa and Olokola in Ogun states have been in a comatose state for over five years while the FID for the Train 7 project is still yet to beascertained.

Victor Eremosele, a former official of the Nigeria LNG Limited, noted at the recently concluded World Petroleum Congress in Moscow, that the windows available for the projects may soon disappear. This is because by 2020, it is possible we would find a situation where significant funds have been spent by other countries on their gas projects and these countries would now become new sources of gas supply to the market. He also said another problem that would confront the gas from Nigerian plants, if they ever take off, would be the increasing drop in the price of gas at the international market, because of Shale gas from the United States.

Gas companies have raised the alarm over the rising indebt-edness by power companies, which has risen to about N25bn. The companies, which are mainly International Oil Companies, made their grievances known at the monthly meeting of the Nigerian Electricity Regulatory Commission (NERC) with stakeholders in the power sector in Lagos recently.

Some of the power generation firms, however, indicated that they had paid part of what they owed but that between the banks and the gas aggregator (Nigerian Gas Company), the money was not getting to the gas companies. The power firms also further rejected the claims of the gas companies by saying some of the money owed them were legacy debts owed by the defunct Power Holding Company of Nigeria. A committee has been set up to look into the problem and address the anoma-lies in the system.

Nigeria loses N342m daily as Eni shuts down pipeline

According to reports, Nigeria will be losing about N342.4 million ($2.14 million) daily, as Italian oil firm, Eni, shut down its 20,000 barrels per day crude oil pipeline in Nigeria. The shut down, accord-ing to a spokesman of the company, is due to sabo-tage on the pipeline, which had led to the interrup-tion of 4,000 barrels a day it gets from its 20 per cent share in Nigerian Agip Oil Company. The Wall Street Journal reported that Enis disclosure confirmed information from a local activist, who stated that the pipeline had been blown up. The activist had previously said Enis local operation is in a dispute with former security contractors on the project, a claim the Eni spokesman failed to confirm or deny.

India replaces US as largest importer of Nigerias crude NNPC

The Nigerian National Petroleum Corporation (NNPC) recently disclosed that India has displaced Nigerias longest and largest crude oil importer, the United States of America (USA) from its status as the top importer of Nigerias crude. The Corporation in a statement noted that the United States which had traditionally taken the bulk of Nigerias crude oil but had in recent months drastically reduced its demand, now takes just about 250,000 barrels per day (bpd) of the countrys crude oil. It, however, ex-plained that India now purchases some 30 per cent of Nigerias daily crude production which currently hovers around 2.5 million barrels per day (mbpd); when calculated, this amounts to 750,000bpd of crude oil purchased by India.

12 / ENERGY MIX REPORT www.energymixreport.com / 13

projects in Nigeria. The offshore diving vessels, Adessa Ocean King, Adessa Leg-end and Adessa Sea Protector, worth over $50 million, have an intensive capacity of 50 tonnes and can accommodate about 90 workers on offshore projects.

Another example of indigenous owner-ship is provided by Oando Energy Ser-vices Limited (OESL), which has invested over US$300 million in the acquisition, refurbishment and upgrade of swamp rigs since its inception. In 2007 OESL commenced its drilling rigs business by acquiring two swamp rigs namely; OES Teamwork and OES Respect. Since then, the company has acquired an additional 3 swamp rigs and drilling equipment to be utilized in the Niger Delta swamps. These 5 rigs which are wholly owned by OESL are at various stages of being deployed to work for major oil companies operating in country.

In 2010, Shell supported Caverton Helicopters an indigenous provider of aviation services to upgrade its fleet with more advanced aircrafts. Notably, Shell awarded a 5-year contract worth about $694million to provide aviation services to Caverton Helicopters; this also repre-sented the biggest aviation contract to a Nigerian Company.

In-Country Fabrication The NCDMB has stated that between $2-$5 billion worth of investments have been made in the development of new fabrication yards and the upgrade of existing yards and facilities. In line with this, Kaztec Engineering Limited, an indigenous oil service company and a subsidiary of the Chrome Group stated that it is building a fabrication yard at the Snake Island in Lagos. The fabrica-tion yard is to be utilised for fabricating jackets, topsides, equipment as well as skills development and will be handled in tandem with Kaztecs technical partners, Addax Petroleum Limited.

Section 53 of the Nigerian Content Act provides that all operators and inves-tors engaged in the Nigerian oil and gas industry must carry out all fabrication and welding activities in the country. As

The Nigerian Oil and Gas In-dustry Content Development Act 2010 (popularly known as the Nigerian Content Act) was signed into law

on April 22, 2010 and has so far aided several indigenous companies to build the capacity and competence with which to execute major projects that were the exclusive preserve of expatriates before the legislation was put in place. At the same time there have been an increasing number of multinational companies that have also been compelled by the legisla-tion to perform a certain amount of their operations in-country. Below are some notable highlights.

NIGERIAN CONTENT ACT 4 YEARS ON: LAUDABLE ACHIEVEMENTS IN NIGERIAS OIL & GAS SECTORBy Noma Garrick

such, NCDMB efforts have resulted in several projects being executed in local fabrication yards. Mobil Producing Nige-ria (MPN), operator of the NNPC/MPN joint venture (JV) built three wellhead platforms locally for the development of 20 new oil fields in the country. MPN contracted Nigerdock Plc. to fabricate the Abang and Itut wellhead platforms while another leading indigenous service company; Dorman Long Engineering Limited handled the fabrication of the Oyot wellhead platform.

An offshore living quarters platform was fabricated in Nigeria for the Ofon Phase II project developed by Total and was the first of such to be done in Nigeria. The completion/load-out of the platform was carried out at the Snake Island Integrated Free Zone Lagos base of Nigerdock Plc by Eiffel Nigeria Limited, a local subsid-iary of Eiffage Construction Metallique of France, contractors to the project. The Ofon Phase II living quarters platform and topside was built for Total by Eiffage Construction Metallic of France, with OOP Engineering Limited as its local content partner.

