A Review of the Nigerian Energy Industry

Nigerians, businesses groan as energy crisis worsens

25 May 2015, Lagos – The worst energy crisis to ever befall Nigeria is taking its toll on Nigerians and the country’s commercial nerve centre Lagos, and could pose a national security threat to lives and property.

Fuel scarcity persists
Fuel scarcity persists

What started out as protest by oil marketers and tanker drivers over the non-payment of outstanding subsidy claims last month, has now snowballed into a bigger crisis brought on by the ongoing strike by senior and junior staff of the Nigerian National Petroleum Corporation (NNPC), long considered the supplier/operator of last resort in the country.

The National Union of Petroleum and Natural Gas (NUPENG) and Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) are protesting the approval granted by the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, transferring the operatorship of Oil Mining Lease (OML) 42 by from NNPC’s exploration and production subsidiary – Nigerian Petroleum Development Company (NPDC) – to the Neconde Energy Limited, which acquired a 45 per cent in the oil block from Shell, Eni and Total over three years ago.

Owing to the strike embarked upon by NNPC personnel, not only has the corporation stopped the distribution and marketing of petroleum products nationwide, gas supply from its subsidiary – Nigerian Gas Company (NGC) – to power stations in the country has also been stopped, which in turn has led to unprecedented drop in electricity supply to 1,327MW.

With the absence of gas to power the thermal power plants, Egbin Power Station, Olorunsogo I and II, Omotosho I and II, Geregu I and II, Ihonvor and Sapele (NIPP) in the western axis and Alaoji in the eastern end, have been shutdown.

The crisis was worsened when tanker drivers under the aegis of the Petroleum Tanker Drivers (PTD) section of NUPENG withdrew tankers from the roads, thus halting the distribution of products imported by the NNPC, in protest against the non-payment of their salaries and haulage fees by the marketers.

However, the drivers’ official position was that their action was in protest against the 48-hour ultimatum given by the Lagos State Government for the drivers to remove from the roads, any tanker that was not within 300 metres from the depots in the state.

The directive followed the gridlock that shutdown Apapa up to Mile 2 and CMS, Eko Bridge and Ikorodu Road and the surrounding areas for three days.

The marketers had blamed their inability to meet their financial obligations to the tanker drivers as well as the truck owners –Nigerian Association of Road Transport Owners (NARTO) to the failure of the government to pay the outstanding subsidy claims.

With tankers off the roads, even deregulated product such as diesel and NNPC’s imported petrol cannot be moved from private depots in Apapa to the filling stations across the country, while some of the few filling stations that have products were selling at N300 per litre at the weekend, amid long queues of vehicles.

Expectedly, the energy crisis characterised by the absence of gas, electricity, petrol, diesel, kerosene and aviation, is causing maximum damage to the economy of Africa’s largest oil producer, with unconfirmed reports yesterday that four persons lost their lives in Lagos as a result of the energy crisis.

Dangote Loses Billions Daily

Some of the worst hit companies include Dangote Cement plants at Ibese in Ogun State and Gboko in Benue, which have been forced to stop production due to the unavailability of diesel and gas to run the factories.

Confirming the development, Africa’s richest man Aliko Dangote, informed THISDAY yesterday that his cement plants at Ibese and Gboko have been closed down while the 10-million metric-ton plant at Obajana in Kogi State is operating at minimal capacity.

He said: “As it stands, I can barely keep the plants operational because we cannot get gas or diesel to run the plants, and there is no electricity at all. We are losing billions daily due to the energy crisis.”

Dangote added that due to precarious nature of the situation, he flew to Abuja on Saturday to meet with President Goodluck Joanthan so that the federal government could take measures to address the situation.

“I met with the president on Saturday afternoon and spoke to him that night also. I impressed on him the need to address the situation urgently and to refrain from handing over the country to Buhari in such a mess.

“I reminded him that he had won praise at home and abroad for putting the country the first by conceding defeat after the elections, but could squander all the good will if he failed to do anything to reverse this unprecedented energy crisis. Even a good company CEO strives to hand over the company in a better shape and not a worse shape to his successor,” he said.

