2 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
TABLE OF CONTENT LIST OF TABLES..................................................................................................................................................... 4 LIST OF FIGURES................................................................................................................................................... 4 LIST OF ACRONYMS............................................................................................................................................. 6 FOREWORD............................................................................................................................................................. 8 EXECUTIVE SUMMARY........................................................................................................................................ 9 1.0 INTRODUCTION.......................................................................................................................................17 1.1. ENERGY & SUSTAINABLE DEVELOPMENT....................................................................................................17 1.2. SCOPE OF THE VISION 2020 ENERGY PLAN..................................................................................................18 1.3. VISIONING APPROACH................................................................................................................................18 2.0 ASSESSMENT OF THE NIGERIAN ENERGY SECTOR........................................................................20 2.1. GLOBAL TRENDS IN THE ENERGY SECTOR...................................................................................................20 2.2. THE NIGERIAN ENERGY SECTOR TODAY .....................................................................................................20 2.2.1. Energy Demand in Nigeria................................................................................................................22 2.2.2. The National Energy Policy...............................................................................................................23 2.3. CONVENTIONAL ENERGY SOURCES..............................................................................................................24 2.3.1. Oil ....................................................................................................................................................24 2.3.2. Gas ...................................................................................................................................................38 2.3.3. Coal..................................................................................................................................................53 2.3.4. Nuclear Energy .................................................................................................................................55 2.4. RENEWABLE ENERGY SOURCES ...................................................................................................................56 2.4.1. Key Challenges facing the development of renewable energy sources in Nigeria.................................57 2.4.2. Hydropower ......................................................................................................................................59 2.4.3. Solar Energy .....................................................................................................................................61 2.4.4. Biomass Energy.................................................................................................................................62 2.4.5. Wind Energy .....................................................................................................................................63 2.5. ENERGY UTILIZATION - ELECTRICITY..........................................................................................................63 2.5.1. Institutional Structure of the Nigerian Power Sector ..........................................................................64 2.5.2. Key Challenges facing the Nigerian Power Industry...........................................................................65 2.5.3. Ongoing Government Initiatives to grow the Power Sector.................................................................68 2.6. PERFORMANCE ASSESSMENT OF THE NIGERIAN ENERGY SECTOR.................................................................70 2.6.1. Operational Performance..................................................................................................................71 2.6.2. Economic Performance .....................................................................................................................75 2.7. COMPARATIVE BENCHMARKING ANALYSIS.................................................................................................77 2.7.1. Definition of Comparator Set.............................................................................................................77 2.7.2. Baseline Data of Comparator Countries ............................................................................................78 2.7.3. Benchmarking Analysis .....................................................................................................................79 2.7.4. Key Learning Points for Nigeria........................................................................................................82 3.0 ENERGY SECTOR 2020 VISION & STRATEGIC PLAN .......................................................................84 3.1. THE GLOBAL ENERGY INDUSTRY IN 2020....................................................................................................84 3.1.1. Growth Projections for the Global Energy Industry ...........................................................................85 3.1.2. Key Growth Drivers for the Global Energy Industry ..........................................................................91 3.2. THE VISION FOR THE NIGERIAN ENERGY SECTOR ........................................................................................91
3 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group 3.3. OBJECTIVES, GOALS/TARGETS, STRATEGIES AND INITIATIVES FOR THE NIGERIAN ENERGY SECTOR..............95 3.4. KEY GROWTH ENABLERS .........................................................................................................................116 3.4.1. Legal & Regulatory Regime.............................................................................................................116 3.4.2. Human Capital & Infrastructure Requirements................................................................................116 3.5. ENVIRONMENTAL IMPLICATIONS OF THE ENERGY VISION 2020 PLAN.........................................................116 3.6. CRITICAL SUCCESS FACTORS ....................................................................................................................117 4.0 IMPLEMENTATION ROADMAP...........................................................................................................118 4.1. IMPLEMENTATION ROADMAP FOR THE ENERGY SECTOR ............................................................................118 4.2. IMPLEMENTATION MONITORING PLAN FOR THE ENERGY SECTOR...............................................................143 REFERENCES.......................................................................................................................................................176 5.0 APPENDICES............................................................................................................................................177 5.1. ANALYSIS OF POWER GENERATION CAPACITY REQUIRED TO SUPPORT 20:2020 ECONOMIC VISION.............177
4 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group List of Tables Table 1-1: Nigeria's Energy Reserves/Capacity as at December 2005.......................................... 18 Table 2-1: Nigeria's Refineries and Installed Capacities................................................................ 27 Table 2-2: Vessel Draft Limits of Some Key Jetties in Lagos......................................................... 36 Table 2-3: Global Oil Demand and Refining Capacity (mbbl/d) ..................................................... 37 Table 2-4: Existing Potential Mine Sites with Reserves in Nigeria................................................. 54 Table 2-5: Estimate of Current Exploitable Hydropower Sites in Nigeria ....................................... 61 Table 2-6: Small Hydro Potential in some States in Nigeria........................................................... 61 Table 2-7: Nigeria's Size and Land Use Parameters..................................................................... 62 Table 2-8: Operational and Economic Performance Indicators...................................................... 70 Table 2-9: Cost of Private Power Generation in Nigeria ................................................................ 74 Table 2-10: Power Supply Reliability Indices................................................................................. 75 Table 2-11: Definition of Comparator Countries ............................................................................ 78 Table 2-12: Baseline information for Comparator Countries.......................................................... 79
List of Figures Figure 1-1: The Energy Value Chain............................................................................................. 19 Figure 2-4: Comparison of Energy per Capita for Select Countries, 2004 ..................................... 21 Figure 2-5: Selected Developing Countries Ranked on the Energy Development Index, 2002...... 21 Figure 2-6: Comparison of Daily Energy Consumption for Select Countries.................................. 22 Figure 2-7: Total Energy Consumption in Nigeria, by type (2006) ................................................. 22 Figure 2-8: Energy Demand in Economic Sectors in Nigeria......................................................... 23 Figure 2-9: Top 15 Crude Oil Reserve Holding Countries ............................................................. 24 Figure 2-10: Nigeria's Historic Oil Production and Reserves Growth (1988-2008)......................... 25 Figure 2-11: Breakdown of Nigerian Oil Exports, 2008.................................................................. 26 Figure 2-12: Location of Downstream Assets in Nigeria................................................................ 27 Figure 2-13: Key Players in the Nigerian Upstream Oil Industry.................................................... 28 Figure 2-14: National Content Figures for Select Countries........................................................... 29 Figure 2-15: Cumulative Oil and Gas Industry Spend by Activity (2005-2009)............................... 30 Figure 2-16: Steel Prices Trend .................................................................................................... 32 Figure 2-17: Jack-up Rig Rates..................................................................................................... 32 Figure 2-18: Estimated PMS Demand and Supply ........................................................................ 34 Figure 2-19: Top 20 Countries Natural Gas Reserves as at January 01, 2007.............................. 38 Figure 2-20: Nigeria's Historical Gas Utilization and Forecast Potential Demand.......................... 39 Figure 2-21: Current Structure of the Nigerian Gas Industry.......................................................... 42 Figure 2-22: Overview of Nigeria's Gas Pipeline Infrastructure...................................................... 44 Figure 2-23: Gas Reserves Availability Breakdown....................................................................... 44 Figure 2-24: Trends in LPG Prices, 1997-2005............................................................................. 46 Figure 2-25: Country Comparison of Per Capita Consumption of LPG.......................................... 46 Figure 2-26: Grouping of Gas Demand Sectors in the Approved Gas Pricing Framework............. 49 Figure 2-27: The approved Nigerian Gas Infrastructure Map......................................................... 52 Figure 2-28: Coal Production in Nigeria (1916 - 2002) .................................................................. 53 Figure 2-29: Location of Hydropower Dams in Nigeria .................................................................. 59 Figure 2-30: Nigeria's Electricity Generation by Fuel Type............................................................ 64
5 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Figure 2-31: Nigeria's Electric Power Transmission and Distribution Capacity .............................. 65 Figure 2-32: Power Losses as a percentage of Generation........................................................... 66 Figure 2-33: Growth in Oil Reserves and Production..................................................................... 71 Figure 2-34: Growth in Gas Reserves and Production .................................................................. 72 Figure 2-35: Oil and Gas Reserves to Production Ratio................................................................ 72 Figure 2-36: Reserves Replacement Ratio.................................................................................... 73 Figure 2-37: Gas Flaring in Nigeria ............................................................................................... 73 Figure 2-38: Growth in Electricity Generation and Consumption ................................................... 74 Figure 2-39: Oil Contribution to GDP and Government Revenue, 2007......................................... 75 Figure 2-40: Sectoral Contribution to Nigeria's GDP Growth Rate (2003-2007) ............................ 76 Figure 2-41: Oil and Gas Consumption Per Capita ....................................................................... 76 Figure 2-42: Power Generation and Consumption Per Capita....................................................... 77 Figure 2-43: 2007 Gas Flaring Countries ...................................................................................... 81 Figure 3-1: Projected Global Energy Mix in 2020 .......................................................................... 84 Figure 3-2: Projected World Oil Demand....................................................................................... 85 Figure 3-3: Growth in Oil Demand, 2008 - 2030............................................................................ 86 Figure 3-4: World Oil Supply Outlook............................................................................................ 87 Figure 3-5: Natural Gas Demand, 1960 - 2030.............................................................................. 88 Figure 3-6: World Coal and Gas Demand Growth, 1990 - 2007, 2007 - 2030 ............................... 89 Figure 3-7: Strategic priorities for the Nigerian Energy Sector....................................................... 94
6 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group List of Acronyms ABU Ahmadu Bello University Bbl Barrels BPE Bureau for Public Enterprises BSCFD Billion Standard Cubic Feet CERD Centre for Energy Research and Development CERT Centre For Energy Research And Training DPR Department of Petroleum Resources ECN Energy Commission of Nigeria EDI Energy Development Index EIA Energy International Agency EPC Engineering, Procurement and Construction ETF Education Trust Fund FEC Federal Executive Council FGN Federal Government of Nigeria FMAWR Federal Ministry of Agriculture and Water Resources FMEH Federal Ministry of Environment and Housing FMIC Federal Ministry of Information and Communication FMJ Federal Ministry of Justice FMLP Federal Ministry of Labour and Productivity FMPR Federal Ministry of Petroleum Resources FMST Federal Ministry of Science and Technology FMT Federal Ministry of Transport GDP Gross Domestic Product IAEA International Atomic Energy Agency ICRC The Infrastructure Concession Regulatory Commission IEA International Energy Agency IGR Internally Generated Revenue IOC International Oil Company KADPOLY Kaduna Polytechnic, Kaduna Kgoe Kilogram of oil equivalent KPI Key Performance Indicators KwH Kilo watt hour LNG Liquefied Natural Gas LOC Local Operating Companies MAN Manufacturers Association of Nigeria Mbpd Million Barrels Per Day MDG Millennium Development Goals MMSD Ministry of Mines and Steel Development Mscf Million Standard Cubic Feet MT Metric Tonnes Mwe Mega Watt of electricity Mwh Mega Watt Hour
7 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group N/A Not Applicable NAEC Nigerian Atomic Energy Agency NASS National Assembly NCP National Council on Privatization NCRTF Nigerian Coal Research Trust Fund NELMCO Nigeria Electricity Liability Management Company NGMP Nigerian Gas Masterplan NGSA Nigerian Geological Survey Agency NIMET Nigerian Meteorological Agency NNRA Nigeria Nuclear Regulatory Agency NOA National Orientation Agency NOC National Oil Company NPC National Planning Commission NPP Nuclear Power Programme NSA National Security Adviser NSI Nuclear Safety Institute NUC Nigerian Universities Commission OECD Organization for Economic Co-operation and Development OPEC Organization of the Petroleum Exporting Countries PPP Private Public Partnership PTDF Petroleum Technology Development Fund SHESSTO Sheda Science and Technology Complex SON Standards Organization of Nigeria TCF Trillion Cubic Feet TCN Transmission Company of Nigeria UI University of Ibadan UNIDO United Nations Industrial Development Organization YABATECH Yaba College of Technology
8 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Foreword This document is the outcome of the study and intense discussions by the members of the energy thematic group of the Vision 20:2020 on the Nigerian energy sector. In preparing the report, the group x-rayed the various energy sub-sectors and examined previous studies conducted on the Nigerian energy sector. It also examined successive governments policies derived from the outcomes of those reports and studies, identified their strengths and pit-falls. The group also examined the implementation of those policies, identified progress made as well as their pitfalls. This was done in order to have a comprehensive picture of the sector for effective visioning. A thorough review was made of previous documents namely vision 2010, NEEDS and 7-Point Agenda. The objective here was to identify the extent those documents have gone in stitching the necessary linkages between the energy sector and the rest of the economy given the centrality of the former to their proper functioning. Furthermore, the quest by the group to produce a useful and implementable vision document led it into interacting with major and active energy industry players both in the public and private spheres. The outcome has been illuminating. It brought out the obvious and the not-so-obvious problems bedeviling the sector, the persistence of which may impair the achievement of the objectives of the Vision 20:2020. Given the strong linkages between the various sectors of the economy and the centrality of energy as a major input, it is imperative that the security situation in the Niger Delta is addressed. Infrastructure in all the major energy sub-sectors require attention while existing institutional frameworks need to be reviewed to bring their operations in line with international best practices. Dire shortages of qualified manpower both at higher and lower levels have become the bane of the industry. The oil and gas sector for example, has less than 1000 welders. In the entire energy sector, the Nigerian content is low, clearly pointing to its over-reliance on external sources even for some basic inputs. The role the energy sector is expected to play in the realization of Vision 20:2020, the initiatives to be pursued in its quest and the roadmap for their implementation has been carefully considered by the energy thematic group. It is the view of the group that the implementation of those initiatives will no doubt, as it is with all reforms meet serious obstacles, surmounting them will be a Herculean task. However, it is our fervent hope that the concerns being exhibited by our leaders on the state of affairs will be matched by clear determination to overcome those obstacles.
Engr. Funsho M. Kupolokun, OFR FNSE Abubakar Siddique Mohammed
Chairman, Energy NTWG Coordinator, Energy NTWG
9 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Executive Summary The energy sector is very strategic to the development of the Nigerian economy. In addition to its macroeconomic importance, the energy sector has major roles to play in reducing poverty, improving productivity and enhancing the general quality of lives of the people. The sector is greatly linked to the other sectors of the economy, contributes to a stable growth of the economy and the realization of social and political objectives.
Nigeria is blessed with a rich variety of conventional and renewable energy sources. The focus of the energy thematic group is the optimal utilization of the nations energy resources for sustainable development and the expansion of the energy supply system to meet future energy demand.
Despite the large reserves of energy resources available in the country, the levels of energy consumption have been very low relative to other countries with comparable energy resources and population figures. In 2004, about 776.9 kgoe of energy per capita (population of 140million) were consumed as against about 2596.9kgoe of energy per capita consumed by South Africa (population of 44million). This low energy consumption is caused by the recurrent scarcity of petroleum products and the persistent electricity black outs which have resulted in a high reliance on self generated electricity.
In previous national vision documents like the Vision 2010, NEEDS and the NEEDS 2 documents, separate action plans were developed for the energy sub-sectors i.e. the oil and gas sectors and the power sectors. However, the interdependencies in these sub-sectors were not taken into account in setting the goals and targets. This is evident for example in the power sector where power generating plants are being built but provisions for gas supply to these plants are not available. Also, the previous national development plans didnt include detailed strategies and initiatives to drive the development of alternative sources of energy.
The energy sector will continue to play a critical role in the industrial, technological, economic and social development of the country. The sector has however been faced by various challenges, which have undermined its development over the years. Specifically for the oil industry, some of these challenges include, local content, security and civil unrest, funding - industry spend/arrears, institutional reforms, human capacity development, environmental degradation, illegal bunkering, crude theft, refinery inefficiency and underutilization, inadequate refining capacity, crude oil and petroleum products pipeline vandalization. In the power sector, the challenges include inadequate power generation capacity, inadequate and obsolete transmission and distribution network in some major cities, inefficient transmission and distribution network resulting in high losses, low access to electricity grid, industry regulation, availability of gas for power generation, billing and revenue collection and inappropriate electricity pricing.
The broad vision for the energy sector is targeted at meeting the demand for energy in all sectors of the Nigerian economy, including the energy needs of households in all parts of the country with safe, clean and convenient energy at an affordable cost. This must be done in a technically efficient, economically viable and environmentally sustainable manner using different energy sources, conventional and non-conventional, as well as new and emerging energy sources to ensure supply at all times with minimal disruption.
The vision statement for the energy industry is:
10 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group By 2020, the energy sector will be the major engine of the nations sustainable social, economic and industrial growth, delivering affordable and constant energy supply efficiently to other sectors of the economy
The vision 2020 plan for the energy sector defines the five (5) strategic priorities for the sector. These priorities have been set to address the critical issues identified in the Nigerian energy sector. These priorities will also enable the achievement of the primary goals of the Government of Nigeria as stated in the 7-pooint agenda. The strategic priorities identified for the Nigerian Energy sector are as follows:
Provide necessary commercial and market incentives in order to attract private investments (local and foreign) required to facilitate the necessary energy capacity expansions in a rapidly growing economy The anticipated growth for the Nigerian energy sector will require a total annual investment in excess of $ 18 Billion in the next 10 years ($ 12 Billion for oil & gas and $ 6 Billion for power). Of this, the projected affordable FG allocation will be $ 6 Billion ($ 5 Billion and $ 1Billion for oil & gas and power respectively). The $ 12 Billion shortfall will require private funding. It is therefore imperative that alternative funding schemes, such as third party and venture capital financing, at appropriate costs, are explored.
Currently, majority of the investments in the energy sector, especially in power generation and refining, is provided by the Government. However, it is proposed that the significant capacity expansions envisaged for the Nigerian energy sector will be driven by the private sector. Appropriate fiscal terms need to be developed in order to attract global partners and investors for the development of the gas infrastructure as proposed in the gas masterplan. Also adequate incentives must be provided to attract private investments in power generation and distribution, coal to-power generation and local manufacturers of solar photovoltaic technologies.
Consolidation of ongoing structural and economic reforms targeted at establishing effective institutional and regulatory frameworks in the energy sector The timely completion and success of the ongoing institutional and regulatory reforms, in the power sector and the oil and gas sector, will improve the current environment and facilitate the accomplishment of the Governments goals in the energy sector. It is expected that once completed, these reforms will improve the funding and efficiency of operations in the energy sector.
In the power sector, it is imperative that the currently ongoing reforms, as proposed in the electric sector reform act, are completed with the total privatization of the generation and distribution assets. Also, the necessary regulatory and structural framework to support an efficient oil and gas industry needs to be put in place. The petroleum industry bill, currently in the National Assembly, includes provisions for the establishment of efficient and commercial institutions in the oil and gas industry.
Achieve energy supply security by utilizing the nations renewable energy resources (including wind, solar, hydro and biomass) to diversify the energy consumption mix
11 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Currently, Nigerias energy mix is dominated by the fossil fuels, i.e. oil and gas. However, to attain the vision 2020 intent, Nigeria needs to diversify its energy mix with renewable energy sources. Nigeria has vast renewable energy resources including hydro (small and large hydro power), solar, wind and biomass. Utilization of the nations renewable energy resources will reduce the countrys dependence on fossil fuels and provide an economically stable source of energy to the power generation mix.
The country needs to develop a technologically driven renewable energy sector that will harness the nations resources to complement its fossil fuel consumption and guarantee energy security. Development of efficient and sustainable energy generation and consumption patterns Although there is currently insufficient energy to meet demand in households and industries, it is necessary for the country to embark on energy conservation and energy efficiency initiatives which will require Industries and homes to move to energy saving equipment and utilities for reduction in total power demand.
Presently, energy utilization in Nigeria is far from being efficient. Apart from the direct loss due to energy wasted, using energy inefficiently has three major implications in Nigeria. These are: o The investment in some energy supply infrastructure is far in excess of what the energy demand is o The environmental problems associated with energy utilization are more aggravated due to large energy consumption o Excessive energy consumption adds to the costs of goods produced especially in energy intensive industries like cement, steel works and refineries
In the power sector, demand side management principles targeted at ensuring efficiency in electricity consumption need to be introduced. Consolidation of ongoing local content campaign by expanding linkages to other sectors of the economy The ongoing Nigerian content development initiative is aimed at ensuring that substantial proportion of activities, materials, engineering parts and human capital utilized in different sectors of the Nigerian economy is domiciled within the country. The domiciliation focus on local value addition is targeted at building global collaboration, attracting foreign direct investments and promoting technology transfer. To sustain the current drive for Nigerian content development it is important for Government to evolve policies to encourage both local and foreign companies to enter into joint venture agreements to operate in Nigeria.
Human capacity development specifically targeted at the low technical and high value skills e.g. fabrication and welding, should also be continuous through the integration of human development programs in all projects. An example is the focus on capacity development of fabrication yards to increase total tonnage and lifting capacity leading to integration of FPSO topsides locally.
Also, the development of a reliable local steel industry to cater for the demand of the oil and gas industry will help to develop deep and functional linkages between the mining industry and the oil & gas industry.
12 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
Based on these strategic priorities for the energy sector, policy objectives have been developed for each of the major energy sources in Nigeria to ensure that the energy sector is able to support the achievement of Nigerias vision 2020 intent.
OIL Nigeria currently has the 10th largest oil reserves in the world and oil has been the countrys most valuable economic asset and non-renewable resource. Given that oil will continue to dominate the global energy mix to 2020, accounting for close to 35% of the total energy demand, the following are the recommendations for the oil industry: Provision of appropriate fiscal incentives to attract investments in oil exploration, at the same time ensuring reasonable returns for the nation Development of a reliable steel industry to cater for the demand of the oil and gas industry, thereby developing deep and functional linkages between the oil & gas and mining industries Enhancement of the in-country capacity for the fabrication of steel structures used in the oil and gas industry Strengthening the relevant regulatory agencies in order to ensure the enforcement of appropriate standards and entrench global HSE standards and principles in the Nigerian oil and gas sector Deregulation and liberalization of the downstream sector Partial privatization of old distribution assets owned by the Government Implementation of alternate funding schemes, such as third party financing and venture capital financing for current JVs
GAS Nigeria has the 7 th largest natural gas reserves at 187TCF, with potential to grow to as much as 600TCF 1 with dedicated gas exploration. However, Nigerias domestic gas industry is currently in the embryonic stage. Specific initiatives are required to facilitate dedicated exploration for natural gas and encourage the utilization of natural gas in all sectors of the national economy. Recommended Initiatives for the development of the gas industry include: Development of a long term gas pricing strategy to attract FDI in the domestic gas sector Development of appropriate fiscal scheme to ensure affordability of LPG in the domestic market including manufacture of cylinders and cookers Complete establishment of the strategic gas aggregator to manage the implementation of the domestic reserves and production obligation and the aggregate price in the domestic gas market in the short term
ELECTRICITY With a total installed electricity generation capacity of about 6000MW, and actual generation of between 2000MW and 3000MW, the electricity demand in Nigeria far outstrips the supply and the supply is epileptic in nature. The country is currently faced with acute electricity problems, which is hindering its development despite the availability of vast natural resources in the country.
1 USGS Study
13 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group An analysis of the power generation capacity required to support the vision 2020 economic vision, carried out by the Energy NTWG, shows that by 2020 Nigeria will need to generate electricity in the range of between 25,000MW to 40,000MW. This is based on the assumption that the country will take a less energy intensive growth path (energy intensity of less than 0.4) with lower electricity consumption, KWh per unit of GDP, unlike china which has an energy intensity of 0.91.
In order to achieve this growth aspiration, it is necessary that alternative energy resources hydro, solar, wind, biomass, coal and nuclear- are harnessed to reduce the countrys reliance on gas fired power plants. Also, intensive manpower development initiatives will be required including equipping the newly created National Power Training Institute, in collaboration with tertiary institutions.
Key recommendations for the development of the power sector include: Complete privatization of the generation & distribution assets currently owned by the Government to ensure effective service delivery Creation of a Government agency which will serve as a one-stop shop for private investors interested in power generation and distribution Establishment of management contracts with private companies for the development and operation of the transmission network whilst retaining ownership by Government Establishment of a coordinating agency for alternative energy development Construction of mini power stations in rural communities using locally appropriate technologies (possibly hybrid) hydro, wind, biomass, solar Massive public campaign towards promoting efficient usage of electricity and energy conservation Introduction of discriminatory tariffs to encourage low electricity utilization in households
COAL The challenges being faced in the nations coal industry need to be addressed if the potential of for coal utilization is to be optimally exploited. Some of these challenges include uncertainties in the actual reserves of coal on which long term projects could be based, low productivity of coal mines, low level of mechanization of production facilities, creating and finding markets for the coal and absence of a cost-effective transportation system for the export of coal.
The recommendations for the development of coal include; Provision of appropriate fiscal incentives for coal to power investors Provision of up-to-date geological data on the coal deposits in the country Collaboration with tertiary institutions and research institutes to develop local coal briquetting and coal stove technology Development of dedicated coal trains to transport and handle coal for power generation Establishment of partnerships with relevant foreign centers of excellence in clean coal technologies to facilitate capability building and manpower development
HYDRO The total technically exploitable large scale hydropower potential of the country is estimated at over 10,000MW, capable of producing 36,000GWh of electricity annually. The small scale hydropower potential is estimated at 734MW. Current hydropower generation is about 14% of the nations hydropower potential and represents about 30% of the total installed grid-connected electricity
14 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group generation capacity. Despite its high initial capital cost, hydropower provides one of the cheapest and cleanest sources of electricity. The country is well endowed with large rivers and some few natural falls which are together responsible for the high hydropower potential. It is estimated that hydropower will be a major provider of base load electricity, after gas, in order to achieve the projected 35,000MW electricity generation by 2020. Therefore, the nation needs to manage its water resources for the development of its hydro - electric potentials and for other uses. The policy should focus more on micro hydro plants. The recommendations of the energy NTWG for the development of the hydropower include: Establishment of small hydropower pilot schemes in each geopolitical zone to create awareness and facilitate technology acquisition Adaptation of existing irrigation dams with hydropower generation potential for power generation and supply to the national grid Partial privatization of old hydropower generation stations i.e. Kainji, Jebba, Shiroro,Oji river etc, currently owned by the Government Provision of appropriate fiscal schemes for privately owned hydropower IPPs Provision of up-to-date data on the potentials of small - scale hydro plants and the preparation of inventories for their locations
WIND Utilization of wind energy is presently very minimal in the country. The only known and still functional wind pump in the country is the Sayya Gidan Gada wind electricity project in Sokoto State. It has a capacity of 5.0 kWp. Already, the wind energy mapping of the country has been done.
A study 2 on the wind energy potentials for a number of Nigerian cities shows that the annual wind speed ranges from 2.32 m/s for Port Harcourt to 3.89 m/s for Sokoto. The maximum extractable power per unit area, for the same two sites was estimated as 4.51 and 21.97 watts per square metre of blade area, respectively. When the duration of wind speeds greater than 3 m/s is considered, the energy per unit area works out as 168.63 and 1,556.35 kWh per square metre of blade area, again for Port- Harcourt and Sokoto.
The policy objective is to emphasize the exploitation of wind energy for rural water supply and also for electricity generation. The recommendations to achieve this include: Execution and commissioning of wind energy pilot projects in select locations around the country Provision of fiscal incentives such as import duty exemptions, tax holiday, investment grants to encourage investments in wind powered generating plants and water pumps Sensitization of the Federal, State and LGCs rural electrification agencies on the potential of wind energy as source of electricity
SOLAR
2 Sambo, 1987
15 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Studies relevant to the availability of the solar energy resource in Nigeria have fully indicated its viability for practical use. Although solar radiation intensity appears rather dilute when compared with the volumetric concentration of energy in fossil fuels, it has been confirmed that Nigeria receives 5.08 x 1012 kWh of energy per day from the sun and if solar energy appliances with just 5% efficiency are used to cover only 1% of the country's surface area then 2.54 x 106 MWh of electrical energy can be obtained from solar energy. This amount of electrical energy is equivalent to 4.66 million barrels of oil per day.
The major limitation to the development of solar technologies is the high capital layout involved. The key recommendations for the development of solar energy in Nigeria are: Continuous active support of research and development activities to cater for site specificity of designs for all parts of the country Provision of fiscal incentives such as import duty exemptions, tax holiday, investment grants to encourage investments in solar powered generating plants and local manufacturing of solar photovoltaic applications Execution of demonstration and pilot projects to ensure that the general public is aware of the potentials of solar energy technologies which will as well assist in creation of markets for solar energy systems
BIOMASS The biomass energy resources of the nation have been estimated to be 144million tones/year. It is estimated that Nigeria consumes about 43.4x109kg of fuel wood annually. Over 60% of Nigerias population depends on fuel wood for cooking and other domestic uses. The consumption of fuel wood is worsened by the wide spread use of inefficient cooking methods, the most common of which is still open fire. The rate of consumption of fuel wood far exceeds the replenishing rate to thus resulting in desert encroachment, soil erosion and loss of soil fertility.
Recently, the Renewable Energy Division (RED) within NNPC championed an automotive biomass ethanol programme which involves securing alternative fuel through the use of biomass technology to produce ethanol from sugarcane and fresh cassava.
However, in order to address the food security issues associated with producing first generation ethanol from food crops, the energy NTWG is proposing a policy focus for second generation biofuels form non-food crops like waste biomass, the stalks of wheat, corn and switch grass, jatropha. Also, initiatives are recommended to discourage fuelwood consumption, especially in rural areas. Other key recommendations include:
The introduction of efficient wood - burning stoves in the rural areas The active introduction of biogas digesters to cater for the cooking energy needs, especially large households and institutions like boarding schools, hospitals, barracks, prison houses etc. Adoption of fuel substitution and blending with ethanol to reduce cost and improve environmental friendliness of fuels
NUCLEAR
16 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
Nuclear energy is one of the major sources of base load electricity generation in the world today. The technology for harnessing nuclear energy demands great responsibility and expertise. Therefore, it requires careful planning of the manpower development and material resources.
Crucial to any nuclear programme is the availability of nuclear minerals such as uranium and thorium. In 1947, pyrochlore containing uranium was found in appreciable quantities on the Jos Plateau and its environs, but there is still no established method of commercial extraction of the uranium. By 1979, about 617,000 km2 of land area had been covered by aerial radiometric surveys and another 90,000 km2 had been covered by other surveys. Since then no further work has been done. There is the need to extend investigations to other areas of the country suspected to have traces of any of the radioactive minerals.
Recommendations for the development of Nuclear energy include: The establishment of unambiguous policy guidelines for the nuclear energy sector, clearly defining the role of relevant governmental organizations and the private sector as the main drivers of the nuclear power programme The domestication of all international instruments, agreements, conventions and treaties entered into by Nigeria Intensified manpower training and development and the provision of adequate Infrastructure for nuclear science and technology Establishment of the Nuclear Power Programme Coordination and Implementation Organization (NPPCIO) to serve as the planning, coordinating and implementing organization for nuclear power programmes
The detailed strategies and initiatives for each of the energy sources are documented in chapters 3 of this report.
For effective and efficient implementation of the vision 2020 plan for the energy sector, implementation and monitoring plans have been developed for the proposed initiatives. These are documented in chapter 4 of this report.
