Report of the Vision 2020

National Technical Working Group

On

Energy Sector

July, 2009
Nigeria Vision 2020 Program

TABLE OF CONTENT
LIST OF TABLES..................................................................................................................................................... 4

LIST OF FIGURES................................................................................................................................................... 4

LIST OF ACRONYMS ............................................................................................................................................. 6

FOREWORD............................................................................................................................................................. 8

EXECUTIVE SUMMARY........................................................................................................................................ 9

1.0 INTRODUCTION .......................................................................................................................................17

1.1. ENERGY & SUSTAINABLE DEVELOPMENT ....................................................................................................17
1.2. SCOPE OF THE VISION 2020 ENERGY PLAN ..................................................................................................18
1.3. VISIONING APPROACH ................................................................................................................................18
2.0 ASSESSMENT OF THE NIGERIAN ENERGY SECTOR........................................................................20
2.1. GLOBAL TRENDS IN THE ENERGY SECTOR ...................................................................................................20
2.2. THE NIGERIAN ENERGY SECTOR TODAY .....................................................................................................20
2.2.1. Energy Demand in Nigeria ................................................................................................................22
2.2.2. The National Energy Policy...............................................................................................................23
2.3. CONVENTIONAL ENERGY SOURCES ..............................................................................................................24
2.3.1. Oil ....................................................................................................................................................24
2.3.2. Gas ...................................................................................................................................................38
2.3.3. Coal..................................................................................................................................................53
2.3.4. Nuclear Energy .................................................................................................................................55
2.4. RENEWABLE ENERGY SOURCES ...................................................................................................................56
2.4.1. Key Challenges facing the development of renewable energy sources in Nigeria.................................57
2.4.2. Hydropower ......................................................................................................................................59
2.4.3. Solar Energy .....................................................................................................................................61
2.4.4. Biomass Energy.................................................................................................................................62
2.4.5. Wind Energy .....................................................................................................................................63
2.5. ENERGY UTILIZATION - ELECTRICITY..........................................................................................................63
2.5.1. Institutional Structure of the Nigerian Power Sector ..........................................................................64
2.5.2. Key Challenges facing the Nigerian Power Industry...........................................................................65
2.5.3. Ongoing Government Initiatives to grow the Power Sector.................................................................68
2.6. PERFORMANCE ASSESSMENT OF THE NIGERIAN ENERGY SECTOR.................................................................70
2.6.1. Operational Performance ..................................................................................................................71
2.6.2. Economic Performance .....................................................................................................................75
2.7. COMPARATIVE BENCHMARKING ANALYSIS .................................................................................................77
2.7.1. Definition of Comparator Set.............................................................................................................77
2.7.2. Baseline Data of Comparator Countries ............................................................................................78
2.7.3. Benchmarking Analysis .....................................................................................................................79
2.7.4. Key Learning Points for Nigeria........................................................................................................82
3.0 ENERGY SECTOR 2020 VISION & STRATEGIC PLAN .......................................................................84
3.1. THE GLOBAL ENERGY INDUSTRY IN 2020....................................................................................................84
3.1.1. Growth Projections for the Global Energy Industry ...........................................................................85
3.1.2. Key Growth Drivers for the Global Energy Industry ..........................................................................91
3.2. THE VISION FOR THE NIGERIAN ENERGY SECTOR ........................................................................................91

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3.3. OBJECTIVES, GOALS/TARGETS, STRATEGIES AND INITIATIVES FOR THE NIGERIAN ENERGY SECTOR ..............95
3.4. KEY GROWTH ENABLERS .........................................................................................................................116
3.4.1. Legal & Regulatory Regime.............................................................................................................116
3.4.2. Human Capital & Infrastructure Requirements................................................................................116
3.5. ENVIRONMENTAL IMPLICATIONS OF THE ENERGY VISION 2020 PLAN .........................................................116
3.6. CRITICAL SUCCESS FACTORS ....................................................................................................................117
4.0 IMPLEMENTATION ROADMAP...........................................................................................................118
4.1. IMPLEMENTATION ROADMAP FOR THE ENERGY SECTOR ............................................................................118
4.2. IMPLEMENTATION MONITORING PLAN FOR THE ENERGY SECTOR...............................................................143
REFERENCES.......................................................................................................................................................176

5.0 APPENDICES............................................................................................................................................177
5.1. ANALYSIS OF POWER GENERATION CAPACITY REQUIRED TO SUPPORT 20:2020 ECONOMIC VISION .............177

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List of Tables
Table 1-1: Nigeria's Energy Reserves/Capacity as at December 2005.......................................... 18
Table 2-1: Nigeria's Refineries and Installed Capacities................................................................ 27
Table 2-2: Vessel Draft Limits of Some Key Jetties in Lagos......................................................... 36
Table 2-3: Global Oil Demand and Refining Capacity (mbbl/d) ..................................................... 37
Table 2-4: Existing Potential Mine Sites with Reserves in Nigeria ................................................. 54
Table 2-5: Estimate of Current Exploitable Hydropower Sites in Nigeria ....................................... 61
Table 2-6: Small Hydro Potential in some States in Nigeria........................................................... 61
Table 2-7: Nigeria's Size and Land Use Parameters ..................................................................... 62
Table 2-8: Operational and Economic Performance Indicators...................................................... 70
Table 2-9: Cost of Private Power Generation in Nigeria ................................................................ 74
Table 2-10: Power Supply Reliability Indices................................................................................. 75
Table 2-11: Definition of Comparator Countries ............................................................................ 78
Table 2-12: Baseline information for Comparator Countries .......................................................... 79

List of Figures
Figure 1-1: The Energy Value Chain ............................................................................................. 19
Figure 2-4: Comparison of Energy per Capita for Select Countries, 2004 ..................................... 21
Figure 2-5: Selected Developing Countries Ranked on the Energy Development Index, 2002...... 21
Figure 2-6: Comparison of Daily Energy Consumption for Select Countries.................................. 22
Figure 2-7: Total Energy Consumption in Nigeria, by type (2006) ................................................. 22
Figure 2-8: Energy Demand in Economic Sectors in Nigeria ......................................................... 23
Figure 2-9: Top 15 Crude Oil Reserve Holding Countries ............................................................. 24
Figure 2-10: Nigeria's Historic Oil Production and Reserves Growth (1988-2008)......................... 25
Figure 2-11: Breakdown of Nigerian Oil Exports, 2008.................................................................. 26
Figure 2-12: Location of Downstream Assets in Nigeria ................................................................ 27
Figure 2-13: Key Players in the Nigerian Upstream Oil Industry.................................................... 28
Figure 2-14: National Content Figures for Select Countries........................................................... 29
Figure 2-15: Cumulative Oil and Gas Industry Spend by Activity (2005-2009)............................... 30
Figure 2-16: Steel Prices Trend .................................................................................................... 32
Figure 2-17: Jack-up Rig Rates..................................................................................................... 32
Figure 2-18: Estimated PMS Demand and Supply ........................................................................ 34
Figure 2-19: Top 20 Countries Natural Gas Reserves as at January 01, 2007.............................. 38
Figure 2-20: Nigeria's Historical Gas Utilization and Forecast Potential Demand .......................... 39
Figure 2-21: Current Structure of the Nigerian Gas Industry.......................................................... 42
Figure 2-22: Overview of Nigeria's Gas Pipeline Infrastructure...................................................... 44
Figure 2-23: Gas Reserves Availability Breakdown....................................................................... 44
Figure 2-24: Trends in LPG Prices, 1997-2005 ............................................................................. 46
Figure 2-25: Country Comparison of Per Capita Consumption of LPG.......................................... 46
Figure 2-26: Grouping of Gas Demand Sectors in the Approved Gas Pricing Framework............. 49
Figure 2-27: The approved Nigerian Gas Infrastructure Map......................................................... 52
Figure 2-28: Coal Production in Nigeria (1916 - 2002) .................................................................. 53
Figure 2-29: Location of Hydropower Dams in Nigeria .................................................................. 59
Figure 2-30: Nigeria's Electricity Generation by Fuel Type ............................................................ 64

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Figure 2-31: Nigeria's Electric Power Transmission and Distribution Capacity .............................. 65
Figure 2-32: Power Losses as a percentage of Generation........................................................... 66
Figure 2-33: Growth in Oil Reserves and Production..................................................................... 71
Figure 2-34: Growth in Gas Reserves and Production .................................................................. 72
Figure 2-35: Oil and Gas Reserves to Production Ratio ................................................................ 72
Figure 2-36: Reserves Replacement Ratio.................................................................................... 73
Figure 2-37: Gas Flaring in Nigeria ............................................................................................... 73
Figure 2-38: Growth in Electricity Generation and Consumption ................................................... 74
Figure 2-39: Oil Contribution to GDP and Government Revenue, 2007......................................... 75
Figure 2-40: Sectoral Contribution to Nigeria's GDP Growth Rate (2003-2007) ............................ 76
Figure 2-41: Oil and Gas Consumption Per Capita ....................................................................... 76
Figure 2-42: Power Generation and Consumption Per Capita....................................................... 77
Figure 2-43: 2007 Gas Flaring Countries ...................................................................................... 81
Figure 3-1: Projected Global Energy Mix in 2020 .......................................................................... 84
Figure 3-2: Projected World Oil Demand....................................................................................... 85
Figure 3-3: Growth in Oil Demand, 2008 - 2030 ............................................................................ 86
Figure 3-4: World Oil Supply Outlook ............................................................................................ 87
Figure 3-5: Natural Gas Demand, 1960 - 2030.............................................................................. 88
Figure 3-6: World Coal and Gas Demand Growth, 1990 - 2007, 2007 - 2030 ............................... 89
Figure 3-7: Strategic priorities for the Nigerian Energy Sector....................................................... 94

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List of Acronyms
ABU Ahmadu Bello University
Bbl Barrels
BPE Bureau for Public Enterprises
BSCFD Billion Standard Cubic Feet
CERD Centre for Energy Research and Development
CERT Centre For Energy Research And Training
DPR Department of Petroleum Resources
ECN Energy Commission of Nigeria
EDI Energy Development Index
EIA Energy International Agency
EPC Engineering, Procurement and Construction
ETF Education Trust Fund
FEC Federal Executive Council
FGN Federal Government of Nigeria
FMAWR Federal Ministry of Agriculture and Water Resources
FMEH Federal Ministry of Environment and Housing
FMIC Federal Ministry of Information and Communication
FMJ Federal Ministry of Justice
FMLP Federal Ministry of Labour and Productivity
FMPR Federal Ministry of Petroleum Resources
FMST Federal Ministry of Science and Technology
FMT Federal Ministry of Transport
GDP Gross Domestic Product
IAEA International Atomic Energy Agency
ICRC The Infrastructure Concession Regulatory Commission
IEA International Energy Agency
IGR Internally Generated Revenue
IOC International Oil Company
KADPOLY Kaduna Polytechnic, Kaduna
Kgoe Kilogram of oil equivalent
KPI Key Performance Indicators
KwH Kilo watt hour
LNG Liquefied Natural Gas
LOC Local Operating Companies
MAN Manufacturers’ Association of Nigeria
Mbpd Million Barrels Per Day
MDG Millennium Development Goals
MMSD Ministry of Mines and Steel Development
Mscf Million Standard Cubic Feet
MT Metric Tonnes
Mwe Mega Watt of electricity
Mwh Mega Watt Hour