In a bid to develop local capacity, part of Chevrons Agbami Project also entailed the fabrication of two FPSO topsides modules (1,100 tons), the Agbami off-loading buoy (1,080 tons) and 21 suction piles (2,460 tons) for the buoy and FPSO locally by Nigerdock Plc. In addition, Aveon Offshore fabricated the manifolds and associated suction piles (1,200 tons) in Port Harcourt. Two additional modules and flare bloom were also constructed at Daewoo Nigeria Ltds yard in Warri.

Manufacturing

The Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI) in their Report; Local Content Strides in the Oil and Gas Industry state that at various times, selected OPTS members partnered with SCC Pipe Mill to provide technical support, upgrade its pipe mill operations and place multiple orders to encourage development of line pipe manufacturing in country.

A notable highlight is the use of made-in-Nigeria pipes for the first time in the nations oil and gas industry by Exx-onMobil. The company deployed Helical Submerged Arc Welded (HSAW) pipes fabricated locally by SCC Pipe Mill for its Usari-Idoho pipeline replacement project in Akwa Ibom State.

The NCDMB has also stated that construction work has commenced for two steel pipe mills in Bayelsa and Edo states. These mills are to produce about 400,000MT per annum of steel pipes for the oil and gas industry by 2016 and create more than 10,000 direct and indirect jobs during the construction and operating phases of the mills.

The NCDMB has stated that it has plans to establish world class industrial parks in strategic oil bearing communities through the Nigerian Oil and Gas Indus-trial Parks Scheme (NOGIPS). NOGIPS is a capacity development initiative to establish physical infrastructure and create enabling environments for low cost production of goods, domiciliation of capacity, technology acquisition, training, creation of employment opportunities and structured community participation.

To this end the NCDMB intimated that the Federal government recently con-cluded plans to set up nine industrial parks in the States of the Niger Delta as part of the agenda to boost the harness-ing of hydrocarbon resources as well as the overall development of the economy. The industrial parks when established would be a significant milestone in the continued quest for achieving effective participation of the local supply chain in the oil and gas sector. The beneficiaries of

In the four years since the Nigerian Oil and Gas Indus-try Content Development Act 2010 has been in force, a growing number of indige-nous companies have begun playing more active roles in the Nigerian oil and gas industry. This feature looks at some of the notable high-lights the Act has achieved thus far.

Indigenous Asset OwnershipThe Nigerian Content Development and Monitoring Board (NCDMB) noted recently that it has been able to save the country about $2.5billion through its promotion of indigenous marine vessel and rig ownership. In 2012, Chevron pro-vided support to an indigenous company; Seabulk Offshore Operations Nigeria Limited to acquire its first DP-2 PSV (The

Al-KAT) valued at over US$30million. The Al-KAT is currently supporting Chevrons joint venture drilling cam-paigns as a liquid mud cuttings vessel combined with gravel pack operations.

Another indigenous company, CNS Ma-rine Nigeria Limited, which has already worked with several international oil companies in Nigeria, recently acquired three vessels to facilitate its offshore

The Nigerian Content Development and Monitoring Board (NCDMB) noted recently that it has been able to save the country about $2.5billion through its promotion of indigenous marine vessel and rig ownership.

14 / ENERGY MIX REPORT www.energymixreport.com / 15

F E A T U R E

the scheme would be operating compa-nies, multinationals, small and medium enterprises (SMEs), original equipment manufacturers (OEMs) and oil producing States.

The NCDMB and Shell Petroleum Devel-opment Company (SPDC) also recently signed an agreement with six original equipment manufacturers (OEMs) that have committed to invest $62million (about N9.6billion) in the manufacture of local components in Nigeria.

Human Capital Development and TrainingThe NCDMB notes that its On the Job Training (OJT) scheme has been a success with over 5,000 employment/OJT slots created for Nigerian engineers and tech-nicians on ongoing oil and gas projects.

Chevron and its partners have upgraded an existing facility the Training and Conference Centre (TCC) located in Ogere, Ogun State and setup a world class 1st of its kind simulation training facili-ty for Operations & Maintenance (O&M) training. As at 2013, the $10million facil-ity has graduated over 400 trainees, 98% of which have been absorbed into the Oil and Gas sector.

In a similar vein, an indigenous oil servic-ing company, PEM Offshore Limited has begun to test run its Offshore Simulation and Innovation Center. The first phase has been set up and once other facilities are put in place, the center will have a full suite of simulation systems which will support the training of local and foreign offshore personnel involved in Nigerian oil and gas operations. According to the companys Vice President, PEM Offshore has secured a 5-year commitment from Chevron and Agip to utilize the facility in actualizing Chevron and Agips annual scholarship award programme to train Nigerian seafarers.

The OPTS also indicates that several of its members have been dedicated to supporting Nigerian-owned engineering companies and to ensuring that they de-velop their expertise and skilled resources

through awards of contracts for provision of engineering services to local operators such as DeltaAfrik, NETCO, Amazon Energy, Point Engineering and Linkso Nigeria Limited to name but a few.

The Nigerian Content Development FundThe Fund is pooled from 1% of all con-tracts awarded in the upstream sector of the oil and gas industry for use in developing the supply chain and building local capacity in the industry. 70% of the pool is to be used to provide guarantees for single digit and longer tenure lending by banks and funding institutions to Nigerian service companies seeking to acquire critical assets while 30% is to be applied for direct intervention by the Board in critical infrastructure develop-ment and training programs. Currently the Nigerian Content Development Fund has grown to around $350m and is now capable of being accessed by Nigerian service companies.

Admittedly, the fund has so far been accessed by only a handful of Nigerian service companies but the NCDMB and its Executive Secretary Ernest Nwapa have indicated that the Board is working to review the administration process and the conditions to be met for prospective beneficiary companies so as to make it more accessible. The current conditions require the benefitting company to tie-up an arrangement with its bank for a facility meant for financing the acquisition of assets and ensure that it draws down the loan and services it successfully. The Fund will then kick in to offset 50 per cent of the interest charged by the bank.