17 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group 1.0 Introduction Today, there is a global focus on energy as a societal, sociopolitical and strategic resource. In addition, there is increasing focus on consumption, waste elimination, development and the environmental impact of energy resources. Investments in the development and implementation of clean, renewable energy technologies and conservation are a major priority of Governments and industry players, subject to fluctuations in the economy and the price of crude oil and natural gas. These renewable energy sources will only complement the major thermal energy sources. Investments in the development of energy resources vary widely from nation-to-nation, ranging from cleaner ways to burn the worlds immense stores of coal; to the construction of advanced- technology nuclear generating plants; to the use of advanced, more cost-effective renewable technologies based on solar, wind and wave power.
1.1. Energy & Sustainable Development Energy is central to sustainable development and poverty reduction efforts. It affects all aspects of development -- social, economic, and environmental -- including livelihoods, access to water, agricultural productivity, health, population levels, education, and gender-related issues. None of the Millennium Development Goals (MDGs) can be met without major improvements in the quality and quantity of energy services in developing countries. The world is expected to change dramatically over the next 25 years, presenting significant challenges for energy production and use. For example, by 2030, the International Energy Agency estimates that $17 trillion dollars of investment will be made in energy infrastructure, largely in developing countries. These investments and others will need to be carefully planned to ensure that greenhouse gas mitigation occurs hand-in-hand with meeting the energy needs and development aspirations of developed and developing countries. Globally, countries are developing strategies and policies to enable the sustainable development of their energy resources so as to fuel economic and social development while reducing air pollution and the greenhouse-gas emissions. Energy is intrinsically linked with sustainable development at the local, national, and regional levels. At the local level, modern energy is required to improved the overall quality of life (especially, that of the poor) by enhancing productive activities and enterprise, which will result in increased incomes. At national and regional levels, adequate modern energy leads to stable economic development, promotion of trade, and enhancement of participation in global markets, besides the added benefits of better social and economic linkages. The energy sector is very strategic to the development of the Nigerian economy. In addition to its macroeconomic importance, it has major roles to play in reducing poverty, improving productivity and enhancing the general quality of lives of the people. The energy sector is greatly linked to the other sectors of the economy: on one hand, the energy sector contributes to a stable growth of the economy and the realization of social and political objectives; on the other hand, the modernization and expansion of the energy supply system to meet future energy demand requires a large amount of human and financial resources.
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1.2. Scope of the Vision 2020 Energy Plan
Nigeria is blessed with a rich variety of conventional and renewable energy resources as shown in table 1-1 below:
Energy Source Reserves Crude Oil 36.5billion barrels Natural Gas 187.44TCF Tar Sands 30 billion barrels of oil equivalent Coal & Lignite Over 4 billion tonnes Large Hydropower 11,235 MW Small Hydropower 3,500MW Fuel wood 13,071,464 Hectares Animal Waste 61 million tones/yr Crop Residue 83 million tones/yr Solar Radiation 3.5 7.0 KWh/m2 day Wind 2-4m/s at 10m height Table 1-1: Nigeria's Energy Reserves/Capacity as at December 2005 Source: Draft National Energy Masterplan, Energy Commission of Nigeria, June 2007
The vision 2020 plan for the energy thematic area focuses on the optimal utilization of the nations energy resources for sustainable development. The energy sources which will be within the scope of the vision 2020 plan are as follows: Conventional sources - Oil - Gas - Coal - Nuclear energy
Non conventional sources - Hydropower - Solar - Wind - Biomass
Electricity
1.3. Visioning Approach In previous national vision documents like the Vision 2010, NEEDS and the NEEDS 2 documents, separate action plans were developed for the energy sub-sectors i.e. the oil and gas sectors and the power sectors. However, the interdependencies in these sub-sectors were not taken into account in setting the goals and targets. This is evident for example in the power sector where power generating plants are being built but provisions for gas supply to these plants are not
19 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group available. Also, the previous national development plans didnt include detailed strategies and initiatives to drive the development of alternative sources of energy.
In order to address this issue, an integrated approach to the energy value chain, highlighting and taking into cognizance the significant interdependencies and synergies between the energy sub- sectors was used in developing the vision 2020 plan. Figure 1-1 below shows the linkages between the electricity value chain and the oil and gas value chain.
Figure 1-1: The Energy Value Chain
In order to validate the current state of the Energy sector in Nigeria and the clearly articulate strategic imperatives for change, the group had interactive sessions with some industry experts. Some of these include, Mr. Basil Omiyi, Country Chair of Shell Companies in Nigeria, Mr. Ademola Adeyemi Bero, MD, British Gas, Nigeria. Also, presentations were made by some Government agencies like PHCN, the Ministry of Petroleum Resources, the Nigerian Nuclear Regulatory Agency and the Ministry of Power.
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2.0 Assessment of the Nigerian Energy Sector 2.1. Global Trends in the Energy Sector The financial crisis of 2008 has resulted in a slow down in energy consumption globally. Low GDP growth is placing a downward pressure on energy use, therefore resulting in knock-on effects on energy financing and investment. As lower demand continues to depress oil and gas prices, announcements are being made of both reduced investment levels and delays in oil and gas projects. However, the long term trend points to an increase in demand, particularly in emerging economies. Despite the economic downturn, growing demand for energy, particularly in China, India, and other developing countries, is expected to lead to rising oil prices over the long term. Mature economies, where they can afford the required investments, are focusing on conservation, renewables and cleaner use of fossil fuels. Over the very long term, nuclear may be an important part of the mix as well. The current financial crisis is not expected to affect long term investments, but could lead to delays in bringing current projects to completion. Driven by growing populations and expanding economies, global energy demand is expected to increase by an average of 1.2% per year between 2005 and 2030, even assuming significant gains in energy efficiency. Global demand is projected to rise from roughly 230 million barrels per day of oil equivalent in 2005 to 310 million barrels per day of oil equivalent an increase of 35%. 2.2. The Nigerian Energy Sector Today Nigeria has significant energy resources, including over 36 billion barrels of oil, 187 trillion cubic feet of gas and 4 billion metric tones of coal and lignite. The country also has a large amount of renewable energy resources including hydro electricity, solar, wind and biomass energy. Hydro resources (small and large hydropower) are estimated at 14,750 megawatts, solar radiation is estimated at 3.5-7.0 kilowatthour/m 2 per day, wind energy potential of 150,000 terra joule per year (generated by an average wind speed of 2.0-4.0 m/s) and biomass at 144 million tons per year. Despite the large reserves of energy resources available in the country, the levels of energy consumption have been very low relative to other countries with comparable energy resources and population figures. In 2004, about 776.9 kgoe of energy per capita (population of 140million) were consumed as against about 2596.9kgoe of energy per capita consumed by South Africa (population of 44million). This low energy consumption is caused by the recurrent scarcity of petroleum products and the persistent electricity black outs which have resulted in a high reliance on self generated electricity. Figure 2-4 below shows Nigerias energy per capita in comparison with some select developing countries.
21 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group 0 500 1000 1500 2000 2500 3000 Angola Egypt Ghana Indonesia Nigeria South Africa K g o e 0 50 100 150 200 250 300 M i l l i o n s Energy Per Capita Population
Figure 2-1: Comparison of Energy per Capita for Select Countries, 2004 Source: EIA
Nigeria is currently ranked 62 out of 75 countries on the IEAs Energy Development Index (EDI). EDI is a simple composite measure of a countrys progress in its transition to modern fuels and of the degree of maturity of its energy end-use. Nigerias EDI ranking highlights the countrys low per capita commercial energy consumption and the low percentage of the population with access to electricity. Figure 2-5 below shows Nigeria EDI rating compared with other developing countries.
Figure 2-2: Selected Developing Countries Ranked on the Energy Development Index, 2002 Nigerias daily energy consumption is 109.6 KwH (per 1000 persons). On a comparative basis, Nigeria energy consumption is low (see Figure 2-6 below). Though energy consumed by wood fuels is not accounted for, it still remains a dominant source of energy in Nigeria. It is estimated that it could account for as high as 77% of total energy consumed by the household sector in Nigeria (see Figure 2-7 below).
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Figure 2-3: Comparison of Daily Energy Consumption for Select Countries
Energy Supply Mix In Nigeria In 1950s, the countrys major power source was coal, which accounted for about 70% of the countrys total power consumption. However, since the discovery of crude oil, the focus of the nation has been on developing its crude oil reserves while neglecting other energy sources. Therefore, Nigerias energy consumption mix is currently dominated by oil (53%), followed by natural gas (39%) and hydroelectricity (7%) as shown in figure 2-7 below. Coal, nuclear and other renewables are currently not part of Nigerias energy consumption mix, with the exception of biomass often used to meet rural heating and cooking needs.
Figure 2-4: Total Energy Consumption in Nigeria, by type (2006) 2.2.1. Energy Demand in Nigeria In 2005, it was estimated that households accounted for about 50% of the energy demand in Nigeria while the industrial and transportation sectors accounted for 30% and15% respectively (see figure 2-8 below). As the economy of the country grows, and the country gets more
23 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group industrialized, it is expected that the industrial sector will account for a larger percentage of the energy demand.
Figure 2-5: Energy Demand in Economic Sectors in Nigeria Source: Clean energy investment in Nigeria, www.iisd.org 1 Note: The renewable portion is mostly biomass (over 90%) especially fuel wood and charcoal
2.2.2. The National Energy Policy In 2003, the Federal Government approved the National Energy Policy, developed by the Energy Commission of Nigeria, to serve as a blueprint for the sustainable development, supply and utilization of energy resources within the economy, and for the use of such resources in international trade and co-operation. The key objectives of the National Energy Policy are: 1. To ensure the development of the nations energy resources, with a diversified energy resources option, for the achievement of national energy security and an efficient delivery system with an optional energy resource mix 2. To guarantee increased contribution of energy productive activities to national income 3. To guarantee adequate, reliable and sustainable supply of energy at appropriate costs and in an environmentally friendly manner, to the various sectors of the economy, for national development 4. To guarantee an efficient and cost effective consumption pattern of energy resources 5. To accelerate the process of acquisition and diffusion of technology and managerial expertise in the energy sector and indigenous participation in energy sector industries, for stability and self reliance
24 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group 6. To promote increased investments and development of the energy sector industries with substantial private sector participation 7. To ensure a Comprehensive, integrated and well informed energy sector plan and programmes for effective development 8. To foster international co-operation in energy trade and projects development in both the African region and the world at large 9. To successfully use the nations abundant energy resource to promote international co- operation Following the approval of the Energy Policy, the Energy Commission of Nigeria developed a draft Energy Masterplan to translate the provisions of the National Energy Policy into implementable projects, activities and programmes. However, the Masterplan is yet to be approved by the Federal Government.
2.3. Conventional energy sources 2.3.1. Oil As at January 2007, Nigerias proven crude oil reserves were estimated to be 36.5 billion barrels, the 10th largest in the world as shown in figure 2-9 below. Oil Exploration in Nigeria has grown over the years from 25 billion barrels in 2004 to about 36.5 billion barrels in 2007. 0 50 100 150 200 250 300 S a u d i A r a b i a I r a n I r a q K u w a it U n i t e d
A r a b
E m ir a t e s V e n e z u e l a R u s s i a n
F e d e r a t io n L i b y a K a z a k h s t a n N ig e r i a U S C a n a d a Q a t a r C h i n a B r a z il B i l l i o n
B a r r e l s
Figure 2-6: Top 15 Crude Oil Reserve Holding Countries
In 2007, Nigeria was the worlds 11th largest producer of oil and the 7 th largest oil producing country with an output of 2.2 million barrels per day (moped) of crude. Nigeria is also the sixth largest oil producing country amongst OPEC member states. Due to the Niger Delta crisis, oil production had dropped to between 1.4mbpd and 1.5mbpd compared with 2.3 million bpd in 2006.Figure 2-10 below shows how Nigerias oil production has grown historically.
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Figure 2-7: Nigeria's Historic Oil Production and Reserves Growth (1988-2008) Source: OPEC Annual Statistical Book, 2009
Crude Oil Exports In 2008, Nigeria exported approximately 1.9 mob/d of its 2.17 million bbl/d of oil production. Of this, about 44% was exported to the United States, making Nigeria the 5th largest foreign oil supplier to the United States. The light, sweet quality of Nigerian crude makes it a preferred gasoline feedstock. Consequently, disruptions to Nigerian oil production impacts trading patterns and refinery operations in North America and affects world oil market prices. Additional importers of Nigerian crude oil include Europe (25%), Brazil (7%), India (11%) and South Africa (4%) as shown in figure 2-11 below.
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Figure 2-8: Breakdown of Nigerian Oil Exports, 2008 Crude Oil Refining In the downstream oil sub-sector, Nigeria has four refineries with a combined installed capacity of 445,000 barrels per day (bpd). At optimum capacity, the output of the refineries will be 18million liters daily. The combined capacity of these four refineries is insufficient to satisfy the domestic consumption of refined products, which is largely premium motor spirit (PMS), estimated at 30 million liters daily. The refineries are currently operating far below their installed capacities due to inadequate funding for their routine maintenance and sabotage of the facilities by militants. The demand shortfall for petroleum products is therefore met through importation. Table 2-1 below shows the installed capacities of the four (4) refineries in Nigeria.
27 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Table 2-1: Nigeria's Refineries and Installed Capacities
Nigerias downstream distribution facilities include 22 storage depots, 5,120 km pipeline network, 24 Pump Stations, nine (9) butanization depots with a total combined capacity of 12,000 MT, over 40 private depots, five NNPC jetties and a number of private jetties. Figure 2-12 below shows the distribution of these assets.
Figure 2-9: Location of Downstream Assets in Nigeria The distribution of refined products in Nigeria is carried out through more than 7,000 retail stations. The retail system and the transportation facilities that bring the products to these outlets are managed by the Pipelines and Products Marketing Company (PPMC). The storage and distribution depots are linked to the refineries and port terminals by pipeline networks. Product distribution is also done by a tanker service, which has been the focus of theft and diversion of shipments. 2.3.1.1. Institutional Structure of the Nigerian Oil Industry The Nigerian National Petroleum Corporation (NNPC) dominates Nigeria's oil industry and is the major partner in the upstream joint ventures with the major multinational petroleum exploration and production companies in Nigeria. NNPC, on behalf of Government, manages all government interests in the Nigerian Oil industry. In addition to its exploration activities, the Corporation is involved in refining, petrochemicals and products transportation as well as marketing. NNPC has 12 strategic business units, covering the entire spectrum of oil industry operations: exploration and production, gas development, refining, distribution, petrochemicals, engineering, and commercial investments. The National Petroleum Investment Management Services (NAPIMS), one of the strategic business units within NNPC, oversees the Federation investments in the Joint Venture Companies (JVCs), Production Sharing Companies (PSCs) and Service Contract Companies (SCs).
28 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Five oil companies - Shell, ChevronTexaco, Mobil, Nigerian Agip Oil Company (NAOC) and Total currently dominates the upstream oil industry in Nigeria. The Major players in the upstream oil industry and their percentage contribution to the total crude oil production in 2007 are shown in Figure 2-13 below.
Figure 2-10: Key Players in the Nigerian Upstream Oil Industry Source: www.nnpcgroup.com The industry is regulated by the Department of Petroleum Resources (DPR), a department within the Ministry of Petroleum Resources. The DPR ensures compliance with industry regulations; processes applications for licenses, leases and permits, establishes and enforces environmental regulations. The DPR, and NAPIMS, play a very crucial role in the day to day activities throughout the industry. The Petroleum Products Pricing Regulatory Agency (PPPRA) is responsible for determining the pricing policy of petroleum products and regulating their supply and distribution. PPPRA manages the Petroleum Support Fund (PSF) that was established to cushion the effects of high international oil price on the domestic market. The Nigerian gas market is dominated by a few major players as essential facilities such as gas plants and pipelines are owned by the largest incumbents. While the Government owned NNPC/NGC is dominant in the downstream sector, the Shell operated JV dominates the upstream sector of the gas market. In addition to the downstream, the Government also has significant holdings in the upstream with an average of about 50% across the JVs and PSCs. 2.3.1.2. Key Challenges Facing the Nigerian Oil Industry The Oil sector has been faced by various challenges which have undermined its development over the years. These challenges include:
29 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Local Content Investments in the Oil and Gas industry amount to billions of dollars annually to fund capital projects and operating costs. Relative to comparative countries, Nigerias needs to enhance the local value addition in the oil & gas industry by: Domiciling significant portions of oil and gas derivatives Increasing the contribution of the oil and gas sector to GDP growth in relation to the huge investments and revenue earnings Enhancing local capacity and capabilities to provide services and material required in the industry While for instance Malaysia and Brazil have both attained 70% level of national content, Nigeria struggles to attain 20% (see figure 2-14)
Figure 2-11: National Content Figures for Select Countries Source: NNPC Presentations
To address this issue, NNPC developed a National Content framework, which incorporates the key stake holders in achieving increased linkage of the petroleum sectors with other sectors of the economy. NNPC also developed a broad National Content Implementation Agenda containing twenty two major initiatives that will enable the realization of the set national content targets. Initiatives being planned and implemented include infrastructural upgrades like setting up deep water ports, promoting world-class galvanizing plant, promoting local manufacturing of steel plates, pipes and developing engineering design expertise in Nigerian engineers. An analysis shows that Engineering, Fabrication, and Construction account for about 50% of planned spend on steel (~20 billion over 2005-2009), highlighting the importance of the steel industry in growing national content in the oil and gas industry (see figure 2-15 below)
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Figure 2-12: Cumulative Oil and Gas Industry Spend by Activity (2005-2009) The Government also introduced some directives to enforce local content in the industry. However, the implementation of these directives needs to be enforced and monitored to ensure that Nigerian human & material resources are utilized in the Oil industry. Furthermore, a draft Nigerian Content Development Bill has been submitted by NNPC to the Federal Government and is being reviewed by the National Assembly. The regulation which is the responsibility of the Department of Petroleum Resources (DPR) will be in place once the bill is enacted. Some of the negative impacts from the current trends in local content: There is need to enhance the capacity of the Nigerian Content Division in NNPC to enforce compliance. Prolonged process for enacting the NC Development Bill has affected the aspiration for aggressive pursuit of the program. Equally the bill in the National Assembly that seeks monitoring of local content adherence outside the ambit of NNPC (with responsibility for managing Govt. Investment interest) and the supervising ministry creates significant worry for investors and industry. Investors confidence in the programme is eroded by the general downturn in the industry as some of the programmed projects that form the planning basis for investment are either frozen or suspended due to misalignment. Indeed some of the investors are slowing down out citing conflicting message and unfavorable competition with foreign companies and reneging on work guaranties by IOC. Security and Civil Unrest The continuous security threat by Niger Delta militants has caused the Countrys Oil production to decline over the years. The United States' Energy Information Administration estimates that between December 2005 and December 2007, Nigeria lost an estimated $16 billion in export revenues due to production shut-in.
31 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group The impacts include: Substantial deferment of production volume Withdrawal of contractors Insurance premium and labour cost increasing NLNG declaring Force Majeure as result of Soku vandalization Cost impact Funding - Industry Spend/Arrears Federal Government funding of the industry has grown steadily over the years. The current investment requirement is a major step-up translating into about $5 - $6 bn funding shortfall. The major challenge however is bridging this funding gap. The Government recently introduced a frame work for short term funding intervention which will help mitigate the challenge to some extent. Efforts towards the resolution of the funding problem are progressing, however as crude prices are falling, investments are not as attractive as in the last 3years. It is expected that a portion of total arrears will be addressed by alternative funding arrangement; MCAs and bridge loans. Institutional Reforms Some of the critical issues regarding the institutional structure of the industry include: Government clarity and optimum alignment of industry roles Absence of clear strategy for maximizing value for the nation Capacity and capability Building within institutions Accountability and empowerment of institutions Weak ethics / culture of performance In order to effectively address these challenges and bring the industry in line with global trends and standards, the current reforms now in the process of implementation will require significant structural, legislative, commercial and operational changes. The present reform started with the inauguration of the Oil and Gas Sector Reform Implementation in the year 2000, by former President Olusegun Obasanjo. The work of the committee led to the preparation of the Draft National Oil & Gas Policy in 2004. The Oil & Gas Sector Reform Implementation committee was reconstituted in 2007 by President Umaru Musa YarAdua under the chairmanship of Rilwanu Lukuman, and was charged with the responsibility of implementing the National Oil and Gas Policy approved by the Federal Executive Council, and to actualise the reform. In pursuance of this, a Petroleum Industry Bill was drafted in line with the policy, as an all- encompassing legislation to regulate major aspects of the Nigerian petroleum industry. The Petroleum industry bill has passed through the second reading in the National Assembly and it is expected to be passed into law soon. Low Level of Domestic Technological Development Nigeria needs to grow its technology capabilities as most of the technologies used in the oil industry are imported for implementation. Technologies that are pertinent to the growth of the industry need to be identified and required partnerships created, that will be the implementation vehicles for the technologies. Escalating Cost of Services
32 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group JV Operators are faced with maturing fields with increasing production decline rates of about 10%/ yr and additional costs to rejuvenate existing field facilities. Also, EPC contract rates and labour costs have been on the increase because of the security issue in the Niger delta. For example, steel prices and rig rates have been increasing until recent times (see Figure 2-16 and 2-17 below)
Figure 2-13: Steel Prices Trend
Figure 2-14: Jack-up Rig Rates
OPEC Quota Allocation Mechanism The call on OPEC is expected to grow at about 2% annually over the next few years. Average OPEC capacity growth rate is similar at about the same level annually. If Nigerias crude oil production continues to grow at the 2006 levels, then capacity growth will outstrip OPEC average annual rate of growth. Given such distortion, a review of the OPEC quota allocation mechanism
33 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group which takes cognizance of installed capacity is imperative if Nigeria is to monetize its crude oil capacity increases. Human Capacity Development There is a dearth of skilled human capital in the oil and gas industry and there is a need to introduce new blood into the industry as the industry is characterized by an ageing work force. This problem is being faced in the global oil industry but it could become more visible and severe in Nigeria as a result of the Niger Delta crisis. Shortages in key skill pools can potentially become a major challenge as the industry transitions. Key skills pools requirement include: Strategic management skills Project management Geosciences and petroleum engineering skills Vocational capabilities such as welding Limited EPC Contracting Capacity Currently there is a dearth of local EPC contracting capacity in Nigeria. Also due to the security issues and Government policies, the global EPC contactors request for price premiums to bid for projects in Nigeria leading to escalating project costs. Environmental Degradation Oil extraction in the Niger Delta region has caused severe environmental degradation, due oil spills, loose environmental regulations, and government complicity during military regimes that once governed the country. Although the situation is improving with more stringent environmental regulations for the oil industry, marine pollution is still a serious problem. Illegal Bunkering/Crude theft Crude oil theft, or "bunkering", costs Nigeria billions of dollars in lost revenue every year. The Nigerian government estimates the amount of oil stolen countrywide is as much as 100,000 barrels a day. Oil theft has also contributed to a cycle of violence and disruption to exploration and production activities in the Niger Delta region.
Inadequate Refining Capacity Nigeria's refining capacity is currently insufficient to meet domestic demand due to low capacity utilization. Nigeria's refineries (Port Harcourt I and II, Warri, and Kaduna) have a combined capacity of 445,000bbl/day, but problems including sabotage, poor management and a lack of regular maintenance contribute to the current problem of low capacity utilization below 40%. Figure 2-18 below shows the estimated PMS demand and supply in Nigeria. Recently, the Government granted permits to several independently-owned refineries in Nigeria. It is expected that the construction of private refineries will save Nigeria billions of dollars in costs of importing refined petroleum products.
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0 5 10 15 20 25 30 35 40 45 50 M i l l i o n
l i t e r s 2005 2006 2 007 20 08 2009 2010 2 011 2012 2013 2014 201 5 Yea rs Comparison in Demand & Supply of PMS in Nigeria Pro jec te d P MS in Demand Estima ted PMS
Figure 2-15: Estimated PMS Demand and Supply Source: NNPC Presentations
Refinery Inefficiency and Underutilization None of the refineries in the country is currently working at full capacity and our demand for PMS is rising resulting in a refining gap of about 800 kbpd. Significant investments will be required in the current refineries and new Greenfield refineries to meet both domestic and international refining gap.
To improve market fundamentals, our refineries must become more efficient and function at near optimal capacity. They need to be performing at world class levels. In addition to this, new (Greenfield) refineries must be encouraged using fiscal and regulatory measures. Crude Oil and Petroleum products pipeline vandalization and militancy Incessant vandalization of petroleum products pipeline occurs predominately along the following 3 axis: Port-Harcourt Aba-Enugu-Makurdi o Isialangwa, Isikwato, Isiagu and Ehume are worst hit areas Mosimi Atlas Cove Pipeline o Ilado, Ijegun, Navy Town, Imore, Arepo, Idimu, Abule-Egba, Abagbo, Itoikin, Ogere and Ijeododo Warri Benin Auchi Suleja o Presco near Benin, Sakpoba, Okhai, Oghara, Oviri Court, Adeje, Okpella, Aviele, Uluole, Iyamu, Oregha, River Ethiope, Osara, Igbonla and Abaji Areas
There are dangers posed by pipeline vandalization and they are: Pipeline vandalism constitutes a national security threat as products are not able to get to the desired destination thereby resulting in long queues, unrest and agitation
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Inefficient Supply and Distribution Network The supply chain for petroleum products has its own peculiar challenges from transportation to pump; they are summarized below: Tariff structure inadequate to cover expenditure - Sectoral reforms must encourage funding and attract new investment in the downstream sector using an appropriate tariff structure Inadequate and ageing vessels - Vessels need to be upgraded and increased Under funding - As with the upstream sector, under funding is prevalent in the downstream and this must be resolved as well as improving investment Inadequate maintenance - Maintenance must be done timely and adequately to prevent breakdown of equipment Inadequacy of jetty facilities at Apapa - Additional Jetty facilities need to be constructed as the sole jetty point is overcrowded constantly resulting in delays Draft limitation affect Calabar, Warri and PH Operations Obsolete equipment - Equipment need to be upgraded and in some cases jettisoned. New technologies should be acquired to ensure optimal performance. Storage limitations at Mosimi, Atlas Cove Capacity for storage and product handling is inadequate and these are crucial to optimizing product delivery. These stations have inadequate storage capacity and there is the need to build more storage capacity. Inadequate pipeline network The current pipeline network needs to be enhanced to improve reach Mode of transportation - Transportation is mostly by trucks this is affected by road networks, domestic incidences etc. Other methods of transportation needs to be considered. Under-pumped markets at major developing cities- There are some major cities in Nigeria that do not have sufficient number of petrol station vis a vis the population and economy of the state e.g. Abuja Berthing constraints of Jetties - The berthing constraints of some jetties make it mandatory that products be offloaded into smaller coastal vessels. This creates additional costs to the operators, thus reducing their margins and rendering them less competitive. (see table 2-2 below)
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Table 2-2: Vessel Draft Limits of Some Key Jetties in Lagos
Corporate Structure and Governance A review of Refineries current operating model reveals major weaknesses relating to statutory issues, capitalization and financing, revenue management, regulatory framework, legal framework and decision-making timeline. The under listed as some the challenges with respect to the structure: Refineries are limited by the NNPC Act from operating effectively and decisively as a commercial entity. This is due to the fact that the board of Refineries and PPMC to do not have the authority to make business decisions independent of NNPC. Low expenditure approval limits set for Refineries Management and Refineries Board Low and insufficient capitalization Low and insufficient investment Insufficient funding due to the companys absolute dependence on NNPC for provision of working capital Prohibition from external borrowing by the Refinerys Article of Association Delay in the disbursement of funds for operations.
Lack of Investment in Downstream Refining Global refining capacity is expected to rise to 116, 303mbbl/d by 2020 (Table 2-3). Recent studies on global oil demand vis a vis refinery capacity incremental investment in refining has not been maintained in consonance with demand. This dictates a compelling need for global investment in refining. (see Table 2-3)
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Table 2-3: Global Oil Demand and Refining Capacity (mbbl/d) Downstream sector reforms market and price liberalization The downstream sector is partially deregulated with NNPC being the dominant player. Price liberalization is also incomplete with substantial subsidies in a high oil price regime. Although PPPRA was established for moderating price volatility, there are some challenges with administering the Petroleum Stabilization Fund (PSF).
Ownership of assets The reforms regarding ownership of downstream assets are incomplete and are being implemented in an adhoc manner. The status of the industry reforms with respect to supply and distribution assets is as listed below: Refineries Elastic debate on ownership and management structure Commercial refining management not yet enhanced Pipelines Ownership and management structure consistent with liberalization of the sector yet to be addressed Private Depots Developments of private depots has taken place but they have not been able to make significant impact because they are in strategic locations
It is imperative to address the issue of ownership and management structure of pipelines and depots to pave way for common usage of assets in an open, transparent and non discriminatory manner. Also earlier work on tariff for common asset usage needs to be completed.
Union/Group Action The other Issues associated with the downstream sector are Union Strikes where Supply is frequently disrupted by actions of NLC, NUNPENG and PENGASSAN and Truck Drivers Union.
Product Adulteration and Hoarding Malpractices like product adulteration, hoarding, and unauthorized diversions are still prevalent in the industry.
38 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group 2.3.2. Gas Nigeria has the world's seventh largest gas reserves with 187 trillion cubic feet (TCF) of proven reserves. The gas is of high quality, particularly rich in natural gas liquids (LPG and condensates). To date, all the proven gas reserves were discovered as a result of oil exploration. Recently, a U.S. Geological Survey (USGS) study estimated that the gas reserves potential in Nigeria could be as high as 600TCF, the worlds fourth largest, with dedicated and focused exploration for gas. The country is therefore believed to be a gas province with oil discoveries. Despite this potential, the level of gas penetration and utilization in the country for both domestic and industrial purposes is relatively low. For years, most of the associated gas produced was flared and the initiatives implemented to reduce flaring have not achieved the required results. Various flare out dates were set but as these dates approached various reasons were adduced for a deferral. It is therefore ironic that despite the countrys large gas reserves and gas flares, domestic gas demand, especially to power and manufacturing sectors are not being met. Also, there is lack of infrastructure to allow the easy movement of gas from the Niger Delta to the consumers. The existing gas pricing mechanism has also not enabled investments. For Nigeria to achieve its planned 2020 position in the world, gas must be the engine of growth through increased industrial and domestic use. Figure 2-19 below shows Nigerias gas reserves relative to the other top reserve holding countries.
Figure 2-16: Top 20 Countries Natural Gas Reserves as at January 01, 2007 Source: Oil and Gas Journal NNPC estimates that the domestic gas will grow aggressively to between 6BCFD and 10BCFD in 2010 from about 1BCFD in 2007. This demand is driven mainly by the growing power sector and the planned investments in gas based industries such as methanol, fertilizer, etc. Also, the export demand is expected to grow to 5BCFD in 2010 from about 8BCFD in 2010. The export demand is driven by the planned LNG and gas utilization projects including NLNG additional trains (T7), Brass LNG, Olokola LNG, Akwa-Ibom LNG, West African Gas Pipeline Project and the Trans-Saharan Gas Pipeline Project. Figure 2-20 below shows Nigerias historical gas utilization and forecast potential demand.