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N/A Not Applicable

NAEC Nigerian Atomic Energy Agency
NASS National Assembly
NCP National Council on Privatization
NCRTF Nigerian Coal Research Trust Fund
NELMCO Nigeria Electricity Liability Management Company
NGMP Nigerian Gas Masterplan
NGSA Nigerian Geological Survey Agency
NIMET Nigerian Meteorological Agency
NNRA Nigeria Nuclear Regulatory Agency
NOA National Orientation Agency
NOC National Oil Company
NPC National Planning Commission
NPP Nuclear Power Programme
NSA National Security Adviser
NSI Nuclear Safety Institute
NUC Nigerian Universities’ Commission
OECD Organization for Economic Co-operation and Development
OPEC Organization of the Petroleum Exporting Countries
PPP Private – Public Partnership
PTDF Petroleum Technology Development Fund
SHESSTO Sheda Science and Technology Complex
SON Standards Organization of Nigeria
TCF Trillion Cubic Feet
TCN Transmission Company of Nigeria
UI University of Ibadan
UNIDO United Nations Industrial Development Organization
YABATECH Yaba College of Technology

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Foreword
This document is the outcome of the study and intense discussions by the members of the energy
thematic group of the Vision 20:2020 on the Nigerian energy sector. In preparing the report, the
group x-rayed the various energy sub-sectors and examined previous studies conducted on the
Nigerian energy sector. It also examined successive governments’ policies derived from the
outcomes of those reports and studies, identified their strengths and pit-falls. The group also
examined the implementation of those policies, identified progress made as well as their pitfalls.
This was done in order to have a comprehensive picture of the sector for effective visioning. A
thorough review was made of previous documents namely – vision 2010, NEEDS and 7-Point
Agenda. The objective here was to identify the extent those documents have gone in stitching the
necessary linkages between the energy sector and the rest of the economy given the centrality of
the former to their proper functioning. Furthermore, the quest by the group to produce a useful and
implementable vision document led it into interacting with major and active energy industry players
both in the public and private spheres.
The outcome has been illuminating. It brought out the obvious and the not-so-obvious
problems bedeviling the sector, the persistence of which may impair the achievement of the
objectives of the Vision 20:2020. Given the strong linkages between the various sectors of the
economy and the centrality of energy as a major input, it is imperative that the security situation in
the Niger Delta is addressed. Infrastructure in all the major energy sub-sectors require attention
while existing institutional frameworks need to be reviewed to bring their operations in line with
international best practices. Dire shortages of qualified manpower both at higher and lower levels
have become the bane of the industry. The oil and gas sector for example, has less than 1000
welders. In the entire energy sector, the Nigerian content is low, clearly pointing to its over-reliance
on external sources even for some basic inputs.
The role the energy sector is expected to play in the realization of Vision 20:2020, the
initiatives to be pursued in its quest and the roadmap for their implementation has been carefully
considered by the energy thematic group. It is the view of the group that the implementation of
those initiatives will no doubt, as it is with all reforms meet serious obstacles, surmounting them will
be a Herculean task. However, it is our fervent hope that the concerns being exhibited by our
leaders on the state of affairs will be matched by clear determination to overcome those obstacles.

…………………………………………… ……………………………………………
Engr. Funsho M. Kupolokun, OFR FNSE Abubakar Siddique Mohammed

Chairman, Energy NTWG Coordinator, Energy NTWG

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Executive Summary
The energy sector is very strategic to the development of the Nigerian economy. In addition to its
macroeconomic importance, the energy sector has major roles to play in reducing poverty,
improving productivity and enhancing the general quality of lives of the people. The sector is
greatly linked to the other sectors of the economy, contributes to a stable growth of the economy
and the realization of social and political objectives.

Nigeria is blessed with a rich variety of conventional and renewable energy sources. The focus of
the energy thematic group is the optimal utilization of the nation’s energy resources for sustainable
development and the expansion of the energy supply system to meet future energy demand.

Despite the large reserves of energy resources available in the country, the levels of energy
consumption have been very low relative to other countries with comparable energy resources and
population figures. In 2004, about 776.9 kgoe of energy per capita (population of 140million) were
consumed as against about 2596.9kgoe of energy per capita consumed by South Africa
(population of 44million). This low energy consumption is caused by the recurrent scarcity of
petroleum products and the persistent electricity black outs which have resulted in a high reliance
on self generated electricity.

In previous national vision documents like the Vision 2010, NEEDS and the NEEDS – 2
documents, separate action plans were developed for the energy sub-sectors i.e. the oil and gas
sectors and the power sectors. However, the interdependencies in these sub-sectors were not
taken into account in setting the goals and targets. This is evident for example in the power sector
where power generating plants are being built but provisions for gas supply to these plants are not
available. Also, the previous national development plans didn’t include detailed strategies and
initiatives to drive the development of alternative sources of energy.

The energy sector will continue to play a critical role in the industrial, technological, economic and
social development of the country. The sector has however been faced by various challenges,
which have undermined its development over the years. Specifically for the oil industry, some of
these challenges include, local content, security and civil unrest, funding - industry spend/arrears,
institutional reforms, human capacity development, environmental degradation, illegal bunkering,
crude theft, refinery inefficiency and underutilization, inadequate refining capacity, crude oil and
petroleum products pipeline vandalization. In the power sector, the challenges include inadequate
power generation capacity, inadequate and obsolete transmission and distribution network in some
major cities, inefficient transmission and distribution network resulting in high losses, low access to
electricity grid, industry regulation, availability of gas for power generation, billing and revenue
collection and inappropriate electricity pricing.

The broad vision for the energy sector is targeted at meeting the demand for energy in all sectors
of the Nigerian economy, including the energy needs of households in all parts of the country with
safe, clean and convenient energy at an affordable cost. This must be done in a technically
efficient, economically viable and environmentally sustainable manner using different energy
sources, conventional and non-conventional, as well as new and emerging energy sources to
ensure supply at all times with minimal disruption.

The vision statement for the energy industry is:

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“By 2020, the energy sector will be the major engine of the nation’s sustainable social,
economic and industrial growth, delivering affordable and constant energy supply
efficiently to other sectors of the economy”

The vision 2020 plan for the energy sector defines the five (5) strategic priorities for the sector.
These priorities have been set to address the critical issues identified in the Nigerian energy
sector. These priorities will also enable the achievement of the primary goals of the Government of
Nigeria as stated in the 7-pooint agenda. The strategic priorities identified for the Nigerian Energy
sector are as follows:

Provide necessary commercial and market incentives in order to attract private

investments (local and foreign) required to facilitate the necessary energy capacity
expansions in a rapidly growing economy
The anticipated growth for the Nigerian energy sector will require a total annual investment in
excess of $ 18 Billion in the next 10 years ($ 12 Billion for oil & gas and $ 6 Billion for power).
Of this, the projected affordable FG allocation will be $ 6 Billion ($ 5 Billion and $ 1Billion for oil
& gas and power respectively). The $ 12 Billion shortfall will require private funding. It is
therefore imperative that alternative funding schemes, such as third party and venture capital
financing, at appropriate costs, are explored.

Currently, majority of the investments in the energy sector, especially in power generation and
refining, is provided by the Government. However, it is proposed that the significant capacity
expansions envisaged for the Nigerian energy sector will be driven by the private sector.
Appropriate fiscal terms need to be developed in order to attract global partners and investors
for the development of the gas infrastructure as proposed in the gas masterplan. Also
adequate incentives must be provided to attract private investments in power generation and
distribution, coal –to-power generation and local manufacturers of solar photovoltaic
technologies.

Consolidation of ongoing structural and economic reforms targeted at establishing

effective institutional and regulatory frameworks in the energy sector
The timely completion and success of the ongoing institutional and regulatory reforms, in the
power sector and the oil and gas sector, will improve the current environment and facilitate the
accomplishment of the Government’s goals in the energy sector. It is expected that once
completed, these reforms will improve the funding and efficiency of operations in the energy
sector.

In the power sector, it is imperative that the currently ongoing reforms, as proposed in the
electric sector reform act, are completed with the total privatization of the generation and
distribution assets. Also, the necessary regulatory and structural framework to support an
efficient oil and gas industry needs to be put in place. The petroleum industry bill, currently in
the National Assembly, includes provisions for the establishment of efficient and commercial
institutions in the oil and gas industry.

Achieve energy supply security by utilizing the nation’s renewable energy resources
(including wind, solar, hydro and biomass) to diversify the energy consumption mix

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Currently, Nigeria’s energy mix is dominated by the fossil fuels, i.e. oil and gas. However, to
attain the vision 2020 intent, Nigeria needs to diversify its energy mix with renewable energy
sources. Nigeria has vast renewable energy resources including hydro (small and large hydro
power), solar, wind and biomass. Utilization of the nation’s renewable energy resources will
reduce the country’s dependence on fossil fuels and provide an economically stable source of
energy to the power generation mix.

The country needs to develop a technologically driven renewable energy sector that will
harness the nation’s resources to complement its fossil fuel consumption and guarantee
energy security.

Development of efficient and sustainable energy generation and consumption patterns
Although there is currently insufficient energy to meet demand in households and industries, it
is necessary for the country to embark on energy conservation and energy efficiency initiatives
which will require Industries and homes to move to energy saving equipment and utilities for
reduction in total power demand.

Presently, energy utilization in Nigeria is far from being efficient. Apart from the direct loss due
to energy wasted, using energy inefficiently has three major implications in Nigeria. These are:
o The investment in some energy supply infrastructure is far in excess of what the
energy demand is
o The environmental problems associated with energy utilization are more aggravated
due to large energy consumption
o Excessive energy consumption adds to the costs of goods produced especially in
energy intensive industries like cement, steel works and refineries

In the power sector, demand side management principles targeted at ensuring efficiency in
electricity consumption need to be introduced.

Consolidation of ongoing local content campaign by expanding linkages to other
sectors of the economy
The ongoing Nigerian content development initiative is aimed at ensuring that substantial
proportion of activities, materials, engineering parts and human capital utilized in different
sectors of the Nigerian economy is domiciled within the country. The domiciliation focus on
local value addition is targeted at building global collaboration, attracting foreign direct
investments and promoting technology transfer. To sustain the current drive for Nigerian
content development it is important for Government to evolve policies to encourage both local
and foreign companies to enter into joint venture agreements to operate in Nigeria.

Human capacity development specifically targeted at the low technical and high value skills
e.g. fabrication and welding, should also be continuous through the integration of human
development programs in all projects. An example is the focus on capacity development of
fabrication yards to increase total tonnage and lifting capacity leading to integration of FPSO
topsides locally.

Also, the development of a reliable local steel industry to cater for the demand of the oil and
gas industry will help to develop deep and functional linkages between the mining industry and
the oil & gas industry.

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Based on these strategic priorities for the energy sector, policy objectives have been developed for
each of the major energy sources in Nigeria to ensure that the energy sector is able to support the
achievement of Nigeria’s vision 2020 intent.