Finance and Insurance Nigerian Content AchievementsThe OPTS notes that its members have deployed several initiatives to address the industrys funding challenges by collab-orating with Nigerian Banks. This has increased capacity of Nigerian Banks to

service the financing needs of the indus-trys contractors/vendors, led to an im-provement in their understanding of the dynamics of the oil & gas sector; helped to develop their capabilities on project financing as well as the underwriting of project risks.

Examples include Total E&P Nigeria Limited and Total Upstream Nigeria Limiteds signing of a memorandum of understanding (MoU) with eight banks in 2013 to provide an estimated $7.5billion (N1.24trillion) in contract funding to local contractors. The fund tagged the Ni-gerian Contractors initiative (NCI) is to bridge the funding gap for the companys local contractors including indigenous vendors and suppliers. The NNPC/MPN Joint Venture has also secured syndicat-ed project facilities totaling $975million from Nigerian Banks over the last ten years to finance the NGLII ($435millon), Satellites Field Development Phase 1 ($90million) & 2012 Reserves Develop-ment Financing ($450million) projects. The financing capacity of Nigerian banks grew from less than 10% of financing commitments in 2004 to 50% in 2012. A total of fourteen Nigerian commercial banks apparently participated in the financing arrangements over the same period.

The OPTS also states that its members have supported the greater participation of Nigerian insurance and re-insurance firms in operations and project risk underwriting and provision of insur-ance cover for projects/ facilities. Some examples of this include; the NNPC/MPN JV which retained three (3) Nigerian insurers - Lasaco Assurance Plc., Sovereign Trust Insurance(STI) Plc and Royal Exchange General Insurance Company Ltd. - as Lead insurers for its operational insurance programs. Under this arrangement, NNPC/MPN JV paid about $13.7million and $36.2million in premiums, in 2010 and 2011 respectively. Shell (SNEPCo) also retained Sovereign Trust Insurance as the lead insurer in 2011 for the Bonga North West /Phase II/STIFO Construction All Risks (CAR) insurance with estimated premium of $45million paid.

Argus Africa Storage and Logistics 17-19 September 2014Cape Town, South Africa

Petroleum

illuminating the markets

Market ReportingConsulting

Events

Exclusive OfferEnergy Mix Report readers can save 10% off the standard rate. Quote the reference code: ASLEMR to qualify.

argusmedia.com/africa-storage

For more information or to register, please quote the code ASLEMR and contact us: Visit argusmedia.com/africa-storage Call +44 (0) 20 7780 4341 Email africastorage@argusmedia.com

Key Speakers and Advisory Board Members Include:

Supporting Partners

Wale Fatoki, Managing Director, TSL Logistics

Dipo Salimonu, Chief Executive Officer, Moteriba Terminals and Logistics

Cyril Secchi, Products Trader, Golden Crown Petroleum

Gideon Loudon, General Manager, Oiltanking South Africa

Mustapha Fasinro, Chief Executive Officer, Linetrale

Baart Classen, Commercial Manager, VTTI Kenya

David Leisegang, Managing Director, Island View Storage

Erik Kleine, Managing Director, South Africa, Vopak

Kunle Adeniji, Head of Trading,Optima Energy

Akin Akinfemiwa, Group Chief Executive Officer, Forte Oil

Exhibitor

The Argus Africa Storage and Logistics conference will provide unrivalled new insight into the challenges faced by the players within the oil and chemical industries across Africa.

Mustapha Fasinro, Chief Executive Officer, Linetrale

16 / ENERGY MIX REPORT www.energymixreport.com / 17

F E A T U R E

DOWNSTREAM

Insurgents scare original manufacturers away from refineries maintenance

Govt cuts down on fuel import licensees for Q3

The original equipment manu-facturers (OEM) of the Warri, Port Harcourt and Kaduna refineries are unwilling to come to Nigeria for the planned turnaround maintenance (TAM) of the refineries due to security challenges in the North and the Niger Delta.

The former Group Managing Director, NNPC, Mr. Andrew Yakubu, at a capacity programme by the corporation organised for stakeholders in the oil and gas industry, confirmed this devel-opment and noted that security concerns raised by the OEMs were frustrating the planned TAM of the four refineries. He said that the OEMs turned down our request for them to come down to Nigeria for the maintenance because of per-ceived security challenges. The refineries are still available and running, and we are currently optimising their integral units.

The security challenges, which have been brought about as a re-sult of the activities of the Boko Haram sect in the North and the militants in the Niger Delta, has led to the OEMs developing security charts of the country, where most areas have been described as high security-risk locations. The development has necessitated the federal gov-ernment to look elsewhere and to engage other equipment and engineering companies to do thejob.

The federal government has reduced the number of companies licensed to import gasoline in the third quarter to 27 from 40 in the previous three months, lists cor-roborated by regional industry sources have showed.

According to Reuters, 27 companies were allocated gasoline import rights by Nigerias downstream regulator Petroleum Products Pricing Regulatory Authority (PPPRA), the lists showed. These companies are expected to import around 1.7 million tonnes for third quar-ter, down from 1.85 million tonnes in the second quarter. Though market sources expect some winners will be unable to import owing to financing obstacles some are still waiting for a backlog of subsidy payments owed by the govern-ment following the 2012 subsidy fraud investigation, which unearthed billions of dollars worth of fake claims.

Nigeria imports gasoline through two state-owned authorities PPPRA and the Pipelines and Product Marketing Company, PPMC. The names of compa-nies licensed to import gasoline for July to September 2014 by PPPRA are: A-Z, Aiteo, Avidor, BSR, Bovas, Conoil, Cyber-netics, Folawiyo, Forte Oil, Gulf Trea-sures, Hyde, Integrated, Matrix, Mettle, NIPCO, Oando, Rainoil, Sahara, Shore-link, Total, TSL, Mobil, Ascon, Hudson, Dee Jones, Techno and Masters.