39 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
Figure 2-17: Nigeria's Historical Gas Utilization and Forecast Potential Demand Source: NNPC Gas Masterplan Roadshow Presentation In light of a potential supply shortfall of about 5BCFD in the domestic market by 2010, a number of strategic initiatives have been undertaken by FG, especially the domestic gas supply obligations. The domestic gas supply obligation mandates the oil companies operating in Nigeria to set apart some of the gas produced for supply to the domestic market. Gas Exports LNG Projects Nigerias LNG is growing capacity rapidly and on course to being the second fastest growing LNG capacity holder in the world, controlling about 30% of the total Atlantic LNG capacity. The only currently operating LNG plant in Nigeria is NLNG but there are plans to build additional LNG facilities. Nigeria LNG A significant portion of Nigerias natural gas is processed into LNG. Nigeria's most ambitious natural gas project is the $11.4 billion NLNG facility on Bonny Island. Partners, including NNPC (49%), Shell (25.6), Total (15%) and Agip (10.4%), completed the first phase of the facility in September 1999. NLNG currently operates six (6) trains with a total production capacity of 22 MTPA per year. The facility is supplied from dedicated natural gas fields, but it is anticipated that within a few years half of the natural gas feedstock will consist of associated (currently flared) natural gas from existing oil fields. Plans for building Train 7 that will lift the total production capacity to over 30 MTPA LNG by 2012, are currently at an advanced stage. Brass LNG The planned Brass LNG project site is located on Brass Island in Nigeria's Bayelsa State. The facility will consist of: two trains each with the production nominal capacity of 5MTPA of LNG; facilities for liquefied butane and propane extraction, segregation, and treatment; two 185,000 m 3
LNG storage tanks; two 110,000 m 3 LPG storage tanks; one 500,000-barrel capacity NGL tank;
40 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group marine facilities for the products export; and accommodation for plant operators. The project shareholders are NNPC (49%), Total (17%), Agip (17%) and Conoco Phillips (17%). Brass LNG products will be loaded onto vessels by cryogenic pipelines and then transported to terminal facilities in the Atlantic Basin. The natural gas will then be transported to the United States and Mexico. The project, estimated at about $8.5 billion, is expected to produce 10 MTPA of LNG during its 20-year lifetime. In 2007, a project management contract was signed with Bechtel Corp. of the United States. Their responsibilities include site preparation, construction camp and construction dock, permanent operator housing and amenities, marine facilities and support services, tankage, utilities and offsite. The conceptual studies, front end engineering and design phases of the project are complete but the final investment decision on the project is still yet to be taken. Olokola LNG The Olokola LNG project will consist of a marine berth for offloading LNG, along with four LNG trains each with a 5.5 MTPA capacity. The first phase of construction completes two of the trains, and the second completes the other two -- resulting in a 22 mtpa capacity. Located on the coast between the Nigerian states of Ogun and Ondo, east of Lagos, the Olokola LNG project will commercialize Nigerian gas, providing resources to Nigeria and exporting LNG to the world, as well as reduce flaring. The project shareholders are NNPC (49.5%), Chevron (18.5%), Shell (18.5%), and the BG Group (13.5%). The participating companies signed an MOU concerning the Olokola LNG project in April 2005. In March 2007, the companies signed a Shareholders' Agreement (SHA), covering the development of the launch project and future expansions. The ground breaking ceremony of the OK LNG project by former president Olusegun Obasanjo marked a major milestone in the nations drive for gas utilization. The project, when completed will lift the countrys earning from the current $2 - 3-billion to $10-billion yearly. The final investment decision on the project is still yet to be taken. Akwa- Ibom LNG Akwa-Ibom State, StatoilHydro, Centrica and Consolidate Contractors Company has signed an MoU for a $ 17 billion deal to build a new two Train LNG plant. The Akwa-Ibom Governor, Godwill Akpabio, said the plant will be built on Tom Island in the southwest part of the state. In November 2007, Centrica, Norway's StatoilHydro and Consolidated Contractors Company announced a Memorandum of Understanding to assess the feasibility of the Akwa-Ibom LNG projects. The MOU has the provision for StatoilHydro and Centrica each taking a 37.5 % interest in the consortium, with Infrastructure Company, Consolidated Contractors holding 25%. The feasibility study is estimated to cost about $10 million and would include analysis of potential feed gas and LNG plant locations.
Regional Gas Export Projects West African Gas Pipeline Project The West African Gas Pipeline (WAGP) is a 678 km long pipeline from the gas reserves in Nigeria's Escravos region of Niger Delta area to Benin, Togo and Ghana. It is the first regional natural gas transmission system in sub-Saharan Africa. The project is designed to substitute
41 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group natural gas from Nigeria for alternate fuels used by power, industrial, mining and commercial sectors in Ghana, Togo and Benin Republic. Operational start-up of the project is expected in December 2008, almost a year behind schedule, with initial capacity of 200 mmcf/d of natural gas. The pipeline is expected to function at a full capacity of 450 mmscfd within 15 years. The pipeline had originally been scheduled to start operating in December 2007, but was delayed after leaks were detected in supply pipelines in Nigeria, which needed cleaning and repair. The project shareholders include the operator, Chevron Nigeria (36.7%), NNPC (25%), Shell (18%), Ghana's Volta River Authority (16.3%), Togo's Societe Togolaise de Gaz (SoToGaz) (2%) and Benin's Societe Ben Gaz S.A (SoBeGaz) (2%). Trans-Saharan Gas Pipeline Project Nigeria and Algeria continue to discuss the possibility of constructing a Trans-Saharan Gas Pipeline (TSGP). The project, which stretches over a distance of 4,300 km across the Saharan desert is to be shared among Nigeria (1,050km); Niger (750km), and Algeria (2,500km) is estimated at about $21bn.The pipeline will carry natural gas from oil fields in Nigeria's Delta region to Algeria's Beni Saf export terminal on the Mediterranean. The Algerian state oil company, Sonatrach has been in support of the Trans-Saharan Pipeline project, but the project hasnt been able to get finances required for its construction.
Recently, the EU expressed its intention to promote the Trans-Saharan Gas Pipeline project as an option to its current Russian supplies, by perhaps, helping to fund feasibility studies and playing a coordinating role between host countries Nigeria, Niger and Algeria. Equatorial Guinea Gas Supply There are plans by NNPC to supply about 600-800mmscfd of gas to the Equatorial Guinea. This gas is expected to feed into the EG LNG plant on Bioko Island. In return for the gas supply, two oil blocks will be allocated to NNPC in the Equatorial Guinea open acreage. This is expected to drive the internationalization of NNPCs operations. In 2006, NNPC and the Government of Equatorial Guinea entered into Heads of Agreement to govern the supply of natural gas to Equatorial Guinea. Escravos Gas to - Liquid Project Chevron Nigeria Limited (75% share) along with NNPC (25% share) is constructing a 34,000 bpd Escravos Gas-to-Liquids (EGTL) plant in Escravos, Nigeria. The plant will be expanded to a 120,000bpd capacity within ten years of completion. The proposed GTL plant will be capable of converting natural gas into premium environmentally friendly fuel. Europe will be the primary market for all fuel products from the Nigerian plant, although some products may be sold in the US. Recently, the project has been under a lot of scrutiny and review by the Nigerian Senate due to the astronomical hike in the project contract sum from $1.7 billion to $5.9 billion.
42 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group 2.3.2.1. Institutional Structure of the Nigerian Gas Industry Gas is produced and treated by the various upstream players governed by joint ventures agreements (JVs) and production sharing contracts (PSCs) with NNPC. Previously, only Chevron and Shell had gas supply agreements with the Nigerian Gas Company (NGC), the single buyer of gas from upstream producers to supply the domestic market. However, the recently approved domestic gas obligation stipulates that all operators supply a portion of the gas produced to the domestic market. The proposed Petroleum Bill also introduces a strategic gas aggregator who will serve as an intermediary between the upstream suppliers and the downstream gas off takers. Shell supplies some of its gas to SNG (Shell Nigeria Gas) in the Port Harcourt region for supply to industrial customers. NGC owns and operates the entire gas transmission system in Nigeria, providing gas transmission services governed by gas transportation agreements. The company has gas sales and purchase agreements with bulk industrial and commercial end users of gas. NGC also supplies gas to the major gas distribution companies like Gaslink and Falcon gas. The current structure of the Nigerian Gas Industry is as shown in Figure 2-21 below. The Federal Government is however planning to restructure the industry with the passage of the Petroleum Industry Bill.
Figure 2-18: Current Structure of the Nigerian Gas Industry 2.3.2.2. Key Challenges Facing the Nigerian Gas Industry There are five key challenges confronting the Nigerian gas sector. These have had a strong impact on the ability of the sector to grow as rapidly as the market opportunity dictates. These challenges include: Gas flaring In 2004, 770BCF of Gas was produced in Nigeria. About 325BCF was consumed by the domestic Gas and export markets while the remaining was flared. Gas flaring is still a major issue in the Nigerian Gas industry as the country is ranked as the second worlds largest Gas flaring country by the World Bank. Conservatively, about 40 % of Gas produced is currently being flared. The previous Gas flare-out deadline set by the Government for January 1, 2008 and subsequently, December 2008 was not met as a result of inadequate funds, undeveloped domestic Gas market, the Niger Delta security situation and delayed completion of Gas utilization projects. However, the Government has set a new date for end of December 2010.
43 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Whilst gas flaring is a local phenomenon, it is generally agreed that its impact is global and has therefore received world attention. Portfolio alignment/ domestic gas supply obligations There is increasing conflict between IOCs portfolio preference and that of NNPC as the domestic gas demand. IOCs continually underestimate the rising domestic market requirement thereby creating tension as to reasonableness of domestic supply obligation (DSO). Appropriate pricing of gas in the domestic market is also an issue in meeting domestic supply obligations.
Gas Pricing The gas prices in the domestic market have been historically low relative to global prices. Furthermore, the commercial and legal framework required to enable the supply of gas to the domestic market are not in place. Thus, there have been cases of gas supply without payment for years. This has eroded the confidence of gas suppliers in making huge supply investment in the market. In addition, the investments earlier made to supply the domestic markets have been put at risk as many of the buyers, such as Aluminum Smelting Company of Nigeria (ALSCON), National Fertilizer Company of Nigeria (NAFCON) folded up shortly after inception. For supply to be sustainable, it has to be backed by both credible suppliers and buyers. A sector based gas pricing framework has been developed and approved by the Government to address the issue of commerciality. The framework segments the domestic market into three categories, comprising power, strategic gas-based industries that use gas as feedstock (fertilizer, methanol), and wholesale distributors, such as NGC and Gaslink who purchase wholesale gas for onward distribution to low pressure commercial buyers. Commercial Issues with Gas Supply to the domestic market Other commercial issues which tend to create a drag from domestic gas utility include the following: Outstanding debt by Govt. institutions in particular PHCN Inadequate Gas Sales / Purchase Agreement Securitization Fiscal Policies To ensure that there is a proper commercial regulatory framework for the gas sector, (including gas development, provision of third party access, pipeline ownership and tariff structure, gas transportation code etc)., the Government initiated a review of the existing fiscal and legislative framework and developed a proposed Petroleum Bill and a Natural Gas Fiscal Reform Act (NAGFRA). These draft acts have been submitted to the legislature. However, delays in the passage of these critical legislature submissions are creating uncertainty in major projects, further escalating the long term supply development. Inadequate Gas Supply infrastructure Existing infrastructure is completely inadequate for the evolving Nigeria Gas sector opportunities- capacity, penetration; connectivity and flexibility are all problems with the current infrastructure. (See Figure 2-22). For instance, while gas reserves are concentrated in the east, there is limited connectivity with the north and the west where the market largely resides.
44 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
Figure 2-19: Overview of Nigeria's Gas Pipeline Infrastructure
Financing of Gas Projects Significant investments are required to deliver planned export and domestic Gas projects opportunities. The history of non-payment for Gas in the domestic market especially by the government parastatals such as PHCN has served as a disincentive for investments in domestic Gas supply by private investors. There is therefore a need for interventions to ensure revenue security to private investors. Limited Availability of Proven Reserves in the near term Although estimated Proven reserves is about 187TCF, available proven reserves over a 20yr horizon is limited to about 130TCF as the Gas Master Plan study shows significant reserves (about 50TCF) are gas cap gas which will only be available in the longer term i.e. about 15- 20yrs from now. Equally additional gas reserves are also locked in the long term solution gas which will be available from later year oil production. With current estimate of reserves requirement in excess of 160TCF (see Figure 2-23) there is limited proven reserves availability in the short to medium term.
Figure 2-20: Gas Reserves Availability Breakdown Source: NNPC Presentations
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Promotion of domestic LPG consumption Over the years, Nigeria has been faced with acute shortage of Liquefied Petroleum Gas (LPG), also called cooking gas. The breakdown of the refineries in the country resulted in the importation of petroleum products to meet domestic demand despite the exportation of LPG from NLNG. The inadequate LPG offloading jetties and storage facilities were identified as being responsible for the inability of NLNG to supply LPG to the domestic market. PSC commercial terms The current legal framework for oil and gas development, the petroleum act, does not include any specific fiscal terms for developing PSC gas. The petroleum act says that all PSC gas belongs to the concessionaire, i.e. the Government, and that the fiscal terms for developing the gas must be agreed between the concessionaire and the contractor. This has slowed down the pace of the development of PSC gas in Nigeria. 2.3.2.3. LPG Supply and Distribution The country is supplied LPG mainly by the four domestic oil refineries which have capacity to produce a combined 400,000 MT of LPG per annum, but are operating well below this level. In 2001 output of LPG from the four refineries was 89,000 MT in total and this rose to 199,000MT in 2002, an increase of 123%. In 1998, a Butanisation Project was embarked upon to boost LPG utilization nationwide. This project envisaged a local distribution system to depend on local refinery output. Accordingly, nine (9) LPG depots and handling facilities were constructed in locations across the country. Lagos (Apapa) had the largest depot capable of 4,000 MT while all the other locations at Calabar, Enugu, Gombe, Makurdi, Gusau, Kano, Ilorin and Ibadan had capacity of 1,000MT each. As at today, though, all these facilities except Apapa have been mothballed, while the Apapa storage is used for temporary storage by commercial importers. The failure of this initiative appears to have been brought about predominantly by the irregular refinery output in recent years. Nevertheless, control of these facilities can be a critical competitive advantage whenever LPG supply becomes steadier in the Nigerian market. In addition, 152 LPG plants were also privately developed in anticipation of a successful butanisation project. These facilities are mostly moribund at present pending the reactivation of the project or the improvement in supply of LPG to the local market. In Nigeria, LPG is transported via LPG pipelines directly to rebottling facilities belonging to over 150 wholesalers located throughout the country. Retailers refill LPG bottles from plants and sell locally to final consumers. This process creates a bottleneck as unloading LPG and transporting it over long distances is time-consuming. This is contributory to supply shortage. Other sources of LPG in the country include ExxonMobil and ChevronTexaco which also produce LPG and NGL from their gas processing facilities in the south-eastern Port of Bonny and south- western Port of Escravos respectively. Nigerias NLNG also recently entered into supply agreements with local LPG companies for LPG supply from the plant in Bonny to the domestic market.
Product Demand Pricing plays a critical role in the penetration of LPG in the different markets around the world. In Nigeria, the usage levels of LPG have been constrained by the historically lower prices of
46 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group competing products such as household kerosene (HHK) and firewood. Over the years, prices have continued to increase as a result of supply shortages, market demand and deregulation (see figure 2-24 below).
Figure 2-21: Trends in LPG Prices, 1997-2005 Source: ADCG Nigerian Oil Industry Report 2003
Other than rising prices, other constraints that could hinder the growth in effective demand for LPG in the medium term include shortage of steel bottles, technical problems with refinery extraction, loading, bulk storage and transportation of LPG.
The declining consumer income, availability of cheaper substitute products such as wood and HHK and the relatively high retail price of LPG have contributed to Nigerias low per capita consumption that amounted to 0.82 kg in year 2000. This comparison is shown in the Figure 2-25 below.
0 5 10 15 20 25 30 35 G h a n a C a m e r o o n I n d i a N ig e r i a I n d o n e s i a E g y p t C h i n a G a b o n C o t e
D 'I v o i r e K g
Figure 2-22: Country Comparison of Per Capita Consumption of LPG Source: ADCG Nigerian Oil Industry Report 2003
The low consumption of LPG in comparison to countries in similar socio-economic bracket suggests that given adequate availability and pricing, LPG has a promising potential for growth in the Nigerian market.
47 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
2.3.2.4. Linkages with the Petrochemical Industry The petrochemical sector in Nigeria has suffered considerably since 2006 due to rebel attacks affecting the country's four oil refineries. The two refineries, on which much of the petrochemicals production depends, at Kaduna and Warri, have been out of operation since early 2006. Local production of a wide range of chemicals is vital to Nigeria as it would help substitute products currently being imported at high cost, thus saving hard currency. Exports to nearby countries would generate income much needed in the downstream sector for expansions, maintenance, spare- parts, etc. 2.3.2.5. Ongoing Government Interventions to Grow the Nigerian Oil and Gas Industry The FG is implementing specific initiatives targeted at addressing some of the issues identified in the Energy sector. These Initiatives include; Industry Reforms The Nigerian Gas Masterplan Industry Reforms The OGIC (Oil and Gas Reform Implementation Committee) was set up to address the ineffectiveness of the institutional arrangements in the oil and gas sector in Nigeria. At the completion of its assignment, the OGIC submitted its report to Government with recommendations for the full deregulation of the sector and the review and harmonization of the laws governing the sector. It proposed the transformation of NNPC into an independent liability company to enable it to concentrate on its principal commercial function instead of the number of roles that it is presently saddled with. The committee also proposed the creation of the National Petroleum Directorate to replace the Federal Ministry of Petroleum Resources, the replacement of the Directorate of Petroleum Resources (DPR) with the Nigerian Petroleum Inspectorate and the replacement of the PPPRA with the Petroleum Products Regulatory Agency. The recommendations of the OGIC report have been used as a basis for the proposed Petroleum Bill to give legal backing to the reforms being initiated by OGIC for proper implementation.
The Nigerian Gas Masterplan In 2005, the Nigerian National Petroleum Corporation (NNPC) initiated the development of a Gas Masterplan. The plan is aimed at maximizing the value of Nigerias gas resources in the export and domestic market. The resulting gas master plan has the following three main objectives: i. Maximize the multiplier effect of gas in the domestic economy ii. Optimise Nigerias share and competitiveness in high value export markets iii. Assure a long term gas security for Nigeria
48 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group The Nigeria Gas Masterplan was approved by the Federal Government in February 2008, and consists of the following frameworks; Legislative and Fiscal Reforms Gas Pricing Gas Supply Obligation and Portfolio Rationalisation Infrastructure Blueprint Domestic LPG Development Strategy Gas Agreement Standardisation Legislative and Fiscal Reforms The Government is proposing the introduction of the Petroleum Bill to address the legal, regulatory, institutional and policy constraints to investments in the downstream gas sector. The Petroleum Bill outlines provisions for the following: Establishment of a Strategic Gas Aggregator Functions and Powers of the Minister for Petroleum Resources Establishment of a Gas Regulatory Commission for Commercial Regulation (access codes, tariffs etc) The Licensing Regime Unbundling of the Nigerian Gas Company (NGC) into Transmission and Marketing Companies Third Party Access The Pricing Regime Customer Protection & Public Service Organisations Competition & Market Regulation To ensure that Nigeria receives an appropriate share of the rent generated from the production and utilisation of natural gas resources, a new fiscal regime, the Natural Gas Fiscal Reform Act (NAGFRA), for the development of gas is being proposed. It is expected that NAGFRA will stimulate participation of new players in the Nigerian gas sector and ensure that government revenues are aligned with expenditure in the sector for broader economic growth. Gas Pricing Framework From a gas pricing strategy perspective, Government has grouped the entire domestic demand into three broad groupings. This grouping is in recognition of the fact that the different demand sectors have different strategic benefits to the country and different pricing considerations. Fig. 2- 26 below presents the 3 categories. All demand sectors will fall into these categories.
49 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
Figure 2-23: Grouping of Gas Demand Sectors in the Approved Gas Pricing Framework
The groupings are: Strategic Domestic Sector This refers to a very limited set of sectors that have a significant direct multiplier effect on the economy namely the Power Sector (residential and light commercial users) or other sector that the Honourable Minister for Energy may from time to time consider applicable. The strategic intent in gas pricing is to facilitate and ensure low cost gas access to these sectors in order to spur rapid economic growth. Strategic Industrial Sector This refers to industries that utilise gas as feedstock in the production of value added products that are primarily destined for export or in some cases, consumed locally. Strategically, these sectors ensure that value is added to Nigerian gas before it is exported. The process of value addition ensures industrialisation, job creation etc. Typical projects in this group are Methanol, GTL and Fertilizer. For this sector, the strategic intent in pricing is to ensure that feed gas price is affordable and predictable in order to ensure competitiveness of the products in international markets in the face of competition from other gas producing countries such as Qatar, Trinidad etc. that provide gas at very low prices to buyers. Commercial Sectors This refers to sectors that use gas as fuel as opposed to feedstock. Unlike the two previous classifications, projects in this category are a potential major direct revenue earner for Nigerian gas in view of their capacity to bear high gas prices as the competing alternative fuel is LPFO. Typical sectors in this category include cement and domestic manufacturing industries, industrial Power etc. The gas pricing framework being proposed is a transitional pricing arrangement. When the domestic market is fully developed and an alternative pricing approach will be developed. The gas pricing framework stipulates a pricing regime for various demand sectors ranging from a floor price of about $0.1/mcf for the strategic domestic sectors to over $2/mcf for the commercial sectors. All suppliers of gas in the country will be paid the aggregate domestic gas price. The Aggregate Domestic Gas Price is the forecast average domestic price based on the projected total domestic demand portfolio using the relevant prices proposed by this framework. A target aggregate price will be set by the Gas Regulator based on the known portfolio of domestic
50 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group demand. The portfolio will be balanced continually to ensure that the aggregate price does not fall below the threshold. In essence, the suppliers have a fixed price whilst the buyers will pay the sector price proposed in the framework. The aggregate pricing will ensure that regardless of their geographical location all suppliers are able to benefit from the high priced customers as well as from the low priced buyers. The aggregate price will ensure that the suppliers receive an acceptable return for their domestic obligation. A strategic aggregator will manage the implementation of the domestic reserves and production obligation and the aggregate price. It will ensure a balanced growth of the domestic portfolio such that the target minimum aggregate price is achieved whilst not compromising the nations primary objective for economic growth by ensuring the availability of adequate volumes of gas to the strategic domestic sectors. Conceptually, the strategic aggregator acts as a one stop intermediary point between the suppliers and the diverse demand sectors and will ensure that gas is supplied at the aggregated price. In July 2009, The Minister of Petroleum Resources gave the approval for setting up the strategic aggregator company, which would be a limited liability company and would have exclusive rights to perform the duties of an aggregator as outlined in the Nigerian Gas Master Plan, for an initial period of five years. It is expected that the company will be subject to strict regulatory oversight by the proposed Mid-Stream Regulator anticipated in the Petroleum Industry Bill (PIB). However, pending the establishment of such regulator, the office of the Minister of Petroleum Resources will carry out all necessary oversight roles in respect of the company. NNPC given its role as the most dominant gas supplier will coordinate the Joint Venture partners and other relevant stakeholders to formalize the proposed company that will be the strategic aggregator. Gas Supply Obligation and Portfolio Rationalisation To facilitate the availability of gas for various demand sectors, the Government has introduced a domestic gas supply and reserves obligation that will be imposed on all operators in the country. The domestic gas obligations will require all gas (AG and NAG) asset holders will to dedicate a specific proportion of their gas reserves and production for supply to the domestic market.
The reserve obligation will be broken down annually to a production obligation for the same period. The sum total of all obligations will equal the planned domestic requirement for the stated period. Periodical reviews to the domestic obligation will take place to reflect the changing demographics of the demand and supply landscape i.e. new demand will be allocated accordingly as new suppliers come on stream.
It is expected that the allocation of the obligation across operators will be based on the principles of equity to be determined by the Minister.
Gas Infrastructure Blueprint An infrastructure blueprint has been developed to ensure connectivity between major gas reserve sources and the demand centres. The blueprint is aimed to reducing the overall cost of infrastructure development by exploring synergies across JVs and leveraging most of the existing infrastructure. The fundamental strategy is the creation of a gas infrastructure that supports the supply of gas to the domestic, regional and international markets. This approach provides for flexibility of supply, and cost effectiveness.
51 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group At the core of the proposed infrastructure are three (3) gas gathering and processing systems each of which will gather gas across a delineated area, process the gas to a national specification and transport the dry gas into the network of gas transmission systems. The processing facilities will enhance the LPG capacity in the country and hopefully address the issue of LPG availability within Nigeria. The three proposed transmission systems, part of which is already in place, are The Western transmission system comprising the existing Escravos-Lagos Pipeline System (ELPS) and a proposed offshore extension The South-North system from Calabar/Akwa-lbom through the East to Ajaokuta and then to Abuja and Kano. This will ultimately progress to be the Trans-Saharan pipeline when mature The Inter-connector system from Ob-Ob to Oben and then to Ajaokuta. This will be the link line between the East, West and the South-North With the proposed network of infrastructure, the ability to supply gas will increase rapidly and flexibly, and Nigeria will be better positioned to respond to growth in demand both domestically, regionally and for export. Please see figure 2-27 below for a copy of the approved Infrastructure map. An enlarged picture of the map can be obtained at www.ngmproadshow.com. Private sector participation is expected to be significant in the delivery of these infrastructure elements. 15 Companies have been shortlisted from an initial 48 firms that had expressed interest in investing in Nigeria's gas sector based on their technical, operational, financial and project management capabilities. Some of the shortlisted Companies include Shell, Chevron Corp, Exxon Mobil, Gazprom, Gail India, Eon, Centrica and Statoil Hydro.
52 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
Figure 2-24: The approved Nigerian Gas Infrastructure Map
Domestic LPG Development Strategy In response to the shortage of LPG supply in the domestic market, NLNG has offered to enter into a charter and management contract with Caverton Marine to provide a mother ship capable of lifting LPG from the NLNG jetty in Bonny and effecting ship-to-ship transfer to shuttle tankers that will move the products to the jetties. NLNG pledged to supply 13,000MT of LPG to the local market and has signed contracts with indigenous firms for steady and reliable supply. The six (6) local companies appointed by NLNG as off-takers are; Harig, Hyson, LeGlobal, Chimons, Linetrade and Greenfield. Together with NLNG, these companies have developed a short-term, workable approach, which will ensure reliable and affordable delivery of LPG to consumers. Gas Agreement Standardisation Standard templates for gas supply and purchase agreements (GSPA) and gas transportation agreements (GTA) have been developed to address the issue of bankability. The GSPA will define the minimum requirements for gas supply for the domestic market. This will include: credit guarantees, take or pay terms etc. Also, a World Bank scheme is being developed to securitize payments for gas supplied to Government owned plants.
53 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group It is expected that these efforts will put in place an acceptable legally binding and template for commercial supply agreements in the Domestic gas sector. 2.3.3. Coal Coal of sub-bituminous grade occurs in about 22 coal fields spread in over 13 states of the Federation, including Adamawa, Anambra, Bauchi, Benue, Cross-River, Edo, Enugu, Gombe, Imo, Kogi, Kwara, Nassarawa, Ondo and Plateau states. The proven coal reserves so far in the country are about 639 million tones while the inferred reserves are about 2.75 billion tones consisting approximately of 49% sub-bituminous, 39% bituminous and 12% lignitic coals. Coal deposits are found in Nigeria. Coal mining in Nigeria started in 1906 and recorded an output of 24,500tons in 1916. Production rose to a peak of 905,000 tons in 1958/59 with a contribution of over 70% to commercial energy consumption in the country as shown in figure 2-28 below. Following the discovery of crude oil in 1958 and the conversion of railway engines from coal to diesel, production of coal fell from the beginning of the sixties to only 52,700 tonnes in 1983. Currently, coal is not part of the countrys energy consumption mix as shown in Figure 2-7 above.
Figure 2-25: Coal Production in Nigeria (1916 - 2002) Source: Ministry of Mines and Steel Development
S/ N Mine Location State Type of coal Estimated Reserves (Mil. T) Proven Reserv es (Mil. T) Borehol e Records Coal Outcrop and seam Thickness (M) Depth of coal (M) Mining Method 1 Okpara Mine Enugu Sub- Bituminous 100 24 20 Many (1.5m) 180 Underground 2 Onyeama Enugu Sub- 150 40 Many Many 180 Underground
54 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group S/ N Mine Location State Type of coal Estimated Reserves (Mil. T) Proven Reserv es (Mil. T) Borehol e Records Coal Outcrop and seam Thickness (M) Depth of coal (M) Mining Method Mine Bituminious (1.5m) 3 Ihioma Imo Lignite 40 N.A Nil Many 20-80 Open-cast 4 Ogboyog a Kogi Sub- Bituminous 427 107 31 17 (0.8.2.3m) 20-100 Open-cast/ Underground 5 Ogwashi Azagba/ Obomkpa Delta Lignite 250 63 7 4(3.5m) 15-100 Open-cast/ Underground 6 Ezimo Enugu Sub- Bituminous 156 56 4 (10.06- 2.0m) 30-43 Open-cast/ Underground 7 Inyi Enugu Sub- Bituminuos 50 20 4 (0.9-2.0m) 25-78 Open-cast/ Underground 8 Lafia/Obi Nassara wa Bituminous (Cokable) 156 21.42 123 Nil (1.3m) 80 Underground 9 Oba/Nne wi Anambr a Lignite 30 N.A 2 14 (0.3-4.5m) 18-38 Underground 10 Afikpo/Ok igwe Ebonyi/I mo Sub- Bituminous 50 N.A Nil N.A 20-100 Underground 11 Amasiod o Enugu Bituminous (Cokable) 1000 N.A 3 N.A. 563 Underground 12 Okaba Kogi Sub- Bituminous 250 3 Many (0.8-2.3m) 20-100 Open-cast/ Underground 13 Owukpa Benue Sub- Bituminous 75 57 Many (0.8-2.3m) 10-100 Open- cast 14 Ogugu/A wgu Enugu Sub- Bituminous N.A. N.A. Nil N.A. N.A. Underground 15 Afuji Edo Sub- Bituminous N.A. N.A. Nil N.A. N.A. Underground 16 Ute Ondo Sub- Bituminous N.A. N.A. Nil N.A. N.A. Underground 17 Doho Gombe Sub - Bituminous N.A N.A Nil N.A. N.A. Underground 18 Kurumu Gombe Sub - Bituminous N.A N.A Nil N.A. N.A. Underground 19 Lamja Adama wa Sub - Bituminous N.A N.A Nil N.A. N.A. Underground 20 Garin maigungu Bauchi Sub - Bituminous N.A N.A Nil N.A. N.A. Underground 21 Gindi Akwati Plateau Sub - Bituminous N.A N.A Nil N.A. N.A. Underground 22 Jamato koji Kwara Sub - Bituminous N.A N.A Nil N.A. N.A. Underground Table 2-4: Existing Potential Mine Sites with Reserves in Nigeria Source: www.methanetomarket.org
55 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Nigerian coal is of very high quality suitable for fuel in power generation, cement and steel production, brick factories, foundries, laundries and bakeries, tire manufacture, battery manufacture, and domestic cooking fuel (i.e., smokeless coal briquettes). In 2005, the percentage contribution of coal to electricity generation in Poland, South Africa, China, India, USA and Israel were 93%, 93%, 78%, 70%, 50% and 71% respectively. Globally, within the same period, coal contributed about 23% of worlds primary energy consumption and 40% of electricity generated. It is projected that coal will continue to play a large and indispensable role in an environment conscious world; the challenge for governments and industry is to use coal within sustainable development context of higher efficiencies and lower emissions taking advantage of the clean coal technologies. The Nigerian Minerals and Mining Act 2007, the National Energy Policy and the draft National Energy Masterplan include provisions for the development and utilization of coal for electricity generation and other uses but these policies have not been fully implemented. 2.3.3.1. Institutional Structure of the Nigerian Coal Industry From the onset of coal production in Nigeria, the Nigerian Coal Corporation had been the only institution active in the coal industry. In 1990, the Federal Government approved the full commercialization of the corporation. During the last decade, joint venture arrangements with foreign partners have been developed for the exploitation of some of the coal deposits. 2.3.3.2. Key Challenges facing the Nigerian Coal Industry The nations coal industry faces some daunting challenges, which need to be addressed if the potential for coal utilization is to be optimally exploited. These include; Uncertainties in the actual reserves of coal on which long-term projects could be based Creating and finding markets for the coal, Low productivity of the coal mines Reducing cost of production through mechanization Absence of a cost-effective transportation system through an expansion of the rail system and port facilities for the export of coal Low level of mechanization of production facilities
2.3.4. Nuclear Energy Nuclear energy is one of the major sources of base load electricity generation in the world today. The technology for harnessing nuclear energy demands great responsibility and expertise. Therefore, it requires careful planning of the manpower development and material resources.