OIL
Nigeria currently has the 10th largest oil reserves in the world and oil has been the country’s
most valuable economic asset and non-renewable resource. Given that oil will continue to
dominate the global energy mix to 2020, accounting for close to 35% of the total energy
demand, the following are the recommendations for the oil industry:

Provision of appropriate fiscal incentives to attract investments in oil exploration, at the
same time ensuring reasonable returns for the nation

Development of a reliable steel industry to cater for the demand of the oil and gas
industry, thereby developing deep and functional linkages between the oil & gas and
mining industries

Enhancement of the in-country capacity for the fabrication of steel structures used in
the oil and gas industry

Strengthening the relevant regulatory agencies in order to ensure the enforcement of
appropriate standards and entrench global HSE standards and principles in the
Nigerian oil and gas sector

Deregulation and liberalization of the downstream sector

Partial privatization of old distribution assets owned by the Government

Implementation of alternate funding schemes, such as third party financing and venture
capital financing for current JVs

GAS
Nigeria has the 7th largest natural gas reserves at 187TCF, with potential to grow to as much
as 600TCF1 with dedicated gas exploration. However, Nigeria’s domestic gas industry is
currently in the embryonic stage. Specific initiatives are required to facilitate dedicated
exploration for natural gas and encourage the utilization of natural gas in all sectors of the
national economy. Recommended Initiatives for the development of the gas industry include:

Development of a long term gas pricing strategy to attract FDI in the domestic gas
sector

Development of appropriate fiscal scheme to ensure affordability of LPG in the
domestic market including manufacture of cylinders and cookers

Complete establishment of the strategic gas aggregator to manage the implementation
of the domestic reserves and production obligation and the aggregate price in the
domestic gas market in the short term

ELECTRICITY
With a total installed electricity generation capacity of about 6000MW, and actual generation of
between 2000MW and 3000MW, the electricity demand in Nigeria far outstrips the supply and the
supply is epileptic in nature. The country is currently faced with acute electricity problems, which is
hindering its development despite the availability of vast natural resources in the country.

1
USGS Study

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An analysis of the power generation capacity required to support the vision 2020 economic vision,
carried out by the Energy NTWG, shows that by 2020 Nigeria will need to generate electricity in the
range of between 25,000MW to 40,000MW. This is based on the assumption that the country will
take a less energy intensive growth path (energy intensity of less than 0.4) with lower electricity
consumption, KWh per unit of GDP, unlike china which has an energy intensity of 0.91.

In order to achieve this growth aspiration, it is necessary that alternative energy resources – hydro,
solar, wind, biomass, coal and nuclear- are harnessed to reduce the country’s reliance on gas fired
power plants. Also, intensive manpower development initiatives will be required including
equipping the newly created National Power Training Institute, in collaboration with tertiary
institutions.

Key recommendations for the development of the power sector include:

Complete privatization of the generation & distribution assets currently owned by the
Government to ensure effective service delivery

Creation of a Government agency which will serve as a one-stop shop for private
investors interested in power generation and distribution

Establishment of management contracts with private companies for the development
and operation of the transmission network whilst retaining ownership by Government

Establishment of a coordinating agency for alternative energy development

Construction of mini power stations in rural communities using locally appropriate
technologies (possibly hybrid) – hydro, wind, biomass, solar

Massive public campaign towards promoting efficient usage of electricity and energy
conservation

Introduction of discriminatory tariffs to encourage low electricity utilization in households

COAL
The challenges being faced in the nation’s coal industry need to be addressed if the potential of
for coal utilization is to be optimally exploited. Some of these challenges include uncertainties in
the actual reserves of coal on which long term projects could be based, low productivity of coal
mines, low level of mechanization of production facilities, creating and finding markets for the coal
and absence of a cost-effective transportation system for the export of coal.

The recommendations for the development of coal include;

Provision of appropriate fiscal incentives for coal to power investors

Provision of up-to-date geological data on the coal deposits in the country

Collaboration with tertiary institutions and research institutes to develop local coal
briquetting and coal stove technology

Development of dedicated coal trains to transport and handle coal for power generation

Establishment of partnerships with relevant foreign centers of excellence in clean coal
technologies to facilitate capability building and manpower development

HYDRO
The total technically exploitable large scale hydropower potential of the country is estimated at over
10,000MW, capable of producing 36,000GWh of electricity annually. The small scale hydropower
potential is estimated at 734MW. Current hydropower generation is about 14% of the nation’s
hydropower potential and represents about 30% of the total installed grid-connected electricity

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generation capacity. Despite its high initial capital cost, hydropower provides one of the cheapest
and cleanest sources of electricity. The country is well endowed with large rivers and some few
natural falls which are together responsible for the high hydropower potential.
It is estimated that hydropower will be a major provider of base load electricity, after gas, in order to
achieve the projected 35,000MW electricity generation by 2020. Therefore, the nation needs to
manage its water resources for the development of its hydro - electric potentials and for other uses.
The policy should focus more on micro hydro plants.
The recommendations of the energy NTWG for the development of the hydropower include:

Establishment of small hydropower pilot schemes in each geopolitical zone to create
awareness and facilitate technology acquisition

Adaptation of existing irrigation dams with hydropower generation potential for power
generation and supply to the national grid

Partial privatization of old hydropower generation stations i.e. Kainji, Jebba, Shiroro,Oji
river etc, currently owned by the Government

Provision of appropriate fiscal schemes for privately owned hydropower IPPs

Provision of up-to-date data on the potentials of small - scale hydro plants and the
preparation of inventories for their locations

WIND
Utilization of wind energy is presently very minimal in the country. The only known and still
functional wind pump in the country is the Sayya Gidan Gada wind electricity project in Sokoto
State. It has a capacity of 5.0 kWp. Already, the wind energy mapping of the country has been
done.

A study2 on the wind energy potentials for a number of Nigerian cities shows that the annual wind
speed ranges from 2.32 m/s for Port Harcourt to 3.89 m/s for Sokoto. The maximum extractable
power per unit area, for the same two sites was estimated as 4.51 and 21.97 watts per square
metre of blade area, respectively. When the duration of wind speeds greater than 3 m/s is
considered, the energy per unit area works out as 168.63 and 1,556.35 kWh per square metre of
blade area, again for Port- Harcourt and Sokoto.

The policy objective is to emphasize the exploitation of wind energy for rural water supply and also
for electricity generation. The recommendations to achieve this include:

Execution and commissioning of wind energy pilot projects in select locations around
the country

Provision of fiscal incentives such as import duty exemptions, tax holiday, investment
grants to encourage investments in wind powered generating plants and water pumps

Sensitization of the Federal, State and LGCs rural electrification agencies on the
potential of wind energy as source of electricity

SOLAR

2
Sambo, 1987

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Studies relevant to the availability of the solar energy resource in Nigeria have fully indicated its
viability for practical use. Although solar radiation intensity appears rather dilute when compared
with the volumetric concentration of energy in fossil fuels, it has been confirmed that Nigeria
receives 5.08 x 1012 kWh of energy per day from the sun and if solar energy appliances with just
5% efficiency are used to cover only 1% of the country's surface area then 2.54 x 106 MWh of
electrical energy can be obtained from solar energy. This amount of electrical energy is equivalent
to 4.66 million barrels of oil per day.

The major limitation to the development of solar technologies is the high capital layout involved.
The key recommendations for the development of solar energy in Nigeria are:

Continuous active support of research and development activities to cater for site
specificity of designs for all parts of the country

Provision of fiscal incentives such as import duty exemptions, tax holiday, investment
grants to encourage investments in solar powered generating plants and local
manufacturing of solar photovoltaic applications

Execution of demonstration and pilot projects to ensure that the general public is aware
of the potentials of solar energy technologies which will as well assist in creation of
markets for solar energy systems

BIOMASS
The biomass energy resources of the nation have been estimated to be 144million tones/year. It is
estimated that Nigeria consumes about 43.4x109kg of fuel wood annually. Over 60% of Nigeria’s
population depends on fuel wood for cooking and other domestic uses. The consumption of fuel
wood is worsened by the wide spread use of inefficient cooking methods, the most common of
which is still open fire. The rate of consumption of fuel wood far exceeds the replenishing rate to
thus resulting in desert encroachment, soil erosion and loss of soil fertility.

Recently, the Renewable Energy Division (RED) within NNPC championed an automotive biomass
ethanol programme which involves securing alternative fuel through the use of biomass technology
to produce ethanol from sugarcane and fresh cassava.

However, in order to address the food security issues associated with producing first generation
ethanol from food crops, the energy NTWG is proposing a policy focus for second generation
biofuels form non-food crops like waste biomass, the stalks of wheat, corn and switch grass,
jatropha. Also, initiatives are recommended to discourage fuelwood consumption, especially in
rural areas. Other key recommendations include:

The introduction of efficient wood - burning stoves in the rural areas

The active introduction of biogas digesters to cater for the cooking energy needs,
especially large households and institutions like boarding schools, hospitals, barracks,
prison houses etc.

Adoption of fuel substitution and blending with ethanol to reduce cost and improve
environmental friendliness of fuels

NUCLEAR

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Nuclear energy is one of the major sources of base load electricity generation in the world today.
The technology for harnessing nuclear energy demands great responsibility and expertise.
Therefore, it requires careful planning of the manpower development and material resources.

Crucial to any nuclear programme is the availability of nuclear minerals such as uranium and
thorium. In 1947, pyrochlore containing uranium was found in appreciable quantities on the Jos
Plateau and its environs, but there is still no established method of commercial extraction of the
uranium. By 1979, about 617,000 km2 of land area had been covered by aerial radiometric surveys
and another 90,000 km2 had been covered by other surveys. Since then no further work has been
done. There is the need to extend investigations to other areas of the country suspected to have
traces of any of the radioactive minerals.

Recommendations for the development of Nuclear energy include:

The establishment of unambiguous policy guidelines for the nuclear energy sector,
clearly defining the role of relevant governmental organizations and the private sector
as the main drivers of the nuclear power programme

The domestication of all international instruments, agreements, conventions and
treaties entered into by Nigeria

Intensified manpower training and development and the provision of adequate
Infrastructure for nuclear science and technology

Establishment of the Nuclear Power Programme Coordination and Implementation
Organization (NPPCIO) to serve as the planning, coordinating and implementing
organization for nuclear power programmes

The detailed strategies and initiatives for each of the energy sources are documented in chapters 3
of this report.

For effective and efficient implementation of the vision 2020 plan for the energy sector,
implementation and monitoring plans have been developed for the proposed initiatives. These are
documented in chapter 4 of this report.

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1.0 Introduction
Today, there is a global focus on energy as a societal, sociopolitical and strategic resource. In
addition, there is increasing focus on consumption, waste elimination, development and the
environmental impact of energy resources. Investments in the development and implementation of
clean, renewable energy technologies and conservation are a major priority of Governments and
industry players, subject to fluctuations in the economy and the price of crude oil and natural gas.
These renewable energy sources will only complement the major thermal energy sources.
Investments in the development of energy resources vary widely from nation-to-nation, ranging
from cleaner ways to burn the world’s immense stores of coal; to the construction of advanced-
technology nuclear generating plants; to the use of advanced, more cost-effective renewable
technologies based on solar, wind and wave power.