DOWNSTREAM

Lagos State govt approves 250 hectares of land for Mid Oil refinery

Dangote refinery set to come on stream as licence is almost ready

The Lagos State govern-ment has approved about 250 hectares of land for the establishment of a 100,000 barrels per day Mid Oil Refining and Petrochemical Company Limited proposed

refinery in Ejirin, Epe Local Government Area of the state.

The acquisition of the land will enable the company commence necessary construction activities that would lead to it refining petroleum products after getting approval for the project from the Department of Petroleum Resources (DPR). According to a DPR source, the firms application is receiving the necessary attention and would get the go ahead to start work on the site for the project in due course.

Dangote Group is said to be poised to acquire the licence to start preliminary work on its proposed petroleum refining project from the Department of Petroleum Resources (DPR) as the agency is said to have concluded the evaluation of the necessary technical details on the first stage of the project.

The company is expected to be given an initial Licence-To-Estab-lish (LTE) and as work progresses there will be further evaluation by the DPR team. Based on its evaluation another licence; Ap-proval-To-Construct (ATC) could be issued. The last phase of the licence, the Licence-To-Operate (LTO) would come after every structure has been put in place, including all the processing units.

The basic engineering design and optimization for the project has been given to UOP, of the Honeywell Group of USA, and the award of project management consultancy has been made to Engineers India Ltd, a Government of India undertaking.

MOMAN, LUPAN urge FG to sanitise lubricants sectorThe Executive Secretaries of Major Marketers Association of Nigeria, MOMAN, Mr. Timothy Olawore and of the Lubricant Producers Associ-ation of Nigeria, LUPAN, Mr. Emeka Obidike have both stated that investors were worried about several illegal activities in the lubricants sector of the petroleum industry. They stated that the ac-tivities, including massive importation of fake and low quality lubricants have greatly threatened the stability of the domestic market.

According to them, the situation has also affected the legal operations of serious investors who were committed to the sustainable development of the sector in the nation. They remarked that the fake and low quality lubricants also constituted serious sources of damage to automobiles, generators and other appliances. The Executive Secretaries called on the federal government to ensure that these fake lubricants are eliminated from the domestic market and also made a strong case for introduction of policies, capable of discouraging their penetration in the domestic market.

NALPGAM calls for clarity with regard to regulation of domestic LPG marketThe Nigerian Association of Liq-uefied Petroleum Gas Marketers (NALPGAM) has called for clar-ification on the multiplication of operational regulations by various agencies of the federal government and indicates that the confusion has continued to create a series of imbalances in Nigerias domestic LPG market.

NALPGAM noted that asides from the Department of Petroleum Re-sources (DPR), which is statutorily empowered to regulate business operations in the domestic LPG market, other agencies of govern-ment whose statutory responsi-bilities are not directly connected to its operations have constituted themselves as part of the existing challenges limiting the growth of the LPG market.

President of NALPGAM, Mr. Basil Ogbuanu, stated recently at the An-nual General Meeting (AGM) and unveiling of the associations new logo in Abuja that the overbearing acts of these government agencies, notably the weight and measure de-partment of the federal ministry of trade and investment, has prompt-ed the association to seek better clarification from the government as to which of its agencies is actu-ally responsible for regulation of the domestic LPG market. Ogbuanu explained that given the terms of demands from such agencies, the association has in its bewilderment deemed it necessary to know the actual position of DPR in opera-tions within the domestic market.

Forte Oil, GTB partner to extend reach to customers

Forte Oil Plc has an-nounced a partnership with Guaranty Trust Bank Plc through the launch of GTExpress, a compre-hensive Agent Banking

Service at its locations nationwide. A statement said through the partnership, GTBank will leverage on the extensive reach of Forte Oils network of over 500 stations nationwide to further bring banking services such as account opening, cash deposit and withdrawal via ATMs, customer enquiries, bills payment and funds transfer closer to the people.

The Bank has rolled out in 14 Forte Oil locations including Western Avenue, Surulere; Bank Road, Ikoyi; Local Airport Road, Ikeja; Festac; Olorunsogo, Mushin; Shomolu, Ikorodu Road, Apapa-Oshodi/ Mile 2 Expressway; Boundary Road Ajegunle; Campos Square Lagos Island, Jebba, Ebute Metta; Old Apapa Road; Wharf Road and Kingsway Road, Apapa.

The statement also noted that customers at these same locations are also able to access Forte Oils premium petroleum products, such as premium motor spirit (PMS/petrol), Automotive Gas Oil (AGO/diesel); its renowned top quality lubricant brands such as the Super Visco, Visco 2000 and Synth1000 to mention but a few; as well as other non-fuel services such as telecommunica-tions, quick services restaurants, grocery stores, car wash and quick vehicle repair.

18 / ENERGY MIX REPORT www.energymixreport.com / 19

POWER

FG, 7 NIPP plant investors to negotiate Share Sale Agreement

Nigeria, US sign MoU to build $2.5bn power plant

Benin Disco secures USTDA grant Nebo inaugurates automated payment system for power sectorThe Joint Transaction Board (JTB) comprising

the National Council on Privatisation (NCP) and the Niger Delta Power Holding Company (ND-PHC), owners of the National Integrated Power Project (NIPP) and the preferred bidders for 7 of the 10 NIPP power plants are to commence negotiations over the Share Sales Agreement for the assets.

This follows the JTBs approval on March 21 of the preferred and reserved bidders for 7 out of the 10 NIPP power plants. The sale of the 3 other power plants, namely Alaoji Generation Com-pany, Omoku Generation Company and Gbarain Generation Company are affected by litigation instituted by Messrs Ethiope Energy Limited and have been stepped down until the matter is resolved.

The handover of the 10 NIPP plants was sched-uled for June 2014, according to the timelines unveiled in June 2013. But owing to non-comple-tion of some of the projects and pending litiga-tions as noted above, the privatisation process is several months behind schedule, while only seven assets are currently being sold.