Coordinated approach to research, training and development in the areas of nuclear science and technology in Nigeria started in 1977 when nuclear energy research centers were established in two Universities. Another nuclear science and technology centre was also established in 1993. The few trained personnel in the area are concentrated in these centers. There is therefore an urgent need to accelerate the manpower development programme in view of the diverse peaceful applications of nuclear energy.
56 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Crucial to any nuclear programme is the availability of nuclear minerals such as uranium and thorium. In 1947, pyrochlore containing uranium was found in appreciable quantities on the Jos Plateau and its environs, but there is still no established method of commercial extraction of the uranium. By 1979, about 617,000 km2 of land area had been covered by aerial radiometric surveys and another 90,000 km2 had been covered by other surveys. Since then no further work has been done.
There is the need to extend investigations to other areas of the country suspected to have traces of any of the radioactive minerals. Uranium ores are complex assemblages of minerals and therefore differ widely in details of composition and texture. The characterization of the known uranium ore minerals in the country has been carried out. There is however the need to develop the extraction processes for each of them, on the basis of which a commercially viable pilot plant could be established.
In addition to the generation of electricity, nuclear energy finds many other peaceful applications. In fact, it has been in use in the country for decades for various peaceful applications in health care delivery system, petroleum industry, agriculture, food preservation, animal husbandry, water resources management, pest control, industry, materials analysis, and mineral exploration. All these applications will be enhanced by the commissioning of the recently acquired nuclear research reactor and the completion of the nuclear accelerator project and the industrial irradiator.
The Nigerian Nuclear Regulatory Authority (NNRA), established in 2001 is responsible for nuclear safety and radiological protection regulation in Nigeria.
Recently, in June 2009, Russian and Nigerian leaders signed a memorandum of understanding to cooperate on peaceful nuclear development. The agreement calls for Russia's state-owned Rosatom to help Nigeria build its nuclear energy infrastructure. It also calls for developing capacity in licensing, siting, design, construction and operation of nuclear power plants.
Also included is a partnership in exploring for uranium and developing uranium fields.
2.4. Renewable energy sources Renewable Energy development in Nigeria has been slow in the absence of a comprehensive framework to plan, coordinate and implement a national policy and strategy. Also, there are no clear and consistent institutional champions to address barriers and create expanded opportunities for renewables. Several ad hoc initiatives are currently being undertaken by various actors. The Energy Commission of Nigeria has a few technology-driven pilot projects on solar PVs, two wind power demonstration projects located in Sokoto, and a small hydro plant that has been operating in Jos for several years. Vast opportunities for small hydro remain untouched. Recently several state governments have embarked on solar projects for rural water supply, residential lighting and lighting of clinics, schools and community centers.
57 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group 2.4.1. Key Challenges facing the development of renewable energy sources in Nigeria Some of the key challenges facing the development of renewable energy sources in Nigeria include: Policy, Legal and Regulatory Framework The focus of national policy has consistently been on developing conventional energy sources for electric power generation. Several incentives were established to promote investments in conventional power generation. Subsidizing grid power has so far not encouraged investments in alternative energy solutions. This lack of a level playing field for all energy sources and technologies has constituted a formidable barrier to the growth of alternative electricity services. Under the 2005 Act, independent power producers are permitted to operate, however, the legal framework for successfully implementing PPA is still evolving. The perception of significant regulatory risks by potential investors and financial institutions compound the challenges faced by potential renewable electricity investors. Moreover, guaranteed access to the grid is an important element of an investment decision to embark on grid-connected power projects. At present, a non- discriminatory open access to the national electricity grid, for renewable power, is not assured. Achieving adequate energy supply where renewables play a role necessitates the creation of appropriate policy framework of legal, fiscal and regulatory instruments that would attract domestic and international investments. Clear rules, legislation, roles and responsibilities of various stakeholders along every stage of the energy value chain from supply to end-use are key elements of the overall policy framework needed to promote renewable energy technologies. Non-existing Framework for Power Purchase Agreements (PPA) Currently there is no PPA framework for renewable energy generation to the grid. A system of rational expectations between renewable electricity producers and the grid operators are an imperative for the growth in grid-based renewables. The PPA sets the terms by which power is marketed and/or exchanged. It determines the delivery location, power characteristics, price, quality, schedule, and terms of agreement and penalties for breach of contract. Legally binding long-term PPAs provide comfort to the developers as well as lenders, and would also encourage the expansion of renewable electricity development through investments. Institutional Framework In Nigeria, coordination between Government Ministries and Agencies responsible for rural development and renewable energy development is weak and rather complex. Unlike oil and gas, no agency has a clear mandate to oversee the development of renewable energy. The lack of a clear champion robs the sector of a driving force for its growth and development. Affordability Even though renewables have low operation and maintenance costs, most renewable energy technologies have high up- front capital cost compared to their conventional energy alternatives. Apart from the higher capital costs, most renewable energy technologies (RET) face the barrier of being perceived as untested technologies. Given these twin barriers to RET, investors face higher risks and uncertainties when making investment decisions. Therefore in a capital constrained economy like Nigeria, where there are many competing demands for available scarce capital resources, the promoters of RET face the problems of high transaction costs and restricted access to capital.
58 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group End users of RET, especially the poor, face problems of access to credit. Lack of access to micro financing, high interest rates, poor business development skills by system vendors and unsupportive climate for investments are some of the primary barriers to market growth. Capacity Human and institutional capacity building at all levels would be required to sustain the scientific, engineering and technical skills relevant for the design, development, fabrication, installation and maintenance of RET. In particular, capacity building in four areas are most lacking, namely; training of manpower to install, operate and maintain RET, development of manufacturing capabilities, development of critical mass of scientists, engineers, and economists, and design and effective functioning of institutional framework. Public Awareness Awareness of the opportunities offered by renewable energies and their technologies is low among public and private sector stakeholders. This lack of information and awareness creates a market distortion that results in higher risk perception for potential renewable energy projects. The general perception is that RETs are not yet mature technologies, hence are only suited for niche markets and even then will require heavy subsidy to make it viable. There is therefore a need for dissemination of information on RE resource availability, benefits and opportunity to the general public in order to raise public awareness and generate activities in the sector. Such process is key to building public confidence and acceptance of RET. Providing information to selected stakeholder groups like the investors can help mobilize financial resources needed to promote RET projects. The Renewable Energy Master Plan proposes the set up of a National Renewable Energy Agency (NREA), which together with non-governmental organizations (NGOs), can assist in increasing public awareness and providing information and assistance to interested stakeholders. Poorly Developed Cross-sectoral Linkages In some of the most successful renewable energy programs, it is an imperative that key sectors of the economy drive the demand for renewable power production. In Nigeria, renewable energy is inadequately linked to key drivers of the national economy such as the growth in small and medium enterprises, growing demand for water supply, developments in the telecommunication industry and the drive towards integrated rural development. Developing these cross-sectoral interfaces is crucial to expanding renewable energy opportunities. Standards and quality control A major constraint to the development of the renewable energy market in Nigeria is the poorly established standard and quality control of locally manufactured and imported technologies. Creating quality assurance is a precondition for building consumer confidence and in growing the market for renewable energy. Two important dimensions to issues of quality include the perception of potential users, poorly developed regime for standards setting, testing and certification as well as professionalism among operators. Inadequate resource assessment The growth of the renewable power industry will depend to a large extent on the availability of a solid resource database. Reliable and up-to-date sources of data will assist investors in making decisions on renewable electricity. Intermittency of resource availability
59 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group An underlying barrier affecting all renewable electricity resources is the intermittency of their availability. The challenge of energy storage and system management presents a major challenge and adds to the complexity and costs of renewable electricity. The Policy Guideline establishes a framework to addresses the above barriers. It creates measures that enable market expansion and private sector participation in renewable electricity business. It further facilitates grid-connected and off-grid operations as well as increased role for renewable electricity in rural electrification. 2.4.2. Hydropower Nigeria is endowed with abundant water resources. Hydropower is one of the major sources of base load electricity generation. Despite its high initial capital cost, hydropower provides one of the cheapest and cleanest sources of electricity. The country is well endowed with large rivers and some few natural falls which are together responsible for the high hydropower potential.
Hydropower is derived from the potential energy available from water due to the height difference between its storage level and the tail water to which it is discharged. Power is generated by mechanical conversion of the energy into electricity through a turbine, at a usually high efficiency rate. Depending on the volume of water discharged and height of fall, hydropower can be large or small. Although there may not be an international consensus on the definition of small hydropower, an upper limit of 30MW can be considered for small hydropower.
Many dams were constructed and operated by the Government. Examples of these large hydropower dams are the Kainji(760MW), Jebba (640MW) and Shiroro power stations (600MW) which supply about 30% of the installed commercial electric power capacity, see Figure 2-29 below for their locations.
Figure 2-26: Location of Hydropower Dams in Nigeria
60 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Source: www.hydroworld.com
The total technically exploitable large scale hydropower potential of the country is estimated at over 10,000MW (see table 2-5), capable of producing 36,000GWh of electricity annually. Only about one-fifth of this potential had been developed as at 2000. The small scale hydropower potential is estimated at 734MW as shown in figure 2-6. Current hydropower generation is about 14% of the nations hydropower potential and represents about 30% of the total installed grid-connected electricity generation capacity.
Location River Potential Capacity (MW) Donka Niger 225 Zungeru II Kaduna 450 Zungeru II Kaduna 500 Zurubu Kaduna 20 Gwaram Jamaare 30 Izom Gurara 10 Gudi Mada 40 Kafanchan Kongum 5 Kurara I Sanga 25 Kurara II Sanga 15 Richa II Daffo 25 Richa I Mosari 35 Mistakuku Kurra 20 Korubo Gongola 35 Kiri Gongola 40 Yola Benue 360 Karamti Kam 115 Beli Taraba 240 Garin Dali Taraba 135 Sarkin Danko Suntai 45 Gembu Dongu 130 Kasimbila Katsina Ala 30 Katsina Ala Katsina Ala 260 Makurdi Benue 1,060 Lokoja Niger 1,950 Onitsha Niger 1,050
61 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Location River Potential Capacity (MW) Ifon Osse 30 Ikom Cross 730 Afokpo Cross 180 Atan Cross 180 Gurara Gurara 300 Mambilla Danga 3,960 Total 12,220 Table 2-5: Estimate of Current Exploitable Hydropower Sites in Nigeria Source: Renewable Energy Masterplan, Energy Commission of Nigeria, 2005
S/n State (pre 1980) River Basin Total Sites Total Capacity (MW) 1 Sokoto Sokoto Rima 22 30.6 2 Katsina Sokoto Rima 11 8 3 Niger Niger 30 117.6 4 Kaduna Niger 19 59.2 5 Kwara Niger 12 38.3 6 Kano Hadeija Jamaare 28 46.2 7 Borno Chad 28 20.8 8 Bauchi Upper Benue 20 42.6 9 Gongola Upper Benue 38 162.7 10 Plateau Lower Benue 32 110.4 11 Benue Lower Benue 19 69.2 12 Rivers Cross River 18 258.1 Total 277 734.2 Table 2-6: Small Hydro Potential in some States in Nigeria Source: Renewable Energy Masterplan, Energy Commission of Nigeria, 2005
2.4.3. Solar Energy Nigeria lies within a high sunshine belt and, within the country solar radiation is fairly well distributed. The annual average of total solar radiation varies form about 12.6MJ/m2-day in the coastal latitudes to about 25.2MJ/m2-day in the far north. Solar energy is renewable and its utilization is environmentally friendly.
62 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group The total thermal energy resource of Nigeria is the totality of the solar radiation falling on its 923,768km2 land area. This total solar radiation includes the direct radiation as felt on sunny days; diffuse radiation scattered by clouds and atmospheric gases and vapors and felt on cloudy days even when the sun is not visible.
Studies relevant to the availability of the solar energy resource in Nigeria have fully indicated its viability for practical use. Although solar radiation intensity appears rather dilute when compared with the volumetric concentration of energy in fossil fuels, it has been confirmed that Nigeria receives 5.08 x 1012 kWh of energy per day from the sun and if solar energy appliances with just 5% efficiency are used to cover only 1% of the country's surface area then 2.54 x 106 MWh of electrical energy can be obtained from solar energy. This amount of electrical energy is equivalent to 4.66 million barrels of oil per day.
Apart from some limited work on materials for solar cell production at Obafemi Awolowo University IIe-Ife, and thin film Growth at the NCERD, Nsukka, most of the studies on Solar-PV in the country have been on components and systems testing, economic viability studies, pilot plant and other application projects. The largest single pilot plant is 7.2kW village electrification project at Kwalkwalawa in Sokoto State, put up by the Energy Commission for Water pumping, health center power supply and village lighting and TV viewing. 2.4.4. Biomass Energy The biomass resources in Nigeria consist of wood, forage grasses and shrubs, animal wastes arising from forestry, agricultural, municipal and industrial activities as well as aquatic biomass. The primary way to utilize biomass is through direct combustion. The total land available in Nigeria for agriculture and under vegetation is a measure of biomass potential. The total land area of Nigeria is distributed among the various uses as shown in table 2-7 below.
Nigeria Quantity (Million ha) Percentage (%) A. SIZE Total area 92.4 100 Water bodies (rivers, lakes, e.t.c.) 79.4 85.9
B. LAND USE Agricultural land 71.9 77.8 Arable cropland 28.2 30.5 Permanent cropland 2.5 2.7 Pasture land 28.3 30.6 Forest and woodland 10.9 11.6 Fadama 2 2.2 Other land 7.5 8.1 Table 2-7: Nigeria's Size and Land Use Parameters Source: Renewable energy masterplan, Energy commission of Nigeria, 2005
The biomass energy resources of the nation have been estimated to be 144million tones/year. It is estimated that Nigeria consumes about 43.4x109kg of fuel wood annually. Over 60% of Nigerias population depends on fuel wood for cooking and other domestic uses. The consumption of fuel
63 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group wood is worsened by the wide spread use of inefficient cooking methods, the most common of which is still open fire. The rate of consumption of fuel wood far exceeds the replenishing rate to thus resulting in desert encroachment, soil erosion and loss of soil fertility.
Plant biomass can be used as fuel in thermal power plants or converted to produce solid briquette, which can then be utilized as fuel for small scale industries. Biogas digesters of various designs are capable of sustaining household, industrial and institutional energy needs. Biofuels can also be derived from biomass and biowaste, e.g. manure, crop residue. These are used to produce power, heat, steam and fuel through a variety of processes. These fuels are used mainly to power vehicles and industrial machines and provide heating. Biofuel is renewable and its use has expanded throughout the globe with Brazil, US, France, Sweden and Germany emerging the leaders in biofuel development.
2.4.5. Wind Energy Nigeria is subject to the seasonal rain bearing south-westerlies, which blow strongly from April to October and to the dry and dusty north-east trade winds which blow strongly from November to March every year. Most areas sometimes experience some periods of doldrums in between these periods. Wind energy reserves are measured in terms of wind speeds at 10m above the ground level.
Seasonal and locational variations in the energy received from the sun affect the strength and direction of the wind. Due to the varying topography and roughness of the country, large differences may exist within the same locality. Hence within a few kilometres, the wind speed may vary. The values range from a low 1.4 to 3.0m/s in the Southern areas and 4.0 to 5.12m/s in the extreme North. Peak wind speeds generally occur between April and August for most sites. Initial study has shown that total actual exploitable wind energy reserve at 10m height, may vary from 8 MWh/yr in Yola to 51 MWh/yr in the mountain areas of Jos Plateau and it is as high as 97 MWh/yr in Sokoto.
A number of wind powered water pumps have been installed in some northern states, notably at Goronyo in Katsina State, Kedada in Bauchi States and in Sokoto State. Recently, a 5KW pilot wind turbine/generator is under tests at Sayya Gidan-Gada village in Sokoto State.
2.5. Energy Utilization - Electricity The history of electricity in Nigeria dates back to 1896 when electricity was first produced in Lagos, fifteen years after its introduction in England. Despite the fact that its existence in the country is over a century, its development has been at a slow rate. The national electricity grid comprises three (3) hydro and six (6) thermal generating stations with a total installed capacity of about 6000MW. However, between 2,000 and 3,000MW of electricity is generated. Figure 2-30 below shows Nigerias electricity generation by source.
64 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
Figure 2-27: Nigeria's Electricity Generation by Fuel Type Source: PHCN 2.5.1. Institutional Structure of the Nigerian Power Sector The electric power sub-sector in Nigeria is dominated by the Power Holding Company of Nigeria (PHCN), a Government parastatal. PHCN co-exists with Independent Power Producers (IPPs), some of which it has power purchase agreements. Following the introduction of the Electric Power Sector Reform Act in 2005, NEPA was transformed into a holding Company (PHCN) which was subsequently unbundled into 18 companies, including 6 generators, 11 distributors and one transmission company. These companies are being powered to carry out the functions relating to the generation, transmission, trading, distribution and bulk supply as well as resale of electricity. Also, the Nigeria Electricity Liability Management Company (NELMCO), a company limited by guarantee has been established to take over some of the functions of PHCN as the Special Purpose Entity (SPE) provided for in the Act guiding the operations of the industry. This means that the legacy contractual obligations of PHCN such as PPAs and GSAs will be handed over to NELMCO. The reform of the power sector, initiated in 1999, has introduced a new set of players, the independent power producers (IPPs). About 29 power generation licenses have been issued to independent power producers by the National Electricity Regulatory Commission (NERC) since 2006.These IPPs are at various stages of their projects implementation. The Federal Ministry of Power is responsible for policy making in the industry. The power sector is regulated by the new National Electricity Regulatory Commission (NERC). The major functions of NERC include: Ensuring adequate, safe, reliable and affordable supply of electricity to all Consumers Promoting competition and providing stable legal framework Providing clear, predictable, light-handed and transparent Regulation Setting operating codes, safety, security, reliability & quality standards Providing incentives to invest in sector Protecting consumers and public interest Licensing and regulating generation, transmission, distribution
65 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group 2.5.2. Key Challenges facing the Nigerian Power Industry The key challenges facing the Nigerian Power Industry are as follows; Inadequate power generation capacity The total installed capacity of the combined hydro and thermal power stations in Nigeria is 7,941.1MW as at December 2008. According to PHCN, about 4,428 MW of power generation capacity is available in Nigeria, of which 3,273MW is from PHCN facilities and 1,155MW from IPPs. However, between 2,000MW and 3,000MW of power is currently generated primarily due to gas constraints. There is a need to improve the capacity utilization of the existing power generating plants by massive rehabilitation and development of new power stations to meet up with the presidential target of 6,000MW by December 2009 and 10,000MW by December 2011. Even though the generation sector of the industry has witnessed the licensing of over 20 firms since the commencement of the reform, many of the licensed generators havent commenced operation. This is due to the normal gestation period for developing power plants and other challenges facing private sector such as gas supply constraints, inadequate commercial framework. Timely intervention in generation is therefore a major challenge. Inadequate transmission and distribution network The transmission network is overloaded with a wheeling capacity less than 4,000 MW. It has a poor voltage profile in most parts of the network, especially in the North, inadequate dispatch and control infrastructure, radial and fragile grid network, frequent system collapse, exceedingly high transmission losses. There are significant line voltage and power losses (as high as 25% compared with 3% in the US and 0.5% in Japan) in the transmission systems due to the large average distances (between 300 and 500km) over which electrical energy is distributed. Low transmission grid voltages, typically 330kV and 132kV compared with 765kV in developed countries also cause significant transmission and distribution losses.
Figure 2-28: Nigeria's Electric Power Transmission and Distribution Capacity Source: PHCN Obsolete and Inefficient transmission and distribution equipment Significant portions of the transmission and distribution network are obsolete, especially in the major cities. The Energy Commission of Nigeria estimates that the sector has significant transmission and distribution losses in the region of 8.25% and 33% respectively.
66 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
Figure 2-29: Power Losses as a percentage of Generation Source: National Energy Data Bank, www.nationalenergydatabank.org
Low access to electricity grid Access to electricity services is low. About 60 % of the population over 80 million people are not served with electricity and rural and semi-urban access to electricity estimated to be about 35%. Per capita consumption of electricity is approximately 125kWh against 4500kWh, 1934 kWh and 1379kWh in South Africa, Brazil and China, respectively. The Rural Electrification Program which began in 1981 focuses exclusively on grid extension; costs per connection remain high and annual rate of connection is low. With the chronic shortage of available generating capacity and low tariffs for rural areas, there is little incentive for PHCN to champion an expansion program. In all, rural electricity capital assets continue to deteriorate through neglect, vandalism and theft. Industry regulation There are still some capability and capacity gaps in the National Electric Regulatory Commission (NERC) saddled with the responsibility of regulating the power industry. This needs to be addressed to create a viable and competitive power sector. The independence of the regulator also needs to be strengthened in order to give confidence to investors. Industry and market structure The implementation of the Electric Power Sector Reform Policy has introduced a number of new players in the power industry. However, there are still needs to be some clarity in the roles and responsibilities of the various market players across the value chain. The industry is still predominantly public and even the licensed generators upon commencement of operation may have to do business with mainly government owned companies and thus be exposed to the usual tension and friction in the relationship between public owned and purely private owned business Insufficient gas for power generation Recently, there have been frequent Gas supply disruptions and inadequate Gas supply to the Gas fired plants and this has caused a lot of power load shedding across the Country. These Gas supply disruptions are mainly caused by militant attacks on upstream Gas supply equipment, vandalism of Gas pipelines, non-payment by PHCN for Gas supplies and build-up of condensates in Gas pipelines. This situation has highlighted the importance of ensuring synergies between the
67 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Gas and the power sector to ensure regular and adequate Gas supplies to drive the growth agenda in power generation. Billing and revenue collection One of the major problems facing the Nigerian Power Industry is the poor efficiency in revenue collection. In a survey carried out in 2002, the revenue customer base of NEPA (now PHCN) was about 3.05 million with 83% residential, 16% commercial and 0.4% Industrial. It is estimated that about 35% of the 83% residential customers do not pay for the electricity they enjoy. Inappropriate electricity Pricing Prior to the current regime, Nigerian electricity tariffs were last reviewed in February 2002 (from an average of N4.00/KWh to about N6.00/KWh) where they remained until July 2008. From July 2008, the MYTO was introduced. This has resulted in a tariff band of N10 and N11 for distribution and N3.20 for wholesale generation over the next 5 years. Investors say this is not cost reflective. Without putting an appropriate tariff regime and firm off-take arrangement in place, it will be challenging to convince the private sector to invest in the industry. Low level of human capacity development There is a need to enhance human capacity in the Nigerian power sector. Currently, PHCN is considered to be overstaffed with a lot of redundancies and this has to be addressed to pave way for a well trained workforce that can move the sector forward. This has also given rise to apathy and more active union activity. To address this challenge, a National Power Training Institute, similar to the Petroleum Training Institute, was set up to take over the operations of the existing training schools of PHCN. This is expected to raise the competency level of the workforce for improved productivity and performance. Vandalization of transmission and distribution lines The incidence of vandalization has significantly impacted negatively on grid equipment capacity development. Vandals target various equipments at every level from distribution flow voltages of 415 to 330Kv super grid levels. These include transmission lines at every level and transformers at distribution level only. Usually these vandals pilfer the distribution transformers, line conductors, insulators and other line equipments that they resell to the grid on the open market. There have been a few incidences of vandalization that has been traceable to pure sabotage as nothing was looted from the vandalized lines. The mode of line vandalization at the higher voltages is usually very disruptive and destructive, frequently resulting in grid collapses, supply disruption and line section collapses with attendant damage to several line support towers, the cables and insulation fittings. The time and cost for reconstructing these towers and restoring the lines are usually enormous. Inadequate maintenance of equipment Maintenance of grid equipment in the power sector is constrained by several factors some of which are; Age of grid equipment and the difficulty in spares procurement even with OEMs Practically all the equipment on the grid has to go through importation as have virtually no power equipment manufacturers in the country. This introduces long lead times for equipment maintenance.
68 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group There is currently a death of skilled maintenance personnel in the sector. This results in heavy dependence on foreign personnel in many cases especially when dealing with OEMs. These maintenance constraints severely impacts grid equipment availability. Inadequate modern control systems Control systems such as frequency governors, voltage control regulators at several power stations are obsolete and so have had to be disabled, resulting in manual control methods. Also on systems operations side, the necessary Supervisory Control and Data Acquisition (SCADA) facilities are either obsolete or inadequate to cope with system monitoring and moment by moment control of the power system. The consequence of foregoing is that power system quality components such as frequency and voltage are kept at very abnormal levels which severely impacts on the stability of the grid and the now frequent unpleasant experiences of grid collapse. It is important to note that system collapses impose further stresses on already stressed grid equipment many times causing equipment damage. Inadequate study of domestic power requirements Actual electric power demand estimates are unknown. This is caused mainly by the growth of non- metered self generated electricity which necessitates very detailed enumeration and study of the domestic power demand market. In this regard, currently available studies of the domestic power requirements are considered inadequate. Commercial framework to support private investments Although Government has commenced implementation of the Power Sector Reform Program, the appropriate commercial framework to support private investments has not been clearly spelt out and the existing framework is not attractive enough to investors 2.5.3. Ongoing Government Initiatives to grow the Power Sector In order to address the challenges of the Power sector, the Government introduced some of the key initiatives. Most of these initiatives have however not yielded the desired results. The initiatives are as listed below: Structural and Legal Reforms In response to the industry challenges, the Government initiated structural and legal reforms in the power sector through the Electric Power Sector Reform Act (EPSRA), 2005. The EPSRA includes provisions for the transformation of the National Electric Power Authority (NEPA) vertically and horizontally into a holding Company (PHCN). PHCN has been unbundled into seven generation companies (GenCos), one transmission company (TCN) and eleven distribution companies (DisCos). This arrangement is expected to encourage private sector investment particularly in generation and distribution. An industry regulator, the Nigerian Electricity Regulatory Commission (NERC) was also set up to regulate tariffs and oversee the industry effectively. BPE and the newly established ICRC will be responsible for privatizing the unbundled entities.
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National Integrated Power Project To further boost the power generation capacity, the Government initiated the National Integrated Power Project (NIPP) and encouraged its JV partners to embark on independent power projects (JV IPPs). Elements of the NIPP project include: Five Greenfield natural Gas fired plants (2,250 MW total) in the Niger Delta region comprised of 18 GE Gas turbines One 2,600 MW hydroelectric power plant in Mambila, Taraba State 22 power transmission sub-projects including 17 new substations and expansion of 32 existing substations; 250 power distribution projects Several new Gas pipelines and other related equipment and infrastructure The JV IPPs include: 480 MW Kwale/Okpai IPP by NNPC/Agip JV 930 MW Afam IPP by NNPC/ShelI JV 450 MW Obite IPP by NNPC/TotaI JV 780 MW ljede IPP by NNPC/ChevronTexaco JV 350 MW Bonny River Power LNG by NNPC/ExxonMobil JV Some of these IPPs have been commissioned but they are yet to start generating power due to the unavailability of Gas. Rural Electrification As part of its commitment to accelerate power supply to homes in Nigeria, the Federal Government under the Electric Power Reform Act 2005 established the Rural Electrification Agency (REA) to provide reliable and affordable electricity to rural dwellers through the use of grid and off-grid electricity supply. A bill has been sent to the National Assembly to amend the ESPRA and scrap REA. It is expected that States and Local Governments will be responsible for expanding the national electricity grid to rural areas where grid connection is not easily accessible and using mini grid systems with renewable energy generation options for remote places in isolated areas. Introduction of the Multi Year Tariff Order To address the low electricity tariff, the FG has introduced the Multi Year Tariff Order (MYTO), which is expected to address the tariff concerns of the existing players in the sector as well as encourage the emergence of independent power producers. The MYTO has set electricity tariffs for consumers over the 15-year path (1 July 2008 to 30 June 2023). The tariffs are set at levels that support the viability and growth of the Nigerian Electricity Supply Industry (NESI).To cushion the effect of the rate increase, the Government will provide subsidies in the first three years of the introduction of the MYTO.
70 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group The new Tariff Order the Multi-Year Tariff Order (MYTO) sets what are intended to be cost- reflective prices for electricity over a period of 15 years (July 2008 to June 2023) with provisions for minor adjustments every year and major reviews every five years. It should be noted that the procedures and rules for minor reviews under MYTOcovering gas, CPI, and the exchange rate are not clearly documented and lack transparency and are likely to require significant review. Consumers will be expected to pay the full estimated cost-reflective tariff with effect from 2011. Introduction of Domestic Gas Obligations The introduction of domestic Gas supply obligations which mandates the Oil and Gas operating companies to set aside a portion of their Gas production for supply to the domestic market is expected to address the Gas supply challenges being experienced in the power sector. The Government estimates that the domestic Gas supply obligations to the power sector will give Nigeria about 8000MW of electricity by 2010.
