By Adewale Sanyaolu
With the curtains of year 2022 formally drawn at the weekend, Nigeria’s energy sector which generating about 80 per cent of Government’s revenue, got severely battered in the year under review.
The sector characterised by several broken promises, fuel scarcity, inability to commence the full implementation of the Petroleum Industry Bill (PIA), leading to an extension for the removal of fuel subsidy, unmet targets for project execution and deliverables indeed left millions of Nigerians at the receiving end.
Amidst its many heartbreaks for the nation during the outgone was the issue of oil theft and payment of subsidy on Premium Motor Spirit(PMS) popularly called petrol which brought the revenue profile of the Federal Government to an all time low as the Nigerian National Petroleum Company(NNPC) Limited was unable to make remittance to the Federation Accounts and Allocation Committee(FAAC).
Other drawbacks in 2022 included; power generation hitches, poor infrastructure,DisCos debts to Gencos, insecurity among others.
However, despite all the above listed drawbacks, the sector still recorded some modest achievements in the year under focus.
Some of these achievements were; President Muhammadu Buhari, accented to the Petroleum Industry Act(PIA) Flag-Off of the first oil drilling project in Northern Nigeria, commencement of the Front-End Engineering Design(FEED) for Nigeria’s first Floating Liquefied Natural Gas(FLNG) facility by UTM FLNG Limited, Flag-off of Nigeria’s Gas Flare Commercialisation Programme, World Bank Group approves $2.7 billion Renewable Energy Plan for Nigeria, Bill for an Act to repeal the Electric Power Sector Reform Act 2005 and enact the Electricity Act 2021(the ‘’Electricity Bill’’ or ‘’Bill) passed its third reading.
Others are; for the first time in 15 years, the Federal Government commenced Auction Process of 7 Deep Offshore Oil Blocks, 7,000KM Nigeria-Morroco Gas Pipeline (NMGP) took-off, Geregu Power Plc became the first power company to list on the Nigerian Stock Exchange, The Federal Government launched its Energy Transition Plan (ETP), establishing the country’s strategy to reach a net-zero emissions energy system by 2060, NNPC transited to NNPC Limited.
Regrettably, some of these achievements didn’t translate to much gains as those that involved project execution have been down played by insecurity, the project promoters could fully move to site due to kidnappings among others.
Oil theft
For the major part of 2022, the country battled with oil theft as the country consistently failed to met its oil projection of 1.8 million barrels per day due to massive oil theft.At a point, the country produced less than one million barrels per day.
According to OPEC’s Monthly Oil Market Report for September, the country’s crude oil output fell to 900, 000 barrels per day (b/d) in August.
According to the OPEC report, Nigeria’s crude oil production (according to data reported by direct sources) dropped from 1 million b/d recorded in July, to 900, 000b/d in August.
The Nigerian National Petroleum Company (NNPC) Limited also recently disclosed that Nigeria loses an average of 700,000 barrels of oil per day at a cost of $90 per barrel in 2022, translating to $22.68 billion for 2022.
Chief Upstream Investment Officer, NNPC Upstream Investment Management Services, Mr. Bala Wunti, stated this during a recent live interview on Arise Television.
Wunti while giving further clarification and clearing the air of several figures and statistics being bandied around on Nigeria’s actual production and loss figure, said the media has been awash with series of conflicting figures.
He explained that in hydrocarbon accounting algorithm, there are three levels of loses which included engineering, actual and opportunity.
The NNPC Upstream boss explained further that engineering loses are loses accepted by material balance and ranges from point 01 to point 05 which nobody accounts for because it is part of the engineering.
On actual loses, he said those are hydrocarbon production that gets stolen by vandals and oil thieves while opportunity loss arise as a result of the fact that one is unable to produce what was planned to be produced process balance is accepted
He maintained that Nigeria’s 2022 budget was predicated on a daily oil production of 1.8 million per day production,adding that in August the country recorded about one million barrels of oil production per day.