Dangote said he was still trying to reach the president last night to see how the strike by NNPC workers could be addressed immediately.

A presidency source also revealed that pressure was brought to bear on the president to reverse the transfer of operatorship to Neconde.

The source said the president had agreed and was about to instruct his Media Adviser, Dr. Reuben Abati, to issue a statement in this regard, but changed his mind at the last second after the president spoke to Alison-Madueke, who appears to be unconcerned about the plight of millions of Nigerians and has remained holed up in the presidential suite of the five-star Landmark Hotel in London since Friday.

Alison-Madueke was reported to have informed the president that even if the operatorship was reversed, the staff of NNPC were also demanding for a review of their salaries and the funding of their pension scheme before they return to work.

‘Neconde Should Retain Operatorship’

However, an oil industry source informed THISDAY that it would not be in the larger interest of the country for the president to reverse the transfer of operatorship to Neconde.

He said NPDC had proved to be inept, inefficient and corrupt, and all the oil blocks it has operated were producing at below capacity.

“Look at the oil blocks in which private companies retained operatorship such as Seplat, they have increased oil output from all those blocks. But those retained by NPDC have witnessed a decline in output and this translates to lower revenues for the government in the long run.

“Besides, when firms like Neconde acquired the blocks from Shell and others, they paid a premium based on the hope that they would be made operators of the oil blocks.

“But the petroleum minister (Alison-Madueke) refused to give them the consent to operate the blocks because she was more interested in signing Strategic Alliance Agreements (SAAs) with the likes of Atlantic Energy and Taleveras, which pretended to be funding the oil blocks and lifting several thousands of barrels of crude oil, yet nothing was being paid to the coffers of government in return.

“These were shady deals and Neconde was not interested in continuing along that path, that is why it pushed till it got the approval to operate the block,” the oil industry source revealed.

He added that OML 42 hosts the Odidi, Jones Creek and Batan-Egwa oil fields which have the capacity to produce more than 120,000 barrels of crude oil a day (b/d), but has been limited to producing some 27,000 b/d from the Odidi and Batan-Egwa fields since NPDC was handed OML 42.

MTN, Airtel Shutdown Base Stations

Other key businesses affected by the energy crisis include the telecom networks, airlines, media houses, bakeries, hotels and scores of small businesses in Lagos, which have been forced to close shop.

In a Twitter post, Nigeria’s biggest mobile phone operator MTN warned that its network faces shutdown due to fuel shortages that have crippled the nation.
The company, the biggest subsidiary of the South Africa-based MTN Group, said it needed a “significant quantity of diesel in the very near future to prevent a shutdown of services across Nigeria”.

“If diesel supplies are not received within the next 24 hours the network will be seriously degraded and customers will feel the impact,” it added on its Twitter account @MTNNG on Saturday evening.

The warning from MTN, which has more than 55 million subscribers, is a sign that businesses are now being hit.
A top official of MTN also informed THISDAY that as at yesterday over 300 of its base stations in Lagos had been shutdown due to lack of electricity and diesel to power them.

“Out of a total of 700 to 800 base stations in Lagos, over 300 are down right now. But the bigger danger are our switches which provide the backbone of our network infrastructure.

“We have three in Lagos and by tomorrow (Monday) evening, if there is no improvement, one switch would definitely shutdown then others would follow suit.

“The bigger threat is the security implication for the entire country if our switches go down and the implication for banks and the entire financial system,” he said.

An expert said the financial markets may not be able to trade much of this week and banking services (including ATMs) could face severe disruptions as their networks shutdown.

Also, Airtel Networks Limited, in statement yesterday, informed its customers and the general public that the prevailing situation in the country regarding the scarcity of diesel and other petroleum products was impacting negatively on its ability to deliver seamless telephony services.

“While we are currently doing everything within our means as well as going the extra mile to ensure that all our base stations and switches are up and running, it is sad to note that it is becoming increasingly difficult to replenish current stock of diesel due to the lingering scarcity of the products.

“We are also concerned that, if the situation persists, it may have adverse effects on our network, impacting both voice and data services,” the company said.