2.6. Performance Assessment of the Nigerian Energy Sector The performance of the Nigerian Energy sector will be evaluated relative to stated goals and objectives which fall into two categories: 1. Operational Performance 2. Economic Performance Operational performance indicators evaluate the technical and operational efficiency of the Energy industry while the economic performance indicators will help to assess the contribution and relevance of the energy sector to the Countries growth and economic performance. The Operational and Economic performance indicators are as shown in the table 2-8 below;
Operational Performance Indicators Economic Performance indicators Oil and Gas Reserves CAGR % (2002-2007) Production CAGR %(2002-2007) Reserve to Production ratio (years) Reserve Replacement Ratio Gas flaring
Consumption per capita (bbl per 1000 per day) Domestic consumption as % of total production Contribution to GDP Power CAGR of electricity Generation (2002-2007) % CAGR of electricity consumption (2002-2007) % Power supply reliability indices System average interruption duration index, SAIDI System average interruption frequency index, SAIFI
Customer average interruption duration index, CAIDI Average service availability index, ASAI Electricity Generation (KWh) per capita Electricity consumption (KWh) per capita Access to Electricity (% population) * Table 2-8: Operational and Economic Performance Indicators
71 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group 2.6.1. Operational Performance 2.6.1.1. Oil and Gas Growth in Oil Reserves and Production Nigerias proven oil reserves have grown over the years from about 34 billion barrels in 2002 to 36 billion barrels in 2007. However, crude oil production has been on the decline from about 2.6 million barrels per day in 2005 about 2.4 million barrels per day in 2007. The decline in crude oil production is due to oil well shut-ins as a result of the Niger delta crisis. In March 2009, about 606,500 barrels of oil per day were shut in due to sabotage to oil facilities. Between 2002 and 2005, crude oil reserves have grown at a cumulative annual growth rate (CAGR) OF 7% while crude oil production grew at about 1.8% in the same period. There is sufficient reserves capacity to underpin a capacity growth in Nigeria. Besides, significant additional potential exists from unexplored basins or previously under explored basins using enhanced recovery methods. Some of these additional potentials are unexplored basins and new frontiers, highly prospective deep and ultra-deep offshore blocks, poorly explored blocks, prospects and deep pool targets as well as bye-passed oil and undeveloped marginal fields.
Figure 2-30: Growth in Oil Reserves and Production
Growth in Gas Reserves and Production Gas reserves have grown at a CAGR of 8% between 2002 and 2007, from 124TCF to 182 TCF. Gas production has grown at about 9% CAGR between 2002 and 2007. The growth in gas reserves is as a result of oil exploration and the increase in associated gas field discoveries. According to a recent United States Geological Survey report, Nigerias proven gas reserves has the potential to grow to about 600TCF with dedicated gas exploration.
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Figure 2-31: Growth in Gas Reserves and Production
Reserves to Production Ratio It is estimated that Nigerias crude oil reserves will last for another 42 years if it continues to produce at the 2007 production level. Gas reserves on the other hand are estimated to last for another 150 years.
Figure 2-32: Oil and Gas Reserves to Production Ratio
Reserves Replacement Ratio Nigerias oil and gas reserves are not growing proportionately with the production rate. This is because to date most of the gas reserves discovered have been through oil exploration and not through dedicated gas exploration. In 2007, oil and gas reserve replacement ratio was zero showing that there is a need to make more discoveries to replenish reserves. The low reserves replacement ratio can be attributed to the fact that there hasnt been dedicated Gas exploration in Nigeria.
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Figure 2-33: Reserves Replacement Ratio
Gas Flaring Gas flaring in Nigeria has reduced over the years from about 52% of gas production in 2002 to 33% in 2007. The previous Gas flare-out deadline set by the Government for January 1, 2008 and subsequently, December 2008 was not met as a result of inadequate funds, undeveloped domestic Gas market, the Niger Delta security situation and delayed completion of Gas utilization projects. However, the Government has set a new for end of December 2010.
Figure 2-34: Gas Flaring in Nigeria Source: NNPC Statistical Bulletin 2.6.1.2. Power Growth in Electricity Generation and Consumption The growth in electricity generation in Nigeria over the years is driven largely by the increase in private generation. Distribution and transmission losses account for the difference between electricity generation and consumption. It is estimated that the demand of power in Nigeria is suppressed demand and that with adequate supply and extensive grid connection, national demand for power has the potential to go as high as 10,000MW.
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Figure 2-35: Growth in Electricity Generation and Consumption
To make up the deficit in the supply-demand, businesses and households incur significant costs. Self generation levels are not known but were estimated at 2,400 MW in 2000. The Ministry of Power estimates that current grid demand is 6,500MW based on a tractable report conducted in 2009. Given the growth in the economy, it is assumed that self-generation is significantly higher and that it exceeds by a large margin the supply available from the power sector itself. Estimates of the unit cost of self-generating electricity for different classes of consumer are given below.
Consumer type Cost per kWh Larger companies N20 to N30 Smaller companies over N30 Households N30 to N60 Table 2-9: Cost of Private Power Generation in Nigeria
Electricity constitutes on average, between 20 to 40% of the cost of production in a typical manufacturing company. The high cost of self-generation means that it costs a typical Nigerian company more that double what a company in another emerging economy or in a developed nation would pay for the same quantum of electricity. Power reliability Power reliability is a measure of the availability of power with respect to the frequency of power outages. Based on a recent study conducted by MAN (Manufacturers Association of Nigeria), Nigeria has an average system interruption index of over 60,000min compared with about 88min in the United States and 52 mins in France. Also, it is estimated that the total number of interruptions of supply that customers experience annually in Nigeria is over 600 compared to Singapore and France where these interruptions are negligible.
Estimates of the power reliability indices in Nigeria, compared to the United States, Singapore and France is as shown in table 2-10 below:
75 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group USA Singapore France Nigeria (PHCN data) Nigeria (MAN study) System average interruption duration index, SAIDI Annual average total duration of power interruption to a customer, in minutes SAIDI, min 88 1.5 52 900 60,000 System average interruption frequency index, SAIFI Annual average total number of interruptions of supply that a customer experiences annually SAIFI, no. per year 1.5 NA NA 5 600 Consumer Average Interruption Duration Index, CAIDI Average duration of an interruption of supply for a consumer who experiences the interruption on an annual basis, in hours CAIDI, hr 0 NA 0 9 15 Average Service Availability Index, ASAI Ratio of (Consumer hours service availability)/Consumer hours service demanded) ASAI 1 1 1 NA 0.4 Table 2-10: Power Supply Reliability Indices Source: National energy data bank, www.energydatabank.org
2.6.2. Economic Performance 2.6.2.1. Oil and Gas Contribution to GDP Despite Nigerias huge energy resources, the energy sector has not contributed significantly to the Nations GDP. In 2007, Oil and Gas contributed about 19% to GDP as shown in figure 2-39 below. The National Bureau of statistics reports that crude petroleum and natural gas contributed about 18% to the GDP in 2008.
Figure 2-36: Oil Contribution to GDP and Government Revenue, 2007 Source: CBN Annual Reports and Statement of Accounts, 2007
76 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Also, the contribution of the Oil industry to Nigerias GDP growth rate has been declining in recent years and was negative in 2006 and 2007 are as shown in Figure 2-40 below.
-2 0 2 4 6 8 10 12 G D P
G r o w t h
R a t e Oil Non-oil Total Oil 6.02 0.84 0.12 -0.93 -1.08 Non-oil 3.44 5.36 6.04 6.65 6.99 Total 9.57 6.58 6.51 6.03 6.22 2003 2004 2005 2006 2007
Figure 2-37: Sectoral Contribution to Nigeria's GDP Growth Rate (2003-2007) Source: CBN Annual Report 2007
Oil and Gas consumption per capita Per capita consumption of Oil and Gas has increased over the years. However, it is estimated that petroleum products export accounted for about 20% of the consumption in 2007. This is due to the inability of the domestic refineries to meet local demand.
Figure 2-38: Oil and Gas Consumption Per Capita
77 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group 2.6.2.2. Power Power Generation and Consumption per capita There hasnt been significant growth in Nigerias power generation per capita and consumption per capita over the years. This shows that the power available for the population to consume hasnt improved over the years and this is evident in the regular blackouts experienced in the country.
Figure 2-39: Power Generation and Consumption Per Capita
Access to Electricity In 2007, the World Bank estimated that only about 40% of the Nigerian population had access to electricity.
2.7. Comparative Benchmarking Analysis The benchmark analysis compares the operational and economic performance of Nigerias energy sector with that of best practice countries in the world. This will help to understand Nigerias position today within the context of where other countries are. Also, key learning points from these best practice countries will serve as a valuable input in the strategic visioning for the Nigerian Energy sector. 2.7.1. Definition of Comparator Set The table below highlights the countries selected for benchmarking in each of the energy sub- sectors and the rationale for selecting them.
Country Rationale for Selection Oil Brazil Significant success in achieving local content in the oil and gas sector with an estimate of 70% in 2001 Exploratory efforts in new frontiers in order to assure a
78 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Country Rationale for Selection sustainable reserve / production ratio Malaysia Oil production started at around the same time with Nigeria Malaysian Governments focus on reducing dependency on oil income Norway Mature upstream gas industry with a unique operational model Coordination of investments has been key distinguishing feature Gas Egypt High penetration of gas in local communities Differential gas pricing for key industry sectors as the basis for developing gas industry, LNG and domestic demand United Kingdom Extensive use of coal for power generation Natural gas-fired power stations are replacing coal as the principal source of power supply Mix of power generating sources including conventional thermal sources, nuclear, renewables and hydro Pakistan Similar challenges to Nigeria with respect to power generation and population Achieved a GDP growth in the 6% - 8% range between 2004 to 2007 despite severe electricity shortfalls Power South Africa Extensive use of coal in generating electricity and a significant proportion of its liquid fuels The Government recently developed a plan to reduce electricity demand by pricing electricity correctly as well as promoting energy efficiency Germany Large share of renewable energy sources are used for power generation Strong technological base in the electricity sector Renewables Brazil Strategic focus on meeting energy demand with renewable energy using bio-fuels Table 2-11: Definition of Comparator Countries 2.7.2. Baseline Data of Comparator Countries The baseline data for each of the comparator countries, with 2007 as the baseline year, are as shown in table 8 below:
Oil s/n Countries GDP (PPP) (Billions USD) Population (million) GDP Growth Rate, 2007 (%) Per Capita Income (PPP) (USD) Proven Reserves, 2007 (bbl) Production, 2007 (moped) 1. Nigeria 338.1 140.00 6.4 2,192.83 36.22 2.355 2. Brazil 1,849.0 189.00 5.4 9,731.03 11.77 1.748
79 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group s/n Countries GDP (PPP) (Billions USD) Population (million) GDP Growth Rate, 2007 (%) Per Capita Income (PPP) (USD) Proven Reserves, 2007 (bbl) Production, 2007 (moped) 3. Malaysia 361.2 27.72 6.3 14,552.03 0.60 0.588
Gas s/n Countries GDP (PPP) (Billions USD) Population (million) GDP Growth Rate, 2007 (%) Per Capita Income (PPP) (USD) Proven Reserves, 2007 (TCF) Production, 2007 (TCF) 1. Nigeria 338.1 140.00 6.4 2,192.83 187.0 1.23 2. Norway 246.6 4.68 3.7 53,285.21 82.3 3.17 3. Egypt 405.4 80.34 7.1 5,046.37 58.5 1.64
Power
s/n Countries GDP (PPP) (Billions USD) Populati on (million) GDP Growth Rate, 2007 (%) Per Capita Income (PPP) (USD) Installed Capacity (MW) Generati on (Million KWh) Consum ption (Million KWh) 1. Nigeria 338.1 140.00 6.4 2,192.83 5,960 22,110 15,850 2. United Kingdom 2,215.0 61.00 3.1 36,500 80,417 371,000 348,500 3. South Africa 476.4 44.82 2.8 9,800 41,105 264,000 241,400 4. Pakistan 427.9 176.24 5.8 2,500 19,528 93,261 68,396 Table 2-12: Baseline information for Comparator Countries
s/n Countries Oil Reserves CAGR % (2002- 2007) Oil Production CAGR % (2002- 2007) Reserve to Production ratio (years) Reserve Replacement Ratio 1. Brazil 5.65 3.10 18.45 0.30
80 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group s/n Countries Oil Reserves CAGR % (2002- 2007) Oil Production CAGR % (2002- 2007) Reserve to Production ratio (years) Reserve Replacement Ratio 2. Malaysia 0.00 -2.82 2.79 0.00 3. Nigeria 7.10 1.75 42.17 0.15
Between 2002 and 2005, Nigerias oil reserves grew at a faster rate than that of Brazil and Egypt. However, within the same period, oil production did not grown at a commensurate rate. This is due to sabotage of facilities and the Niger Delta security issue. Malaysias oil production is also declining and its reserves are fast running out as shown in the reserve to production years, 2.79 years.
Economic Performance
s/n Countries Change in annual Production (2006/2007) % Oil consumption per capita (bbl per 1000 per day) Ratio of Domestic Production to Domestic Consumption 1. Brazil 1 12.698 0.945 2. Malaysia -4 19.733 1.079 3. Nigeria -4 1.936 0.193
Nigerias domestic demand for petroleum products is largely met by imports unlike Brazil and Malaysia where the petroleum products consumed are refined locally. Despite the augmentation of petroleum product consumption through importation, Nigerias oil consumption per capita is the lowest amongst other major oil producing countries as shown in the table above.
2.7.3.2. Gas Sector Performance Operational Performance
s/ n Countries Gas Reserves CAGR (2003 - 2007) % Gas Production CAGR (2003-2007) % Reserve to Production Ratio (years) Reserve Replacement Ratio Gas Flare (% of Production) 1. Norway 0.47 0.66 25.99 -0.61 0.00 2. Egypt 0.00 1.43 35.61 0.00 3.72 3. Nigeria 8.21 8.68 147.29 -2.23 32.45
In 2007 Nigeria flared over 32% of gas produced, making her the top gas flaring nation in the world by percentage flare of production. Gas comparator countries including Norway and Egypt flare 0% and 4% of their gas production respectively.
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Figure 2-40: 2007 Gas Flaring Countries
Economic Performance
s/n Countries Gas consumption per capita (bcf/ 100,000 people) Domestic consumption as % of total production 1. Norway 0.49 7% 2. Egypt 1.52 68% 3. Nigeria 0.03 37%
Despite Nigerias huge gas reserves, the effect is scarcely felt by the population as shown by the low gas consumption per capita relative to Norway and Egypt. Currently, most of Nigerias natural gas is either flared or converted to LPG and exported.
Norway consumes very little of the gas produced domestically because it generates most of its power from hydro resources. Norwegian gas is exported, accounting for 16% of the total European gas consumption and is the second largest gas exporter to Europe after Russia and third largest in the world. For Egypt, the decreasing oil production caused the Government to increase its focus on gas production and utilization. There has been an increased in the demand for natural gas from Egyptian thermal power plants resulting in the high gas consumption per capita. Egypt also exports natural through the Arab Gas Pipeline to Jordan and Syria.
2.7.3.3. Power Sector Performance Operational Performance
50 16.8 10.6 7 5.3 5.2 3.7 3.5 3.4 2.9 38.9 0 10 20 30 40 50 60 R u s s i a N i g e r i a I r a n I r a q K a z a k h s t a n A l g e r i a L i b y a A n g o l a S a u d i
A r a b i a Q a t a r R e s t
o f
t h e
w o r l d B i l l i o n
c u b i c
m e t r e s
( b c m )
82 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group s/n Countries Access to Electricity (% population) CAGR of electricity Generation (2002- 2007) % CAGR of electricity consumption (2002-2007) % 1. United Kingdom 100 0.36 0.39 2. South Africa 66 1.71 0.77 3. Pakistan 53 5 5 4. Nigeria 40 -1.17 3.95
Based on a United Nations World Development Indicators report of 2002, only 40% of Nigerians have access to electricity. Also, between 2002 and 2007, Nigerias electricity generation declined by 1.17% while electricity consumption increased by 3.95%. Compared with the benchmark countries, Nigeria has not been able to grow its generation capacity to match electricity demand.
Economic Performance
s/n Countries Electricity Generation (KWh) per capita Electricity consumption (KWh) per capita 1. United Kingdom 6,081.97 5,713.11 2. South Africa 5,890.26 5,386.02 3. Pakistan 529.17 388.08 4. Nigeria 157.93 113.21
Nigerias electricity generation and consumption per capita is the lowest amongst developing economies in her category and other oil and gas producing countries. This is also evident from the incessant power failures that occurs throughout the country
2.7.4. Key Learning Points for Nigeria Egypt Egypt seems to have developed a clear long-term strategic vision for the oil and gas industry including the manufacture of gas-based petrochemicals. Apart from restructuring our oil and gas sector as is currently being planned through the Petroleum Industry Bill, there needs to be a clear long-term vision for the sector. The Nigerian Gas Master Plan (NGMP) attempts to capture the gas sector vision, but this needs to be anchored by legislation to ensure national commitment and ownership. The Egyptian national oil company (EGPC) had been, for decades, the sole holding company for government participation in the oil and gas sector. However, in the last few years Egypt has established three holding companies for gas, petrochemicals and exploration in frontier areas. We need to do this in particular for gas, if the objectives of the NGMP are to be accomplished. Nigeria needs to be more aggressive in inviting more international players to bring in capital, technology and management by creating the right environment and structures that respond to business enquiries. We must bear in mind that there are other countries in competition with us for investment globally.
83 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group UK It is pertinent that efficient operational practices are restored in the Nigerian Power sector. The UK grid developed a contiguous grid structure that ensured what we call high grid inertia, which is an outcome of many generating machines connected together, improving stability. In the UK, there is an operational practice of system quality through the enforcement of sound frequency & voltage control techniques. To achieve this, system generation & transmission reinforcement must go beyond just building any type of new machinery, without due consideration for grid frequency and voltage control equipment inclusion. A major reason behind much of our grid instability arises from non standard frequency & voltage control practice. The restoration of sound business practice can only be realized through deliberate & carefully executed privatization program, which ensures proper tariffs. This in turn stimulated investment and set the pace for end user choice of electricity supplier. The UK privatization program was not just enacted by law. The successive companies at all levels of the industry were taken through a transparent and open public IPO program, much as occurred during our banks consolidation era. Shares were publicly listed and the public were able to buy into the new Power companies whose business like investors and managers eventually grew their markets beyond the UK into even continental USA. There is no reason why the success story in the UK can not be replicated here in Nigeria. Pakistan Nigeria needs to harmonize all its renewable energy plans and to set up an agency which will ensure the implementation of these plans. The Pakistani Government set up an Alternative Energy Development Board (AEDB) in May 2003 to act as the central national body on the subject of renewable energy. The main objective of the AEDB is to facilitate, promote, and encourage development of renewable energy in Pakistan. The AEDB has also been charged with providing electricity services to the 7,874 villages in the Sindh and Balochistan provinces that lie too far from the national electricity grid to be economically served. The Pakistani Government created a one-stop shop, the PPIB, for private investors in the power sector. In Nigeria currently, an independent power producers has to deal with a lethargy of Government agencies form licensing to full operations. By creating the PPIB, Pakistan attracted about US$4.5billion between 1994 and 2006. Nigeria needs to set up an agency which can cater for all the needs and enquiries of private power producers.
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3.0 Energy Sector 2020 Vision & Strategic Plan 3.1. The Global Energy Industry in 2020 An expanding global economy will increase demand for many raw materials, such as oil. Most experts believe that there are enough energy resources worldwide to meet the projected demand. Despite the trend towards more efficient energy use, total energy is projected to increase by 1.2% per year between 2005 and 2030. Substantial part of worlds energy need will continue to be provided by fossil fuels mainly oil, gas and coal. It is estimated that the three sources will meet close to 80% of global energy demand with renewable energy sources such as hydrogen, solar, and wind energy accounting for only about 13% of the energy supply in 2020 as shown in Figure 3- 1 below.
Figure 3-1: Projected Global Energy Mix in 2020
Growing demands for energy especially by the rising powers, especially China and India, through 2020 will have substantial impacts on geopolitical relations. It is expected that the developed world will still consume more energy than developing countries in absolute terms but its share of world demand will fall. Experts believe China will need to boost its energy consumption by about 150% and India will need to nearly double its consumption by 2020 to maintain a steady rate of economic growth. Europes energy needs are unlikely to grow to the same extent as those of the developing world, in part because of Europes expected lower economic growth and more efficient use of energy.
Demand in the energy sector will depend critically on the pace at which energy efficiency continues to improved, especially in the transport sector. With some 75 % of future energy demand expected to come from the transport sector, especially from developing countries, the pace of future energy demand growth (and its composition) will depend heavily on future efficiency gains in car technology. Prospects for such improvements are good, if policy continues to be supportive of both conservation and efficiency measures. Already existing technologiesavailable either in initial rollout phases or as prototypes (flex-fuel and hybrid cars, plug-in hybrids, and electric and hydrogen-powered vehicles)could help to more than double fuel efficiency. An ambitious (and successful) policy to speed the development and diffusion of these technologies could see the
85 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group share of these vehicles rise to 90% in the high-income world and to 75% in developing countries by 2050, substantially reducing private transportations dependency on liquid fuels.
The International Energy Agency assesses that with substantial investment in new capacity, overall energy supplies will be sufficient to meet growing global demand. Continued limited access of the international oil companies to major fields could restrain this investment, however, and many of the areasthe Caspian Sea, Venezuela, West Africa and South China Seathat are being counted on to provide increased output involve substantial political or economic risk. Traditional suppliers in the Middle East are also increasingly unstable. Thus sharper demand-driven competition for resources, perhaps accompanied by a major disruption of oil supplies, is among the key uncertainties to 2020.
3.1.1. Growth Projections for the Global Energy Industry OIL
Demand It is estimated that the dominance of oil in the energy supply chain will continue to 2020. OPEC projects that oil demand will rise by 20 mb/d from 20082030, when it reaches almost 106 mb/d. Developing countries are set to account for most of the rise, with consumption rising by 23 mb/d over the period 20082030 to reach 56 mb/d (see figure 3-2 below). Almost 80% of the net growth in oil demand from 2008 2030 is in developing Asia (see figure 3-3 below). OECD oil demand falls over the entire projection period, having peaked in 2005. Nevertheless, it is important to stress once more the fact that energy poverty will remain a pressing issue over this period. Focusing just on oil, per capita oil use in developing countries will remain far below that of the developed world. For example, oil use per person in North America in 2030 will still be more than ten times that of South Asia.
Figure 3-2: Projected World Oil Demand
86 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group The transportation sector is identified as being the main source of future oil demand growth. However, there is an anticipated decline in oil use in this sector in the OECD. This arises from the combined effects of more rapid efficiency improvements and saturation. For developing countries, the growth in transportation is the single most important sectoral source of demand increase, but the combined volumes of other sectors amount to an increase almost as large. For Russia and the other transition economies, practically the only source of increase is transportation.
Figure 3-3: Growth in Oil Demand, 2008 - 2030
Supply Massive new hydrocarbons reserves are unlikely to be discovered, although quite a few smaller new resources, most of them in the Middle East and Latin America, could be brought on-stream. Energy companies will have to work much harder to get resources out of the ground. Offshore and deepwater exploration will become more common, and messier oil sources, such as bitumen-rich oil sands, will be the focus of greater attention.
Russia, as the largest energy supplier outside of OPEC, will be well positioned to marshal its oil and gas reserves to support domestic and foreign policy objectives. Algeria has the worlds eighth largest gas reserves and is also seeking to increase its exports to Europe.
Non-OPEC non-conventional oil supply increases by more than 7 mb/d over the entire period 20082030. The key growth is expected to come from Canadian oil sands and biofuels in the US, Europe and Brazil. On top of this, non-OPEC NGLs are also expected to increase, from 5.5 mb/d in 2008 to 7.2 mb/d in 2030 (see figure 3-4 below). Over the long-term, OPEC NGLs also increase rapidly, rising by close to 4 mb/d over the whole period 20082030. A small increase in GTLs supply is also expected.
87 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group The projected demand figures, non-OPEC supply expectations, and the increase in non-crude OPEC supply suggests that the amount of OPEC crude required will continue to rise after the medium-term period, reaching just over 41 mb/d by 2030. The share of OPEC crude in total supply by 2030 is 39%.
Figure 3-4: World Oil Supply Outlook
NATURAL GAS
Demand Europes increasing preference for natural gas, combined with depleting reserves in the North Sea, will give an added boost to political efforts already under way to strengthen ties with Russia and North Africa, as gas requires a higher level of political commitment by both sides in designing and constructing the necessary infrastructure. According to a study by the European Commission, the Unions share of energy from foreign sources will rise from about half in 2000 to two-thirds by 2020. The OECD will also still account for more natural gas consumption in 2020 even though
88 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group the volumes consumed by the developing world are expected almost to treble in the same period (see figure 3-5 below).
Figure 3-5: Natural Gas Demand, 1960 - 2030
COAL
Close to 40% of the global electricity generated comes from coal. Coal use is predominantly for the electricity generation sector, which utilizes more than three times as much as the industry sector, incorporating such sectors as iron and steel. The prospects for future coal use are therefore inevitably bound to the evolution of the electricity sector.
Coal use has recently been growing faster than oil or gas use, particularly in China. This has been driven by several forces. One important perspective is energy security. There is inevitably a strong appeal in using a fuel for which there is an abundance of easily accessible resources. This is certainly the case for China, Russia, the US and India, which between them account for more than two-thirds of the worlds coal reserves, and are correspondingly among the worlds largest coal users.
The 2009 World Oil Outlook by OPEC estimates that demand growth for coal in developing countries will rise by an average of 2.6% p.a.(see figure 3-6 below). There is assumed to be little growth in Russias use of coal, with future power plants expected to take advantage of domestic natural gas or new nuclear.
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Figure 3-6: World Coal and Gas Demand Growth, 1990 - 2007, 2007 - 2030 Source: 2009 World Oil Outlook, OPEC
For the OECD, the coal use projections are lower than historical rates as a result of lower economic growth because of the global financial crisis, and the impact of a rising renewables share in the energy mix. OPEC estimates that coals share in electricity generation will continue to fall, despite the spate of applications for new coal-fired based generation.
RENEWABLE ENERGY Technological advances, environmental pressures, issues of security of supply and high oil prices are driving rapid progress with regards to alternative energy sources,. Wind generation now provides a substantial contribution to electricity supply in some areas; tidal generation is an alternative and less erratic option. By some estimates, the cost of producing electricity from solar panels is not far above the real peak cost of power from some countries electricity grids. Fuel cells continue to make technological advances, and clean coal technologies are being developed to reduce carbon dioxide emissions from the worlds most abundant fossil fuel. It is expected that alternative technologies will be able to meet only a small share of total energy demand by 2020, not least because of the enormous advantages of fossil fuels for transport uses. The extent to which governments will intervene to push renewable energy sources is likely to depend more on security concerns than climate change.
Hydropower With a current share of approximately 16%, hydropower remains the third largest contributor to global electricity generation. While the sustainable potential in developed countries has already been largely exploited, developing countries, where considerable resources remain untapped, are expected to continue developing hydropower, although environmental concerns and the impact of population resettlement could constrain the full exploitation of the available resources.
The 2009 World Oil Outlook estimates that between 2007 and 2030, global demand for hydropower will grow at an average annual rate of 2.3% p.a. The fastest growth will be witnessed
90 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group in China, with an average growth rate of 4.4% p.a. Demand for hydropower will be highest in Latin America by 2030, surpassing the current leader North America.
Biomass Modern biomass use is growing the world over, including in the industrial, residential agriculture and commercial sectors, but especially as an input to electricity generation and for biofuels production. OPEC estimates that global modern biomass use expands between 2007 and 2030 at an average annual rate of 3.4% p.a., with growth in OECD countries greater than that in developing countries.
With regards to biofuels, which represents the fastest growth component in biomass use between 2007 and 2030, it has become increasingly clear that biofuels have their limitations. The large- scale expansion of first-generation biofuels those that are produced from grains, sugar, seeds and other food crops are now widely seen as having been a contributing factor to rising food prices. Furthermore, it is evident that even the environmental benefits of biofuels have recently come under closer scrutiny. It has been recognized that they negatively impact water resources, both in terms of physical availability and access to water, as well as biodiversity, in terms of soil erosion and nutrient leaching due to large-scale mono-cropping.
Second-generation biofuels, which do not rely on food crops, are seen as potentially resolving most of the sustainability concerns surrounding biofuels. However, these are still largely in the R&D phase and are not expected to become commercially available and contribute significantly to biofuels supply before 2020.
Other Renewables Solar, wind, tidal and small hydro, in addition to geothermal, are kept high on the agenda of many governments as sources of energy that can potentially achieve the two goals of securing energy supply and mitigating climate change. The stance of President Barack Obama on alternative energy has provided some much-needed encouragement to the industry in the US in the face of the global financial crisis, which negatively affected several renewables projects. In other regions, such as the EU, renewables are also expected to enjoy the support of governments in various forms. Nevertheless, renewables, starting from a low base, are still expected to contribute only modestly to global energy supply, even by 2030. OPEC estimates that the largest growth to 2020 will be in power generation, where modern biomass will grow at 4.2% p.a. and other renewables by 6.9% p.a.
NUCLEAR POWER Nuclear power is drawing renewed interest because it may provide a cost-competitive and low- emissions source of electricity production while also enhancing energy security. Next generation nuclear technology could make nuclear power safer. Concerns about the proliferation and safety of nuclear fuel and waste remain, however, and will need to be addressed.
The next decade will see a gradual shift in the energy generation mix in favor of gas, nuclear and renewable energy away from coal despite its worldwide usage. According to the IAEA (International Atomic Energy Agency), the role of nuclear power is expected to increase as newer plants resulting from innovative technology are being built and existing older ones are re-licensed.
91 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group 3.1.2. Key Growth Drivers for the Global Energy Industry Energy use has increased steadily, quadrupling since 1960, as a result of economic growth, rising population and social progress. The reliable, efficient and economic supply of energy has helped world economies grow, create jobs and improved the living conditions of billions of people.
Global population in 2005 was about 6.4 billion. In most parts of the world, birth rates are slowing down. Nonetheless world population is expected to grow by an average of 1% per annum over the years to 2030. Seemingly insignificant as this growth may sound, however, in reality it translates into a global population increase to 8 billion by 2030. This is more than a billion more energy users than exist today. It is projected that global economic growth measured by gross domestic product at market exchange rates will increase at approximately 3% per annum to 2030. This growth will be led by expanding economies of developing countries.
The combination of population and economic growth will push global energy demand higher, at an average rate of 1.2 % per annum. In 2030, global energy demand will be higher than twice the level of 1980. Over the years, indeed since 1980, the global economy has been growing at the rate of approximately 3 per cent per annum accompanied by improved energy efficiency. And it is anticipated that the decline in energy intensities will continue at a 70 % faster pace than in the past. This notwithstanding, global energy demand from all sources is projected to increase by 42% from 2007 to 2030. Developing countries will account for most of these increases by virtue of higher population and economic growth. Global assessment reveals that by 2030, the highest GDP of any region in the world, approximately $30 trillion will be recorded by Asia Pacific, followed by North America about $26 trillion and Europe at about $19 trillion. India and China will also continue to experience significant population growth.
The key drivers for the renewables solar, wind, geothermal, small hydro and modern biomass- including nuclear are security of supply and climate. These factors have stimulated the emergence of new industries and services for planning, manufacturing, operating and maintenance. Technological innovations and government policy developments have combined to increase the strength of the new industries, which are in turn driving further growth.
3.2. The Vision for the Nigerian Energy Sector
The broad vision for the energy sector is targeted at meeting the demand for energy in all sectors of the Nigerian economy, including the energy needs of households in all parts of the country with safe, clean and convenient energy at an affordable cost. This must be done in a technically efficient, economically viable and environmentally sustainable manner using different energy sources, conventional and non-conventional, as well as new and emerging energy sources to ensure supply at all times with minimal disruption.