1.1. Energy & Sustainable Development

Energy is central to sustainable development and poverty reduction efforts. It affects all aspects of
development -- social, economic, and environmental -- including livelihoods, access to water,
agricultural productivity, health, population levels, education, and gender-related issues. None of
the Millennium Development Goals (MDGs) can be met without major improvements in the quality
and quantity of energy services in developing countries.
The world is expected to change dramatically over the next 25 years, presenting significant
challenges for energy production and use. For example, by 2030, the International Energy Agency
estimates that $17 trillion dollars of investment will be made in energy infrastructure, largely in
developing countries. These investments and others will need to be carefully planned to ensure
that greenhouse gas mitigation occurs hand-in-hand with meeting the energy needs and
development aspirations of developed and developing countries.
Globally, countries are developing strategies and policies to enable the sustainable development of
their energy resources so as to fuel economic and social development while reducing air pollution
and the greenhouse-gas emissions.
Energy is intrinsically linked with sustainable development at the local, national, and regional
levels. At the local level, modern energy is required to improved the overall quality of life
(especially, that of the poor) by enhancing productive activities and enterprise, which will result in
increased incomes. At national and regional levels, adequate modern energy leads to stable
economic development, promotion of trade, and enhancement of participation in global markets,
besides the added benefits of better social and economic linkages.
The energy sector is very strategic to the development of the Nigerian economy. In addition to its
macroeconomic importance, it has major roles to play in reducing poverty, improving productivity
and enhancing the general quality of lives of the people. The energy sector is greatly linked to the
other sectors of the economy: on one hand, the energy sector contributes to a stable growth of the
economy and the realization of social and political objectives; on the other hand, the modernization
and expansion of the energy supply system to meet future energy demand requires a large amount
of human and financial resources.

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1.2. Scope of the Vision 2020 Energy Plan

Nigeria is blessed with a rich variety of conventional and renewable energy resources as shown in
table 1-1 below:

Energy Source Reserves

Crude Oil 36.5billion barrels
Natural Gas 187.44TCF
Tar Sands 30 billion barrels of oil equivalent
Coal & Lignite Over 4 billion tonnes
Large Hydropower 11,235 MW
Small Hydropower 3,500MW
Fuel wood 13,071,464 Hectares
Animal Waste 61 million tones/yr
Crop Residue 83 million tones/yr
Solar Radiation 3.5 – 7.0 KWh/m2 – day
Wind 2-4m/s at 10m height
Table 1-1: Nigeria's Energy Reserves/Capacity as at December 2005
Source: Draft National Energy Masterplan, Energy Commission of Nigeria, June 2007

The vision 2020 plan for the energy thematic area focuses on the optimal utilization of the nation’s
energy resources for sustainable development. The energy sources which will be within the scope
of the vision 2020 plan are as follows:
Conventional sources
- Oil
- Gas
- Coal
- Nuclear energy

Non – conventional sources

- Hydropower
- Solar
- Wind
- Biomass

Electricity

1.3. Visioning Approach

In previous national vision documents like the Vision 2010, NEEDS and the NEEDS – 2
documents, separate action plans were developed for the energy sub-sectors i.e. the oil and gas
sectors and the power sectors. However, the interdependencies in these sub-sectors were not
taken into account in setting the goals and targets. This is evident for example in the power sector
where power generating plants are being built but provisions for gas supply to these plants are not

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available. Also, the previous national development plans didn’t include detailed strategies and
initiatives to drive the development of alternative sources of energy.

In order to address this issue, an integrated approach to the energy value chain, highlighting and
taking into cognizance the significant interdependencies and synergies between the energy sub-
sectors was used in developing the vision 2020 plan. Figure 1-1 below shows the linkages
between the electricity value chain and the oil and gas value chain.

Figure 1-1: The Energy Value Chain

In order to validate the current state of the Energy sector in Nigeria and the clearly articulate
strategic imperatives for change, the group had interactive sessions with some industry experts.
Some of these include, Mr. Basil Omiyi, Country Chair of Shell Companies in Nigeria, Mr. Ademola
Adeyemi – Bero, MD, British Gas, Nigeria. Also, presentations were made by some Government
agencies like PHCN, the Ministry of Petroleum Resources, the Nigerian Nuclear Regulatory
Agency and the Ministry of Power.

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2.0 Assessment of the Nigerian Energy Sector

2.1. Global Trends in the Energy Sector

The financial crisis of 2008 has resulted in a slow down in energy consumption globally. Low GDP
growth is placing a downward pressure on energy use, therefore resulting in knock-on effects on
energy financing and investment. As lower demand continues to depress oil and gas prices,
announcements are being made of both reduced investment levels and delays in oil and gas
projects. However, the long term trend points to an increase in demand, particularly in emerging
economies.
Despite the economic downturn, growing demand for energy, particularly in China, India, and other
developing countries, is expected to lead to rising oil prices over the long term. Mature
economies, where they can afford the required investments, are focusing on conservation,
renewables and cleaner use of fossil fuels. Over the very long term, nuclear may be an important
part of the mix as well.

The current financial crisis is not expected to affect long term investments, but could lead to delays
in bringing current projects to completion. Driven by growing populations and expanding
economies, global energy demand is expected to increase by an average of 1.2% per year
between 2005 and 2030, even assuming significant gains in energy efficiency. Global demand is
projected to rise from roughly 230 million barrels per day of oil equivalent in 2005 to 310 million
barrels per day of oil equivalent – an increase of 35%.

2.2. The Nigerian Energy Sector Today

Nigeria has significant energy resources, including over 36 billion barrels of oil, 187 trillion cubic
feet of gas and 4 billion metric tones of coal and lignite. The country also has a large amount of
renewable energy resources including hydro electricity, solar, wind and biomass energy. Hydro
resources (small and large hydropower) are estimated at 14,750 megawatts, solar radiation is
estimated at 3.5-7.0 kilowatthour/m2 per day, wind energy potential of 150,000 terra joule per year
(generated by an average wind speed of 2.0-4.0 m/s) and biomass at 144 million tons per year.
Despite the large reserves of energy resources available in the country, the levels of energy
consumption have been very low relative to other countries with comparable energy resources and
population figures. In 2004, about 776.9 kgoe of energy per capita (population of 140million) were
consumed as against about 2596.9kgoe of energy per capita consumed by South Africa
(population of 44million). This low energy consumption is caused by the recurrent scarcity of
petroleum products and the persistent electricity black outs which have resulted in a high reliance
on self generated electricity. Figure 2-4 below shows Nigeria’s energy per capita in comparison
with some select developing countries.

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3000 300

2500 250

2000 200

Millions
Kgoe

1500 150

1000 100

500 50

0 0
Angola Egypt Ghana Indonesia Nigeria South Africa

Energy Per Capita Population

Figure 2-1: Comparison of Energy per Capita for Select Countries, 2004
Source: EIA

Nigeria is currently ranked 62 out of 75 countries on the IEA’s Energy Development Index (EDI).
EDI is a simple composite measure of a country’s progress in its transition to modern fuels and of
the degree of maturity of its energy end-use. Nigeria’s EDI ranking highlights the country’s low per
capita commercial energy consumption and the low percentage of the population with access to
electricity. Figure 2-5 below shows Nigeria EDI rating compared with other developing countries.

Figure 2-2: Selected Developing Countries Ranked on the Energy Development Index, 2002

Nigeria’s daily energy consumption is 109.6 KwH (per 1000 persons). On a comparative basis,
Nigeria energy consumption is low (see Figure 2-6 below). Though energy consumed by wood
fuels is not accounted for, it still remains a dominant source of energy in Nigeria. It is estimated that
it could account for as high as 77% of total energy consumed by the household sector in Nigeria
(see Figure 2-7 below).

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Figure 2-3: Comparison of Daily Energy Consumption for Select Countries

Energy Supply Mix In Nigeria

In 1950s, the country’s major power source was coal, which accounted for about 70% of the
country’s total power consumption. However, since the discovery of crude oil, the focus of the
nation has been on developing its crude oil reserves while neglecting other energy sources.
Therefore, Nigeria’s energy consumption mix is currently dominated by oil (53%), followed by
natural gas (39%) and hydroelectricity (7%) as shown in figure 2-7 below. Coal, nuclear and other
renewables are currently not part of Nigeria’s energy consumption mix, with the exception of
biomass often used to meet rural heating and cooking needs.

Figure 2-4: Total Energy Consumption in Nigeria, by type (2006)

2.2.1. Energy Demand in Nigeria

In 2005, it was estimated that households accounted for about 50% of the energy demand in
Nigeria while the industrial and transportation sectors accounted for 30% and15% respectively
(see figure 2-8 below). As the economy of the country grows, and the country gets more

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industrialized, it is expected that the industrial sector will account for a larger percentage of the
energy demand.

Figure 2-5: Energy Demand in Economic Sectors in Nigeria

Source: Clean energy investment in Nigeria, www.iisd.org
1
Note: The renewable portion is mostly biomass (over 90%) especially fuel wood and charcoal

2.2.2. The National Energy Policy

In 2003, the Federal Government approved the National Energy Policy, developed by the Energy
Commission of Nigeria, to serve as a blueprint for the sustainable development, supply and
utilization of energy resources within the economy, and for the use of such resources in
international trade and co-operation.
The key objectives of the National Energy Policy are:
1. To ensure the development of the nation’s energy resources, with a diversified energy
resources option, for the achievement of national energy security and an efficient delivery
system with an optional energy resource mix
2. To guarantee increased contribution of energy productive activities to national income
3. To guarantee adequate, reliable and sustainable supply of energy at appropriate costs and
in an environmentally friendly manner, to the various sectors of the economy, for national
development
4. To guarantee an efficient and cost effective consumption pattern of energy resources
5. To accelerate the process of acquisition and diffusion of technology and managerial
expertise in the energy sector and indigenous participation in energy sector industries, for
stability and self reliance

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6. To promote increased investments and development of the energy sector industries with
substantial private sector participation
7. To ensure a Comprehensive, integrated and well informed energy sector plan and
programmes for effective development
8. To foster international co-operation in energy trade and projects development in both the
African region and the world at large
9. To successfully use the nation’s abundant energy resource to promote international co-
operation

Following the approval of the Energy Policy, the Energy Commission of Nigeria developed a draft
Energy Masterplan to translate the provisions of the National Energy Policy into implementable
projects, activities and programmes. However, the Masterplan is yet to be approved by the Federal
Government.

2.3. Conventional energy sources

2.3.1. Oil
As at January 2007, Nigeria’s proven crude oil reserves were estimated to be 36.5 billion barrels,
the 10th largest in the world as shown in figure 2-9 below. Oil Exploration in Nigeria has grown
over the years from 25 billion barrels in 2004 to about 36.5 billion barrels in 2007.

300

250

200
Billion Barrels

150

100

50

0
s

ia
a

na
S
a

ar
a

an

l
t

te

zi
io
ai
I ra

I ra
bi

ad
by
el

er

at

a
ir a

hi
at

st
ra

zu

Br
ig

an
Li

C
kh
r
Ku
iA

de

N
ne

C
za
E
ud

Fe
Ve
ab

Ka
Sa

n
Ar

a
si
d

us
te

R
ni
U

Figure 2-6: Top 15 Crude Oil Reserve Holding Countries

In 2007, Nigeria was the world’s 11th largest producer of oil and the 7th largest oil producing
country with an output of 2.2 million barrels per day (moped) of crude. Nigeria is also the sixth
largest oil producing country amongst OPEC member states. Due to the Niger Delta crisis, oil
production had dropped to between 1.4mbpd and 1.5mbpd compared with 2.3 million bpd in
2006.Figure 2-10 below shows how Nigeria’s oil production has grown historically.