United States power plant developer, Global Ed-ison Corporation, is set to build a new 1,500mw power plant in Anambra State following an agreement signed between the FG and Global Edison for the construction of the $2.5 billion gas-powered plant. The plant is part of a memo-randum of understanding (MoU) signed be-tween Nigeria and the United States (US) Power Africa Initiative.

The MoU which would outline the roles to be played by Nigeria and the US was signed in Abuja recently by the US ambassador to Nigeria, James Entwistle, and the Minister of Power, Prof. Chinedu Nebo, on behalf of both countries. Also to be achieved through the MoU is a 70mw solar manufacturing plant to be built in Nigeria.

The Benin Electricity Distribution Plc (BEDC) has become the first distribution company to benefit from a grant funding by Unit-ed States Trade and Development Agency (USTDA). The grant funding is offered for the purpose of Technical Assistance (TA) to update and modernise the electricity distribution network for BEDC in Nigeria.

A statement issued by the company said that its core investor consortium, Vigeo Power Limited (VPL), with the assistance of Citi Asset Management Limited (CAML), initiated this process in order to ensure that strategic investments initiatives to be taken by BEDC, will be based on adequate research and planning. The sign-ing ceremony was witnessed by the Minister of Power, Minister of Trade and Commence, Ambassador to United States, Deputy Ambassador to United States, Director of USTDA and USTDA Country Manager West Africa.

The Operator of the Nigerian Electricity Market (ONEM) otherwise known as the Market Opera-tor (MO) has unveiled a central revenue settle-ment system for the Nigerian Electricity Supply Industry (NESI) called the NIBSS-Power Collect system. The revenue settlement platform for all stakeholders in NESI was initiated and devel-oped by the ONEM in partnership with the Nigerian Inter-Bank Settlement System (NIBSS) of the Central Bank of Nigeria (CBN) as an automated revenue lifecycle management system.

According to the ONEM, the system is expected to help the market operator and other operators in NESI ensure equi-table revenue collection and splitting among themselves. It will also give the MO the tools to regulate market price stability. Nebo said in his remarks while inaugurating the

NDPHC to hand over power infrastructure to boost supply

The Niger Delta Power Holding Company Ltd (NDPHC) has concluded plans to handover distribu-tion and transmission sub-stations to Distribution Companies (DISCOs) to boost power supply in the country. The NDPHC Head of Communication and Public Relations, Mr Yakubu Lawal said the sub-sta-tions, which were spread across the 11 Discos in the country, would also include some electrical power transformers to improve the service delivery of the Discos. He gave a breakdown of some of the auxiliary power projects completed by NDPHC to include about 40 transmission lines, 45 transmission sub-stations and 20 sub- station extensions.

Bresson signs pact with Aggreko on 250 mw of electricityPioneer Independent Power Producer Bresson AS Nigeria Limited has concluded plans with emergency power conglom-erate Aggreko to bolster power supply in Nigeria with 250mw of electricity within the next nine months.

The memorandum of understanding (MoU) for the project which is to be cited in industrial clusters across the coun-try was concluded and signed in Paris, France by Bresson AS Chairman, Mr. Gbenga Olawepo and Aggreko Regional Director, Mr. Christopher Jacquin. Supply has been historically proven to be inadequate in areas of high activities, thereby inviting private sector interests to increase supply.

Olawepo said Bresson was determined to further add a total of 500mw within the next 12 months to its daily generation capacity through emergency power generation, particularly in strategic centres in order to arrest acute power shortag-es. Bresson AS, which owns Magboro 90mw power project situated in Magboro, Ogun State also hopes to commission its Magboro plant configured on 2GE LM 6000.

FG considers 3 options for TCN privatisationThe federal government is considering three options for the privatisation of the Transmission Company of Nigeria. This was disclosed by the Minister of Power, Prof. Chinedu Nebo, recently. The options being considered, according to the minister, are full privatisation, regional privatisation and concession of the TCN to private investors.

Nebo described the inflow of potential investors from all over the world into the country for the proposed privatisation of the TCN as massive. The minister, who did not give a tentative date when the privatisation process would begin, said the federal govern-ment was overwhelmed with the interest shown by investors, but would outline the process schedule in due course.

system said that ONEM had done a great job in taking the sector to a whole new level by the development and de-ployment of the NIBSS-Power Collect system. Nebo also urged stakeholders in the power supply chain to key into the system to ensure adequate data capture and transpar-ency in payment system. He said such stakeholders include the Generating Companies, the Transmission Company and the Distribution Companies.

20 / ENERGY MIX REPORT www.energymixreport.com / 21

NIGERIAN CONTENT: CHALLENGES ABOUND DESPITE RELATIVE SUCCESSESBy Noma Garrick

It is impossible to argue with the fact that there have been several major achievements with regard to the promo-tion of Nigerian content

and also that a lot success has been recorded since President Goodluck Jonathan signed into law the Nigerian Oil and Gas Industry Content Development Act (Nigerian Content Act) on April 22, 2010. However, as we will highlight briefly below, there have also been some instances which have called into question the ability of the Nigerian Content Act to ade-quately protect the interests of indigenous oil and gas compa-nies. Furthermore, several local companies maintain that it is still a challenge getting access to the choice contracts awarded by the multinationals thereby cre-ating a scenario whereby a lot of their services, factories, fab-rication yards and equipment are left idle not to mention the massive amount of revenue that has been lost as a result.

of expatriates, who perform job functions that Nigerians have capacity to execute. It has also been alleged that instead of resorting to the sanctions provided by the Act to enforce compliance, the Nigerian

Content Development and Monitoring Board (NCDMB) instead resorts to a more collaborative or persuasive ap-proach to get the erring multinationals to comply with the provisions of the Act.

