Gas shortage hinders operations $235m contribution to NIPP unremitted
ALL is not well with the Federal Government, states and local councils joint efforts to boost power supply in the country. With the three tiers of government having contributed $5.75 billion (N802 billion) on the National Integrated Power Project (NIPP) out of which half (about N400 billion) has been spent, there are strong indications that adequate and stable electricity for most Nigerians is still a tall ambition.
The new threats to the projects are recurring gas shortages to power the plants and non-remittance of monies, including $235 million by some states and local councils, to the NIPP to promptly execute the contracts.
This state of the power sector, especially the independent power projects was highlighted in Abuja yesterday by Managing Director of the Nigeria Delta Power Holding Company (NDPHC), James Olotu.
He said the funds for the scheme waere domiciled in a special account at the Central Bank of Nigeria (CBN) and securitised to ensure that projects paid for were delivered.
He said: "The cost of the project is $5.75 billion. The amount yet to be received as part contribution is $235 million. What has been spent so far is just half of the total money."
NIPPs are power projects in the generation, transmission and distribution sectors meant to fast track capacity improvement of Nigeria's power industry. The NIPP was originally conceptualized to undertake mostly generation (gas-fired) projects, but had to stretch its ambit to include a wide range of transmission and distribution upgrade projects in order to address years of under-investment and the resultant capacity gaps in the sector.
Olotu explained that much of the money committed was in form of letters of credit and not cash to the contractors as contractor can only draw such money based on milestone achievement that was certified by the project consultant and then client (NDPHC).
But despite funds set aside for the project, gas availability is hindering the operations of some of the power plants that are ready so far, Olotu told newsmen. The poor pricing of gas and the lack of existing gas purchase agreements between government and international oil companies are some of the major challenges affecting gas supply to the ready plants, he said.
He stressed that though the Olorunsogo Power Plant had four units of 450 megawatts capacity that were ready, only one unit of 112.5mw is currently operating as a result of unavailability of gas. The same story, he stated, apply to the Sapele Plant, which has a capacity of 250mw. He told newsmen how the two units only worked for four days before gas issues affected them and they collapsed.
Noting that his company paid 100 per cent for all gas delivered to the NIPP, he stressed that if the issue of gas supply is resolved, most of the NIPP plants would come on stream on schedule.
The NDPHC boss defended the decision to fire the contractor handling the Project Lot 4 of the Afam-Ikot Ekpene 330KV Transmission Lines and associated sub-stations site, noting that the organisation had a deadline to deliver on its project and would not tolerate contractors who don't live up to expectation. He stressed that the contractor had shown inability to deliver on the project many years after the project was awarded to him, as such, the need to save the nation from the embarrassment of an incapable contractor.
Meanwhile, all is now set for the audit of the oil and gas as well as the solid minerals sectors as the Nigeria Extractive Industries Transparency Initiative (NEITI) has formally signed the contracts for the exercise with the two firms that won the bids.
The oil and gas audit, which will be conducted by Sada Idris & Co., is expected to cover the period 2009-2011. The second audit, the first of its kind to be conducted by NEITI in the solid minerals sector, will be undertaken by Haruna Yahaya and Co. and covers the period 2007-2010.
Speaking at the event, the Executive Secretary of NEITI, Mrs. Zainab Ahmed, declared that the full implementation of NEITI report by all the stakeholders would improve credit rating and higher level of credibility for the government within the international community.
She added: "This is in addition to empowering civil society, the media and the public with information and data to hold government and companies to account. The goal is to channel the resources to provide water, road, electricity, security, health care and other measures aimed at poverty reduction.
The NEITI scribe noted that NEITI report is four years behind schedule hence the need to fast-track its processes to bring it up-to-date and regularity.
"Between 2008 and now shows that the report is four years behind. For us at NEITI, this is not acceptable. We are determined to make NEITI audits regular, comprehensive in content and timely in responding to national questions over governance and transparency in the extractive industries. We are determined to make NEITI reports a reliable reference point for the legislature, the civil society and the media as tools of monitoring, oversight and advocacy for enthronement of corporate governance in the extractive sector," she submitted.
To make this happen, Mrs. Ahmed hinted that NEITI plans to automate its audit process, information and data gathering methods in line with its yearly work plans and the development plans.
The 2009 to 2011 oil and gas audit to be executed by Sada Idris and Co. is expected to deliver the financial flows, establish cash calls, government crude lifting, and petroleum tax validations. Others include report on non-financial flows, produce a report on royalty validation, carry out an index of covered entities and ensure insightful findings and recommendations on the management of oil and gas finances.
For the physical audit, Mrs. Ahmed said NEITI expects a report on production arrangements, upstream mass balance, product importation, pricing of federation equity crude, gas utilization, bid rounds management and a comprehensive report on Nigeria's operations in the joint development zone.
She also hinted that NEITI expects to find out from the solid minerals audit, a report on tonnage/mined quarries minerals by major players as well as activities in the manufacturing and construction sectors that derive their raw materials from mining and quarrying activities.
She added: "Other expectations from the audit include analyses of historical documents on production, export and payment of royalties for minerals produced in Nigeria. The audit will also review systems and procedures for managing finances of the sector, establish feasibility reports of major players in the solid minerals sector, relevant laws as they affect mining sector, lapses and the way forward."
While reiterating the conviction of NEITI on the ability of the indigenous firms to execute the tasks creditably, Mrs. Ahmed declared that choice of the indigenous companies followed open, transparent international bid procurement processes.
The solid minerals audit is to about N137 million while the oil and gas audit is to gulp N226 million. The audits are expected to be completed within nine months and will bring NEITI audits up to date.
The Guardian