The vision statement for the energy industry is: By 2020, the energy sector will be the major engine of the nations sustainable social, economic and industrial growth, delivering affordable and constant energy supply efficiently to other sectors of the economy
92 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group The vision 2020 plan for the energy sector defines the five (5) strategic priorities for the sector. These priorities have been set to address the critical issues identified in the Nigerian energy sector. These priorities will also enable the achievement of the primary goals of the Government of Nigeria as stated in the 7-pooint agenda. The strategic priorities identified for the Nigerian Energy sector are as follows:
Provide necessary commercial and market incentives in order to attract private investments (local and foreign) required to facilitate the necessary energy capacity expansions in a rapidly growing economy The anticipated growth for the Nigerian energy sector will require a total annual investment in excess of $ 18 Billion in the next 10 years ($ 12 Billion for oil & gas and $ 6 Billion for power). Of this, the projected affordable FG allocation will be $ 6 Billion ($ 5 Billion and $ 1Billion for oil & gas and power respectively). The $ 12 Billion shortfall will require private funding, including JV partner operating contributions. It is therefore imperative that alternative funding schemes, such as third party and venture capital financing, at appropriate costs, are explored.
Currently, majority of the investments in the energy sector, especially in power generation and refining, is provided by the Government. However, it is proposed that the significant capacity expansions envisaged for the Nigerian energy sector will be driven by the private sector. Appropriate fiscal terms need to be developed in order to attract global partners and investors for the development of the gas infrastructure as proposed in the gas masterplan. Also adequate incentives must be provided to attract private investments in power generation and distribution, coal to-power generation and local manufacturers of solar photovoltaic technologies.
Consolidation of ongoing structural and economic reforms targeted at establishing effective institutional and regulatory frameworks in the energy sector The timely completion and success of the ongoing institutional and regulatory reforms, in the power sector and the oil and gas sector, will improve the current environment and facilitate the accomplishment of the Governments goals in the energy sector. It is expected that once completed, these reforms will improve the funding and efficiency of operations in the energy sector.
In the power sector, it is imperative that the currently ongoing reforms, as proposed in the electric sector reform act, are completed with the total privatization of the generation and distribution assets. Also, the necessary regulatory and structural framework to support an efficient oil and gas industry needs to be put in place. The petroleum industry bill, currently in the National Assembly, includes provisions for the establishment of efficient and commercial institutions in the oil and gas industry.
Achieve energy supply security by utilizing the nations renewable energy resources (including wind, solar, hydro and biomass) to diversify the energy consumption mix
Currently, Nigerias energy mix is dominated by the fossil fuels, i.e. oil and gas. However, to attain the vision 2020 intent, Nigeria needs to diversify its energy mix with renewable energy sources. Nigeria has vast renewable energy resources including hydro (small and large hydro power), solar, wind and biomass. Utilization of the nations renewable energy resources will
93 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group reduce the countrys dependence on fossil fuels and provide an economically stable source of energy to the power generation mix.
The country needs to develop a technologically driven renewable energy sector that will harness the nations resources to complement its fossil fuel consumption and guarantee energy security. Development of efficient and sustainable energy generation and consumption patterns Although there is currently insufficient energy to meet demand in households and industries, it is necessary for the country to embark on energy conservation and energy efficiency initiatives which will require Industries and homes to move to energy saving equipment and utilities for reduction in total power demand.
Presently, energy utilization in Nigeria is far from being efficient. Apart from the direct loss due to energy wasted, using energy inefficiently has three major implications in Nigeria. These are: o The investment in some energy supply infrastructure is far in excess of what the energy demand is o The environmental problems associated with energy utilization are more aggravated due to large energy consumption o Excessive energy consumption adds to the costs of goods produced especially in energy intensive industries like cement, steel works and refineries
In the power sector, demand side management principles targeted at ensuring efficiency in electricity consumption need to be introduced. Consolidation of ongoing local content campaign by expanding linkages to other sectors of the economy The ongoing Nigerian content development initiative is aimed at ensuring that substantial proportion of activities, materials, engineering parts and human capital utilized in different sectors of the Nigerian economy is domiciled within the country. The domiciliation focus on local value addition is targeted at building global collaboration, attracting foreign direct investments and promoting technology transfer. To sustain the current drive for Nigerian content development it is important for Government to evolve policies to encourage both local and foreign companies to enter into joint venture agreements to operate in Nigeria.
Human capacity development specifically targeted at the low technical and high value skills e.g. fabrication and welding, should also be continuous through the integration of human development programs in all projects. An example is the focus on capacity development of fabrication yards to increase total tonnage and lifting capacity leading to integration of FPSO topsides locally.
Also, the development of a reliable local steel industry to cater for the demand of the oil and gas industry will help to develop deep and functional linkages between the mining industry and the oil & gas industry.
94 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
Figure 3-7: Strategic priorities for the Nigerian Energy Sector
95 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
3.3. Objectives, Goals/Targets, Strategies and Initiatives for the Nigerian Energy Sector
ENERGY SOURCE: OIL
Vision: A globally competitive oil sector with multiplier effects and cross-sectoral linkages in the economy. We envision a deregulated and vibrant downstream oil sector where the supply and distribution facilities are efficiently run to meet the local demand while exporting to the international market
Objective 1: Increase oil reserves and production using environmentally friendly petroleum exploration and production methods to minimize environmental degradation in oil producing areas Goals Strategies Initiatives Structure oil bloc bid rounds (including Sao Tome and Principe JDZ) in line with international best practices on a periodic basis Adhere to the local content principle in the allocation/bidding for oil blocks Establish and maintain a comprehensive geological and seismic survey program with digitalized maps in order to promote and accelerate exploration programs Ensure the enforcement of the marginal fields law Establish a special fund for indigenous upstream operators Deploy appropriate modern technology and reservoir engineering practices in fields and recover marginal fields to indigenous E&P companies To grow reserves from 32billion barrels to 40 billion barrels by 2015 and 50 billion barrels by 2020 and grow crude oil production capacity from 1.8mbpd to 3.2 mbpd by 2015 and 4.5mbpd by 2020 Invest in and embark on aggressive exploration for oil reserves and production in all parts of the country Carry out regular maintenance and upgrade of existing oil production facilities including flow stations and pipelines
96 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Recover erstwhile production capacity of 3mbpd and grow production capacity rapidly by revamping and expanding existing production facilities Drill in-fill wells in existing oil fields and Embark on new oil field developments Develop a framework of fiscal terms that will attract investments to accelerate the development of underdeveloped and un-explored terrains in the country Provide appropriate fiscal incentives to attract investments in oil exploration, at the same time ensuring reasonable returns for the nation Conduct a periodic review of policies guiding the licensing of new exploration acreages to reflect the strategic objectives of the Government To increase OPEC Quota allocation from 1.67mbpd to 3.2mbpd in 2015 and 4.5mbpd in 2020 Pursue a capacity reflective approach for OPEC allocation rather than current allocation formula Prepare a business case to engage OPEC on quota allocation mechanism
Objective 2: To grow national content value add in the Nigerian energy sector , thereby expanding linkages to other sectors of the economy and making Nigeria the West African hub for the provision of oil and gas services to the Gulf of Guinea Goals Strategies Initiatives Resuscitation of Ajaokuta Steel plant, rolling mills and others Set up new steel plants to support anticipated local steel demand Develop a reliable steel industry to cater for the demand of the oil and gas industry, thereby developing deep and functional linkages between the oil & gas and mining industries Promote the in-country manufacture of steel plates, section and pipes to feed the thousands of tonnage of fabrication and pipeline in planned E&P and gas projects Attain a national content value of 50% by 2015 and 70% by 2020 Enhance the in-country capacity for the fabrication of steel structures used in the oil and gas industry Set up a deepwater port with supporting fabrication facilities operated by world class fabrication companies to integrate FPSO topsides in Nigeria
97 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Upgrade Oron marine academy and establish additional Marine academies to facilitate human capital development in seafaring Identify, quantify and qualify bentonite and barite deposits in Nigeria Conduct studies on national demand and export possibilities for locally produced drilling fluids and mud Establish a barite and bentonite processing plant in Nigeria Develop capacity for local production of class G cement Enact a law to ensure 100% local sourcing of bentonite and barite for oil exploration activities in-country Encourage the use of locally available materials such as bentonite, class G cement and barites in exploration activities Establish a common and comprehensive local content measurement standard for the oil and gas industry
Objective 3: To create an efficient oil and gas industry, with low operating costs, maximized revenue and efficient regulation Goals Strategies Initiatives Review existing petroleum arrangements and consider alternative contractual arrangements and structures Review current fiscal policies and schemes in the oil and gas industry Reduce operational costs by 5% in 2015 and 10% in 2020 through improved industry efficiencies Put in place the necessary regulatory and structural framework to support an efficient and competitive oil and gas industry Carry out major restructuring and transformation of government agencies including DPR, NNPC in consonance with the ongoing OGIC reforms Review the current contracting process and pproval limits for oil and gas projects Reduce contracting process for oil and gas projects to 6-8 months Improve the decision making cycle/ contracting time for oil and gas projects Review contracting process for recurring contracts and make proposals for a fair and timely approval process
98 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Objective 4: To ensure that oil and gas operations meet global health, safety and environment (HSE) standards Goals Strategies Initiatives Review the terms of reference and laws of relevant regulatory institutions with a view to strengthening them Attain total oil spill of not more than 2000bbls per annum in 2015 and 1000bbls per annum by 2020 Strengthen the relevant regulatory agencies in order to ensure the enforcement of appropriate standards and entrench global HSE standards and principles in the Nigerian oil and gas sector Ensure continous environmental impact assessment of all oil and gas projects and strict adherence to the recommendations of EIA on all projects Reduce gas flares to operational and technical requirements only by 2010 Encourage oil and gas producing companies to gather and utilize associated gas to eliminate flaring by 2010 Provide necessary funding required to ensure the timely completion of on-going and new gas utilization projects To manage naturally occurring radioactive materials (NORM) generated from exploration activities to meet global standards Ensure the enforcement of appropriate regulations related to the control of NORMS Streamline and strengthen the regulatory bodies for efficient and effective control of NORMs
Objective 5: To create a well secured operating and business environment in oil producing communities Goals Strategies Initiatives Facilitate the rapid implementation of the Niger Delta Master Plan Foster cooperation with Government for intelligence gathering and networking Promote economic empowerment programmes targeted at capacity building Organize capability building programmes and training for employability targeted at the acquisition of vocational skills in oil producing communities Reduce the occurrence of attacks on oil and gas producing facilities by militants Work with NGOs as key implementation mechanism for community related projects Identify credible NGOs with track records of successfully implemented projects in the oil producing communities and liaise with them for the implementation of community related
99 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group projects Ensure greater consultation and needs assessment prior to agreeing MOUs with oil producing communities Create employment opportunities in oil producing communities by upgrading and building new facilities Accelerate the approval of community related projects
Objective 6: To transform the national oil company into a world class, commercially driven and globally competitive organization Goals Strategies Initiatives Identify opportunities to acquire other small oil and gas companies , both local and foreign Develop the NOC into a medium oil and gas producing company that can operate internationally Ensure preferential oil bloc allocation to the National oil company (NOC) Encourage major oil companies to establish R&D outfits in Nigeria and conduct part of their research in-country in conjunction with local educational and research institutions Grow NOC production to over 250,000bpd in 2015 and 400,000 bpd in 2020 Intensify human capital development in the NOC by collaborating with other world class NOCs Collaborate with other NOCs, educational institutions, and other R&D centers (local and foreign)
Objective 7: To increase local refining capacity to serve both domestic and regional markets Goals Strategies Initiatives Completely deregulate and liberalize the downstream sector Provide incentives and attractive fiscal terms to encourage the establishment of private refineries in the country Grow in-country refining capacity to over 750,000bpd in 2015 and 1,500,000bpd in 2020 Create an enabling environment to attract foreign and local investments in refineries Award new refining licenses to credible and competent downstream operators
100 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
Objective 8: To develop adequate distribution infrastructure to facilitate efficient delivery of petroleum products to every part of the country Goals Strategies Initiatives Cluster existing depots into geographical areas, separate pipelines from depots and privatize the assets on that basis Carry out a partial privatization of old distribution assets owned by the Government Upgrade old distribution assets and develop a public -private JV ownership of the petroleum products pipeline network Enhance the capacity of downstream distribution assets to handle refined products from 0.75Mbpd of crude in 2015 and 1.5Mbpd in 2020 Create an enabling environment to attract new investments in downstream storage and distribution assets Provide incentives and attractive fiscal terms to encourage private investments in downstream distribution and storage assets in every part of the country
Objective 9: To ensure provision of adequate funding for oil and gas projects Goals Strategies Initiatives Increase accessible funding for oil and gas projects by 30% in 2015 and 50% in 2020 Complete structural and legal reforms in the oil and gas sector targeted at creating an efficient, transparent and commercially viable industry Explore alternate funding schemes, such as third party financing and venture capital financing for current JVs
101 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
ENERGY SOURCE: GAS
Vision: A fully commercial and vibrant gas sector, developed in a comprehensive and integrated manner to accelerate the growth of the economy.
Objective 1: Develop Nigerias gas industry, separate from the oil industry while delivering significant capacity additions to serve local and export gas markets Goals Strategies Initiatives Clearly define the fiscal and commercial agreements for non-associated gas and gas produced under the PSC Develop appropriate fiscal terms to attract global partners and investors for the development of the gas infrastructure proposed in the gas master plan: 3 central gas gathering and processing facilities(CPFs) West Delta (Warri/Forcados area) Obiafu (North PortHarcourt) Akwa--Ibom/Calabar Area 3 gas pipeline transmission system (including compressor stations) 1200km South--North Line 700km Western System with 200km offshore extension 200km Interconnector System License pre-qualified investors interested in developing, owning and operating gas infrastructure as proposed in the gas master plan: Grow proven gas reserves from 180TCF to 215 TCF by 2015 and 250TCF by 2020 Create an enabling environment, with appropriate legal and regulatory framework, to attract private investments (local and foreign) in gas exploration and production Develop incentives to encourage dedicated exploration for natural gas, especially in the unexplored basins
102 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
Objective 2: Meet Nigerias domestic gas demand, especially to the power and manufacturing sector, and maximize the multiplier effect of gas in the domestic economy while optimizing Nigerias share and competitiveness in high-value export markets Goals Strategies Initiatives Implement new gas export projects including: Train 7 expansion of NLNG Brass LNG OK LNG WAGP Expansion Centrica - StatoilHydro - CCC LNG Project Trans-Saharan Gas Pipeline Project Increase gas exports: LNG and LPG from 22mtpa to 50mtpa to 40bcm per annum Pipeline to XX Strategically position Nigerias gas development assets and infrastructure for growth in high yielding export markets, with local content as a key driver Ensure enforcement of the local content policy in the development of natural gas projects Ensure rigorous enforcement of the domestic gas supply obligations to guarantee the availability of gas for domestic gas utilization projects Develop a standard gas sales and purchase agreement for gas sales to the domestic market Implement the gas infrastructure blueprint for gas infrastructure development to guide investment in gas infrastructure Provide price incentives to encourage industrial and domestic consumers to convert to gas usage Grow domestic gas demand to 5bscf/d in 2015 and 8bscf/d by 2020 Give domestic gas supply projects priority over gas export projects to ensure that local gas demand, especially to power, is met Fully set-up the strategic gas aggregator to manage the implementation of the domestic reserves and production obligation and the aggregate price in the domestic gas market in the short term
103 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Delineate and address supply-side challenges of availability, affordability/commerciality of supply and deliverability of gas supplies to the domestic market Develop a long term gas pricing strategy to attract FDI in the domestic gas sector
Objective 3: Accelerate development of the Nigerian domestic gas sector thereby achieving aggressive GDP growth while assuring long-term energy security Goals Strategies Initiatives Increase the use of LPG gas in homes and industries and LPG penetration from current 0.5kg to 3kg per capita per year in 2015 and 5kg per capita per year in 2020 Promote LPG use as a viable alternative for kerosene and firewood for domestic cooking Develop fiscal incentives and subsidies to ensure affordability of LPG in the domestic market including manufacture of cylinders and cookers Grow gas based petrochemical manufacturing capacity by 60% in 2015 and 80% Stimulate the growth of the petrochemicals sector by increasing gas- based manufacturing of petrochemicals Develop fiscal incentives and pricing models to provide subsidies and ensure affordability of gas to gas-based petrochemical industries ( e.g. methanol and fertilizer plants) and in the domestic steel industry
ENERGY SOURCE: COAL
104 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Objective 1: To promote the effective utilization of coal to complement the nations energy needs Goals Strategies Initiatives Provide adequate fiscal incentives for coal to power investors Promote the production of coal for power generation by creating a favorable business environment for coal-to-power investors Re-introduce integrated coal to power transport system (rail, pipe, conveyor etc.) To carry out more detailed exploration for coal to determine most economic deposits Ensure transparency in the allocation of coal mining titles To achieve a 10% and 20% contribution of coal to the national power generation mix by 2015 and 2020 respectively Intensify the search for more coal reserves to make coal a sustainable and reliable alternative energy source Acquire and provide up-to-date geological data on the coal deposits in the country Provide adequate incentives for large scale production of coal stoves at affordable prices Create public awareness for the use of smokeless coal briquettes as an alternative to fuelwood Establish a coal briquetting plant for mass production of coal briquettes Promote the use of coal in households as an alternative to fuelwood in order to check deforestation Organize a national programme for selecting efficient coal briquette burning stoves for adoption as national models for mass production To achieve a 20% contribution of coal to the household energy consumption by 2020 Encourage Research and Development activities in the production, processing and utilization of coal Collaborate with tertiary institutions and research institutes to develop local coal briquetting and coal stove technology
105 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Establish programmes for manpower training for the coal industry in polytechnics, technical colleges and vocational schools Partner with relevant foreign centers of excellence in clean coal technologies to facilitate capability building and manpower development
ENERGY SOURCE: NUCLEAR ENERGY
Objective 1: To pursue the development and exploitation of nuclear energy for peaceful purposes Goals Strategies Initiatives Establish, by law, the Nuclear Power Programme Coordination and Implementation Organization (NPPCIO) to serve as the planning, coordinating and implementing organization for nuclear power programme Pass the Nuclear Safety, Safeguards and Security (NSSS) Bill and the new Nigerian Atomic Energy Commission (NAEC) Act Strengthen the Nigerian Nuclear Regulatory Authority for efficiency and independence Domesticate all international instruments, agreements, conventions and treaties entered into by Nigeria Achieve 1500MW and 3000 MW national electricity contribution from nuclear technology by the year 2015 and 2020 respectively Establish unambiguous policy guidelines for the nuclear energy sector, clearly defining the role of relevant governmental organizations and the private sector as the main drivers of the nuclear power programme Carry out public enlightenment on the countrys Nuclear Power Potential and the activities of various agencies in the sector
106 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Objective 1: To pursue the development and exploitation of nuclear energy for peaceful purposes Goals Strategies Initiatives Establish long term, legally binding agreements on the operational structure of the nuclear power plants e.g. build-operate and transfer or build, operate and own Strengthen, streamline and upgrade the existing nuclear research and development institutions Establish the nuclear safety institute for the regulatory authority Establish centers of excellence (CE) in nuclear science and technology in these institutions :ABU, IBADAN, NSUKKA, IFE, KADPOLY and YABATECH Establish bilateral relationship with friendly countries for manpower and infrastructural development Intensify manpower training and development and the provision of adequate Infrastructure for nuclear science and technology Provide vendors and suppliers (both local and foreign) tax incentives to organize workshops and establish training institutions in Nigeria
RENEWABLE ENERGY SOURCES
107 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Vision: A technologically driven renewable energy sector that harnesses the nation's resources to complement its fossil fuel consumption and guarantee energy security
ENERGY SOURCE: HYDRO
Objective 1: To fully harness the hydro power potential available in the country for electricity generation Goals Strategies Initiatives Zone the entire country into potential hydropower generating zones and present the zones for competitive bidding by potential hydropower producers Sensitize the Federal, State and LGCs rural electrification agencies on the potential of small hydropower as source of electricity Establish small hydropower pilot schemes in each geopolitical zone to create awareness and facilitate technology acquisition Adapt existing irrigation dams with hydropower generation potential for power generation and supply to the national grid Conduct a national survey of hydropower potentials in the country Utilize mini and micro hydropower schemes to extend electricity to rural and remote areas Establish more hydrological and meteorological stations To achieve a 15% and 20% contribution of hydro electricity to the nations electricity generation mix by 2015 and 2020 respectively Create an enabling environment (fiscal, administrative , regulatory e.t.c.) to attract private investments in establishing and operating hydropower plants Undertake BOT- Build Operate and Transfer arrangements on new hydropower stations sites in the country and prepare to privatize the business entity after completion and startup
108 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Objective 1: To fully harness the hydro power potential available in the country for electricity generation Goals Strategies Initiatives Initiate the partial privatization of old hydropower generation stations i.e. Kainji, Jebba, Shiroro,Oji river etc, currently owned by the Government Provide incentives and appropriate commercial terms for privately owned hydropower IPPs
ENERGY SOURCE: WIND
Objective 1: To commercially develop the nations wind energy resource and integrate with other energy resources for off- grid electricity supply to rural areas Goals Strategies Initiatives Update and expand the Nigerian wind atlas Execute and commission wind energy pilot projects in select locations around the country Utilize wind power plants to extend electricity to rural and remote areas Sensitize the Federal, State and LGCs rural electrification agencies on the potential of wind energy as source of electricity To achieve a 1% contribution of wind energy to the nations electricity generation mix by 2020 Aggressively drive to optimize the components of wind water pumping and electricity generation and - to de- emphasize diesel powered water pumps wherever the wind speed will allow wind water pumping Provide fiscal incentives such as import duty exemptions, tax holiday, investment grants to encourage investments in wind powered generating plants and water pumps
ENERGY SOURCE: SOLAR
109 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Objective 1: To fully harness the hydro power potential available in the country for electricity generation Goals Strategies Initiatives Objective 1: To harness the nations solar energy resources for electricity generation, especially to rural and remote areas Goals Strategies Initiatives Collaborate with universities, Research institutes and centers (local and foreign) to develop home grown solar photovoltaic applications Continuous active support of research and development activities to cater for site specificity of designs for all parts of the country Introduce competitive national scholarships and /awards on solar technology proposals/designs Provide fiscal incentives such as import duty exemptions, tax holiday, investment grants to encourage investments in solar powered generating plants and local manufacturing of solar systems Create an enabling environment to attract private investments in manufacturing, establishing and operating solar energy systems Provide fiscal incentives to encourage local and foreign investors to establish factories for the porduction of major components (such as inverters, deep cycle batteries, charge controllers, e.t.c.) Create public awareness programmes on the potentials of solar energy for water heating and electricity backup To achieve a 1% contribution of solar energy to the nations electricity generation mix by 2020 Support demonstration and pilot projects to ensure that the general public is aware of the potentials of solar energy technologies which will as well assist in creation of markets for solar energy systems Develop and maintain a comprehensive database on solar energy resources, technologies, systems, end- use appliances, market operators e.t.c.
110 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Objective 1: To fully harness the hydro power potential available in the country for electricity generation Goals Strategies Initiatives
ENERGY SOURCE: BIOMASS Objective 1: Integrate biomass energy resources, including agricultural residues, animal and human wastes, with other energy resources through the adoption of an efficient conversion technology Goals Strategies Initiatives Enact a biomass act backed by legislation, which incorporates incentives and appropriate commercial terms for use of biomass fuels Introduce efficient wood-burning stoves in rural areas at subsidized rates Create a sustainable legal, institutional and commercial framework that encourages public private sector investment in the sector Provide commercial and market incentives to encourage the use of biogas digesters to cater for the cooking energy needs of especially large households and institutions like boarding schools, hospitals, barracks, prison houses etc. Encourage collaboration between tertiary institutions, research institutes and centres with biomass energy operators Promote R&D activities in biomass energy technology Institute a national and international fair on innovative designs and development models for biomass technologies Identify and select appropriate sites for biofuel, biogas, biomass briquette pilot projects To replace 50% of firewood consumption for cooking with biomass energy technology by 2020 Develop extension programmes and establish pilot projects to facilitate the general use of new biomass energy technologies Conduct public enlightenment programme to highlight the potentials for biomass energy
111 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Objective 1: To fully harness the hydro power potential available in the country for electricity generation Goals Strategies Initiatives Conduct a comprehensive feasibility study on the potentials of biomass resources in Nigeria To achieve an power generation capacity of 1,000 MW using biomass resource Create an enabling environment to attract private investments in biomass to- power projects Introduce a special tax incentive to encourage use of biomass for power generation Enact national act that will enforce production of second generation biofuels from non-food crops and use of biofuels in blend of at least 10% with convectional fuel Enact a biomass act backed by legislation, which incorporates incentives and appropriate commercial terms for use of biomass fuels Achieve a biofuel blends not exceeding 10% by 2020 using locally produced renewable biofuels from secondary biomass Create a sustainable legal, institutional and commercial framework that encourages public private sector investment in the sector Create public awareness programme to highlight the bebefits of second generation biofuels
ENERGY UTILIZATION: POWER
Vision: A power sector that efficiently delivers sustainable adequate, qualitative, reliable and affordable power in a deregulated market while optimizing the on- and off-grid energy mix
112 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Objective 1: Increase generation, transmission and distribution capacity in order to provide adequate and sustainable power supply Goals Strategies Initiatives Complete the privatization of the generation & distribution assets currently owned by the Government to ensure effective service delivery Ensure the independence of the market regulator Create a deregulated and competitive electric power sector to attract foreign and local investments Strengthen the market operator to carry out duties as assigned in the electric sector reform act Enact a Government policy which incorporates incentives and commercial terms for IPPs. (A model form GSA & PPA to be included) Create a Government agency which will serve as a one- stop shop for private investors interested in power generation and distribution To achieve 20,000MW by 2015 and 35,000MW installed generation and distribution capacity by 2020 with 80% of the generation capacity to be provided by the private sector, and 100% private ownership of the distribution assets Ensure a viable commercial framework for the electric power sector, including a tariff regime that promotes transparency, guarantees security of investment and a reasonable rate of return on investments Extend and optimize the gas infrastructure and grid network to allow for the construction of gas fired power plants across the country To strengthen the transmission network to wheel 20,000MW by 2015 and 35,000MW by 2020 Enhance the transmission capacity and provide redundancies in the transmission system so as to ensure a fully integrated network that minimizes transmission losses while strengthening grid security Source private capital and management for the development and operation of the transmission network whilst retaining ownership by Government To increase electricity access to 60% by 2015 and 80% by 2020 from the current 40% Intensify rural electrification efforts in a more efficient manner Assist the state and local governments in the development of alternative power solutions for rural areas
113 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Objective 2: To achieve optimal energy mix using most appropriate technologies Goals Strategies Initiatives Establish a coordinating agency for alternative energy development To achieve an electricity generation mix shown below: Gas fired plants 18,000 Coal 7,000 Nuclear 2,000 Hydro 7,000 Other renewables 1,000 Wind Solar Biomass
Total 35,000MW Increase utilization of alternative energy in the National energy mix Construct mini power stations in rural communities using locally appropriate technologies (possibly hybrid) hydro, wind, biomass, solar
Objective 3: To significantly reduce electricity wastage by promoting energy efficient practices Goals Strategies Initiatives Launch massive public campaign towards promoting efficient usage of electricity and energy conservation Introduce discriminatory tariffs targeted at encouraging off-peak electricity load, especially for large volume electricity consumers Introduce discriminatory tariffs to encourage low electricity utilization in households Introduce and encourage the use of energy efficient appliances at all levels of the electricity industry Increase the average load factor in the power sector by 30% in 2015 and 50% in 2020 Introduce demand side management principles targeted at ensuring efficiency in energy consumption in the electricity industry Liaise with the Manufacturing sector and encourage the transformation of their production processes to highly energy efficient technologies
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Objective 4: To encourage local production of inputs required for development of the power sector Goals Strategies Initiatives Establish Industrial parks for Power input producers & other manufacturers such that these parks are provided with uninterrupted electricity supply
Provide incentives to encourage local manufacturing and production of consumables used in the power sector, initially of relatively low tech power equipment such as conductors, insulators, cables, transmission and distribution structures etc. Provide tax holidays & guaranteed patronage to local power input producers and Industries Develop and equip the newly created National Power Training Institute, in collaboration with tertiary institutions, to facilitate human capital development To produce 20% and 30% of the material inputs for the power sector locally by 2015 and 2020 respectively
Ensure local manpower development by establishing effective training institutions and programmes as well as enforcing minimum local content components of power sector development and operational activities Enforce a minimal percentage (50%) of local manpower involvement at all levels of every EPC project, Plant operations and maintenance in the power sector
Objective 5: To improve the billing and collection efficiency of power distribution companies in the power sector Goals Strategies Initiatives Conclude privatization of distribution assets as a matter of priority To achieve billing and collection efficiencies of 100% and 95% respectively for power consumed by 2020
Completely privatize distribution assets in order to provide efficient billing and collecting infrastructure and ensure international best practices in electricity distribution Carry out public enlightenment programmes targeted at highlighting the effect of unpaid electricity bills on electricty generation
115 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Deploy prepaid meters in all the major electricity consumption area in the country
116 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
3.4. Key Growth Enablers 3.4.1. Legal & Regulatory Regime A fundamental prerequisite for a well-functioning energy sector is the introduction and sustenance of a sound legal and regulatory regime. This function of law as a framework for the energy sector is crucial as there cannot be efficiency without appropriate legal regulation and a framework to determine what kind of relationships will exist between the various parties and the conditions subject to which they will operate. It is also required to determine their competencies, duties, powers and rights. Many of the associated legal and regulatory reforms must be in place before a truly efficient energy market can evolve. In Nigeria today, legal and regulatory reforms have been proposed but are yet to become functional. These reforms must be completed for our energy sector to thrive: 3.4.2. Human Capital & Infrastructure Requirements To attain the vision 2020 intent, it is necessary that human capacity development be a major focus of attention in energy sector. We need to develop in-country training institutions to enhance the support, design and fabrication in the oil and gas industry. We should also develop locally coal technology, solar, hydro, wind, biomass and nuclear energy. Research in these areas will be pursued by encouraging collaboration between the industry and the territory institutions to foster world class technological development locally.
The provision of required infrastructure for our growing energy sector will be rigorously pursued. More depots from oil and gas will be built in addition to existing ones, will be clustered into geographical zones and privatized. Adequate pipelines for crude refined production and gas will be built and managed efficiently. Adequate transmission and distribution lines will also be provide and efficiently managed.
3.5. Environmental Implications of the Energy Vision 2020 Plan Like any other scientific progress, energy installations and processes, even though making life easier and comfortable, pose impacts to environment that are preventable in most cases. Notwithstanding the apparent difficulties encountered in resolving these cases, imbalance of the natural environment do occur especially in exploitation of fossil fuels. It is apparent that oil spills associated with oil production and activities are almost unavoidable. Effects of spillage and spill mitigation, response and technological breakthroughs are minimizing the effects of that environmental degradation and avoiding the occurrences in most instances. Processing of the produced oil and gas downstream are also not without effects to the environment and water systems.
Overall, these impacts can be assessed in environmental impacts studies including both pre-and post assessments. Off-shore oil production might as well alter the ecological balance of marine life if not properly managed. Usage of fossils is always associated with unwanted hydrocarbon emissions and particulates that usually dirty the environment.
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As part of the vision 2020 plan for the energy sector, adequate assessments need to be conducted to ensure that the development of the energy sources, including coal, nuclear, oil and gas and renewable energy sources do not impact the environment negatively. Also, necessary institutional arrangements to enforce existing environmental protection laws must be put in place.