Airtel assured its customers that it will continue working with its partners and stakeholders to mitigate any negative impact “as we remain committed to our promise of providing exceptional services just as we seek the cooperation and understanding of all whilst apologizing for any inconvenience at this time”.

Domestic Airlines Ground Flights, Businesses Close Shop

Just at the telecom firms were fretting yesterday, the airlines were already counting their losses the airlines had already started counting their losses.

The cancellation of flights by the airline operators had started last Monday when the Chairman of Air Peace, a new domestic carrier, Allen Onyema, warned of the impending crisis as it became difficult to source Jet A1, which constitutes about 40 per cent of airlines’ operational expenses.

By Saturday, Arik Air, Aero Contractors, Med View, Air Peace and other airlines had cut down their operations, cancelling most of their flights because of the non-availability of aviation fuel.

Similarly, Nigeria’s biggest operator, Arik Air cancelled all its domestic flights at the weekend while its Lagos to London flight had to stop in Kano to fuel, because the airline could not source about 120,000 litres needed for the aircraft in Lagos.

Aero Contractors cancelled its flights, but was able to operate Asaba, Warri and Benin and on Friday it delayed its Calabar to Lagos flights till Saturday, as the airline was unable to source fuel in time, so when it landed in Calabar, Friday, it could not get back to Lagos that evening because the airport is on a visual flight rule barring night flights.

Also on Saturday, First Nation Airways was only able to operate Lagos Abuja flight; Medview operated Lagos to Abuja and Abuja to Yola flights and cancelled the rest of its flights.

There was no hope that the airlines would operate any flights yesterday and by today, there are indications that all domestic flights may be grounded.

Domestic carriers need over 2.5 million litres of aviation fuel daily for full flight operations but by Friday all the tank farms at the airport in Lagos seemed drained and trucking from the Apapa depot had since stopped since NUPENG embarked on industrial action.

On Thursday, Virgin Atlantic had to fly to Accra, Ghana, to refuel before airlifting its Nigerian flights to London and many of the airlines with large body aircraft arrive Nigeria fully laden with return and endurance fuel,
knowing that they would not be able to refuel in Nigeria.
Other international airlines were reported to have flown to Cotonou and Dakar to refuel before departing the continent with Nigerian outbound passengers.

In addition to the airlines and telecos, smallers businesses such as bakeries, hair salons and radio stations were forced to shutdown in Lagos at the weekend.

Among the media houses that were temporarily closed down for hours in order to ration fuel were radio stations like Beat FM, Classic FM, Naija FM and City FM.
A statement from Beat FM said: “We will be shutting down at 8.30pm today (Saturday) due to diesel shortage. We will be back tomorrow (Sunday). We will keep you posted.”

Also, City FM wrote: “Due to the prevailing fuel scarcity, we will be shutting down 12 today. Please do bear with us. Back up in the morning. Night all.”

It was also gathered that hotels were overflowing in Lagos Island yesterday, as several residents checked into them with their families due to lack of electricity and diesel to power their generators.

However, Intercontinental Hotel, THISDAY learnt, issued a notice to its guests yesterday informing them that they may have to vacate the hotel by Wednesday if it is unable to obtain diesel to run the hotel.

NLC Faction Threatens Strike

Meanwhile, the Vice President of the Joe Ajaero-led faction of the Nigerian Labour Congress (NLC), Mr. Issa Aremu warned yesterday that the union might be forced to direct workers to stay home if the excruciating fuel scarcity persists.

In a statement in Kaduna, Aremu said it was time Nigerians rose up to stop what he described as the agonising capitalism that is going on in the country.
“After several weeks of deliberate deprivation of petroleum products by both the government and marketers alike with all the associated hardships, it’s time all Nigerians stopped agonising and rose in unison against this capitalism,” he said.

He noted that with petroleum products prices as high as N350 per litre, far above N87 per litre, claims and counter-claims between Finance Minister, Dr. Ngozi Okonjo-Iweala and marketers over the so-called N159 billion subsidy claims and all state actors looking on indifferently.

He said Nigeria is the only country on earth  which  criminally denies its citizens basic sources of energy; fuel and electricity.

According to him, “What is happening in Nigeria amounts to ‘economicide’, which is a conscious subjugation of 170 million people to economic suicide and economic ruination through unsustainable petroleum import-based racket that denies petroleum products needed for mass movement of goods and services.

