Nigeria hands over privatised plants

Nigeria has handed over its spun-off power companies to private buyers who paid a total of US 2,5-billion dollars in a series of open auctions. President Goodluck Jonathan presented the share certificates and licences to the new owners of six power generation companies and nine distribution firms that had paid up in full, at a ceremony in Abuja.

The public companies now gone private are among the 18 successors of the now defunct Power Holding Company of Nigeria. At least US$20-billion dollars have gone into several power reform programmes in the past 14 years of civilian rule, much of it wasted. The holding company was split into six generation, 11 distribution and one transmission companies. All the generating and distributing firms were sold separately

Kenya seeks investors to build coal, natural gas power plants

As part of it’s +5000Mw in 40 months program, Kenya has invited bids from investors for the development of two power plants with a combined output of up to 1,800 megawatts (MW) from coal and natural gas, according to details from Ministry of Energy and Petroleum.

The ministry said it is seeking investors to develop a 700-800 MW natural gas fired plant near the port city of Mombasa.

“The proposed project will be a 700-800MW power plant to be located on a 300 acre parcel of land at Dongo Kundu or any other appropriate location between Mombasa and Kilifi,” the ministry said in a statement.

The ministry also plans to build a 900 to 1,000MW coal power plant in Lamu. Already, the government wants to develop a US$5.5 billion mega port in Lamu to link landlocked South Sudan and Ethiopia to the Indian Ocean.

This bidding process marks the beginning of a road map that will see Kenya increase electricity generation capacity by 5,000MW from the current 1,644MW to 6,700 MW in 40 months. On the list of projects expected to increase demand for electricity includes construction of the standard gauge railway, setting up of Konza city and other ICT towns.

For more details on the tender documents, please click on the link below.

http://www.energy.go.ke/index.php/more-about-nitrolight

Also planned is construction of an oil pipeline from South Sudan to Lamu as well as the mining industry, irrigation projects and demand by the newly formed county governments.

“We are also going to upscale power purchase agreements, which have been taking too long to conclude as well as deal with transmission and distribution challenges,” said Joseph Njoroge, Principal Secretary-Ministry of Energy and Petroleum. With increased generation capacity, the generation cost in $ cents is projected to reduce from 11.30 to 7.41.

Commercial and industrial tariff will also fall from US$c14.14 to US$c9.00 and domestic tariff from US$c19.78 to US$c10.45.

The 5000 MW additional generation capacity will be developed from geothermal-1646 MW, Natural Gas 1,050 MW, Wind 630 MW and coal 1,920 MW, all under the framework of public private partnership (PPP).

According to Davis Chirchir, Cabinet Secretary, Ministry Of Energy and Petroleum the country has a power deficit of 500 MW at present and 1,664 MW that has been developed over the past 50 years.

“What we have was designed for supply to homes and not industry and that is why many manufacturers are either struggling or have shut their operations, relocating to cheaper destinations,” he said

The Ministry is expected to shortly publish requests for proposals inviting Independent Power Producers (IPPs) to participate in generation while the Government concentrates in transmission and distribution.

The government has already allocated Sh80 billion in the 2013/14 budget, a large bulk of which would be used in transmission and distribution.

With capacity of 1,664 MW against a maximum-recorded demand of about 1,410MW, Kenya is under pressure to boost power generation as east Africa’s biggest economy is expected to expand at more than 5 per cent.

The government last month said it wants to add 5,000 MW to Kenya’s power output by 2017 to accelerate growth, which is expected to push Kenya’s power demand up to 15,000MW by 2030.

For more details on the tender documents, please click on the link below.

http://www.energy.go.ke/index.php/more-about-nitrolight

Kenya Developing New Oil & Gas Regulation

A senior official from the Kenyan energy ministry announced on 17 September 2013 that the government would be releasing seven oil blocks totalling 30,000 square metres in Marsabit, Lamu, and Turkana exploration basins.The blocks were surrendered due to production sharing contract (PSCs) regulations that require exploration firms to cede 25% of their licensed acreage to the government if they lay dormant for two years (onshore) or three years (offshore). 

Unlike previous licensing arrangements, which were agreed on a first-come, first-serve basis, energy ministry officials have repeatedly stated that new blocks will be assigned following public bidding rounds. However, the bidding round is unlikely to be held until the current review of the energy legislation is completed.

Cabinet Secretary for Energy and Petroleum Davis Chirchir has stated the new draft bill, which is intended to update the 1984 Petroleum (Exploration and Production) Act, will be sent to parliament in November and will bring the sector in line with the 2010 constitution, particularly as related to the devolution process. However, the passage of the bill is likely to be delayed until early 2014 by the ongoing trials of President Uhuru Kenyatta and Deputy President William Ruto at the International Criminal Court (ICC).

