Oshowole: Gas as catalyst for power supply

No Comments » February 2nd, 2014 posted by // Categories: Energy Development Project



Oshowole: Gas as catalyst for power supply

AN interesting historical event occurred in 2009. A small team of donor funded consultants developed a 10 Step Action Plan for Power Reform. It was circulated and reviewed amongst a few technocrats in Abuja but little was then heard of it until Vice-President Jonathan became President in May 2010 and the “spade work” transmutted into the Roadmap for Power Sector Reform – the blueprint for the reform process which culminated in the historical sale of Nigeria’s power assets. Despite the imperfection of the process and the teething problems the private investors who have taken over PHCN assets are experiencing, the reform will be a success in the longterm. Building the confidence of investors and lenders to stake the $10 billion the sector is calculated to need in investment every year is critical to delivering the success early. Hence, attracting investors into the country’s power sector must be top priority for Nigeria as it hosts the World Economic Forum on Africa (WEFA) in May 2014 for the first time (against South Africa’s record 17 times of hosting the WEFA).

Nigeria has done a lot of the hard work required to build investor confidence – the World Economic Forum on Africa in Abuja is a big opportunity to start getting the cheques. By Nigerian standards, the manner in which the power sector reform was resuscitated from its comatose state and driven towards the 2013 privatisation is exceptional. A Presidential Action Committee on Power was established and the Presidential Task Force on Power (PTFP) set up with a Special Adviser to the President on Power, as Chairman in May 2010. By August 2010, a well-thought Roadmap to Power Sector Reform was launched to national and international acclaim. Shortly later, a Presidential Investors Retreat was held in Abuja at the Presidential Villa to demonstrate Nigeria’s seriousness about the power sector reform to the world’s major players and investors in power who attended in good numbers.

The Road Map set clear targets to be attained across the power value chain-Fuel-to-Power, Generation, Transmission, National Integrated Power Programme (NIPP) and Distribution and also a step-by-step process for regulatory and policy reforms underpinning the transition from state ownership to private sector acquisition.

Progress on targets were reviewed on a weekly basis and issues escalated to the Presidential Action Committee on Power which comprised key ministers and very senior government officials whose portfolios were relevant to the power sector. The fact that the President drove these weekly meetings on progress on the power sector ensured that issues received high political recognition and didn’t languish in the normal inter-ministerial gridlock. Subject Matter Experts seconded from the international oil companies, private sector consultants funded by donor support and an assembly of talented experts who were gathered in the Secretariat of the PACP-the PTFP- made for an assembly of skills and dedication that is never found in the regular bureaucracy. It may not have been perfect, but it was very clear that Nigeria was doing things diffferently in the area of power sector reform. The promulgation of tarrifs which would ensure that investors were paid enough for power to cover the cost of their investment in generating and distributing power signalled to the world that Nigeria was ready to attract investment into power rather than have the state power monopoly pretend it is supplying power to consumers at subsidized prices.

Nigeria ought to be a compelling case for investors in power. At least 50% of people in Nigeria have no access to electricity. Those that do have access do not get enough. It is often not reliable and not of the right quality. Millions want much of it for longer and want to pay less for it than they do self-generating. Whichever way you look at it, there is a huge demand for electricity in Nigeria. The roots of the problem were simply a lack of investment. It was a situation where there is a huge electricity hungry country with a huge population with an abundance of the fuel, gas, to generate power. In fact, with the world’s ninth largest gas reserves – once gas pricing is commercialised – all the ducks are in place for a power boom. There are other sources of power in Nigeria such as coal, major and mini hydro dams, biomass, solar as well as wind, if the wind maps are to be believed.

Policy consistency has been achieved. Existing power generating assets have been sold and handed over and the NIPP plants are slated for sale in 2014. The power distribution companies have been sold. So far, so good. The scale of investment required to take Nigeria from a situation where we are now to where we might want to be is huge. South Africa generates 40,000 MWs, Brazil 100,000 MWs and Malaysia 26,000 MWs. Nigeria struggles to produce 4,000 MWs currently. Nigeria needs billions of dollars of new investment in generation. Nigeria must develop gas reserves which are the ninth largest in the world and needs investment in gathering gas, pipelines, processing plants and metering stations to deliver it to power plants. Currently, it cannot use some 3000 MWs of installed generating capacity as a result of lack of gas and could double its generation if it had enough gas. Much of the gas is currently just burnt and totally wasted. Gas needs to be given a value and comercialised. Transmission is still in government hands; management has been contracted out for three years. Nigeria needs to transmit efficiently the insufficient power it generates, hence transmission networks need investment and expansion. New plants need to be linked to the grid. The distribution companies are now private and have detailed needs and investment plans.

The World Economic Forum on Africa Abuja 2014 is a golden opportunity to showcase the scope for investment and profits in generation and also to begin to showcase the opportunities in gas and transmission. It would be building castles in the sand and a mere talk shop if power is not at the centre of the Forum; Power to create the jobs to get Inclusive Growth. It is useful that Aliko Dangote is involved in the event; this is a businessman who self-generates some 140 MWs from Gas and uses this for power-intense sugar and cement businesses that create so many jobs in Nigeria. There is a huge demand for power in Nigeria. And there is money to be made from providing it. There are risk guarantees available from the World Bank. The overall framework is there and there is a focus at the highest levels to remove any constraints. Power creates opportunities for everyone: for scores of artisanal occupations such as welding, for manufacturers by reducing costs, for traders, restaurants, taximen and others by making it easier for cities to function at night, etc. All these create more disposable income that can be spent in the market. The benefits are infinite. Displaying Nigeria’s huge need for power sector investment and the much-improved policy and regulatory framework is the best use Nigeria could make of hosting the World Economic Forum on Africa.

• Oshowole, a consultant in Europe, Africa and Asia for over 25 years, has worked on power reform in Nigeria and was recently engaged in the Oil and Gas Sector in Angola.


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