“The system enriches a few cabals, puts pressures on foreign exchange, encourages fuels products hoarding, and promotes sheer price robbery of the already impoverished citizens.

“This is an unofficial declaration of war against the citizens by combined forces of irresponsible ruling elite and business crooks.”

He declared further that “if the current scarcity and price robbery of Nigerians continue, the Nigeria Labour Congress would have no choice but compel workers to stay at home.

“Workers certainly cannot fuel themselves to work with their blood. There is a limit to slavery and state/marketers’ extortionism!

“We also have high-sounding agencies such as NNPC and PPPRA, among others, and yet there is no governance with respect to the distribution of basic products like petroleum and kerosene. This agonising capitalism must be resisted by all Nigerians”.

Capital Oil Begins Distribution of Petrol

However, there was a glimmer of hope yesterday when Capital Oil and Gas Limited defied the oil workers strike by opening its depot and commenced the distribution of petrol to various parts of the country to end the current shortage, which has grounded economic activities in the country.

Speaking to journalists during the commencement of loading, the Managing Director and Chief Executive Officer of Capital Oil, Mr. Ifeanyi Ubah, said his company would not be part of the sabotage against Nigeria, saying that the suspension of loading by marketers had resulted in immense hardship for Nigerians.

He said that he was not consulted by those who wanted to shutdown the country, adding that “the people on strike do not have the investment we have in this industry”.

Ubah acknowledged that the directive his company received on May 16, 2015 via SMS to suspend loading with effect from May 18 was as result of funds owed to transporters by oil marketers, who in turn, were owed by the federal government.

He, however, said a better solution should be pursued to solve this problem, without causing untold hardship to the people, pointing out that deregulation is the best solution to Nigeria’s energy crisis.

“Capital Oil and Gas has watched with so much pain, the suffering and hardship our citizens have been subjected to as a result of scarcity of petrol, diesel, aviation fuel and household kerosene. We are deeply pained to hear that hospitals cannot perform surgeries; laboratories are unable to carry out much-needed tests, especially for emergency patients, leaving such patients at risk of dying; radio stations are shutting down; communication is being affected as MTN and other telecommunications companies have announced an impending shutdown, while homes, offices and key facilities nationwide are experiencing blackouts.

“In some parts of the country, petrol is already selling at an all-time high of N1,000 per litre. Our citizens have left their homes and are now sleeping in fuel stations, facing the risk of robbery attacks and other attendant risks,” Ubah explained.

He said that in a few days, a new government headed by Muhammadu Buhari would be inaugurated, adding that apart from Nigerians being unable to watch the handover ceremony on television and apart from unavailability of means of transportation for the attendees to this historic occasion, the chaos caused by the current scarcity might shutdown the country and sabotage the efforts the country had made to attain greater heights.

“We are constrained at this point and have decided that two wrongs cannot make a right. We will not be part of this sabotage against our fatherland. Therefore, from this minute, we shall take the risk of opening our facilities and commence the swift loading and distribution of products nationwide,” he added.

The Capital Oil boss said his company would distribute 13 million litres of petrol or about 400 tankers from yesterday afternoon to this morning.

According to him, many imported vessels were waiting to discharge at his depot but there was no space to discharge because of the strike.

He said if the crisis is allowed to linger, products at the depots would continue to evaporate.

Ubah, who said his action was propelled by patriotism, urged other marketers to follow suit to save the country from the impending economic and social crisis.

“This is a period that requires patriotism and service to fatherland. Let us join hands to help our fellow citizens and save Nigeria. We also call on striking bodies to call off the strike. Let us work together for the betterment of our people,” he added.

Speaking on the gridlock on Oshodi-Apapa Road, which has been caused by fuel tankers, Ubah stated that his company has a total solution to the traffic menace.

“In the coming weeks, we hope to engage the Federal Ministry of Transport, Lagos State Government and other stakeholders in the affected area, to optimally utilise our truck park facilities, which have the capacity to accommodate over 1,100 trucks per time and 5,000 on a shift basis,” he said.

– This Day

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