3.6. Critical Success Factors
Nigeria certainly has the potential to become one of the top 20 economies in the world by the year 2020 by virtue of its rich human and material resource endowment. But much of its abundant potentials have remained untapped. With the vision 20:2020 intent, the time has therefore, come to unlock the potentials to initiate and sustain high and broad based growth and development.
As mentioned earlier in this report, to achieve the objectives of the vision 20:2020, the energy sector is expected to play a critical role. Energy, especially power, is a major and critical industrial input and no nation could attain sustainable growth and development without adequate and constant electricity supply. Unfortunately, electricity supply in the country has been inadequate, epileptic and unreliable that it has been a clog in the wheel of economic growth, process and social well being. In order to ensure the attainment of the vision 2020 intent in the energy sector, the following key success factors must be considered:
Political Commitment There is absolute willingness and high level commitment on the part of the political leadership at the Federal and State levels to fix the energy sector. This is quite evident in the priority given to the sector in the 7- point Development agenda of President YarAdua. The huge investments and resources at all levels of government being deployed to the sector is a pointer to the commitment of Government to revamp the sector.
Reforms There is a consensus and commitment among key stakeholders in the economy to a significant change and reform of the sector. With these reforms, the sector is being deregulated and liberalized and the private sector is being encouraged to invest heavily I the sector. Significant investments are required in the energy and the government alone cannot fund these investments. The reforms once completed will help to create an enabling environment for private investments in the sector.
Political stability The country has continued to experience political stability since 1999. This is very crucial to guaranteeing stable and consistent policy in the energy sector in pursuing the realization of energy reform and goals of the sector as encapsulated in the vision document.
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4.0 Implementation Roadmap 4.1. Implementation Roadmap for the Energy Sector
ENERGY SOURCE: OIL Timelines Strategies Initiatives S 3 M 4 L 5
Implementin g Agencies Collaborating Agencies Funding Sources Structure oil bloc bid rounds (including Sao Tome and Principe JDZ) in line with international best practices on a periodic basis X FMPR DPR FGN Adhere to the local content principle in the allocation/bidding for oil blocks X FMPR DPR FGN Establish and maintain a comprehensive geological and seismic survey program with digitalized maps in order to promote and accelerate exploration programs X FMPR NOC, IOC FGN, IOC, NOC Ensure the enforcement of the marginal fileds law X FMPR DPR FGN Establish a special fund for indigenous upstream operators X FMPR DPR FGN Invest in and embark on aggressive exploration for oil reserves and production in all parts of the country Deploy appropriate modern technology and X X X DPR NOC, IOC,
3 Short Term :2010 - 2012 4 Medium Term : 2013 - 2015 5 Long Term: 2016 - 2020
119 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S 3 M 4 L 5
Implementin g Agencies Collaborating Agencies Funding Sources reservoir engineering practices in fields and recover marginal fields to indigenous E&P companies LOC Carry out regular maintenance of existing oil production facilities including flow stations and pipelines X X X NOC, LOC,IOC NOC, LOC,IOC NOC, LOC,IOC Recover erstwhile production capacity of 3mbpd and grow production capacity rapidly by revamping and expanding existing production facilities X X X NOC, LOC,IOC NOC, LOC,IOC NOC, LOC,IOC Drill in-fill wells in existing oil fields and embark on new oil field developments X X X NOC, LOC,IOC DPR NOC, LOC,IOC Develop a framework of fiscal terms that will attract investments to accelerate the development of un-explored and underdeveloped terrains in the country X FMPR DPR FGN Provide appropriate fiscal incentives to attract investments in oil exploration, at the same time ensuring reasonable returns for the nation Conduct a periodic review of policies guiding the licensing of new exploration acreages to reflect strategic objectives of the Government X FMPR DPR FGN Pursue a capacity reflective approach for OPEC allocation rather than current allocation formula Prepare a business case to engage OPEC on quota allocation mechanism X FMPR DPR, NOC FGN Resuscitation of Ajaokuta Steel plants, rolling mills and others X X MMSD FMPR, NOC FGN Develop a reliable steel industry to cater for the demand of the oil and gas industry, thereby developing deep and Set up new steel plants to support anticipated local steel demand X X MMSD Private investors FGN, Private investors
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Implementin g Agencies Collaborating Agencies Funding Sources functional linkages between the oil & gas and mining industries Promote the in-country manufacture of steel plates, section and pipes to feed the thousands of tonnage of fabrication and pipeline in planned E&P and gas projects X X MMSD NOC, Private investors Private investors, NOC, FGN Set up a deepwater port with supporting fabrication facilities operated by world class fabrication companies to integrate FPSO topsides in Nigeria X X Private investors Ministry of Transport, Nigerian Ports Authority, FGN Private investors Enhance the in-country capacity for the fabrication of steel structures used in the oil and gas industry Upgrade Oron marine academy and establish additional Marine academies to facilitate human capital development in seafaring X X Identify, quantify and qualify bentonite and barite deposits in Nigeria X X Private investors MMSD, NOC Private investors Conduct studies on national demand and export possibilities for locally produced drilling fluids and mud X X MMSD NOC, IOC FGN Establish a barite and bentonite processing plant in Nigeria X X FMPR NOC, IOC, Nigerian Content Division FGN Develop capacity for local production of class G cement X FMPR, Nigerian Content Division NOC, IOC FGN Encourage the use of locally available materials such as bentonite, class G cement and barites in exploration activities Enact a law to ensure 100% local sourcing of bentonite and barite for oil exploration activities in-country X FMPR, Nigerian Content Division NOC, IOC FGN
121 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S 3 M 4 L 5
Implementin g Agencies Collaborating Agencies Funding Sources Establish a common and comprehensive local content measurement standard for the oil and gas industry X FMPR, Nigerian Content Division NOC, IOC FGN Review existing petroleum arrangements and consider alternative contractual arrangements and structures X X X FMPR NOC, DPR FGN Review current fiscal policies and schemes in the oil and gas industry X FMPR NOC, IOC FGN Put in place the necessary regulatory and structural framework to support an efficient and competitive oil and gas industry Carry out major restructuring and transformation of government agencies including DPR, NNPC in consonance with ongoing OGIC reforms X X X FMPR FGN FGN Review the current contracting process and approval limits for oil and gas projects X X X FMPR FGN FGN Improve the decision making cycle/ contracting time for oil and gas projects Review contracting process for recurring contracts and make proposals for a fair and timely approval process X X X FMPR FGN FGN Review the terms of reference and laws of relevant regulatory institutions with a view to strengthening them X X X FMPR, DPR FGN FGN Strengthen the relevant regulatory agencies in order to ensure the enforcement of appropriate standards and entrench global HSE standards and principles in the Nigerian oil and gas sector Ensure continuous environmental impact assessment of all oil and gas projects and strict adherence to the recommendations of EIA on all projects X X X FMPR, DPR FGN FGN Encourage oil and gas producing companies to gather and utilize associated gas to eliminate flaring by 2010 Provide necessary funding required to ensure the timely completion of on-going and new gas utilization projects X X X FMPR, DPR FGN FGN
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Implementin g Agencies Collaborating Agencies Funding Sources Ensure the enforcement of appropriate regulations related to the control of NORMS Streamline and strengthen the regulatory bodies for efficient and effective control of NORMs X X X FMPR, DPR FGN FGN Facilitate the rapid implementation of the Niger Delta Master Plan X X X FMPR, NDDC NOC, FGN Foster cooperation with Government for intelligence gathering and networking X X NOC, LOC, IOC, LGs FMPR, NDDC NOC,LOC, States, LGs IOC Promote economic empowerment programmes targeted at building community capacity Organize training for employability and capability building programme for vocational skills in oil producing communities X X X NDDC, NOC, IOC, LOC FMPR NDDC, NOC, IOC, LOC Work with NGOs as key implementation mechanism for community related projects Identify credible NGOs with track records of successfully implemented projects in the oil producing communities and liaise with them for the implementation of community related projects X X X NDDC, NOC, IOC, LOC FMPR NDDC, NOC, IOC, LOC Ensure greater consultation and needs assessment prior to agreeing MOUs with oil producing communities X X X NDDC, NOC, IOC, LOC FMPR NDDC, NOC, IOC, LOC Create employment opportunities in oil producing communities by upgrading and building new facilities Accelerate the approval of community related projects X X X NDDC, NOC, IOC, LOC FMPR NDDC, NOC, IOC, LOC Identify opportunities to acquire other small oil and gas companies , both local and foreign X X FMPR NOC, DPR FGN Develop the NOC into a medium oil and gas producing company that can operate internationally Ensure preferential oil bloc allocation to the National oil company (NOC) X X X FMPR NOC, DPR FGN
123 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S 3 M 4 L 5
Implementin g Agencies Collaborating Agencies Funding Sources Encourage major oil companies to establish R&D outfits in Nigeria and conduct part of their research in-country in conjunction with local educational and research institutions X X X FMPR, DPR Ministry of Education, Research Institutes FGN Intensify Human capital development in the NOC by collaborating with other world class NOCs Collaborate with other NOCs, educational institutions, and other R&D centers (local and foreign) X X X NOC NOC, Educational Institutions and R &D centres NOC Completely deregulate and liberalize the downstream sector X X FMPR DPR, NOC FGN Provide incentives and attractive fiscal terms to encourage the establishment of private refineries in the country X X X FMPR NOC, DPR FMPR Create an enabling environment to attract foreign and local investments in refineries Award new refining licenses to credible and competent downstream operators X X FMPR DPR, NOC FGN Cluster existing depots into geographical areas, separate pipelines from depots and privatize the assets on that basis X X NOC, JVs DPR NOC, JVs Carry out a partial privatization of old distribution assets owned by the Government Upgrade old distribution assets and develop a public -private JV ownership of the petroleum products pipeline network X X NOC DPR NOC Create an enabling environment to attract new investments in downstream storage and distribution assets Provide incentives and attractive fiscal terms to encourage private investments in downstream distribution and storage assets in every part of the country X X FMPR DPR, NOC FGN Complete structural and legal reforms in the oil and gas sector targeted at creating an efficient, transparent and Explore alternate funding schemes, such as third party financing and venture capital financing for current JVs X X FMPR NOC FMPR
124 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S 3 M 4 L 5
Implementin g Agencies Collaborating Agencies Funding Sources commercially viable industry
ENERGY SOURCE: GAS
125 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S M L Implementing Agencies Collaborati ng Agencies Funding Sources Establish a national holding company for gas to ensure a focused development of the gas sector x FMPR/FEC/N ASS FG Clearly define the fiscal and commercial agreements for non-associated gas and gas produced under the PSC x FMPR FMF FG Develop appropriate fiscal terms to attract global partners and investors for the development of the gas infrastructure proposed in the gas master plan: 3 central gas gathering and processing facilities(CPFs) West Delta (Warri/Forcados area) Obiafu (North PortHarcourt) Akwa--Ibom/Calabar Area 3 gas pipeline transmission system (including compressor stations) 1200km South--North Line 700km Western System with 200km offshore extension 200km Interconnector System x x x FMPR, NGMP Team FG/Investo rs License pre-qualified investors interested in developing, owning and operating gas infrastructure as proposed in the gas master plan: x FMPR, NGMP Team FMF FG Create an enabling environment, with appropriate legal and regulatory framework, to attract private investments (local and foreign) in gas exploration and production Develop incentives to encourage dedicated exploration for natural gas, especialy in the unexplored basins x FMPR, DPR FMF FG
126 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S M L Implementing Agencies Collaborati ng Agencies Funding Sources Implement new gas export projects including: Train 7 expansion of NLNG Brass LNG OK LNG WAGP Expansion Centrica - StatoilHydro - CCC LNG Project Trans-Saharan Gas Pipeline Project X X X FMPR/ IOCs FG/ Private investors/I OCs Strategically position Nigerias gas development assets and infrastructure for growth in high yielding export markets, with local content as a key driver Ensure enforcement of the local content policy in the development of natural gas projects x FMPR, DPR FMF FG Ensure rigorous enforcement of the domestic gas supply obligations to guarantee the availability of gas for domestic gas utilization projects x FMPR, DPR FMF FG Develop a standard gas sales and purchase agreement for gas sales to the domestic market x FMPR, DPR FMF FG Implement the gas infrastructure blueprint for gas infrastructure development to guide investment in gas infrastructure X X X NGMP Team and FMPR
Provide price incentives to encourage industrial and domestic consumers to convert to gas usage x FMPR, DPR FMF FG Give domestic gas supply projects priority over gas export projects to ensure that local gas demand, especially to power, is met Fully set-up the strategic gas aggregator to manage the implementation of the domestic reserves and production obligation and the aggregate price in the x FMPR, DPR FMF FG
127 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S M L Implementing Agencies Collaborati ng Agencies Funding Sources domestic gas market in the short term Delineate and address supply-side challenges of availability, affordability/commerciality of supply, deliverability and its cost effectiveness, legal and regulatory framework, and funding Develop a long term gas pricing strategy to attract FDI in the domestic gas sector x FMPR, DPR FMF FG Promote LPG use as a viable alternative for kerosene and firewood for domestic cooking Develop fiscal incentives and subsidies to ensure affordability of LPG in the domestic market including manufacture of cylinders and cookers x FMPR, DPR FMF FG Stimulate the growth of the petrochemicals sector by increasing gas-based manufacturing of petrochemicals Develop fiscal incentives and pricing models to provide subsidies and ensure affordability of gas to gas-based petrochemical industries ( e.g. methanol and fertilizer plants) and in the domestic steel industry X X FMPR Ministry of Industry FMCI
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ENERGY SOURCE: COAL Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Provide adequate fiscal incentives for coal to power investors X X X FMP, MMSD FMP, MMSD FGN Promote the production of coal for power generation by creating a favorable business environment for coal- to-power investors Re-introduce integrated coal to power transport system (rail, pipe, conveyor etc.) X X MMSD, FMP Investors FGN, Investors To carry out more detailed exploration for coal to determine most economic ally viable deposits X X MMSD NGSA MMSD Ensure transparency in the allocation of coal mining titles X X X MMSD FGN FGN Intensify the search for more coal reserves to make coal a sustainable and reliable alternative energy source Acquire and provide up-to-date geological data on the coal deposits in the country X X X MMSD, NGSA FGN FGN Provide adequate incentives for large scale production of coal stoves at affordable prices X X X NCC MMSD MMSD Create public awareness for the use of smokeless coal briquettes as an alternative to fuelwood X X X NCC MMSD MMSD Establish a coal briquetting plant for mass production of coal briquettes X X X MMSD MMSD, Investors Investors Promote the use of coal in households as an alternative to fuelwood in order to check deforestation Organize a national programme for selecting efficient coal briquette burning stoves for adoption as national models for mass X X X NCC MMSD MMSD
129 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources production Collaborate with tertiary institutions and research institutes to develop local coal briquetting and coal stove technology X X X NCC MMSD MMSD Establish programmes for manpower training for the coal industry in polytechnics, technical colleges and vocational schools X X X NCC MMSD MMSD Encourage Research and Development activities in the production, processing and utilization of coal Partner with relevant foreign centers of excellence in clean coal technologies to facilitate capability building and manpower development X X X NCC MMSD MMSD
ENERGY SOURCE: NUCLEAR ENERGY Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Establish unambiguous policy guidelines for the nuclear energy sector, clearly defining the role of relevant governmental organizations and the private sector as the main Establish, by law, the Nuclear Power Programme Coordination and Implementation Organization (NPPCIO) to serve as the planning, coordinating and implementing organization for nuclear power programme X NASS, FMJ NPC, FMF, FMST, FIC, , NSA, PHCN,NNRA , NGSA, NAEC, NIMET FGN
130 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Pass the Nuclear Safety, Safeguards and Security (NSSS) Bill and the new Nigerian Atomic Energy Commission (NAEC) Act X NASS, FMJ NNRA, NAEC FGN Strengthen the Nigerian Nuclear Regulatory Authority for efficiency and independence X X X FMPR IAEA, NNRA FGN Domesticate all international instruments, agreements, conventions and treaties entered into by Nigeria X X NASS , FMJ NNRA FGN Carry out public enlightenment on the countrys Nuclear Power Potential and the activities of various agencies in the sector X X X NPPCIO, NAEC, NNRA FMIC FGN drivers of the nuclear power programme Establish long term, legally binding agreements on the operational structure of the nuclear power plants e.g. build- operate and transfer or build, operate and own X X NPPCIO, NAEC FMJ, NNRA FGN Strengthen, streamline and upgrade the existing nuclear research and development institutions X X X FMST, NAEC, FMST, NUC, IAEA FGN, IAEA Intensify manpower training and development and the provision of adequate Infrastructure for nuclear science and technology Establish the nuclear safety institute for the regulatory authority X X X NNRA IAEA FGN, IAEA
131 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Establish centers of excellence (CE) in nuclear science and technology in these institutions :ABU, IBADAN, NSUKKA, IFE, KADPOLY and YABATECH X X X FMST, NUC, NBTE, NAEC ABU, UI, NSUKKA, IFE, KADPOLY, YABATECH FGN Establish bilateral relationship with friendly countries for manpower and infrastructural development X X X FMFA, FME, NPPCIO, NNRA, NAEC IAEA, Respective Nigerian Foreign Missions and the host Countries FGN Provide vendors and suppliers (both local and foreign) tax incentives to organize workshops and establish training institutions in Nigeria X X X FMF NPPCIO, NAEC FGN
132 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group ENERGY UTILIZATION: POWER
Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Complete the privatization of the generation & distribution assets currently owned by the Government to ensure effective service delivery X BPE/ICRC FMP Budgetary Allocations Ensure the independence of the market regulator X FMP FMJ Create a deregulated and competitive electric power sector to attract foreign and local investments Strengthen the market operator to carry out duties as assigned in the electric sector reform act X FMP Enact a Government policy which incorporates incentives and commercial terms for IPPs. (A model form GSA & PPA to be included) X FMP/FMJ NERC Budgetary Allocations Create a Government agency which will serve as a one-stop shop for private investors interested in power generation and distribution X FMP FMF /FMEH/NERC/ NELMCO Budgetary Allocations Ensure a viable commercial framework for the electric power sector, including a tariff regime that promotes transparency, guarantees security of investment and a reasonable rate of return on investments Extend and optimize the gas infrastructure and grid network to allow for the construction of gas fired power plants across the country X FMPR FMP Budgetary Allocations / Private Sector
133 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Enhance the transmission capacity and provide redundancies in the transmission system so as to ensure a fully integrated network that minimizes transmission losses while strengthening grid security Source private capital and management for the development and operation of the transmission network whilst retaining ownership by Government X FMP/ TCN FMF/Banks/Capit al Market Operators Private Sector through equity and/or debt. Intensify rural electrification efforts in a more efficient manner Assist the state and local governments in the development of alternative power solutions for rural areas X X X FMP, States, Local Governments FGN FMP, States, Local Governments Establish a coordinating agency for alternative energy development X FMP FMJ/NNPC/ECN/ NERC FMP Increase utilization of alternative energy in the National energy mix Construct mini power stations in rural communities using locally appropriate technologies (possibly hybrid) hydro, wind, biomass, solar X X X FMP, States, Local Governments FGN FMP, States, Local Governments Launch massive public campaign towards promoting efficient usage of electricity and energy conservation x FMP NERC FMP Introduce discriminatory tariffs to encourage low electricity utilization in households X NERC Generation and Distribution Companies
Introduce demand side management principles targeted at ensuring efficiency in energy consumption in the electricity industry Introduce and encourage the use of energy efficient appliances at all levels of the electricity industry X FMP
134 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Liaise with the Manufacturing sector and encourage the transformation of their production processes to highly energy efficient technologies X FMP MAN Establish Industrial parks for Power input producers & other manufacturers such that these parks are provided with uninterrupted electricity supply X FMCI FMP FMCI Provide incentives to encourage local manufacturing and production of consumables used in the power sector, initially of relatively low tech power equipment such as conductors, insulators, cables, transmission and distribution structures etc. Provide tax holidays & guaranteed patronage to local power input producers and Industries X FMF FMP Develop and equip the newly created National Power Training Institute, in collaboration with tertiary institutions, to facilitate human capital development X FMP Universities and Polytechnics FMP Ensure local manpower development by establishing effective training institutions and programmes as well as enforcing minimum local content components of power sector development and operational activities Enforce a minimal percentage (50%) of local manpower involvement at all levels of every EPC project, Plant operations and maintenance in the power sector X FMP Completely privatize distribution assets in order to provide efficient billing Conclude privatization of distribution assets as a matter of priority X ICRC/BPE FMP
135 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Carry out public enlightenment programmes targeted at highlighting the effect of unpaid electricity bills on electricity generation x FMP NERC FMP and collecting infrastructure and ensure international best practices in electricity distribution Deploy prepaid meters in all the major electricity consumption area in the country X Distribution Companies FMP Distribution Companies
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RENEWABLE ENERGY SOURCES
ENERGY SOURCE: HYDRO
Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Zone the entire country into potential hydropower generating zones and present the zones for competitive bidding by potential hydropower producers PHCN, FMP ECN, FMAWR FGN, PPP Sensitize the Federal, State and LGCs rural electrification agencies on the potential of small hydropower as source of electricity X PHCN, FMP, States and Local Govt FMAWR FGN, State and Local Govt, PPP Establish small hydropower pilot schemes in each geopolitical zone to create awareness and facilitate technology acquisition X PHCN, FMP ECN, FMAWR FGN, PPP Adapt existing irrigation dams with hydropower generation potential for power generation and supply to the national grid X PHCN, FMP, State Govt FMAWR FGN, State Govt., PPP Conduct a national survey of hydropower potentials in the country X PHCN, FMP ECN, FMAWR FGN, PPP Utilize mini and micro hydropower schemes to extend electricity to rural and remote areas Establish more hydrological and meterological stations X X PHCN, FMP ECN, FMAWR FGN, PPP
137 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Undertake BOT- Build Operate and Transfer arrangements on new hydropower stations sites in the country and prepare to privatize the business entity after completion and startup X FMP, BPE PPP, FMAWR PPP, FGN Initiate the partial privatization of old hydropower generation stations i.e. Kainji, Jebba, Shiroro,Oji river etc, currently owned by the Government X BPE, FMF, PHCN FMP PPP Create an enabling environment (fiscal, administrative , regulatory e.t.c.) to attract private investments in establishing and operating hydropower plants Provide incentives and appropriate commercial terms for privately owned hydropower IPPs X NASS, FMF, PHCN ECN, FMP FGN
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ENERGY SOURCE: WIND
Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Update and expand the Nigerian wind atlas X FMST Nigerian Metrological Dept, ECN FGN Execute and commission wind energy pilot projects in select locations around the country X FMP, PHCN State Govt, LG councils FGN, State & Local Govt, PPP Utilize wind power plants to extend electricity to rural and remote areas Sensitize the Federal, State and LGCs rural electrification agencies on the potential of wind energy as source of electricity X FMP, PHCN State Govt, LG councils FGN, State Local Govt, PPP Aggressively drive to optimize the components of wind water pumping and electricity generation and - to de-emphasize diesel powered water pumps wherever the wind speed will allow wind water pumping Provide fiscal incentives such as import duty exemptions, tax holiday, investment grants to encourage investments in wind powered generating plants and water pumps X FMP, PHCN State Govt, LG councils FGN, State Local Govt, PPP
139 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
ENERGY SOURCE: SOLAR
Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Collaborate with universities, Research institutes and centers (local and foreign) to develop home grown solar photovoltaic applications X ECN, NNPC, FMST Tertiary institutions PTDF, ETF, PPP Continuous active support of research and development activities to cater for site specificity of designs for all parts of the country Introduce competitive national scholarships and /awards on solar technology proposals/designs X X ECN, NNPC Tertiary institutions PTDF, ETF, PPP Provide fiscal incentives such as import duty exemptions, tax holiday, investment grants to encourage investments in solar powered generating plants and local manufacturing of solar systems X State Govts, PPP ECN, FMP FGN, states, PPP Create an enabling environment to attract private investments in manufacturing, establishing and operating solar energy systems Provide fiscal incentives to encourage local and foreign investors to establish factories for the production of major components (such as inverters, deep cycle batteries, charge controllers, e.t.c.) X State Govts, PPP ECN, FMP FGN, states, PPP
140 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Create public awareness programmes on the potentials of solar energy for water heating and electricity backup X X ECN, FMP FMIC FGN Support demonstration and pilot projects to ensure that the general public is aware of the potentials of solar energy technologies which will as well assist in creation of markets for solar energy systems Develop and maintain a comprehensive database on solar energy resources, technologies, systems, end-use appliances, market operators e.t.c. X ECN, FMP Tertiary institutions
ENERGY SOURCE: BIOMASS
Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Enact a biomass act backed by legislation, which incorporates incentives and appropriate commercial terms for use of biomass fuels X NASS, ECN, FMP FGN FGN Create a sustainable legal, institutional and commercial framework that encourages public private sector investment in the sector Introduce efficient wood-burning stoves in rural areas at subsidized rates X X ECN FGN FGN
141 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Provide commercial and market incentives to encourage the use of biogas digesters to cater for the cooking energy needs of especially large households and institutions like boarding schools, hospitals, barracks, prison houses etc. X X FGN NASS FGN Encourage collaboration between tertiary institutions, research institutes and centres with biomass energy operators X X X ECN, NUC FGN Promote R&D activities in biomass energy technology Institute a national and international fair on innovative designs and development models for biomass technologies X X ECN, FMST FGN Identify and select appropriate sites for biofuel, biogas, biomass briquette pilot projects X X ECN FGN Develop extension programmes and establish pilot projects to facilitate the general use of new biomass energy technologies Conduct public enlightenment programme to highlight the potentials for biomass energy X X X ECN, FMIC Media Houses FGN Conduct a comprehensive feasibility study on the potentials of biomass resources in Nigeria X X ECN FGN Create an enabling environment to attract private investments in biomass to- power projects Introduce a special tax incentive to encourage use of biomass for power generation X FGN, FMF FMP FGN
142 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Timelines Strategies Initiatives S M L Implementing Agencies Collaborating Agencies Funding Sources Enact national act that will enforce production of second generation biofuels from non-food crops and use of biofuels in blend of at least 10% with convectional fuel X X NASS, ECN NNPC FGN Enact a biomass act backed by legislation, which incorporates incentives and appropriate commercial terms for use of biomass fuels X X NASS, ECN FGN Create a sustainable legal, institutional and commercial framework that encourages public private sector investment in the sector Create public awareness programme to highlight the bebefits of second generation biofuels X X X ECN, FMIC Media Houses FGN
143 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
4.2. Implementation Monitoring Plan for the Energy Sector
ENERGY SOURCE: OIL Goal 1: To grow reserves from 32billion barrels to 40bbls by 2015 and 50bbls by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % compl etion Issues Risks Mitigati on Structure oil bloc bid rounds (including Sao Tome and Principe JDZ) in line with international best practices on a periodic basis FMPR Periodic Attain >70% bid round objectives
Establish and maintain a comprehensive geological and seismic survey program with digitalized maps in order to promote and accelerate exploration programs to uncover the oil and gas potentials in the entire hydrocarbon bearing zones in various parts of the country and territorial waters DPR Quarterly >40% from 2010, >90 from 2015 of digitized seismic survey
Maintain a strategic balance between oil and gas production from traditional oil fields in onshore terrain, inland basins, continental shelves, offshore, and the deepwater offshore fields governed by PSCs FMPR Yearly % of national prod from non- traditional areas
Embark on aggressive exploration for oil reserves in all parts of the country Deploy current and appropriate National Oil Half Yearly
144 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 1: To grow reserves from 32billion barrels to 40bbls by 2015 and 50bbls by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % compl etion Issues Risks Mitigati on technologies for improved reservoir management and seismic acquisition & Gas Research Center
Goal 2:To grow crude oil production capacity from 1.8mbpd to 3.2mbpd by 2015 and 4.5mbpd by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % compl etion Issues Risks Mitigation Carry out regular maintenance of existing oil production facilities including flow stations and pipelines DPR Half yearly % completion of preventive maintenanc e plan
Drill in-fill wells in existing oil fields DPR Half yearly No. of infill wells drilled
Recover erstwhile production capacity of 3mbpd and grow production capacity rapidly by revamping and expanding existing production facilities Recover erstwhile production capacity of 3mbpd and grow production capacity rapidly by revamping and expanding existing production facilities Embark on new oil field developments
DPR Yearly No. of new field developmen ts
145 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
Goal 3:To increase OPEC Quota allocation from 1.67mbpd to 3.2mbpd in 2015 and 4.5mbpd in 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completi on Issues Risks Mitigatio n Increase OPEC Quota through the pursuit of capacity reflective approach rather than current OPEC allocation formula Prepare a business case to engage OPEC on quota allocation mechanism NPC Half Yearly
Goal 4: Attain a national content value of 50% by 2015 and 70% by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % complet ion Issues Risks Mitigatio n Resuscitation of Ajaokuta Steel plants, rolling mills and others NPC Half Yearly Tonnes of steel produced locally
Set up new steel plants to support anticipated local steel demand NPC Half Yearly No. of new steel plants
Develop a reliable steel industry to cater for the demand of the oil and gas industry, thereby developing deep and functional linkages between the oil & gas and mining industries Promote the in-country manufacture of steel plates, section and pipes to feed the thousands of MMSD Half Yearly % locally produced steel consumed in E&P projects
146 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 4: Attain a national content value of 50% by 2015 and 70% by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % complet ion Issues Risks Mitigatio n tonnage of fabrication and pipeline in planned E&P projects Set up a deepwater port with supporting fabrication facilities operated by world class fabrication companies to integrate FPSO topsides in Nigeria FMT / BPE Half Yearly Enhance the in- country capacity for the fabrication of steel structures used in the oil and gas industry Upgrade Oron marine academy and establish additional Marine academies to facilitate human capital development in seafaring No. of seafaring graduates trained in local marine academies
Identify, quantify and qualify bentonite and barite deposits in Nigeria FMMS Half Yearly Develop capacity for local production of class G cement
FMP Quarterly Tonnes of locally produced class G cement
Encourage the use of locally available materials such as bentonite, class G cement and barites in exploration activities Establish a common local content measurement standard for the oil and gas industry NCD Board Quarterly
147 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
Goal 5: Reduce operational costs by 5% by 2015 and 10% by 2020 through improved industry efficiencies Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % complet ion Issues Risks Mitigation Review existing petroleum arrangements and consider alternative contractual arrangements and structures FMPR Periodic Revamp existing fiscal schemes FMPR Periodic Put in place the necessary regulatory and structural framework to support an efficient oil and gas industry Carry out major restructuring and transformation of government agencies including DPR, NNPC FMPR Quarterly
Goal 6: Reduce contracting process for oil and gas projects to 6-8 months Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigation Improved decision making/ contracting time for oil and gas Review current approval limits for oil and gas projects FEC Half Yearly
148 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 6: Reduce contracting process for oil and gas projects to 6-8 months Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigation projects Review contracting process for recurring contracts and make proposals for a fair and timely approval process FEC Half Yearly Average approval time for contract s