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Figure 2-7: Nigeria's Historic Oil Production and Reserves Growth (1988-2008)
Source: OPEC Annual Statistical Book, 2009

Crude Oil Exports

In 2008, Nigeria exported approximately 1.9 mob/d of its 2.17 million bbl/d of oil production. Of this,
about 44% was exported to the United States, making Nigeria the 5th largest foreign oil supplier to
the United States. The light, sweet quality of Nigerian crude makes it a preferred gasoline
feedstock. Consequently, disruptions to Nigerian oil production impacts trading patterns and
refinery operations in North America and affects world oil market prices.

Additional importers of Nigerian crude oil include Europe (25%), Brazil (7%), India (11%) and
South Africa (4%) as shown in figure 2-11 below.

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Figure 2-8: Breakdown of Nigerian Oil Exports, 2008

Crude Oil Refining

In the downstream oil sub-sector, Nigeria has four refineries with a combined installed capacity of
445,000 barrels per day (bpd). At optimum capacity, the output of the refineries will be 18million
liters daily. The combined capacity of these four refineries is insufficient to satisfy the domestic
consumption of refined products, which is largely premium motor spirit (PMS), estimated at 30
million liters daily. The refineries are currently operating far below their installed capacities due to
inadequate funding for their routine maintenance and sabotage of the facilities by militants. The
demand shortfall for petroleum products is therefore met through importation.

Table 2-1 below shows the installed capacities of the four (4) refineries in Nigeria.

Installed Year Expanded Year

S/N Refinery Capacity (bpd) Commissioned Capacity (bpd) Expanded

Port Harcourt
1. Refinery (1) 35,000 1965 60,000

2. Warri Refinery 100,000 1978 125,000 1986

3. Kaduna Refinery 100,000 1980 110,000 1986

Port Harcourt
4. Refinery (2) 150,000 1989 - -

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Table 2-1: Nigeria's Refineries and Installed Capacities

Nigeria’s downstream distribution facilities include 22 storage depots, 5,120 km pipeline network,
24 Pump Stations, nine (9) butanization depots with a total combined capacity of 12,000 MT, over
40 private depots, five NNPC jetties and a number of private jetties. Figure 2-12 below shows the
distribution of these assets.

Figure 2-9: Location of Downstream Assets in Nigeria

The distribution of refined products in Nigeria is carried out through more than 7,000 retail stations.
The retail system and the transportation facilities that bring the products to these outlets are
managed by the Pipelines and Products Marketing Company (PPMC). The storage and distribution
depots are linked to the refineries and port terminals by pipeline networks. Product distribution is
also done by a tanker service, which has been the focus of theft and diversion of shipments.

2.3.1.1. Institutional Structure of the Nigerian Oil Industry

The Nigerian National Petroleum Corporation (NNPC) dominates Nigeria's oil industry and is the
major partner in the upstream joint ventures with the major multinational petroleum exploration and
production companies in Nigeria.
NNPC, on behalf of Government, manages all government interests in the Nigerian Oil industry. In
addition to its exploration activities, the Corporation is involved in refining, petrochemicals and
products transportation as well as marketing. NNPC has 12 strategic business units, covering the
entire spectrum of oil industry operations: exploration and production, gas development, refining,
distribution, petrochemicals, engineering, and commercial investments.
The National Petroleum Investment Management Services (NAPIMS), one of the strategic
business units within NNPC, oversees the Federation investments in the Joint Venture Companies
(JVCs), Production Sharing Companies (PSCs) and Service Contract Companies (SCs).

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Five oil companies - Shell, ChevronTexaco, Mobil, Nigerian Agip Oil Company (NAOC) and Total
currently dominates the upstream oil industry in Nigeria. The Major players in the upstream oil
industry and their percentage contribution to the total crude oil production in 2007 are shown in
Figure 2-13 below.

Shell (JV),
16.87%
Others (PSC)
27%

Mobil (JV),
NAOC (JV),
24.68%
4.94%

Elf (JV), 9.88%

Chevron (JV),
15.75%

Shell (JV) Mobil (JV) Chevron (JV) Elf (JV) NAOC (JV) Others (PSC)

Figure 2-10: Key Players in the Nigerian Upstream Oil Industry

Source: www.nnpcgroup.com

The industry is regulated by the Department of Petroleum Resources (DPR), a department within
the Ministry of Petroleum Resources. The DPR ensures compliance with industry regulations;
processes applications for licenses, leases and permits, establishes and enforces environmental
regulations. The DPR, and NAPIMS, play a very crucial role in the day to day activities throughout
the industry.
The Petroleum Products Pricing Regulatory Agency (PPPRA) is responsible for determining the
pricing policy of petroleum products and regulating their supply and distribution. PPPRA manages
the Petroleum Support Fund (PSF) that was established to cushion the effects of high international
oil price on the domestic market.
The Nigerian gas market is dominated by a few major players as essential facilities such as gas
plants and pipelines are owned by the largest incumbents. While the Government owned
NNPC/NGC is dominant in the downstream sector, the Shell operated JV dominates the upstream
sector of the gas market.
In addition to the downstream, the Government also has significant holdings in the upstream with
an average of about 50% across the JVs and PSCs.

2.3.1.2. Key Challenges Facing the Nigerian Oil Industry

The Oil sector has been faced by various challenges which have undermined its development over
the years. These challenges include:

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Local Content
Investments in the Oil and Gas industry amount to billions of dollars annually to fund capital
projects and operating costs. Relative to comparative countries, Nigeria’s needs to enhance the
local value addition in the oil & gas industry by:
• Domiciling significant portions of oil and gas derivatives
• Increasing the contribution of the oil and gas sector to GDP growth in relation to the huge
investments and revenue earnings
• Enhancing local capacity and capabilities to provide services and material required in the
industry
While for instance Malaysia and Brazil have both attained 70% level of national content, Nigeria
struggles to attain 20% (see figure 2-14)

Figure 2-11: National Content Figures for Select Countries

Source: NNPC Presentations

To address this issue, NNPC developed a National Content framework, which incorporates the key
stake holders in achieving increased linkage of the petroleum sectors with other sectors of the
economy. NNPC also developed a broad National Content Implementation Agenda containing
twenty –two major initiatives that will enable the realization of the set national content targets.
Initiatives being planned and implemented include infrastructural upgrades like setting up deep
water ports, promoting world-class galvanizing plant, promoting local manufacturing of steel plates,
pipes and developing engineering design expertise in Nigerian engineers. An analysis shows that
Engineering, Fabrication, and Construction account for about 50% of planned spend on steel (~20
billion over 2005-2009), highlighting the importance of the steel industry in growing national content
in the oil and gas industry (see figure 2-15 below)

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Figure 2-12: Cumulative Oil and Gas Industry Spend by Activity (2005-2009)

The Government also introduced some directives to enforce local content in the industry. However,
the implementation of these directives needs to be enforced and monitored to ensure that Nigerian
human & material resources are utilized in the Oil industry.
Furthermore, a draft Nigerian Content Development Bill has been submitted by NNPC to the
Federal Government and is being reviewed by the National Assembly. The regulation which is the
responsibility of the Department of Petroleum Resources (DPR) will be in place once the bill is
enacted.
Some of the negative impacts from the current trends in local content:
• There is need to enhance the capacity of the Nigerian Content Division in NNPC to
enforce compliance.
• Prolonged process for enacting the NC Development Bill has affected the aspiration for
aggressive pursuit of the program.
• Equally the bill in the National Assembly that seeks monitoring of local content
adherence outside the ambit of NNPC (with responsibility for managing Govt.
Investment interest) and the supervising ministry creates significant worry for investors
and industry.
• Investors’ confidence in the programme is eroded by the general downturn in the
industry as some of the programmed projects that form the planning basis for
investment are either frozen or suspended due to misalignment.
• Indeed some of the investors are slowing down out citing conflicting message and
unfavorable competition with foreign companies and reneging on work guaranties by
IOC.

Security and Civil Unrest

The continuous security threat by Niger Delta militants has caused the Country’s Oil production to
decline over the years. The United States' Energy Information Administration estimates that
between December 2005 and December 2007, Nigeria lost an estimated $16 billion in export
revenues due to production shut-in.

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The impacts include:

• Substantial deferment of production volume
• Withdrawal of contractors
• Insurance premium and labour cost increasing
• NLNG declaring Force Majeure as result of Soku vandalization
• Cost impact

Funding - Industry Spend/Arrears

Federal Government funding of the industry has grown steadily over the years. The current
investment requirement is a major step-up translating into about $5 - $6 bn funding shortfall. The
major challenge however is bridging this funding gap. The Government recently introduced a frame
work for short term funding intervention which will help mitigate the challenge to some extent.
Efforts towards the resolution of the funding problem are progressing, however as crude prices are
falling, investments are not as attractive as in the last 3years. It is expected that a portion of total
arrears will be addressed by alternative funding arrangement; MCAs and bridge loans.
Institutional Reforms
Some of the critical issues regarding the institutional structure of the industry include:

Government clarity and optimum alignment of industry roles

Absence of clear strategy for maximizing value for the nation

Capacity and capability Building within institutions

Accountability and empowerment of institutions

Weak ethics / culture of performance
In order to effectively address these challenges and bring the industry in line with global trends and
standards, the current reforms now in the process of implementation will require significant
structural, legislative, commercial and operational changes. The present reform started with the
inauguration of the Oil and Gas Sector Reform Implementation in the year 2000, by former
President Olusegun Obasanjo. The work of the committee led to the preparation of the Draft
National Oil & Gas Policy in 2004.
The Oil & Gas Sector Reform Implementation committee was reconstituted in 2007 by President
Umaru Musa Yar’Adua under the chairmanship of Rilwanu Lukuman, and was charged with the
responsibility of implementing the National Oil and Gas Policy approved by the Federal Executive
Council, and to actualise the reform.
In pursuance of this, a Petroleum Industry Bill was drafted in line with the policy, as an all-
encompassing legislation to regulate major aspects of the Nigerian petroleum industry. The
Petroleum industry bill has passed through the second reading in the National Assembly and it is
expected to be passed into law soon.
Low Level of Domestic Technological Development
Nigeria needs to grow its technology capabilities as most of the technologies used in the oil
industry are imported for implementation. Technologies that are pertinent to the growth of the
industry need to be identified and required partnerships created, that will be the implementation
vehicles for the technologies.
Escalating Cost of Services

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JV Operators are faced with maturing fields with increasing production decline rates of about 10%/
yr and additional costs to rejuvenate existing field facilities. Also, EPC contract rates and labour
costs have been on the increase because of the security issue in the Niger delta.
For example, steel prices and rig rates have been increasing until recent times (see Figure 2-16
and 2-17 below)

