Group Executive Director, Gas and Power, Nigerian National Petroleum Corporation (NNPC), Dr. David Ige, led the Federal Government’s delegation to the 2015 Offshore Technology Conference (OTC) in Houston, Texas, United States (US), where he had a no-holds-barred interview with journalists. ENERGY EDITOR, Adeola Yusuf, was there. Excerpts:
What is your assessment of Nigeria’s participation at the 2015 Offshore Technology Conference (OTC)?
We have gone round the various stands and it has been quite impressive. But despite what appears to be a very low morale in the industry, we have a strong presence of Nigerians here, exhibiting their products and services. And I think that the continued growth of the service sector shows the growth and vibrancy of the oil and gas sector. I think that overall, there is a lot to be proud of as Nigerians.
What is the Federal Government doing to attract more foreign direct investments (FDI) into Nigeria?
Nigeria is blessed with a lot of resources in terms of oil and gas and that remains a natural location to attract people into the industry and with capital there. Over the years, we have consistently seen foreign investment. There has been an aggregate increase in foreign direct investment in Nigeria and also in the industry.
And, clearly, there is a lot of competition globally for capital as a result of new discoveries in other locations, but we have found out that still, Nigeria has the potentials to be one of the most competitive locations globally. Though, there is still a lot of work for us to do to maintain that competitive edge, but with the different stakeholder engagement we are having, PETAN, Nigerian Content and policy intervention, we will continue to reposition ourselves such that Nigeria continues to be an attractive location for investors to come in. The infrastructure and baseline is there. And have been on for a few years. So, it is easy for people to come in here. All we need to do is to ensure that as competition come on, we still maintain our position so that we can compete favourably.
What is the level of works on the East West pipeline?
Construction has started on the East West pipeline and, as you know, we are beginning to make progress on the infrastructure on both sides. Our expectation is that by December 2016, we will have had mechanical completion of the pipeline and, early 2017, we will start to flow gas on it.
Power epilepsy has been blamed on insufficient gas supply to thermal stations. Has this stratum witnessed any improvement?
At the moment, gas supply to power stations has grown to over one billion cubic feet per day and I think that before the end of this year, we will see a significant increase as well. Cumulatively, we are producing about two billion cubic feet of gas now. Some of the gas we are producing and that are available are stranded because some of the power plants, I think, are not ready. So, over the next couple of months, we should see an increase. For example, we have got gas at Gbarain pipeline, which should be ready for commissioning.
Egbema and other plants also have gas. So, when you put all these together, we have about two billion cubic feet of gas. But not all of it is in active generation today, either because the power plant is not ready or because power evacuation is not ready. On the western side of Nigeria, where the power plants are ready, we have a shortage of gas, which amounts to about 400 cubic feet of gas. We expect that before the end of this year, we will have reduced this significantly as some of our projects come on stream. By and large, over the next 12 to 18 months, we are expecting almost complete levelling up of supply to power plants.
What is happening in Lagos- Escravos pipeline?
Lagos pipeline is almost completed. We expect that within the next three months, that project is done. We have completed and commissioned Lagos all the way up to Uben; we have completed Emuren (Ogun) all the way to Itokin in Lagos. So, the bit that remains now is from the Benin end to Emuren, but this is progressing very well and the expectation is that by August this year the pipeline would have been completed and would have doubled the capacity to two billion cubic feet per day. This should be the biggest pipeline in Africa.
Why do you think that gas pricing has remained an issue for producers and consumers despite the increase in price?
I am not exactly sure why gas price is an issue for producers and consumers because gas price has been increased to export parity in Nigeria, so the issue today is not pricing really. What has remained a challenge in Nigeria is the mounting debts because gas price is not being paid by consumers at the rate at which it is supposed to be paid. In the last couple of months, the CBN put a programme in place to extinguish some of the legacy debts, but we are going to make sure that the new volume that are being supplied are actually being paid by end consumers through the power operators back to the gas suppliers. I think that the issue is not the price; it is more around the collection and payment of that price.
Otherwise, I see no reason why anybody should complain; our price right now is pretty much at par with reasonable standard. So, our gas price domestically is basically competitive. And of course, we have room now for willing buyers and willing sellers’ arrangement and you can see that people now negotiate their prices and they can get what the buyers can pay.
Overall, there might be a miscommunication about pricing; pricing is at the optimum or close to the optimum now. More importantly, there is willing buyers willing sellers’ arrangement anyway, so the market is free, but it is just for the market itself to stabilise to a level where people pay for what they take. Those who have entered into an agreement before this arrangement will also be accommodated.
This is because once the minister announces the new price for gas, it definitely reflects on all gas supply agreement. So, any gas agreement right now is supposed to reflect the gas pricing for the volume that are within the base load. With this, anybody who is doing a new transaction must do on willing buyer-willing seller agreement, so nobody is cut off in this arrangement.
There is a fall in power generation to below 3,000mw. Considering the volume of gas, which you said is available now, what should have been responsible for this drop?
We are having quite a lot of issues that are interlinked in the power sector. For the past two months, one leg of the Escravos- Lagos pipeline between escaravos and Ojidi and Warri has been down after the vandalisation. It has taken us this long to repair the pipeline because, first of all, the elections meant that the JTF could not provide security for our people to go in there and access. So, it was only after the elections that people can now go-in there and access and work is on-going right now to effect that repair. So, with the loss of that pipeline at the moment, we are losing close to 120-150 million cubic feet per day of gas, which has been the case for the last eight weeks or so.
In addition to that, the Trans Forcados pipeline, like you know, is attacked about four weeks or three weeks ago, there was an attempt to repair it, but when we try to bring back that online, we noticed further leakage, which I believe has just been fixed or is being fixed right now. With the Transforcados pipeline out, we are losing gas supply from Obein, from Sapele and from NPDC, which is a significant one. So, right now, we are losing gas from Escravos and we are losing gas from the Obein axis; that is a significant amount of our supply capacity that is down on the western side. On the Eastern side, you know that we have had issues with evacuation, largely evacuation issues. Even though we are able to supply gas to Okpai power plant, the power sector evacuation challenges do not make us to evacuate all of that power.
So, Okpai sometimes is not been able to operate at full capacity. We are able to supply to Ibom power, but Ibom power has been operating at about 50 per cent capacity for quite some months now. Although, the gas is there, the power plant is not working at full capacity. We are able to supply gas to Alaoji, but the Alaoji power plant is not able to evacuate power, because when Alaoji is on, you cannot be able to evacuate Alaoji and Calabar.
It is a combination of issues, this is the time that the hydro generation is at the lowest; we have lost 300mw from Shiroro as a result of hydro going down. So, bringing all these together is almost like a perfect storm for a much reduced generation. I believe that over the next couple of weeks, as we repair the pipelines and we also receive the rain storm and, of course, some of our projects that have been commissioned, which the outages have earlier affected, will be back on stream. So, you should be able to see some improvements in the next couple of weeks. But all the problems we face right now are actually shortterm problems and not problems that are due to supply.
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