A recent example of non compliance allegedly involved Total Exploration and Production Nigeria Ltd and its contractors Saipem and Hyundai Heavy Industries (HHI) of Korea, whom the NCDMB accused of gross violations of sections 28, 33 and 41 (2) of the Act by deploying non-compliant assets and expatriates. The NCDMB in this case however, appears to have wielded the big stick against Total by apparently stopping the companys Ofon-2 project. The NCDMB also banned Italian engineering, construction and drilling contractor, Saipem, as well as Hyundai Heavy Industries (HHI) of Korea, the contractor for Total on the project from participating in the ongoing and future tendering processes in Nigerias oil and gas industry as a result of what the board called abuse of expatriate quota and procurement processes.

Total, on its own part released a state-ment denying the reports claiming it had shut down its Ofon-2 project but acknowledged receipt of a notice of non-compliance with the Nigerian Con-tent Act, from the NCDMB, against one of its contractors, HHI. It also denied reports suggesting that there were only two Nigerians working for HHI on the Ofon-2 project. The statement further said that Total would be meeting with HHI and NCDMB to ensure a timely and satisfactory resolution of the issues raised by the NCDMB notice.

In Country FabricationAnother issue relates to the amount of in country fabrication for major projects in the oil and gas industry. In particular, not enough of the integration of fabricated steel structures which go into large structures such as Floating Production Storage and Offloading (FPSO) vessels is done locally. A typical FPSO in use for each of Nigerias deep-water oilfields has on average a weight

of more than 110,000 tonnes; a length of over 300 metres; and a width of about 60 metres. However, of this amount, only about 8,00010,000 tonnes per vessel are fabricated in Nigeria by indigenous contractors due to the fact that the ma-jority of the fabrication work is carried out in Korean yards by companies such as Hyundai Heavy Industries (HHI) and Samsung Heavy Industries (SHI).

Furthermore, the ongoing court action between Samsung Heavy Industries (SHI) of Korea and the Lagos Deep Offshore Logistics (LADOL) base is a serious cause for concern. SHI recently won the contract for the construction of the FPSO for the Egina Oilfield being developed by French oil giant, Total and the integration of the FPSO was originally planned to take place at the LADOL base in Lagos as SHIS pre-agreed partner and indigenous logistics and oil service provider. How-ever, at the Federal High Court, it was alleged by LADOL that SHI had sought to exclude LADOL from benefiting from the contract.

This is of particular concern as one of the policies of the NCDMB is that major oil and gas projects such as the Egina FPSO project should give rise to the construc-tion of a legacy facility in the country for the benefit of its economy and the employment of its citizens. In this case the legacy project was the upgrade of the fabrication and integration facilities at LADOL, which the NCDMB estimated would cost between $150 million and $200 million. While the facts of the case are lengthy, it suffices to say that much of the crux of LADOLs action is based on the fact that after the award of the contract, SHI sought to terminate the original arrangement and insisted on a re-evaluation of the in-country integra-tion strategy by suggesting that exporting the entire work to South Korea would save $500 million and avoid a 10-month delay in project execution. The case is still currently in court and the outcome yet to be determined, but should SHI succeed in securing offshore fabrication, it would present a major test to the objectives of the Nigerian Content Act at a time of extreme unemployment in Nigeria and

One of the core allegations that have been raised is that some multinationals have continued to violate the provisions of Nigerian Content Act through the use of expatriates, who perform job functions that Nigerians have capacity to execute.

Issues of Non ComplianceOne of the core allegations that have been raised is that some multinationals have continued to violate the provisions of Nigerian Content Act through the use

22 / ENERGY MIX REPORT www.energymixreport.com / 23

would also impact negatively on the aim of developing local capacity in Nigeria.

Discrimination and Under Utilization of Nigerian ServicesThere are also still complaints of discrim-ination and under utilization of indige-nous capacity in the oil and gas industry. These allegations of discrimination have been made with particular regard to project rates and also remuneration in relation to Nigerian man hours when compared to the value of expatriate man hours. Linked to this are also allega-tions of the poaching of skilled Nigerian workers from indigenous firms by foreign companies in the services sector of the in-dustry, thereby reducing the human capi-tal base of local firms. A senior executive of a local service company recently noted that; indigenous companies providing similar services to their foreign coun-terparts are paid less thereby affecting negatively their ability to sustain compe-tent and certified personnel, especially those trained by them. He also stated that payments for projects executed by local firms executing projects for major oil companies should be at par with what foreign contracting firms obtained.

At the Practical Nigerian Content Work-shop held in Yenagoa, Bayelsa State late last year, the executives of top indigenous companies such as Oando Energy Ser-vices Ltd, Mr. Bandele Badejo and Fenog Nigeria Limited, Mr. Chukwudi Uwakwe;

made appeals to the IOCs operating in the country to encourage local operators by considering them for more contracts and ensuring fair treatment for them. This is particularly the case as they had borrowed large sums from local and in-ternational banks to boost their capacities and needed to meet their obligations with their respective banks.

Legal services also appear to be an area which has suffered some neglect with re-gard to Nigerian content strides. Section 51 of the Act provides that all operators, contractors and other entities in any operations, business or legal services transaction in the Nigerian oil and gas in-dustry requiring legal services shall retain only the services of a Nigerian Legal Prac-titioner or a firm of Legal Practitioners located in Nigeria. However, according to several prominent legal practitioners, the amount of legal instructions emanating from the industry is still considerably low despite the promulgation of the Act. With most of the notable, considerable high fee earning transactions still largely given to foreign law firms.

Crude Oil Lifting Another area where there has been low compliance with the Act over the last four years is in the area of crude oil lifting. Section 3 (1) of the Nigerian Content Act

stipulates that Nigerian independent op-erators shall be given first consideration in the award of blocks, oil fields licenses, oil lifting licenses and in all projects for which contract is to be awarded in the Nigerian oil and gas industry subject to the fulfilment of such conditions as may be specified by the Minister. However, up until recently, there were literally no Nigerian vessels involved in the lifting or transportation of crude oil since its discovery in commercial quantities back in 1956. There now seem to be some promising signs going forward as the Nigerian National Petroleum Corpora-tion (NNPC) awarded the yearly crude oil lifting term contracts for 2014/2015 to mostly Nigerian companies comprising Aiteo, Taleveras, Barbedos and others, and by so doing, downsized contracts traditionally awarded to international oil traders. The Minister of Petroleum Resources, Mrs. Diezani Alison-Mad-ueke, explained that the contract awards to indigenous firms to lift crude oil were to promote even local participation in the oil and gas sector. How successful this development will be however, remains to be seen.