Figure 2-13: Steel Prices Trend

Figure 2-14: Jack-up Rig Rates

OPEC Quota Allocation Mechanism

The call on OPEC is expected to grow at about 2% annually over the next few years. Average
OPEC capacity growth rate is similar at about the same level annually. If Nigeria’s crude oil
production continues to grow at the 2006 levels, then capacity growth will outstrip OPEC average
annual rate of growth. Given such distortion, a review of the OPEC quota allocation mechanism

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which takes cognizance of installed capacity is imperative if Nigeria is to monetize its crude oil
capacity increases.
Human Capacity Development
There is a dearth of skilled human capital in the oil and gas industry and there is a need to
introduce new blood into the industry as the industry is characterized by an ageing work force. This
problem is being faced in the global oil industry but it could become more visible and severe in
Nigeria as a result of the Niger Delta crisis.
Shortages in key skill pools can potentially become a major challenge as the industry transitions.
Key skills pools requirement include:
• Strategic management skills
• Project management
• Geosciences and petroleum engineering skills
• Vocational capabilities such as welding
Limited EPC Contracting Capacity
Currently there is a dearth of local EPC contracting capacity in Nigeria. Also due to the security
issues and Government policies, the global EPC contactors request for price premiums to bid for
projects in Nigeria leading to escalating project costs.
Environmental Degradation
Oil extraction in the Niger Delta region has caused severe environmental degradation, due oil
spills, loose environmental regulations, and government complicity during military regimes that
once governed the country. Although the situation is improving with more stringent environmental
regulations for the oil industry, marine pollution is still a serious problem.
Illegal Bunkering/Crude theft
Crude oil theft, or "bunkering", costs Nigeria billions of dollars in lost revenue every year. The
Nigerian government estimates the amount of oil stolen countrywide is as much as 100,000 barrels
a day. Oil theft has also contributed to a cycle of violence and disruption to exploration and
production activities in the Niger Delta region.

Inadequate Refining Capacity

Nigeria's refining capacity is currently insufficient to meet domestic demand due to low capacity
utilization. Nigeria's refineries (Port Harcourt I and II, Warri, and Kaduna) have a combined
capacity of 445,000bbl/day, but problems including sabotage, poor management and a lack of
regular maintenance contribute to the current problem of low capacity utilization below 40%. Figure
2-18 below shows the estimated PMS demand and supply in Nigeria.
Recently, the Government granted permits to several independently-owned refineries in Nigeria. It
is expected that the construction of private refineries will save Nigeria billions of dollars in costs of
importing refined petroleum products.

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Co m p aris on in D e m a nd & Su pp ly of PM S in N ig e ria

50
45
40
35
M il li on l ite rs

30
25
20
15
10
5
0
2005 2006 2 007 20 08 2009 2010 2 011 2012 2013 2014 201 5

P ro jec te d P MS in
D em and Ye a rs
E stim a ted P MS

Figure 2-15: Estimated PMS Demand and Supply

Source: NNPC Presentations

Refinery Inefficiency and Underutilization

None of the refineries in the country is currently working at full capacity and our demand for PMS is
rising resulting in a refining gap of about 800 kbpd. Significant investments will be required in the
current refineries and new Greenfield refineries to meet both domestic and international refining
gap.

To improve market fundamentals, our refineries must become more efficient and function at near
optimal capacity. They need to be performing at world class levels. In addition to this, new
(Greenfield) refineries must be encouraged using fiscal and regulatory measures.
Crude Oil and Petroleum products pipeline vandalization and militancy
Incessant vandalization of petroleum products pipeline occurs predominately along the following 3
axis:
• Port-Harcourt –Aba-Enugu-Makurdi
o Isialangwa, Isikwato, Isiagu and Ehume are worst hit areas
• Mosimi – Atlas Cove Pipeline
o Ilado, Ijegun, Navy Town, Imore, Arepo, Idimu, Abule-Egba, Abagbo, Itoikin,
Ogere and Ijeododo
• Warri – Benin – Auchi – Suleja
o Presco near Benin, Sakpoba, Okhai, Oghara, Oviri Court, Adeje, Okpella,
Aviele, Uluole, Iyamu, Oregha, River Ethiope, Osara, Igbonla and Abaji Areas

There are dangers posed by pipeline vandalization and they are:

Pipeline vandalism constitutes a national security threat as products are not able to get to the
desired destination thereby resulting in long queues, unrest and agitation

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Inefficient Supply and Distribution Network

The supply chain for petroleum products has its own peculiar challenges from transportation to
pump; they are summarized below:
• Tariff structure inadequate to cover expenditure - Sectoral reforms must encourage
funding and attract new investment in the downstream sector using an appropriate tariff
structure
• Inadequate and ageing vessels - Vessels need to be upgraded and increased
• Under funding - As with the upstream sector, under funding is prevalent in the
downstream and this must be resolved as well as improving investment
• Inadequate maintenance - Maintenance must be done timely and adequately to prevent
breakdown of equipment
• Inadequacy of jetty facilities at Apapa - Additional Jetty facilities need to be constructed
as the sole jetty point is overcrowded constantly resulting in delays
• Draft limitation affect Calabar, Warri and PH Operations
• Obsolete equipment - Equipment need to be upgraded and in some cases jettisoned.
New technologies should be acquired to ensure optimal performance.
• Storage limitations at Mosimi, Atlas Cove – Capacity for storage and product handling is
inadequate and these are crucial to optimizing product delivery. These stations have
inadequate storage capacity and there is the need to build more storage capacity.
• Inadequate pipeline network – The current pipeline network needs to be enhanced to
improve reach
• Mode of transportation - Transportation is mostly by trucks this is affected by road
networks, domestic incidences etc. Other methods of transportation needs to be
considered.
• Under-pumped markets at major developing cities- There are some major cities in
Nigeria that do not have sufficient number of petrol station vis a vis the population and
economy of the state e.g. Abuja
• Berthing constraints of Jetties - The berthing constraints of some jetties make it
mandatory that products be offloaded into smaller coastal vessels. This creates
additional costs to the operators, thus reducing their margins and rendering them less
competitive. (see table 2-2 below)

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Table 2-2: Vessel Draft Limits of Some Key Jetties in Lagos

Corporate Structure and Governance

A review of Refineries’ current operating model reveals major weaknesses relating to statutory
issues, capitalization and financing, revenue management, regulatory framework, legal framework
and decision-making timeline. The under listed as some the challenges with respect to the
structure:
• Refineries are limited by the NNPC Act from operating effectively and decisively as a
commercial entity. This is due to the fact that the board of Refineries and PPMC to do
not have the authority to make business decisions independent of NNPC.
• Low expenditure approval limits set for Refineries’ Management and Refineries’ Board
• Low and insufficient capitalization
• Low and insufficient investment
• Insufficient funding due to the company’s absolute dependence on NNPC for provision
of working capital
• Prohibition from external borrowing by the Refinery’s Article of Association
• Delay in the disbursement of funds for operations.

Lack of Investment in Downstream Refining

Global refining capacity is expected to rise to 116, 303mbbl/d by 2020 (Table 2-3). Recent studies
on global oil demand vis a vis refinery capacity incremental investment in refining has not been
maintained in consonance with demand. This dictates a compelling need for global investment in
refining. (see Table 2-3)

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Table 2-3: Global Oil Demand and Refining Capacity (mbbl/d)

Downstream sector reforms – market and price liberalization

The downstream sector is partially deregulated with NNPC being the dominant player. Price
liberalization is also incomplete with substantial subsidies in a high oil price regime. Although
PPPRA was established for moderating price volatility, there are some challenges with
administering the Petroleum Stabilization Fund (PSF).

Ownership of assets
The reforms regarding ownership of downstream assets are incomplete and are being
implemented in an adhoc manner. The status of the industry reforms with respect to supply and
distribution assets is as listed below:

Refineries
• Elastic debate on ownership and management structure
• Commercial refining management not yet enhanced

Pipelines
• Ownership and management structure consistent with liberalization of the sector
yet to be addressed

Private Depots
• Developments of private depots has taken place but they have not been able to
make significant impact because they are in strategic locations

It is imperative to address the issue of ownership and management structure of pipelines and
depots to pave way for common usage of assets in an open, transparent and non discriminatory
manner. Also earlier work on tariff for common asset usage needs to be completed.

Union/Group Action
The other Issues associated with the downstream sector are Union Strikes where Supply is
frequently disrupted by actions of NLC, NUNPENG and PENGASSAN and Truck Drivers Union.

Product Adulteration and Hoarding

Malpractices like product adulteration, hoarding, and unauthorized diversions are still prevalent in
the industry.

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2.3.2. Gas
Nigeria has the world's seventh largest gas reserves with 187 trillion cubic feet (TCF) of proven
reserves. The gas is of high quality, particularly rich in natural gas liquids (LPG and condensates).
To date, all the proven gas reserves were discovered as a result of oil exploration. Recently, a U.S.
Geological Survey (USGS) study estimated that the gas reserves potential in Nigeria could be as
high as 600TCF, the world’s fourth largest, with dedicated and focused exploration for gas. The
country is therefore believed to be a gas province with oil discoveries. Despite this potential, the
level of gas penetration and utilization in the country for both domestic and industrial purposes is
relatively low.

For years, most of the associated gas produced was flared and the initiatives implemented to
reduce flaring have not achieved the required results. Various flare out dates were set but as these
dates approached various reasons were adduced for a deferral. It is therefore ironic that despite
the country’s large gas reserves and gas flares, domestic gas demand, especially to power and
manufacturing sectors are not being met. Also, there is lack of infrastructure to allow the easy
movement of gas from the Niger Delta to the consumers. The existing gas pricing mechanism has
also not enabled investments. For Nigeria to achieve its planned 2020 position in the world, gas
must be the engine of growth through increased industrial and domestic use.

Figure 2-19 below shows Nigeria’s gas reserves relative to the other top reserve holding countries.

Figure 2-16: Top 20 Countries Natural Gas Reserves as at January 01, 2007
Source: Oil and Gas Journal
NNPC estimates that the domestic gas will grow aggressively to between 6BCFD and 10BCFD in
2010 from about 1BCFD in 2007. This demand is driven mainly by the growing power sector and
the planned investments in gas based industries such as methanol, fertilizer, etc. Also, the export
demand is expected to grow to 5BCFD in 2010 from about 8BCFD in 2010. The export demand is
driven by the planned LNG and gas utilization projects including NLNG additional trains (T7), Brass
LNG, Olokola LNG, Akwa-Ibom LNG, West African Gas Pipeline Project and the Trans-Saharan
Gas Pipeline Project. Figure 2-20 below shows Nigeria’s historical gas utilization and forecast
potential demand.

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Figure 2-17: Nigeria's Historical Gas Utilization and Forecast Potential Demand
Source: NNPC Gas Masterplan Roadshow Presentation
In light of a potential supply shortfall of about 5BCFD in the domestic market by 2010, a number of
strategic initiatives have been undertaken by FG, especially the domestic gas supply obligations.
The domestic gas supply obligation mandates the oil companies operating in Nigeria to set apart
some of the gas produced for supply to the domestic market.

