Monday, February 24, 2020



…Nigeria only OPEC country importing fuel
…Ninth in gas reserves in the world, but has less than 4000megawatts
…The country should take clue from telecoms industry
…Gas the only way out of the conundrum

-By Felix Douglas

Nestoil is one of Nigeria’s independent companies that has thrived in the oil industry with interests in exploration, services in the value chain. During the recent Nigeria Oil and Gas Conference, NOG 2019, the company participated in spotlight session of which the Group Managing Director, GMD, Dr. Ernest Azudialu was invited to speak on the topic “Amplifying Innovation in the Oil and Gas Industry.”
The GMD of Nestoil was represented by Dr. Chukwueloka Umeh, Executive Director of the company. Umeh oversees the running of affairs within the group with regards to pipelines, power, aviation among other services for the company.
Speaking to oil and gas executives at the spotlight session, Umeh asked: “where has Nigeria been in the oil industry, where is she now, where is she going or would have been.”
He made it known that oil was discovered in 1956 in Oloibiri what is now Bayelsa by Shell BP the country has the capacity of over 2.5million barrels of oil per day. Nigeria is currently the 6th exporter and producer of oil in the world, certainly the largest in Africa. Apparently, Nigeria is the only Organization of Petroleum Exporting Countries, OPEC member that is importing fuel and largest importer of Premium Motor Spirit, PMS. This is a school of thought for the country.
The country’s refineries are grossly inadequate to support domestic needs. According to the Nigerian National Petroleum Corporation, NNPC, Nigeria has the 9th gas reserves in the world and as at 2018, it added over a trillion cubic feet, tcf, of gas at NLNG and domestically she produces less than 4000 megawatts of power with over 180 million people. This means every Nigerian gets less power in comparison to Norway that produces 36000 megawatts for 3million people and South Africa with 2000 megawatts for 7million people.
Astoundingly, Umeh posited that the country produces fertilizer and also imports it. Natural gas is one of the key ingredients of producing fertilizer, “there is no reason why we should not produce everything we need here”
The Nestoil Executive Director who had his background working for General Electric in the United States, designing specifically low emissions gas turbine engines both for power generation and aviation industry, was also a rocket scientist and did a few projects with NASA.
In terms of gas to power, Umeh made an illustration: “Think about a man that lives on the banks of a river with his family, the water in the river is clean, all he has to do is to walk to the river, fetch the water and use it daily but he treks over 20 kilometres every day to go buy water from someone that is collecting this water, bottling it, and selling it for a profit. That is what we are doing.”
He stated further that several indigenous oil companies like Nestoil took advantage of opportunities created in the country by the International Oil Companies, IOCs, and its local counterparts.
Nestoil is an Engineering Procurement Construction, EPC company. It does its EPC and commissioning of oil and gas pipelines, essentially infrastructures to produce oil, gas and market them as well.
Dr. Umeh disclosed that in the twenty-eight years of Nestoil existence, the company had built over 300 kilometers of pipelines and several flow stations especially in harsh terrain in Nigeria including seasonal swamp land and toughest communities in the Niger Delta. Commendably, its activities are done with zero loss of life.
Nestoil and other EPC companies in Nigeria with over 2000 employees working in the industry have thrived tremendously. For the better part of fifty years, Nigeria has been largely an oil producing country with about 37billion barrels of proven reserves. The practice of exploring and producing oil is well understood.
In spite of the presence of IOCs and some indigenous companies that have sprouted in the oil industry, in today’s world, the focus is shifting. Countries are beginning to look at other forms of energy beyond fossil fuels.
The Nestoil Executive Director advised Nigeria to shift its direction to gas. “African countries including Nigeria must look closely, gas is a resource that can be used to produce power, petrol-chemicals and the country has worked on technologies to perfect it so that the environment will not be impacted negatively as it works with things like coal.”
Umeh added: “The country should think of a paradigm shift without it, it is going nowhere. The country has an understanding of how to produce gas but something is missing. Gas production for transportation, the use is simple. What the country should bother on is how to use it, and this is where the innovation must come in, it is easy to copy and paste whatever other countries have done. When you copy and paste, it might not work in your environment and it hasn’t work for us, we need to start thinking of different ways to do the same thing so as to achieve different result.”
As a developing country, Nigeria should take a clue from the telecoms industry. Africa has the highest penetration of internet in the world. In Nigeria, specifically, it has 55% penetration of internet. One among two Nigerians have access to internet that is about 111million people in 2019.
Why the telecoms industry is successful in Nigeria? It is due to segmentation. Service provider such as MTN, GLO, 9MOBILE and others focused on providing quality services, voice and data. Others bother on providing towers and fibre.
Umeh said at present, “If you do not like your MTN service, you can port to GLO, if you don’t like GLO, you port to 9MOBILE, if you don’t like the price of 9MOBILE, you are free to go elsewhere. This is a true market.” The market is regulated by the Nigeria Communications Commission, NCC.
Regulation creates a playing field that supports private companies to build businesses and put in their best to make it work. This must also be applied in the country to make gas works.
If Nigeria replicates what is done in the telecoms industry, what will be experienced is a situation where Generating Companies, GenCos, are able to get their licenses and other permit they need within two to four years without bureaucratic hooks. They will also be able to get Foreign Direct Investment they need from other countries.
Dr. Umeh advocated for Independent Power Plants, IPPs, to be built. When IPPs are built they should be allowed to sell power at Cost Reflective Tariff. This means money is borrowed to develop the system, right tariff is charged, loan is paid and profit made. There is win-win strategy. Investors are in business to sustain it and make profit.
Another strategy is that Distribution Companies, DisCos, should be allowed to sell power to customers at a reasonable price so as to make required investments. Companies need to own the networks, transmission wires, distribution wires and transformers so that DisCos can focus only on the basis of selling power.
“If I do not like the person selling power to my house, I go to another seller, competition will start to drive the pricing and quality service being offered. As this happens, more gas will be produced in the country.”
This method should be replicated in the oil and gas industry, produce more gas and built pipelines. The gas master plan in Nigeria is in progress but work is too slow, it has to be accelerated at fast pace to move the industry forward.
Taking a clue from a nation like China, why is the Asian giant working? It took about twenty years for the country to change its economy around. It invested massively in infrastructure, power generation, production of goods and services. At present in China, there are power lines dotted in the country.
For Nigeria to have a robust economy, it has to improve its gas networks and allow it to run in people’s homes including all the states of the federation. This will in turn reflect in power plants.
Imagine a situation when Nigerians will turn on their lights at home and it comes on, it is doable but the country has to change the way it approaches the industry.
There is need to take a different approach in the way things are done. Regulations and innovative ideas are required to make things work. Umeh stated thus, “Without this we are just living in a pipe dream and we are going to be here next year and the year after saying the same things.”

Energy Focus
Editor at Energy Focus Report.

Leave a Reply

Your email address will not be published. Required fields are marked *