The “Audu Ogbeh is right?, Everything jaga-jaga, Agbero Franchise Model, Gencos not dancing to Disco, Edition: Nigerian Oil, Gas and Power Round-up, August 8–12, 2016.
Everywhere jaga-jaga, everywhere scatter-scatter.
Chaos. Anarchy. Dystopia. Lawlessness. Pick one of these to describe the state of oil and gas production in the Niger Delta.
3 major force majeures currently declared: Forcados, Qua Iboe and NLNG. Very few places in the world share that honour. Maybe Libya and Iraq. We are a laughing stock now.
During the week, the spate of assaults took another dimension as what seemed to be an Ijaw-centric campaign now includes an ‘Urhobo’ militant group. Seems they were bored of not getting some attention. They blew a pipeline (an empty one) around Warri.
Three soldiers were also murdered around Nembe. Routine stuff.
If you see kiamo bia bia dem
Lock am for
jail for Abuja Akinsley Agbe
Himself dey for there Ade
Gbedo na him, They feed all of
them (ye pa) inside
Prison prison everything
scatter, scatter poor man
Dey surfer, surfer (gbosa, gbosa)
gun shoot
inna the air (x2)
Audu Ogbeh is right?
Lots of emotive discussion during the week around Audu Ogheh’s threat to fertilizer companies in Nigeria. He warned them from prioritizing exports over domestic supply in a very Chavez-esque way triggering lots of vitriol and condemnation. I am constrained to use very mild words about Audu Ogbeh’s performance as Agric Minister especially when we had Akin Adesina just a dozen plus months ago. Seems a huge step down. I am convinced that the problem with the fertilizer scarcity is around the corruption along the supply chain, an issue Adesina tacked quite successfully during his tenure.
But is Audu Ogbeh totally wrong to seek concessions from fertiliser producers in Nigeria? No. I am wary of absolutism because it stifles the opportunity for healthy discussions. Government has a role to play in influencing prices especially farming inputs like fertilizer. Until 2015, the US did not allow exports of crude oil while the Jones Act still forbids intra-country journeys with non-US flagged ships.
As an incentive, fertilizer companies in Nigeria pay substantially low prices for their major input, natural gas. The average fertliser plant in Nigeria by regulation pays less than $1/mscf for gas while power plants pay $2.5/mscf and others pay beyond $3/mscf. The argument is that for gas based industries, the low gas prices would support investments, jobs, local supply of fertilizers etc. Infact, a key crux of the gas aggregation process is for gas producers to ‘share in the pain’ of supplying to these fertiliser companies. It’s a necessary form of ‘price socialism’.
So when these fertilser companies prefer to export to the global market where their competitors are paying for gas at $5/mscf, they have an undue, subsidized advantage. Government has the leverage (not right) to demand for lower domestic prices albeit under a clear, unambiguous and well-structured framework. Maybe a ‘domestic supply obligation’ can be introduced especially for those who want to benefit from the low gas prices. For those who are ready to pay ‘market’ prices, they may be free of such obligation.
The Indonesians want to own Seplat
Pertamina, the Indonesian National Oil Company may own a substantial part of Seplat in the nearest future. They are currently bidding for the Maurel & Prom who own over 20% of Seplat. Note that Pertamina is a third world owned government entity and been run professionally enough for it to consider foreign acquisitions. I comment my reserve.
New IOC heartland
There is the story I heard about an International Oil Company who sent an advance team in the 80’s to check out the possibility of making Nigeria their technology hub. Few days here and the team had witnessed multiple power cuts enough to convince them this was not the place to be. They moved that tech headquarters to Malaysia. Beyond the obvious, the lesson I draw from this story is the willingness of the oil companies to make Nigeria the heartland of their operations. For many of them Nigeria was core. Nowadays, we have lost our lustre. New heartlands are shaping up around the continent. The Tanzania-Mozambique axis is evolving, Egypt is regaining its form and the Senegal/Mauritania axis are becoming an option. The import of these is that the plum jobs and exposure that a generation experienced could disappear.
To arrest this situation, it’s time to address the security challenges and also very importantly rejig our gas and Deepwater policies. As most IOCs become gas-centric, it may be prudent to tweak certain policies to encourage investment.
Gencos are not here to dance Disco + Agbero franchise model.
Once Nigerian’s form associations, be wary. Electricity generating companies during the week lost their cool and issued a statement decrying the debt overhang on the industry. N156 Billion is said to be owed to the six of them. Clearly the Discos are the weakest link in the power sector value chain as most have not improved capabilities since the acquisition of the assets in 2013. I have always felt there are options for the Discos to address the huge challenge. Benin Distribution alone covers four states, the size of Greece. Eko Disco oversees a dense network of almost a million households. To develop capability to effectively distribute power in all these areas is a herculean task.
That’s why I am recommending an ‘Agbero franchise model’ ™ (lol) for the power industry. I would address this in detail in a later edition or separate essay. The ‘Agbero franchise model’ is the way to go. Its proven and tested.
Tit-bits from the SPE Conference
At a panel session, a Professor asked Austin Avuru, Seplat MD, in public why Seplat would get ‘pioneer status’ for a field that was already producing. In his usual brilliant manner, Avuru countered that the law allowed Seplat to take the opportunity. Seplat was also the 13th company to take advantage of the obnoxious pioneer status provision. They were just exposed by their IPO prospectus.
He emphasised that in his meetings with Okonjo Iweala who tried to cancel Seplat’s pioneer status, he threateaned to sue the Federal Government. Of course NOI backed out. Problem is that provision has not been removed from the gazette. Only a matter of time before another company finds their way through the hearts of the guys at Nigerian Investment Promotion Commission.
Company of the Week
Sahara Energy.
Top 5 biggest Nigerian Company. Very understated.
Stake in 5 oil assets — OPL 274, 284, 286,. OML 40 and 18.
Owns majority stake in Ikeja Electric and Egbin Power. (Conflict of interest?). And Afam power in Rivers state.
Big oil and products trader and shipper.
Is directing traffic at the Redemption Camp the ‘DJ Khaled key’? I wont argue much.