Gas Exports
LNG Projects
Nigeria’s LNG is growing capacity rapidly and on course to being the second fastest growing LNG
capacity holder in the world, controlling about 30% of the total Atlantic LNG capacity. The only
currently operating LNG plant in Nigeria is NLNG but there are plans to build additional LNG
facilities.
Nigeria LNG
A significant portion of Nigeria’s natural gas is processed into LNG. Nigeria's most ambitious
natural gas project is the $11.4 billion NLNG facility on Bonny Island. Partners, including NNPC
(49%), Shell (25.6), Total (15%) and Agip (10.4%), completed the first phase of the facility in
September 1999. NLNG currently operates six (6) trains with a total production capacity of 22
MTPA per year. The facility is supplied from dedicated natural gas fields, but it is anticipated that
within a few years half of the natural gas feedstock will consist of associated (currently flared)
natural gas from existing oil fields.
Plans for building Train 7 that will lift the total production capacity to over 30 MTPA LNG by 2012,
are currently at an advanced stage.
Brass LNG
The planned Brass LNG project site is located on Brass Island in Nigeria's Bayelsa State. The
facility will consist of: two trains each with the production nominal capacity of 5MTPA of LNG;
facilities for liquefied butane and propane extraction, segregation, and treatment; two 185,000 m3
LNG storage tanks; two 110,000 m3 LPG storage tanks; one 500,000-barrel capacity NGL tank;

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marine facilities for the products export; and accommodation for plant operators. The project
shareholders are NNPC (49%), Total (17%), Agip (17%) and Conoco Phillips (17%).
Brass LNG products will be loaded onto vessels by cryogenic pipelines and then transported to
terminal facilities in the Atlantic Basin. The natural gas will then be transported to the United States
and Mexico. The project, estimated at about $8.5 billion, is expected to produce 10 MTPA of LNG
during its 20-year lifetime.
In 2007, a project management contract was signed with Bechtel Corp. of the United States. Their
responsibilities include site preparation, construction camp and construction dock, permanent
operator housing and amenities, marine facilities and support services, tankage, utilities and
offsite. The conceptual studies, front end engineering and design phases of the project are
complete but the final investment decision on the project is still yet to be taken.
Olokola LNG
The Olokola LNG project will consist of a marine berth for offloading LNG, along with four LNG
trains each with a 5.5 MTPA capacity. The first phase of construction completes two of the trains,
and the second completes the other two -- resulting in a 22 mtpa capacity. Located on the coast
between the Nigerian states of Ogun and Ondo, east of Lagos, the Olokola LNG project will
commercialize Nigerian gas, providing resources to Nigeria and exporting LNG to the world, as well
as reduce flaring. The project shareholders are NNPC (49.5%), Chevron (18.5%), Shell (18.5%),
and the BG Group (13.5%).
The participating companies signed an MOU concerning the Olokola LNG project in April 2005. In
March 2007, the companies signed a Shareholders' Agreement (SHA), covering the development
of the launch project and future expansions.
The ground breaking ceremony of the OK LNG project by former president Olusegun Obasanjo
marked a major milestone in the nation’s drive for gas utilization. The project, when completed will
lift the country’s earning from the current $2 - 3-billion to $10-billion yearly.
The final investment decision on the project is still yet to be taken.
Akwa- Ibom LNG
Akwa-Ibom State, StatoilHydro, Centrica and Consolidate Contractors Company has signed an
MoU for a $ 17 billion deal to build a new two Train LNG plant. The Akwa-Ibom Governor, Godwill
Akpabio, said the plant will be built on Tom Island in the southwest part of the state.
In November 2007, Centrica, Norway's StatoilHydro and Consolidated Contractors Company
announced a Memorandum of Understanding to assess the feasibility of the Akwa-Ibom LNG
projects. The MOU has the provision for StatoilHydro and Centrica each taking a 37.5 % interest in
the consortium, with Infrastructure Company, Consolidated Contractors holding 25%.
The feasibility study is estimated to cost about $10 million and would include analysis of potential
feed gas and LNG plant locations.

Regional Gas Export Projects

West African Gas Pipeline Project
The West African Gas Pipeline (WAGP) is a 678 km long pipeline from the gas reserves in
Nigeria's Escravos region of Niger Delta area to Benin, Togo and Ghana. It is the first regional
natural gas transmission system in sub-Saharan Africa. The project is designed to substitute

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natural gas from Nigeria for alternate fuels used by power, industrial, mining and commercial
sectors in Ghana, Togo and Benin Republic.
Operational start-up of the project is expected in December 2008, almost a year behind schedule,
with initial capacity of 200 mmcf/d of natural gas. The pipeline is expected to function at a full
capacity of 450 mmscfd within 15 years. The pipeline had originally been scheduled to start
operating in December 2007, but was delayed after leaks were detected in supply pipelines in
Nigeria, which needed cleaning and repair.
The project shareholders include the operator, Chevron Nigeria (36.7%), NNPC (25%), Shell
(18%), Ghana's Volta River Authority (16.3%), Togo's Societe Togolaise de Gaz (SoToGaz) (2%)
and Benin's Societe Ben Gaz S.A (SoBeGaz) (2%).

Trans-Saharan Gas Pipeline Project

Nigeria and Algeria continue to discuss the possibility of constructing a Trans-Saharan Gas
Pipeline (TSGP). The project, which stretches over a distance of 4,300 km across the Saharan
desert is to be shared among Nigeria (1,050km); Niger (750km), and Algeria (2,500km) is
estimated at about $21bn.The pipeline will carry natural gas from oil fields in Nigeria's Delta region
to Algeria's Beni Saf export terminal on the Mediterranean.
The Algerian state oil company, Sonatrach has been in support of the Trans-Saharan Pipeline
project, but the project hasn’t been able to get finances required for its construction.

Recently, the EU expressed its intention to promote the Trans-Saharan Gas Pipeline project as an
option to its current Russian supplies, by perhaps, helping to fund feasibility studies and playing a
coordinating role between host countries Nigeria, Niger and Algeria.

Equatorial Guinea Gas Supply

There are plans by NNPC to supply about 600-800mmscfd of gas to the Equatorial Guinea. This
gas is expected to feed into the EG LNG plant on Bioko Island. In return for the gas supply, two oil
blocks will be allocated to NNPC in the Equatorial Guinea open acreage. This is expected to drive
the internationalization of NNPC’s operations.
In 2006, NNPC and the Government of Equatorial Guinea entered into Heads of Agreement to
govern the supply of natural gas to Equatorial Guinea.
Escravos Gas – to - Liquid Project
Chevron Nigeria Limited (75% share) along with NNPC (25% share) is constructing a 34,000 bpd
Escravos Gas-to-Liquids (EGTL) plant in Escravos, Nigeria. The plant will be expanded to a
120,000bpd capacity within ten years of completion.
The proposed GTL plant will be capable of converting natural gas into premium environmentally
friendly fuel. Europe will be the primary market for all fuel products from the Nigerian plant,
although some products may be sold in the US.
Recently, the project has been under a lot of scrutiny and review by the Nigerian Senate due to the
astronomical hike in the project contract sum from $1.7 billion to $5.9 billion.

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2.3.2.1. Institutional Structure of the Nigerian Gas Industry

Gas is produced and treated by the various upstream players governed by joint ventures
agreements (JVs) and production sharing contracts (PSCs) with NNPC. Previously, only Chevron
and Shell had gas supply agreements with the Nigerian Gas Company (NGC), the single buyer of
gas from upstream producers to supply the domestic market. However, the recently approved
domestic gas obligation stipulates that all operators supply a portion of the gas produced to the
domestic market. The proposed Petroleum Bill also introduces a strategic gas aggregator who will
serve as an intermediary between the upstream suppliers and the downstream gas off takers. Shell
supplies some of its gas to SNG (Shell Nigeria Gas) in the Port Harcourt region for supply to
industrial customers.
NGC owns and operates the entire gas transmission system in Nigeria, providing gas transmission
services governed by gas transportation agreements. The company has gas sales and purchase
agreements with bulk industrial and commercial end users of gas. NGC also supplies gas to the
major gas distribution companies like Gaslink and Falcon gas.
The current structure of the Nigerian Gas Industry is as shown in Figure 2-21 below. The Federal
Government is however planning to restructure the industry with the passage of the Petroleum
Industry Bill.

Figure 2-18: Current Structure of the Nigerian Gas Industry

2.3.2.2. Key Challenges Facing the Nigerian Gas Industry

There are five key challenges confronting the Nigerian gas sector. These have had a strong impact
on the ability of the sector to grow as rapidly as the market opportunity dictates. These challenges
include:

Gas flaring
In 2004, 770BCF of Gas was produced in Nigeria. About 325BCF was consumed by the domestic
Gas and export markets while the remaining was flared.
Gas flaring is still a major issue in the Nigerian Gas industry as the country is ranked as the second
world’s largest Gas flaring country by the World Bank. Conservatively, about 40 % of Gas
produced is currently being flared. The previous Gas flare-out deadline set by the Government for
January 1, 2008 and subsequently, December 2008 was not met as a result of inadequate funds,
undeveloped domestic Gas market, the Niger Delta security situation and delayed completion of
Gas utilization projects. However, the Government has set a new date for end of December 2010.

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Whilst gas flaring is a local phenomenon, it is generally agreed that its impact is global and has
therefore received world attention.

Portfolio alignment/ domestic gas supply obligations

There is increasing conflict between IOCs’ portfolio preference and that of NNPC as the domestic
gas demand. IOCs continually underestimate the rising domestic market requirement thereby
creating tension as to reasonableness of domestic supply obligation (DSO). Appropriate pricing of
gas in the domestic market is also an issue in meeting domestic supply obligations.

Gas Pricing
The gas prices in the domestic market have been historically low relative to global prices.
Furthermore, the commercial and legal framework required to enable the supply of gas to the
domestic market are not in place. Thus, there have been cases of gas supply without payment for
years. This has eroded the confidence of gas suppliers in making huge supply investment in the
market.
In addition, the investments earlier made to supply the domestic markets have been put at risk as
many of the buyers, such as Aluminum Smelting Company of Nigeria (ALSCON), National
Fertilizer Company of Nigeria (NAFCON) folded up shortly after inception. For supply to be
sustainable, it has to be backed by both credible suppliers and buyers.
A sector based gas pricing framework has been developed and approved by the Government to
address the issue of commerciality. The framework segments the domestic market into three
categories, comprising power, strategic gas-based industries that use gas as feedstock (fertilizer,
methanol), and wholesale distributors, such as NGC and Gaslink who purchase wholesale gas for
onward distribution to low pressure commercial buyers.

Commercial Issues with Gas Supply to the domestic market

Other commercial issues which tend to create a drag from domestic gas utility include the
following:
• Outstanding debt by Govt. institutions in particular PHCN
• Inadequate Gas Sales / Purchase Agreement
• Securitization

Fiscal Policies
To ensure that there is a proper commercial regulatory framework for the gas sector, (including gas
development, provision of third party access, pipeline ownership and tariff structure, gas
transportation code etc)., the Government initiated a review of the existing fiscal and legislative
framework and developed a proposed Petroleum Bill and a Natural Gas Fiscal Reform Act
(NAGFRA). These draft acts have been submitted to the legislature. However, delays in the
passage of these critical legislature submissions are creating uncertainty in major projects, further
escalating the long term supply development.

