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DEMOCRACY @14: Mixed fortunes forenergy sector

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#1 Sunstar191


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Posted 04 June 2013 - 06:11 AM

It has been mixed fortunes for the
Nigerian energy sector since the
current democratic dispensation
began May 29, 1999. Since the return
to democracy, the sector has recorded
significant improvement in key parameters such as in reserves and
production while it also recorded an
increase in other negative
parameters, like increase in pipeline
vandalism, crisis in the area of
subsidy payment, increased corruption, and divestments by oil
majors among others. Oil production
Nigeria’s crude oil production
increased from about 2.153 million
barrels per day, bpd, in 1998 to 2.52
million bpd in 2012, representing an
appreciation of 17.05 per cent over the last 14 years. Crude oil production
was about 2.055 million bpd as at
1980, peaking at 2.627 million bpd in
2005. Conversely, the nation’s crude oil
reserves rose from 27.5 billion barrels
as at 1998 to about 35 billion barrels
at present, rising to a peak of 36.22
billion in 2006 and 2007, before
dropping to 31.9 billion barrels in 2009, then rising to its current levels. Vandalism unlimited
On the flip side, pipeline vandalism
and crude oil theft attained a
worrisome dimension since the return
to democracy in May 1999, with the
Petroleum and Natural Gas Senior Staff Association of Nigeria,
PENGASSAN, saying the country loses
about N954 billion ($6 billion) to crude
oil theft annually. Similarly, the
Pipeline Product Marketing Company
(PPMC), a subsidiary of the NNPC, said Nigeria lost a total of N162.6 billion
from crude oil and petroleum products
theft between 2009 and 2012. Last year, the Minister of Petroleum
Resources, Mrs. Diezani Alison-
Madueke, said Nigeria lost about
N1.908 trillion ($12 billion) to pipeline
vandalism and oil theft in 2011,
adding that of the total amount, $5 billion was spent on pipeline repairs,
while the amount lost to crude theft
was valued at $7 billion. Confirming this, the Minister of
Finance and Coordinator of the
Economy, Mrs. Ngozi Okonjo-Iweala,
said Nigeria is losing an estimated
400,000 bpd of crude oil, resulting in
about 17 per cent reduction in export sales. This cost the nation’s treasury
about $14 billion in 2011 alone. Illegal refinery operators More gas up in flames
Another major issue that came to
reckoning during the return to
democracy in 1999 is the issue of gas
flaring, which the NNPC estimated at
N159 billion ($1 billion) losses annually. According to the NNPC, the country
currently flares about 15 per cent of
its 7.8 billion cubic feet gas wells
production per day, amounting to
1.2bcf per day. However, end seems not to be in site
to the issue of gas flaring, as oil
majors disclosed recently that their
inability to stop gas flaring is due to
absence of the necessary
infrastructure among other challenges. Scandalous subsidy regime
Furthermore, subsidy payment
generated a lot of controversies in
Nigeria, with large scale fraud and
irregularities recorded in the system.
It was alleged that in 2006, Nigeria spent N261.1 billion on fuel subsidy; in
2007 – N278.9 billion; in 2008 –
N633.2 billion. A report by the National Assembly
revealed monumental corruption in
the fuel subsidy scheme, disclosing
that the country paid out about
N2.587 trillion between 2009 and
2011 against N384 billion budgeted for the period. A number of individuals and firms
were asked to refund certain amounts
of money to the coffers of the federal
government, while some of them are
currently being prosecuted. Controversial lease sales
There are also the controversies
surrounding the award of Oil Mining
Leases, OMLs, Oil Prospecting Leases,
OPLs, and Marginal Oil fields among
others. Darkness pervade the land
The misfortune of the country’s power
sector continued with the return to
democracy in 1999, as power supply
declined to alarming levels over the
years. However, despite the fact that a
significant increase had been
witnessed in power generating
capacity since the return to
democracy in 1999, the increase is yet
to translate into steady power supply to Nigerians. Prior to May 29, 1999, Nigeria’s power
generating capacity was as low as
1,500 mega watts, MW, a factor, Prof
Rahamon Bello, Vice Chancellor,
University of Lagos, attributed to lack
of investment in maintenance and expansion programs on existing
power plants. From about 1,500MW, power supply
rose to about 5,500MW in 2010, before
dropping to below 4,000MW currently. Reforms in the power sector were
kick-started in 1999, when the
Federal Government, led by President
Olusegun Obasanjo, set up the Electric
Power Sector Implementation
Committee, EPIC, through the National Council on Privatisation, NCP. The Committee set up to undertake a
comprehensive study of the electricity
power industry, came up with the
National Policy on Electric Power and
a draft Electric Power Sector Reform
Bill which formed the formed the basis of a draft bill sent to the
National Assembly by the NCP in 2002
and subsequently passed in 2005. The Electric Power Sector Reform Act
which led to the creation of the
Power Holding Company of Nigeria,
PHCN, and the Nigeria Electricity
Regulatory Commission, NERC, has as
its major components, the restructuring of existing utility,
liberalisation and privatisation, as
well as reinforcement of existing
infrastructure through National
Integrated Power Projects (NIPPs)
and other government interventions. The Act empowers the PHCN to
assume the assets, liabilities and
employees of National Electric Power
Authority, NEPA, unbundling of PHCN
into successor companies and
ensuring greater operational autonomy, development of an
efficient electricity market,
privatisation of successor companies. On ascent to power, the Goodluck
Jonathan administration jumpstarted
the power sector reforms programme
which was stalled. He launched the
Roadmap for Power Sector Reform in
August 2010, followed with the re- instatement of the NERC and the
inauguration of the board of the
Nigerian Bulk Electricity Trading Plc,
which was created to encourage
investment in the power sector,
especially investors in the power generating sector. The Jonathan administration also
embarked on the privatisation of
thermal generation stations and
power distribution companies across
the country, with the aim of creating
an electricity market that would lead to a more efficient electricity supply
industry and a more vibrant power
sector. The administration also entered into
agreements with different companies
and investors with the aim of
increasing the country’s power sector. It also embarked on the
commissioning of power projects
across the country and has signed
agreements with gas companies to
boost gas supply to gas-powered
generating facilities in the country...http://www.vanguardn...-energy-sector/

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