Goal 7: Ensure zero fatality from oil and gas operations Strategy Initiatives Monito ring Agenci es Monitoring Frequency KPI % completion Issues Risks Mitiga tion Entrench global HSE standards and principles in the Nigerian oil and gas sector Strengthen regulatory role to ensure compliance with HSE standards DPR Quarterly
Goal 8: Attain total oil spill of not more than 2000bbls per annum by 2015 and 1000bbls per annum by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % compl etion Issues Risks Mitigation Ensure the enforcement of appropriate environmental protection Streamline and strengthen the regulatory authorities for speedy and efficient oil spill response DPR, FME Monthly No. and volume of spills, Average response time
149 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 8: Attain total oil spill of not more than 2000bbls per annum by 2015 and 1000bbls per annum by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % compl etion Issues Risks Mitigation regulations Ensure regular environmental impact assessment of all oil and gas projects DPR , FME Periodic No. of environmental impact assessments
Goal 9: Reduce gas flares to operational and technical requirements only by 2010 Strategy Initiatives Monitoring Agencies Monitori ng Frequenc y KPI % complet ion Issues Risks Mitigation Encourage oil and gas producing companies to gather and utilize associated gas to reduce flaring to Operational requirements only by 2010
Provide necessary funding required to ensure the timely completion of on-going and new gas utilization projects DPR , FME Quarterly % of total gas flared
150 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 10: To manage naturally occurring radioactive materials (NORM) generated from exploration activities to meet global standards Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigati on Ensure the enforcement of appropriate regulations Streamline and strengthen the regulatory bodies for efficient and effective control of NORMs
Goal 11: Reduce the occurrence of attacks on oil and gas producing facilities by militants Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % complet ion Issues Risks Mitigati on Partner with host communities to achieve sustainable development
FMPR Quarterly Actual spend on community developmen t projects Promote economic empowerment programmes targeted at building community capacity Facilitate the rapid implementation of the Niger Delta Master Plan FMND, NDDC Quarterly No. of Niger delta projects completed
151 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 11: Reduce the occurrence of attacks on oil and gas producing facilities by militants Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % complet ion Issues Risks Mitigati on Foster cooperation with Government for intelligence gathering and networking FMPR, State Govt, Local Govt Half Yearly Organize training and capacity building programmes for vocational skills in oil producing communities FMPR, State Govt, Local Govt Half Yearly No. of training programs completed
Ensure greater consultation and needs assessment prior to agreeing MOUs FMPR, State Govt, Local Govt Half Yearly No. of jobs created within community
Utilize NGOs as key implementation mechanism for community related projects FMPR, State Govt, Local Govt Half Yearly No. of projects managed by NGOs
Create employment opportunities in oil producing communities by upgrading and building new facilities Accelerate the approval of community related projects FMPR Half Yearly Approval time for community related projects
Goal 12: Grow NOC production to over 250,000bpd in 2015 and 400,000bpd in 2020
152 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Strategy Initiatives Monitori ng Agencies Monitoring Frequency KPI % complet ion Issues Risks Mitigation Grow by acquisition of other small oil and gas companies where possible FMPR Yearly No. of oil and gas acquisitions Develop the NOC into a medium oil and gas producing company that can operate internationally
Ensure preferential oil bloc allocation to the National oil company (NOC) FMPR Periodically No. of blocks assigned to NOC
Collaborate with major oil companies to establish R&D outfits in Nigeria and conduct part of their research in-country in conjunction with local educational and research institutions FMPR Periodically No. of identified R&D opportunities Expand and promote research and development activities in the industry Collaborate with other NOCs, educational institutions, and other R&D centers (local and foreign) NOC Half Yearly No. of agreements signed with other NOCs and international R&D centres
Goal 13: Grow in-country refining capacity to over 750,000bpd in 2015 and 1,500,000bpd in 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completi on Issues Risks Mitigation
153 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 13: Grow in-country refining capacity to over 750,000bpd in 2015 and 1,500,000bpd in 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completi on Issues Risks Mitigation Deregulate and liberalize the downstream sector by converting the refineries, product haulage facilities and distribution network into joint ventures FMPR Half yearly Complete deregulation of downstream Create an enabling environment to attract foreign and local investments in refineries Award new refining licenses to credible and competent downstream operators FMPR Periodic No. of new refinery licenses, % of successful start ups
Goal 14: Upgrade old distribution assets and build new ones with the capacity required to handle refined products from 0.75Mbpd in 2015 and 1.5Mbpd in 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % comp letion Issues Risks Mitigatio n Develop a public - private JV ownership of the petroleum Cluster existing depots into geographical areas and privatize the assets on that basis FMPR Half Yearly
154 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 14: Upgrade old distribution assets and build new ones with the capacity required to handle refined products from 0.75Mbpd in 2015 and 1.5Mbpd in 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % comp letion Issues Risks Mitigatio n products pipeline network Separate pipelines from depots and operate as separate independent entities FMPR Yearly % independent depots
Goal 15: Increase accessible funding for oil and gas projects by 30% by 2015 and 50% by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % comple tion Issues Risks Mitigation Complete structural and legal reforms in the oil and gas sector targeted at creating an efficient, transparent and commercially viable industry
Explore alternate funding schemes for current JVs FMPR, National Assembly Periodic % of funding gotten from alternativ e funding schemes
ENERGY UTILIZATION: POWER
155 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 1: To achieve 20,000MW and 45, 000MW installed generation and distribution capacity by 2015 and 2020 respectively Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigation Create a deregulated and competitive electric power sector to attract foreign and local investments
Complete the privatization of the generation & distribution assets currently owned by the Government to ensure effective service delivery FEC Quarterly Number of successor companies privatized Unionism
National Security
Enact a Government policy which incorporates incentives and commercial terms for IPPs. (A model form GSA & PPA to be included) NERC Annually Frequency of IPPs completion
Create a Government agency which will serve as a one-stop shop for private investors interested in power generation and distribution NASS/FMP Annually Rate of successful private sector investment in power sector Favorable Climate, Tax Incentives, Security of Investment, PPA
Ensure a viable commercial framework for the electric power sector, including a tariff regime that promotes transparency, guarantees security of investment and a reasonable rate of return on investments Extend and optimize the Gas infrastructure and grid network to allow for the construction of gas fired power plants across the country
FEC Annually Kilometers of domestic gas pipelines laid in a given year Vandalizatio n, right of way
156 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 2: To strengthen the transmission network to wheel 20,000MW by 2015 and 35,000MW by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigati on Improve transmission capacity and provide redundancies in the transmission system so as to ensure a fully integrated network that minimizes transmission losses while strengthening grid security Source private capital and management for development and operation of the transmission network whilst retaining ownership by Government
ICRC (Infrastructur e Concession Reg, Commission) Annually Volume of Investme nt in Transmis sion Grid, Efficiency /Stability of the Grid N/A National security
Extension Of the Grid to cover the Country Sabotage
Monopoly
Goal 3: To increase electricity access to 60% by 2015 and 80% by 2020 from the current 40% Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigation Intensify rural electrification efforts in a more efficient manner Assist the state and local governments in the development of alternative power solutions for rural areas Alternative Energy Development Agency.(to be created) Annually % access to rural electricity
157 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 4: To achieve an electricity generation mix as follows by 2020: Gas fired plants: 20,000MW, Coal: 5,000MW, Nuclear: 2,000MW, Hydro: 5,000MW, Other Renewables (wind, solar, biomass): 3000MW Total: 35,000MW Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigation Review all existing Coal mine block allocations without provisions for coal fired power generation Alternative Energy Development Agency Annually Proven coal reserves for electricity generation Construct mini power stations in rural communities using locally appropriate technologies (possibly hybrid) hydro, wind, biomass, solar Empower The Nigerian Atomic Energy Commission (NAEC) towards accelerated Nuclear Power development that will ensure generation of 3000MW by 2020 FEC/NSA Increase utilization of alternative energy in the National energy mix Establish a coordinating agency for alternative energy development FMP N/A
Goal 5: Increase the average load factor in the power sector by 30% by 2015 and 50% by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigation Introduce demand side management principles Launch massive public campaign towards promoting efficient usage of NOA Weekly
158 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 5: Increase the average load factor in the power sector by 30% by 2015 and 50% by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigation electricity Introduce discriminative tariffs that encourages low electricity utilization
Introduce and encourage the use of energy efficient appliances at all levels of the electricity industry TCN Monthly targeted at ensuring efficiency in energy consumption in the electricity industry Liaise with the Manufacturing sector and encourage the transformation of their production processes to be highly energy efficient NERC Quarterly
Goal 6: To produce 50% of the material inputs for the power sector locally by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigation
Provide incentives that will encourage local manufacturing and production initially of relatively Establish Industrial parks for Power input producers & other manufacturers will be provided with uninterrupted electricity supply ICRC Annually
159 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 6: To produce 50% of the material inputs for the power sector locally by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigation low tech power equipment such as conductors, insulators, cables, transmission and distribution structures etc. Provide tax holidays & guaranteed patronage to local power input producers and Industries FEC Annually Develop and equip the newly created National Power Training Institute, in collaboration with tertiary institutions, to a level where it can produce power sector professionals that are world class FMP Annually Ensure local manpower development by establishing effective training institutions and programmes as well as enforcing minimum local content components of power sector development and operational activities. Enforce a minimal percentage (50%) of local manpower involvement at all levels of every EPC project, Plant operations and maintenance in the power sector FMP/FMLP Annually
Goal 7: To achieve billing and collection efficiencies of 100% and 95% respectively for power consumed by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigation
160 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 7: To achieve billing and collection efficiencies of 100% and 95% respectively for power consumed by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigation Conclude privatization of distribution assets as a matter of priority NCP Annually Completely privatize distribution assets in order to provide efficient billing and collecting infrastructure and ensure international best practices Deploy prepaid meters in all the major electricity consumption areas where viable
Goal 8: To create an efficient industry and market structure Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigation Ensure the independence of the market regulator NERC Annually Continue the implementation of power sector reforms to provide a fully deregulated market Strengthen the market operator to carry out duties as assigned in the electric sector reform act NERC Annually
161 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 8: To create an efficient industry and market structure Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigation Enact policies that clarify all commercial terms and incentives for private sector participation in the power sector. NERC Annually
162 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group ENERGY SOURCE: COAL Goal 1: To achieve a 10% contribution of coal to the nations energy mix by 2015 and a 20% contribution by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completio n Issues Risks Mitigati on Establish Nigerian Coal Research Trust Fund (NCRTF) MMSD, NCC Continuous until Trust Fund is established
Encourage tertiary institutions and research institutes and centers to carry out research into coal briquetting and coal stove technology FMST, FMCI, NCC, NCRTF Continuous Provide adequate incentives for large scale production of coal briquette, stoves andother appliances at affordable prices Establish a coal briquetting plant for mass production of coal briquettes FMST FMCI, NCC, NCRTF Continuous No. of coal briquettes produced
Create public awareness for the use of smokeless coal briquettes as an alternative to fuelwood Organize sensitization workshops on the use of coal briquettes MMSD, NCC, FMI&C Continuous Intensify the search for more coal reserves to make coal a sustainable and reliable alternative energy source To carry out more detailed exploration for coal to determine most economic deposits of about 100 tonnes proven reserve each (size of deposit to sustain 1000 MW for 30 years) MMSD Continuous until quantity of all coal reserves are ascertained
163 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 1: To achieve a 10% contribution of coal to the nations energy mix by 2015 and a 20% contribution by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completio n Issues Risks Mitigati on Issue license to prospective investor in a transparent manner
FMP, MMSD, FMT Continuous until selection of investors is complete No. of coal exploration licenses issued to investors
Re-introduce integrated coal to power infrastructure including transport system (rail, pipe, conveyor etc.
FMP, MMSD, FMT Half -yearly % contribution of coal fired plants to electricity generation To attract investors to coal to power exploration, production and marketing Provide adequate incentives to coal investors FGN, FMP, MMSD Continuous
164 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group ENERGY SOURCE: GAS Goal 1: Grow proven reserves from 180TCF to 215 TCF by 2015 and 250TCF by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % complet ion Issues Risks Mitigati on Establish a national holding company for gas to ensure a focused development of the gas sector FMPR Quarterly N/A Clearly define the fiscal and commercial agreements for gas produced under the PSC and non- associated gas FMPR Quarterly N/A License investors interested in developing, owning and operating gas infrastructure franchises as proposed in the gas master plan FMPR/DPR Quarterly N/A Create an enabling environment, with appropriate legal and regulatory framework, to attract private investments (local and foreign) in gas exploration and production Develop appropriate fiscal terms to attract global partners and investors for the development of the gas infrastructure proposed in the gas master plan FMPR/NGM P Team Monthly N/A
Goal 2: Increase gas exports: LNG and LPG from 22mtpa to 50mtpa, Pipeline exports to 40bcm per annum Strategy Initiatives Monitorin g Agencies Monitoring Frequency KPI % completion Issue s Risks Mitig ation Strategically position Nigerias gas development assets and infrastructure for growth in high yielding Implement new gas export projects including: Train 7 expansion of NLNG Brass LNG NNPC/DP R Quarterly N/A
165 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 2: Increase gas exports: LNG and LPG from 22mtpa to 50mtpa, Pipeline exports to 40bcm per annum Strategy Initiatives Monitorin g Agencies Monitoring Frequency KPI % completion Issue s Risks Mitig ation export markets, with local content as a key driver OK LNG WAGP Expansion Centrica StatoilHydro - CCC LNG Project Trans Saharan Gas Pipeline Project
Goal 3: Grow domestic gas demand to 5bscfd by 2015 and 8 bscfd by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completio n Issues Risks Mitiga tion Ensure rigorous enforcement of the Domestic Gas Supply Obligation Regulation to guarantee the demand and supply of gas for domestic gas utilization projects FMPR/DPR Half Yearly N/A Develop a standard gas sales and purchase agreement for gas sales to the domestic market FMPR/NGMP Team Monthly N/A Give domestic gas supply projects priority over gas export projects to ensure that local gas demand, especially to power, is met Implement the Gas Infrastructure Blueprint for gas infrastructure development to guide investment in gas infrastructure FMPR/NGMP Team Quarterly N/A
166 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 3: Grow domestic gas demand to 5bscfd by 2015 and 8 bscfd by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completio n Issues Risks Mitiga tion Fully set-up the strategic gas aggregator to manage the implementation of the domestic reserves and production obligation and the aggregate price in the domestic gas market in the short term
FMPR/NGMP Team Monthly N/A Delineate and address supply- side challenges of availability, affordability/comm erciality of supply, deliverability and its cost effectiveness, legal and regulatory framework, and funding Develop a long term gas pricing strategy which will attract FDI in the sector
FMPR/NGMP Team
Monthly N/A
167 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
RENEWABLE ENERGY SOURCES
ENERGY SOURCE: HYDRO
Goal 1: To achieve a 15% contribution of hydro electricity to the nations electricity generation mix in 2015 and 20% in 2020 Strategy Initiatives Monitoring Agencies Monitori ng Frequen cy KPI % comple tion Issues Risks Mitigati on Zone the entire country into potential hydropower generating zones and present the zones for competitive bidding by potential hydropower producers PHCN, ECN, NERC, FMP Quarterly Water volume per dam/zone 100% Verify accuracy and present zoning to potential bidders None None Sensitize the Federal, State and LGCs on the potential of small hydropower as source of electricity FMP,ECN,NE RC,PHCN, Quarterly Water volume per dam/zone
Establish small hydropower pilot schemes in each geopolitical zone to create awareness and facilitate technology acquisition FMP, ECN,NERC,P HCN, Quarterly Number of Hydropow er pilot schemes/z one
Utilize mini and micro hydropower schemes to extend electricity to rural and remote areas Adapt existing irrigation dams with hydropower generation potential, by installing necessary infrastructure (e.g. turbines), for power generation to the national grid FMP, ECN,NERC,P HCN, FMAWR Quarterly
168 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 1: To achieve a 15% contribution of hydro electricity to the nations electricity generation mix in 2015 and 20% in 2020 Strategy Initiatives Monitoring Agencies Monitori ng Frequen cy KPI % comple tion Issues Risks Mitigati on Undertake BOT- Build Operate and Transfer arrangements on new known potential hydropower stations sites in the Country and prepare to privatize the business entity after completion and startup. Source private capital and management for the development and operations to undertake BOT arrangements for new hydro plant stations.
FMP, ECN,NERC,P HCN, FMAWR, PPP Quarterly Number of private investors in hydropow er generating plants
Undertake ROT- Rehabilitate Operate and Transfer arrangements on all old hydropower stations in the country Complete the privatization of the old hydropower generation stations i.e. Kainji, Jebba, Shiroro,Oji river etc, currently owned by the Government, but retain some shares ownership by Government to about 20% FMP, ECN,NERC,P HCN, FMAWR, PPP Half yearly Number of privatized old Hydro power stations
Create an enabling environment to attract private investments in establishing and operating hydropower plants Enact a Government policy, backed by legislation, which incorporates incentives and appropriate commercial terms for hydropower IPPs FGN, NASS FMP, ECN,NERC,P HCN, FMAWR,PPP Half yearly
169 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
ENERGY SOURCE: WIND
Goal 1: To achieve a 1% contribution of wind energy to the nations electricity generation mix Strategy Initiatives Monitoring Agencies Monitori ng Frequen cy KPI % compl etion Issues Risks Mitigati on Update and expand the Nigerian wind atlas ECN, NIMET, FMP, NERC,PHCN, FMAWR,PPP Half yearly e Execute and commission wind energy pilot projects in select locations around the country ECN, FMP, NERC,PHCN, FMAWR,PPP Yearly Number of completed wind power pilot schemes in each zone
Utilize wind power plants to extend electricity to rural and remote areas Sensitize the Federal, State and LGCs on the potential of wind energy as source of electricity ECN, NIMET, FMP, NERC,PHCN, FMAWR Monthly Number of Enlightenment campaigns at Federal,states and LGC
Create an enabling environment to attract private investments in establishing and operating wind power plants Provide fiscal incentives such as import duty exemptions, tax holiday, investment grants to encourage investments in wind powered generating plants FGN, Hydro Power investors, PPP Monthly
170 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
ENERGY SOURCE: SOLAR
Goal 1: To achieve a 1% contribution of solar energy to the nations electricity generation mix Strategy Initiatives Monitorin g Agencies Monitori ng Frequenc y KPI % completi on Issues Risks Mitigati on Collaborate with universities, Research institutes and centers (local and foreign) to develop home grown solar energy technologies ECN,PHC N, Tertiary institutions, PTDF,ETF Biannuall y Number of developed patents/ technologies
Introduce competitive national scholarships and /awards on solar technology proposals/designs Tertiary institutions, PTDF,ETF Annually Number of scholarships and /awards offered
Intensify research and development in the development of solar energy technology Develop and maintain a Comprehensive database on solar energy resources, technologies, systems, end- use appliances, market operators e.t.c. ECN,PHC N, Tertiary institutions, PTDF,ETF Monthly Create an enabling environment to attract private investments in manufacturing, establishing and operating solar energy systems Provide fiscal incentives such as import duty exemptions, tax holiday, investment grants to encourage investments in solar powered generating plants and local manufacturing of solar systems FGN, Solar Power investors, PPP Monthly
171 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
ENERGY SOURCE: BIOMASS
Goal 1: Achieve a biofuel blends not exceeding 10% by 2020 using locally produced renewable biofuels Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completion Issues Risks Mitigation Enact national act that will enforce production and use of biofuels in blend of at least 10% with convectional fuel NNPC,NAS S,ECN, FMAWR, FMP Quarterly Enact a biomass act backed by legislation, which incorporates incentives and appropriate commercial terms for use of biomass fuels
NNPC,NAS S,,ECN, FMAWR, FMPR Half yearly Create an alternative energy agency to serve as a one stop shop for private investors in biofuels FGN,ECN Half yearly Create a sustainable legal, institutional and commercial framework that encourages public private sector investment in the sector and rapid technological deployment Develop and create a special tax incentives targeting increase in use and exploitation of biomass resources FGN,ECN Half yearly
172 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
Goal 2: To incorporate use of biomass for achievement of optimal energy mix contributing up to 5% biomass-to-power by 2020 Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % complet ion Issues Risks Mitigation Establish a coordinating agency for alternative energy development FGN,ECN Half yearly
Conduct a Comprehensive feasibility studies on biomass resources in Nigeria and their possible conversion to power (electricity) ECN,NNPC,P TDF, Tertiary institutions, PHCN Half yearly Number of studies completed
Introduce a special tax incentive to encourage use of biomass for power generation FGN,ECN Half yearly Create an enabling environment to attract private investments in biomass to- power projects Decentralize biomass-to- power projects in order to be an off-grid operation for rural areas PHCN, ECN, FGN, PPP Quarterly Number of decentralize d off-grid areas
173 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group
ENERGY SOURCE: NUCLEAR ENERGY
Goal 1: Achieve 1500MW and 3000MW national electricity contribution from nuclear technology by the year 2015 and 2020 respectively Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completio n Issues Risks Mitigati on Establish, by law, the Nuclear Power Programme Coordination and Implementation Organization (NPPCIO) to serve as the planning, coordinating and implementing organization for nuclear power programme NNRA, NAEC Continuous until the organization is set up
Pass the Nuclear Safety, Safeguards and Security (NSSS) Bill and the new Nigerian Atomic Energy Commission (NAEC) Act NNRA, NAEC Continuous until the bills are passed
Establish unambiguous policy guidelines for the nuclear energy sector, clearly defining the role of relevant governmental organizations and the private sector as the main drivers of the nuclear power programme Strengthen the Nigerian Nuclear Regulatory Authority to be effectively independent and efficient NNRA, MPR yearly
174 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 1: Achieve 1500MW and 3000MW national electricity contribution from nuclear technology by the year 2015 and 2020 respectively Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completio n Issues Risks Mitigati on Domesticate all international instruments, agreements, conventions and treaties entered into by Nigeria NNRA, MPR, NAEC, FMST, MFA Continuous No. of all internatio nal instrumen ts domestic ated
Carry out public enlightenment on the countrys Nuclear Power Programme and the activities of various agencies in the sector FMIC, NPPCIO, NNRA, NAEC Continuous Establish long term, legally binding agreements on the operational structure of the nuclear power plants e.g. build- operate and transfer or build, operate and own NPC, NPPCIO, NAEC Continuous Strengthen and upgrade the existing nuclear research and development institution FMST, NAEC Continuous Establish the nuclear safety institute for the regulatory authority NNRA Continuous Intensify manpower training and development and the provision of adequate Infrastructure for nuclear science and technology Establish centers of excellence (CE) in NUC, FME, NAEC Continuous
175 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Goal 1: Achieve 1500MW and 3000MW national electricity contribution from nuclear technology by the year 2015 and 2020 respectively Strategy Initiatives Monitoring Agencies Monitoring Frequency KPI % completio n Issues Risks Mitigati on nuclear science and technology in these institutions :ABU, IBADAN, NSUKKA, IFE, KADPOLY and YABATECH Establish bilateral relationship with friendly countries for manpower and infrastructural development MFA, NPPCIO, NAEC, NNRA Continuous No. of bilateral agreemen ts for manpowe r and infrastruct ural developm ent
Encourage vendors and supplies to establish workshops and training institutions in Nigeria FMI, MAN NPPCIO, Continuous Provide vendors and suppliers tax incentives appropriate to the life span of the nuclear power plant project FMF, NCS, NPPCIO Continuous
176 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group References 1. Nigerias Dual Energy Problems: Policy Issues and Challenges, International Association for Energy Economics, Akin Iwayemi 2. www.eia.doe.gov 3. www.earthtrends.com 4. www.nigeria.gov.ng 5. EIA short term Energy Outlook, March 2009, http://www.eia.doe.gov/steo 6. The International Comparative Legal Guide to: Gas Regulation 2009, Nigeria, www.ICLG.co.uk 7. www.allbusiness.com 8. www.nigeriamuse.com 9. www.marketresearch.com 10. www.OilGasarticles.com 11. www.bpeng.org 12. Power Sector Reforms in Nigeria by O.I Okoro, P. Govender and E. Chikumi 13. Issues & Challenges of Power Sector Reforms in A Depressed Economy By, Ekeh J.C 14. Nigeria: Expanding Access to Rural Infrastructure, Issues and Options for Rural Electrification, Water Supply and Telecommunications, ESMAP Technical Paper 091, December 2001 15. BP Annual Statistical Bulletin, 2008 16. Plunkett Research, Ltd., Industry Statistics, Trends and In-depth Analysis of Top Companies 17. International Atomic Energy Agency, www.iaea.org 18. GCC and the World Economy in 2020, Economist Intelligence Unit, March 2009 19. OPEC Statistical Bulletin, 2007 20. OPEC World Outlook 2008 21. National Energy Policy, Energy Commission of Nigeria, 2003 22. Draft National Energy Masterplan, Energy Commission of Nigeria, 2007 23. Renewable Energy Masterplan, Energy Commission of Nigeria, 2005 24. National Energy Databank, www.energydatabank.org
177 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group 5.0 Appendices 5.1. Analysis of Power Generation Capacity Required to support 20:2020 Economic Vision In 2007 the worlds 20 th largest economy according to UNdata statistics was Indonesia with a GDP of $432,817m.
If Indonesias economy grows at an annual rate of 3% (in real terms), it will have an annual GDP (2007 prices) of $635,607m in 2020. It is likely that Indonesias economic growth will exceed 3% annually but, since other more mature economies in the 2007 top twenty are likely to grow at this rate or less, 3% p.a. annual growth is a reasonable assumption to make in determining the approximate level of GDP that Nigeria will need to achieve to become a top twenty economy by 2020. Nigerias GDP in 2007 was $173,184m according to UNdata. To achieve annual output of $635,607m in 2020, the Nigerian economy will have to grow at an annual average compound rate of approximately 10.5%. To establish the approximate size of electricity sector that would be necessary to support national economic activity consistent with this level of output it is necessary to make assumptions regarding: the future electricity intensity of the Nigerian economy (electricity consumed per unit of GDP); The achievable load factor (electricity consumed per unit of installed capacity). Country GDP (m USD) (nominal 2007) 1 United States 13,776,472 2 Japan 4,379,624 3 China 3,400,351 4 Germany 3,317,377 5 United Kingdom 2,767,982 6 France 2,545,696 7 Italy 2,095,141 8 Spain 1,436,893 9 Canada 1,425,778 10 Brazil 1,314,199 11 Russian Federation 1,289,582 12 India 1,141,346 13 Korea, South 956,788 14 Australia 945,674 15 Mexico 893,365 16 Netherlands 766,251 17 Turkey 487,552 18 Sweden 454,792 19 Belgium 454,580 20 Indonesia 432,817
178 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Nigeria is likely to wish to follow an energy efficient growth path, i.e. to achieve a relatively low level of electricity intensity 6 . It is also likely to wish to achieve high levels of capacity utilization in the electricity sector, which would be reflected in a relatively high load factor. Nigerias electricity intensity is currently around 0.11kWh per $ of GDP. While this is very low by international standards, this does not reflect a high level of efficiency of electricity usage in economic activity but, rather, the fact that electricity consumption data do not capture the high levels of own generation. It is an indication of performance failure not economic efficiency. Nigerias load factor is currently around 31% (based on UNdata figures). This is low by international standards and indicative of the poor overall performance of the sector. In making predictions about the size of electricity sector needed to support top 20 status, it is reasonable to assume that both intensity and load factor will be higher. The following table combines figures on electricity intensity and load factor to derive a matrix of installed capacity consistent with a target GDP of $635,607m in 2020 (at 2007 prices). Nigeria Best T20 Lower q'ile T20 Spain USA Indonesia Average T20 Turkey Brazil China 0.11 0.15 0.2 0.21 0.29 0.30 0.32 0.35 0.36 0.91 Best T20 68% 12 15 21 22 31 32 34 37 38 97 China 65% 12 16 22 23 32 34 36 39 40 101 Indonesia 54% 15 19 27 28 39 41 43 47 48 122 Upper q'ile T20 52% 15 20 28 29 41 42 45 49 50 127 Average T20 50% 16 21 29 30 43 44 47 51 52 133 Brazil 48% 16 22 30 31 44 46 49 53 54 138 USA 46% 17 23 32 33 46 48 51 56 57 145 Spain 45% 18 23 32 33 47 49 52 56 57 146 Turkey 44% 18 24 33 34 48 50 53 58 59 151 Nigeria 31% 26 34 47 49 69 72 76 83 84 216 Electricity intensity (kWh/USD) Electricity intensity (kWh/USD) Electricity intensity (kWh/USD) Electricity intensity (kWh/USD) L o a d
f a c t o r L o a d
f a c t o r L o a d
f a c t o r L o a d
f a c t o r Installed capacity consistent with achieving GDP of $635,607m at different levels of electricity intensity and load factor ('000MW) Installed capacity consistent with achieving GDP of $635,607m at different levels of electricity intensity and load factor ('000MW) Installed capacity consistent with achieving GDP of $635,607m at different levels of electricity intensity and load factor ('000MW) Installed capacity consistent with achieving GDP of $635,607m at different levels of electricity intensity and load factor ('000MW)
The table shows values consistent both with the electricity intensity and load factors actually achieved by a range of top 20 (T20) economies based on 2006 data and with statistical measures of these figures achieved by the current (2007) economies as a group. A combination of the best in T20 class electricity intensity and load factor would require installed capacity of approximately 15,000MW. Conversely, a growth path that combined Chinas very high electricity intensity with Turkeys relatively poor load factor would require installed capacity of around 150,000MW. The following table gives reference data for selected T20 countries.
6 A more complete analysis would focus on the overall energy intensity of the Nigerian economy in terms of tonnes of oil equivalent (TOE) per unit of GDP and then on an analysis of how this would split across different energy sources. The simplified analysis made in this note is, however, considered adequate for present purposes.
179 Nigeria Vision 2020 Program Report of the Energy Sector National Technical Working Group Rank* Rank* Rank* Rank* GDP GDP GDP GDP (m USD) (m USD) (m USD) (m USD) Population Population Population Population (m) (m) (m) (m) Net elec' Net elec' Net elec' Net elec' consumption consumption consumption consumption (bn kWh) (bn kWh) (bn kWh) (bn kWh) Installed Installed Installed Installed capacity capacity capacity capacity (m kW) (m kW) (m kW) (m kW) Electricity Electricity Electricity Electricity intensity intensity intensity intensity (kWh/USD) (kWh/USD) (kWh/USD) (kWh/USD) Load factor Load factor Load factor Load factor United States United States United States United States 1 13,132,900 298 3,817 957 0.29 45% China China China China 3 2,773,835 1,314 2,529 443 0.91 65% Spain Spain Spain Spain 8 1,230,591 40 254 64 0.21 50% Brazil Brazil Brazil Brazil 10 1,072,453 188 382 91 0.36 48% Turkey Turkey Turkey Turkey 17 403,459 70 141 37 0.35 44% Indonesia Indonesia Indonesia Indonesia 20 364,599 232 111 23 0.30 54% Nigeria Nigeria Nigeria Nigeria 39 145,430 132 16 6 0.11 31% Notes: Notes: Notes: Notes: All data relate to 2006 with the exception of * * based on 2007 GDP data Sources: Sources: Sources: Sources: GDP and population data - UNdata Power sector data - Energy Information Administration Economic and electricity sector data for selected 'top twenty' economies Economic and electricity sector data for selected 'top twenty' economies Economic and electricity sector data for selected 'top twenty' economies Economic and electricity sector data for selected 'top twenty' economies
Other things being equal, it is reasonable to assume that Nigeria will wish to adopt a growth path that takes it as far as possible towards the upper leftmost values shown in the highlighted quadrant in the first table above. Given that other countries can be expected to seek to achieve improvement over the forthcoming decade in their own electricity sector performance and in the efficiency with which electricity is utilized in economic production a target of 25,000 to 40,000MW of installed capacity in 2020 would appear to be consistent with Nigerias vision to achieve the status of a top 20 economy by 2020.