‘’ So as recording in the August production figure, what that means is that the difference between 1.8 million barrels and one million barrels is what we are losing. Where people get the losses mixed up is whether it is all these 800,000 or 700,000 that is being stolen or some of them are opportunity loss. That is where probably the discrepancy comes in. But from our records, we are losing an average of 700,000 barrels per day before we recovered.’’
He added that the 700,00 daily oil loss translates to about 21 million barrels per month. When this figure is multiplied by $90 in one year, that amounts to $22.68 billion loss for 2022.
Wunti lamented that at the moment, the country was equally deferring about 200,000 barrels per day due to the force majeure declared at the Brass and Bonny terminals as a result of security vulnerability Both terminals are currently under force majeure shutting in about 200 barrels per day. We are working with the private security contractors and other security agencies to return the TNP to functionality. We are successful to an extent but hopefully, we will open very soon.
Subsidy as albatross
Daily Sun investigations in September had projected that the N4 trillion set aside by the Federal Government for fuel subsidy in 2022 budget may eventually hit N7.372 trillion by year end
The Nigerian National Petroleum Company Limited (NNPCL) had in a post on its verified Twitter Handle pegged Nigeria’s average Premium Motor Spirit (PMS), popularly called petrol supply at 68 million litres per day.
The firm also put the average subsidy on petrol at N297 per litre and an annual estimate of N6.5 trillion on the assumption of 60 million litres per day.
The Federal Government had set aside N443 billion for fuel subsidy in 2022 but later returned to the National Assembly for an incremental expense from N443billion which it had planned up to N4 trillion.
If the current estimate of 68 million per day figure by the NNPC is sustained, Nigeria would have spent N7.372 trillion by December 31, 2022(68 million litres/day multiplied by N297/litres in 365 days gives N7.372 trillion Naira) which is an increase of N3.372 trillion over the N4 trillion budget.
NNPC added that between January and August 2022, the total volume of petrol imported into the country was 16.46 billion litres, which translates to an average supply of 68 million litres per day.
Similarly, it said import in the year 2021 was 22.35 billion litres, translating to an average supply of 61 million litres per day.
Mounting electricity debt
The insolvent state of the nation’s power sector appears to have defied all solutions as the Executive Secretary of Association of Power Generation Companies (APGC), Dr.Joy Ogaji, in August 2022, raised the alarm over the spike of indebtedness to its members now estimated at about N2 trillion by the Nigerian Bulk Electricity Trading (NBET) PlC.
In March 2022, Ogaji had said that NBET was indebted to APGC to the tune of N1644 trillion, a figure that has grown to N2 trillion as at August 2022.
Ogaji gave a breakdown of the debts to include N214.93 billion in 2015; N273.32 billion in 2016; N236.47 in 2017, N264.08 billion in 2018, and N256.97 billion, N266.01 billion and N120.25 billion in 2019,2020 and 2021 respectively. She said of the N2 trillion owed GenCos, N1 trillion of the amount is to be paid to gas suppliers.
The APGC boss said the inability of the transmission arm of the power sector value chain to transmit power generated by the sector was a major disservice to the industry.
On the other hand, she said a situation where electricity generated is not taken will led to a gradual collapse of the sector.
“For instance, if you continue to produce a product without a demand for such, it will get to a time that you will be discouraged from producing anymore and that will lead to a collapse.”
She said at the inception of the of the privatisation exercise, most Gencos took acquisition loan at N155/Dollar but today it is about N700/Dollar which must be serviced at the current rate.
Ogaji lamented that about 98 per cent of the input used by Gencos are imported which makes the issue of forex pertinent.
The Executive Director, Generation, Niger Delta Power Holding Company (NDPHC), Mr Kassim Abdullahi, in August 2022, lamented that NBET was equally owing the company about N150 billion for electricity generated.
Besides, he said the company had equally subsidised electricity to the tune of N1 trillion because its tariff is 28 per cent lower than the market price.