New oil and gas legislation is likely to include a number of profit-maximising measures including new taxes, a minimum state stake in projects and local content provision laws. Under the current legislation, the NOCK receives a 10% share in production once commercial quantities of oil or gas are found. However, in October 2012, the then-energy minister, Kiraitu Murungi, stated that this would be amended to a 10% initial stake, which increases to 25% once production begins.

In January 2013, then-Commissioner for Petroleum Energy Martin Mwaisakenyi Heya stated that once production had begun, oil companies would be entitled to recover 60% in ‘cost oil'. The 'profit oil' would then be split between the oil companies and the government on a sliding scale, with the government claiming 50% of up to 30,000 barrels per day (40,000 b/d offshore) and 78% of 100,000 b/d or above (120,000 b/d offshore).

If companies fail to find oil within a two-year (onshore) or three-year (offshore) period, they are required to return 25% of acreage to the government. Although many of these proposals were drafted under the previous administration, the current energy secretary is unlikely to deviate from them.

In July 2013, the government, supported by the World Bank, commissioned consultants Hunton and Williams and Challenge Energy to review the draft legislation. The government has already committed to a number of the consultant's suggestions, including the use of competitive public bidding rounds. The consultants also recommended the introduction of a capital gains tax, which the government is likely to adopt given their desire to maximise revenue from the oil sector in order to balance the current account.

Significance 

Since it is unlikely that a clear regulatory framework will be in place in the six-month outlook, existing investors will become increasingly dependent on political influencers, or industry gatekeepers. These are well-connected business stakeholders or policy-makers that wield considerable influence over energy sector licensing, regulations, and policy. Gatekeepers are likely to be members of the National Fossil Fuel Advisory Committee (NFFAC), as well as senators of the oil-producing regions.

Following the implementation of the new energy bill, the government has committed to review the terms for the natural gas sector, which are omitted from the current regulations. Due to the lack of legislation, energy ministry officials have stated that energy companies have avoided drilling in areas with the potential for natural gas as their contracts were solely focused on crude oil exploration.

Tullow makes another oil discovery - Ekales-1 Oil Discovery in Kenya

Tullow Oil plc has announce that the Ekales-1 well, located in Block 13T in Northern Kenya, has made a new oil discovery. Results of drilling, wireline logs and samples of reservoir fluid indicate a potential net oil pay in the Auwerwer and Upper Lokone sandstone reservoirs of between 60 and 100 metres. Future flow testing will be carried out to confirm productivity from these zones
.

Ekales-1 is located in between Ngamia-1 and Twiga South-1 --where oil was also discovered-- and the oil explorer says that “reservoir properties at this location appear similar to those previously encountered.”

Tullow also disclosed that it had started drilling at the Agete-1 well mid this month and it expected the third rig to be operation in fourth quarter of 2013.

“This success at the Ekales-1 wildcat is further evidence of the exceptional oil potential of our East African Rift Basin acreage,” said Angus McCoss, the exploration director at Tullow Oil.

“Having opened the first basin with the Ngamia-1 well last year, we are now increasing the pace of exploration in Kenya aiming for 12 wells over the next 12 months.”

The firm said it would undertake further testing of the area to ascertain productivity.

Tullow, in July, also found 40 metres of oil reserves in Etuko-1 which are estimated to have combined resource of 300 million barrels (mmbo).

Tests on Twiga-1 and Ngamia-1 have confirmed the two wells alone have a potential of 250 mmbo, Tullow said.

The discovery comes a few weeks after Africa Oil, Tullow’s prospecting partner, raised fivefold the estimated deposits in the Lokichar basin to 368 million barrels of oil.

“Based on the drilling and testing programme over the past year we have confirmed the South Lokichar Basin contains gross contingent resources of 368 million barrels of oil, an increase of 557 per cent,” said Africa Oil chief executive Keith Hill, earlier this month.

Tanzania to cash in on gas bonanza

Tanzania has closed a deal with Malaysian company Huchems Fine Chemical Corporation to invest US$800million dollars to build east Africa’s first ammonia-based chemical manufacturing plant. The plant will be located in Tanzania and will use country’s abundant natural gas resources. The parties expect to conclude a final agreement before the end of 2013.

The planned chemical plant represents an important development in the African energy and petrochemical sectors, tapping local energy supplies for domestic industrial production rather than export, creating locally produced, value- added chemical products that are critical to other sectors of the domestic economy, such as fertilizer for agriculture. The project is expected to create hundreds of stable manufacturing jobs, while increasing the availability and lowering the cost of key chemical products.