The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, explained that the contract awards to indigenous firms to lift crude oil were to promote even local participation in the oil and gas sector. How successful this development will be however, remains to be seen.

24 / ENERGY MIX REPORT www.energymixreport.com / 25

Society of Petroleum Engineers (SPE): NAICE 2014

From top left to bottom right: (1)A cross section of delegates at the opening ceremony (2) Abdulrazaq Isa, Danjuma Saleh, a delegate and Bernard Oboarekpe (3) Chevron exhibition booth (4) Cross section of delegates (5) Felix Amieyeofori and other delegates (6) Cross section of industry awardees at the industry awards night (7) Alex Neyin, Chairman BoT of Nigeria Council, SPE (8) Mutiu Sunmonu (9) Austin Avuru, Bernard Oboarekpe, Dr. Ike Ibe, Engr. Taofiq Tijani, Mark Rubin and Cornelius Zegelaar (10) Bernard Oboarekpe, Emeka Ene and Eng. Taofiq Tijani (11) Shell exhibition booth (12) Bernard Oboarekpe, SPE Chair, Nigeria Council and an awardee (13) SPE NAICE 2014 Exco members (14) NPDC exhibition booth (15) Richmond Osuji, Chi Ukpai, Folorunsho Alakija and other delegates

1

3 4

10

12 13 14

76 8

11

5

2

15

I N D U S T R Y E V E N T

9

Nigeria emerges UNEPs regional centre for marine pollution

DPR to begin electronic processing and issuance of service permits

Proposed NEMSA Bill may blur regulatory lines in the electricity sector

The United Nations Environment Programme, UNEP, has sited the headquarters of the regional coordina-tion centre to combat marine pollution in West, Cen-tral and Southern Africa, in Nigeria. UNEP Regional Coordinator on the Abidjan Convention, Mr. Abou Bamba, stated that the decision to grant Nigeria the centre hosting right was reached at the 11th meeting of the Conference of Parties to the Abidjan Conven-tion and that Nigeria won the right based on its long years of experience in marine pollution management.

According to him, with this special hosting right, Nigeria would be in charge of the coordination of combating trans-boundary marine pollution across the 22 countries of the Abidjan Convention. As the host

The Department of Petroleum Resources (DPR) is to commence electronic processing and issuance of statutory oil and gas industry service permits (OGISP), in line with initiatives of the agency to reposition and ensure enhanced service delivery.

By this development, Nigerian registered companies seeking to render services in the oil and gas industry would be required to submit online applications for new permits and the renewal of expired ones to the oil and industry regulatory agency with the required documents.

Head, Public Affairs at the DPR, Ms. Dorothy Bassey, explained that the electronic application system for statutory permits is the beginning of digitalisation of the agencys entire licensing and permitting system and is geared to remove bottle-necks and ensure quality service. She explained that the online application system will require applicants to log onto the DPR website to create their company accounts from which they can apply for different categories of permits upon completion of the appli-cable forms.

She said duly completed applications would be processed within 72 hours and that all required steps for the online application processes, including the specified fees and charges for all the statutory service permits are currently posted on the DPR website.

A private members bill called the Nigerian Electric-ity Management Authority (NEMSA) bill currently before the National Assembly may blur the lines in Nigerias electricity sector. The bill, a private members bill, proposed by Hon. Patrick Ikhariale, Chairman of the House Committee on Power and Steel, proposes to situate NEMSA as a technical regulator and enforcement institution in the Nigeri-an Electricity Supply Industry (NESI).

The bill seeks to convert the Electricity Inspec-torate Service (EIS), whose functions previously carried out under the auspices of the Ministry of Power had been transferred to NERC in the Electric Power Sector Reform Act, to the National Elec-tricity Management Authority (NEMSA)). The bill further proposes that NEMSA will also take over the staff and assets of the current Electricity Man-agement Services Plc.

However, the Nigerian Electricity Regulatory Commission (NERC) has powers similar to those being sought to be vested in the new authority. The National Electric Power Policy (NEPP) 2011 which is the foundation of Nigerias power sector reform and the Electric Power Sector Reform Act (EPSR) 2005, particularly section 32 provides clearly for the mandate of the NERC as the technical and eco-nomic regulator of the Nigerian Electricity Supply Industry (NESI).

Solar technology to drive rural electrif-ication projects Nebo

Brittania-U files appeal at Supreme Court over disputed Chevron blocks, cautions Minister against contempt of court

FG to generate electricity from coal fields, to revoke non-performing coal licencesMinister of Mines and Steel Development, Mr Musa Sada has said that the federal government would develop coal fields across the country to facilitate electricity generation and industrialisation. Sada said the federal government had introduced the National Integrated Infrastructure Master plan (NIIM) to develop coal fields as part of designed efforts to generate power and fast-track industrialisation. According to him, the federal government has identified 16 coal blocks in Enugu, Gombe, Nasarawa, Benue, Delta and Kogi states.

He said the Nigerian Geological Survey Agency and the National Steel Raw Material Exploration Agency (NSRMEA) were still undertaking exploration work on coal deposits in the country. He also said that the Ministry of Mines and Steel Development, in collaboration with the Ministry of Power, had established an inter-ministerial committee to assess people who could use coal to produce power. The minister said some coal blocks were currently under the supervision of the Ministry of Power to enable investors to generate coal for power generation.

The federal government has also sternly warned that it would revoke non-performing coal licences. The National Council on Privatisation held a meeting with Vice President Namadi Sambo at the Presidential Villa recently where the warning was issued to those holding coal blocks. After the meeting, the Minister of Power, Prof. Chinedu Nebo, noted that those who had coal licenses had not performed optimally, as coal was still in short supply for power generation. He stated that those who have no immediate plans to produce coal would have their licences withdrawn. Sada added that a deadline of one month would be placed for those having the licences to give reasons why their licenses should not be revoked.

for the centre, Nigeria would among other functions, be required to collect and disseminate relevant information, initiate, design and assist in the running of national and regional training courses and exercises and assist the countries in ensuring the sustainability and revision of their national plans and of the sub-regional contingency plan.

Others include; facilitation and coordinating internation-al assistance in cases of emergency, fostering scientific and technical cooperation with UN specialised agencies, intergovernmental, governmental and non-governmental organisations, and facilitation of the provision of techni-cal and scientific assistance and training to governments and institutions within the region.

ALTERNATIVE & RENEWABLE ENERGY LEGAL

ENVIRONMENT

REGULATORY

The Minister of Power, Prof. Chinedu Nebo, has said solar technology solution will replace the traditional use of genera-tors as a primary source of energy for the rural electrification projects across the country. Nebo disclosed this when a group of officers from the Defence Command and Staff College (DCSC) of Bostwana, led by its commandant, Brigadier Shadrack Moloi, visited the ministry.

Represented by the Permanent Secre-tary, Dr Godknows Igali, Nebo said with improvement in the storage capabilities of solar, it was now possible for rural people to enjoy electricity without any hindrance. He also identified the need to train locals in the maintenance of solar panels and other ancillary facilities, adding that solar power is not only sustainable, but also renewable and better than diesel generators.

The legal battle over the disputed Chevron oil blocks has shifted to the Supreme Court as Brittania-U Nigeria Lim-ited has filed an appeal at the apex court challenging the ruling of the Court of Appeal sitting in Lagos against the extension of the interim orders made by a Federal High Court in Lagos on the disputed oil blocks Oil Mining Leases (OMLs) OMLs 52, 53 and 55.

The lawyer to Brittania-U, Mr. Ricky Tarfa (SAN) has also petitioned the Minister of Petroleum Resources, Mrs. Deziani Alison-Madueke, the Nigerian National Petroleum Corporation (NNPC) and other relevant parties not to jeopardise the ongoing suits by taking actions that would pre-empt the outcome of the case in court. Brittania-U is claiming specific performance of the assignment of the three OMLs or $10billion damages for wrongful repudiation of the contract.

26 / ENERGY MIX REPORT www.energymixreport.com / 27

Delta State communities threaten NPDC with shutdown of its activities

Chevron to double donations to social projects in Nigeria

ExxonMobil announces second quarter 2014 results

Royal Dutch Shell Plc announces second quarter 2014 results

The Opuama/Ikpotogbene Community in Warri North Local Government Area of Delta State has called on the Nigerian Petroleum Development Company (NPDC) to immediately halt oil exploration and exploitation activities in its community, alleging that the company did not follow due process before its ongoing operation in the area. The community expressed disappointment with the apparent decision of the company to abandon the process initiated to fashion a Memorandum of Understanding (MoU) between the host communities and the NPDC.

This is comes barely days after the NPDC, which is a subsidiary of the Nigerian National Petroleum Corpo-ration (NNPC), was given a similar notice to quit a com-munity for alleged illegal entry and commencement of operations in the locality by Youths, women and elders of Polobubo (Tsekelewu) community in Warri North.

Chevron plans to nearly double its donation to Nige-rian social projects over the next five years, part of a choreographed plan to improve the local economy and bolster the companys supply chain in the African country, its second-largest source of crude oil. Accord-ing to Reuters, Chevron is donating $40 million to the Niger Delta Partnership Initiative (NDPI), a nonprofit it helped form in 2010 with $50 million in seed money. The second round of funding will make NDPI the larg-est recipient of Chevron donations in the companys history, executives said. The NDPI works with local organizations in the Niger River Delta to help cull HIV transmission rates, teach cassava farmers marketing techniques and connect catfish breeders with feed sup-pliers, among other projects.

ExxonMobil has announced its second quarter 2014 results. The multinational in a statement through its Chairman Rex W. Tillerson commented: Exx-onMobils financial results were achieved through strong operational performance and portfolio management. We continue to enhance shareholder value by funding capital projects and delivering robust shareholder returns through dividends and share purchases. Upstream production for the year remains in line with plans and we continue to add volumes from our high-quality development port-folio through assets such as the Papua New Guinea LNG project, which started up ahead of schedule during the quarter.

Second quarter 2014 earnings were $8.8 billion, up 28 percent from the second quarter of 2013, reflecting strong operations and asset divestments. Capital and exploration expenditures for the first half of 2014 were $18.2 billion, down 17 percent from the first half of 2013. Through the first half of 2014, the Corporation distributed $11.7 billion to shareholders through dividends and share purchas-es to reduce shares outstanding.

Royal Dutch Shells has announced its second quarter 2014 earnings. Its earnings on a current cost of supplies were $5.1 billion compared with $2.4 billion for the same quarter a year ago. Earnings included an identified net charge of $1.0 billion after tax, mainly reflecting impairments which were partly offset by divestment gains. Second quarter 2014 CCS earn-ings excluding identified items were $6.1 billion compared with $4.6 billion for the second quarter 2013, an increase of 33%.

Cash flow from operating activities for the second quarter 2014 was $8.6 billion, compared with $12.4 billion for the same quarter last year. Excluding working capital move-ments, cash flow from operating activities for the second quarter 2014 was $11.0 billion, compared with $8.4 billion for the second quarter 2013. Capital investment for the second quarter 2014 was $8.5 billion. Net capital investment for the second quarter 2014 was $1.1 billion, compared with $10.9 billion for the same period a year ago.

Total dividends distributed in the quarter were $3.0 billion, of which $1.0 billion were settled under the Scrip Dividend Programme. During the second quarter some 8.6 million A shares were bought back for cancellation for a consideration of $0.3 billion. Shell has now cancelled the Scr