Inadequate Gas Supply infrastructure

Existing infrastructure is completely inadequate for the evolving Nigeria Gas sector opportunities-
capacity, penetration; connectivity and flexibility are all problems with the current infrastructure.
(See Figure 2-22). For instance, while gas reserves are concentrated in the east, there is limited
connectivity with the north and the west where the market largely resides.

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Figure 2-19: Overview of Nigeria's Gas Pipeline Infrastructure

Financing of Gas Projects

Significant investments are required to deliver planned export and domestic Gas projects
opportunities. The history of non-payment for Gas in the domestic market –especially by the
government parastatals such as PHCN has served as a disincentive for investments in domestic
Gas supply by private investors. There is therefore a need for interventions to ensure revenue
security to private investors.
Limited Availability of Proven Reserves in the near term
Although estimated Proven reserves is about 187TCF, available proven reserves over a 20yr
horizon is limited to about 130TCF as the Gas Master Plan study shows significant reserves (about
50TCF) are gas cap gas which will only be available in the longer term i.e. about 15- 20yrs from
now. Equally additional gas reserves are also locked in the long term – solution gas which will be
available from later year oil production. With current estimate of reserves requirement in excess of
160TCF (see Figure 2-23) there is limited proven reserves availability in the short to medium term.

Figure 2-20: Gas Reserves Availability Breakdown

Source: NNPC Presentations

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Promotion of domestic LPG consumption

Over the years, Nigeria has been faced with acute shortage of Liquefied Petroleum Gas (LPG),
also called cooking gas. The breakdown of the refineries in the country resulted in the importation
of petroleum products to meet domestic demand despite the exportation of LPG from NLNG. The
inadequate LPG offloading jetties and storage facilities were identified as being responsible for the
inability of NLNG to supply LPG to the domestic market.
PSC commercial terms
The current legal framework for oil and gas development, the petroleum act, does not include any
specific fiscal terms for developing PSC gas. The petroleum act says that all PSC gas belongs to
the concessionaire, i.e. the Government, and that the fiscal terms for developing the gas must be
agreed between the concessionaire and the contractor. This has slowed down the pace of the
development of PSC gas in Nigeria.

2.3.2.3. LPG Supply and Distribution

The country is supplied LPG mainly by the four domestic oil refineries which have capacity to
produce a combined 400,000 MT of LPG per annum, but are operating well below this level. In
2001 output of LPG from the four refineries was 89,000 MT in total and this rose to 199,000MT in
2002, an increase of 123%.
In 1998, a Butanisation Project was embarked upon to boost LPG utilization nationwide. This
project envisaged a local distribution system to depend on local refinery output. Accordingly, nine
(9) LPG depots and handling facilities were constructed in locations across the country. Lagos
(Apapa) had the largest depot capable of 4,000 MT while all the other locations at Calabar, Enugu,
Gombe, Makurdi, Gusau, Kano, Ilorin and Ibadan had capacity of 1,000MT each. As at today,
though, all these facilities except Apapa have been mothballed, while the Apapa storage is used
for temporary storage by commercial importers. The failure of this initiative appears to have been
brought about predominantly by the irregular refinery output in recent years. Nevertheless, control
of these facilities can be a critical competitive advantage whenever LPG supply becomes steadier
in the Nigerian market.
In addition, 152 LPG plants were also privately developed in anticipation of a successful
butanisation project. These facilities are mostly moribund at present pending the reactivation of the
project or the improvement in supply of LPG to the local market.
In Nigeria, LPG is transported via LPG pipelines directly to rebottling facilities belonging to over
150 wholesalers located throughout the country. Retailers refill LPG bottles from plants and sell
locally to final consumers. This process creates a bottleneck as unloading LPG and transporting it
over long distances is time-consuming. This is contributory to supply shortage.
Other sources of LPG in the country include ExxonMobil and ChevronTexaco which also produce
LPG and NGL from their gas processing facilities in the south-eastern Port of Bonny and south-
western Port of Escravos respectively. Nigeria’s NLNG also recently entered into supply
agreements with local LPG companies for LPG supply from the plant in Bonny to the domestic
market.

Product Demand
Pricing plays a critical role in the penetration of LPG in the different markets around the world. In
Nigeria, the usage levels of LPG have been constrained by the historically lower prices of

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competing products such as household kerosene (HHK) and firewood. Over the years, prices have
continued to increase as a result of supply shortages, market demand and deregulation (see figure
2-24 below).

Figure 2-21: Trends in LPG Prices, 1997-2005

Source: ADCG Nigerian Oil Industry Report 2003

Other than rising prices, other constraints that could hinder the growth in effective demand for LPG
in the medium term include shortage of steel bottles, technical problems with refinery extraction,
loading, bulk storage and transportation of LPG.

The declining consumer income, availability of cheaper substitute products such as wood and HHK
and the relatively high retail price of LPG have contributed to Nigeria’s low per capita consumption
that amounted to 0.82 kg in year 2000. This comparison is shown in the Figure 2-25 below.

35
30
25
20
Kg

15
10
5
0
re
n

ia
ia
na

na

on
t
yp
oo

di

oi
es
er
ha

ab
hi
In

Eg

Iv
er

ig

C
G

D'
do
N
m
Ca

In

e
ot
C

Figure 2-22: Country Comparison of Per Capita Consumption of LPG

Source: ADCG Nigerian Oil Industry Report 2003

The low consumption of LPG in comparison to countries in similar socio-economic bracket

suggests that given adequate availability and pricing, LPG has a promising potential for growth in
the Nigerian market.

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2.3.2.4. Linkages with the Petrochemical Industry

The petrochemical sector in Nigeria has suffered considerably since 2006 due to rebel attacks
affecting the country's four oil refineries. The two refineries, on which much of the petrochemicals
production depends, at Kaduna and Warri, have been out of operation since early 2006.
Local production of a wide range of chemicals is vital to Nigeria as it would help substitute products
currently being imported at high cost, thus saving hard currency. Exports to nearby countries would
generate income much needed in the downstream sector for expansions, maintenance, spare-
parts, etc.

2.3.2.5. Ongoing Government Interventions to Grow the Nigerian Oil and Gas
Industry
The FG is implementing specific initiatives targeted at addressing some of the issues identified in
the Energy sector.
These Initiatives include;
• Industry Reforms
• The Nigerian Gas Masterplan
Industry Reforms
The OGIC (Oil and Gas Reform Implementation Committee) was set up to address the
ineffectiveness of the institutional arrangements in the oil and gas sector in Nigeria.
At the completion of its assignment, the OGIC submitted its report to Government with
recommendations for the full deregulation of the sector and the review and harmonization of the
laws governing the sector. It proposed the transformation of NNPC into an independent liability
company to enable it to concentrate on its principal commercial function instead of the number of
roles that it is presently saddled with.
The committee also proposed the creation of the National Petroleum Directorate to replace the
Federal Ministry of Petroleum Resources, the replacement of the Directorate of Petroleum
Resources (DPR) with the Nigerian Petroleum Inspectorate and the replacement of the PPPRA
with the Petroleum Products Regulatory Agency.
The recommendations of the OGIC report have been used as a basis for the proposed Petroleum
Bill to give legal backing to the reforms being initiated by OGIC for proper implementation.

The Nigerian Gas Masterplan

In 2005, the Nigerian National Petroleum Corporation (NNPC) initiated the development of a Gas
Masterplan. The plan is aimed at maximizing the value of Nigeria’s gas resources in the export and
domestic market. The resulting gas master plan has the following three main objectives:

i. Maximize the multiplier effect of gas in the domestic economy

ii. Optimise Nigeria’s share and competitiveness in high value export markets
iii. Assure a long term gas security for Nigeria

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The Nigeria Gas Masterplan was approved by the Federal Government in February 2008, and
consists of the following frameworks;

– Legislative and Fiscal Reforms

– Gas Pricing
– Gas Supply Obligation and Portfolio Rationalisation
– Infrastructure Blueprint
– Domestic LPG Development Strategy
– Gas Agreement Standardisation
Legislative and Fiscal Reforms
The Government is proposing the introduction of the Petroleum Bill to address the legal, regulatory,
institutional and policy constraints to investments in the downstream gas sector.
The Petroleum Bill outlines provisions for the following:
– Establishment of a Strategic Gas Aggregator
– Functions and Powers of the Minister for Petroleum Resources
– Establishment of a Gas Regulatory Commission for Commercial Regulation (access
codes, tariffs etc)
– The Licensing Regime
– Unbundling of the Nigerian Gas Company (NGC) into Transmission and Marketing
Companies
– Third Party Access
– The Pricing Regime
– Customer Protection & Public Service Organisations
– Competition & Market Regulation
To ensure that Nigeria receives an appropriate share of the rent generated from the production and
utilisation of natural gas resources, a new fiscal regime, the Natural Gas Fiscal Reform Act
(NAGFRA), for the development of gas is being proposed.
It is expected that NAGFRA will stimulate participation of new players in the Nigerian gas sector
and ensure that government revenues are aligned with expenditure in the sector for broader
economic growth.
Gas Pricing Framework
From a gas pricing strategy perspective, Government has grouped the entire domestic demand
into three broad groupings. This grouping is in recognition of the fact that the different demand
sectors have different strategic benefits to the country and different pricing considerations. Fig. 2-
26 below presents the 3 categories. All demand sectors will fall into these categories.

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Figure 2-23: Grouping of Gas Demand Sectors in the Approved Gas Pricing Framework

The groupings are:

• Strategic Domestic Sector – This refers to a very limited set of sectors that have a
significant direct multiplier effect on the economy namely the Power Sector (residential and
light commercial users) or other sector that the Honourable Minister for Energy may from
time to time consider applicable. The strategic intent in gas pricing is to facilitate and
ensure low cost gas access to these sectors in order to spur rapid economic growth.
• Strategic Industrial Sector – This refers to industries that utilise gas as feedstock in the
production of value added products that are primarily destined for export or in some cases,
consumed locally. Strategically, these sectors ensure that value is added to Nigerian gas
before it is exported. The process of value addition ensures industrialisation, job creation
etc. Typical projects in this group are Methanol, GTL and Fertilizer. For this sector, the
strategic intent in pricing is to ensure that feed gas price is affordable and predictable in
order to ensure competitiveness of the products in international markets in the face of
competition from other gas producing countries such as Qatar, Trinidad etc. that provide
gas at very low prices to buyers.
• Commercial Sectors – This refers to sectors that use gas as fuel as opposed to feedstock.
Unlike the two previous classifications, projects in this category are a potential major direct
revenue earner for Nigerian gas in view of their capacity to bear high gas prices as the
competing alternative fuel is LPFO. Typical sectors in this category include cement and
domestic manufacturing industries, industrial Power etc.
The gas pricing framework being proposed is a transitional pricing arrangement. When the
domestic market is fully developed and an alternative pricing approach will be developed.
The gas pricing framework stipulates a pricing regime for various demand sectors ranging from a
floor price of about $0.1/mcf for the strategic domestic sectors to over $2/mcf for the commercial
sectors. All suppliers of gas in the country will be paid the aggregate domestic gas price. The
Aggregate Domestic Gas Price is the forecast average domestic price based on the projected total
domestic demand portfolio using the relevant prices proposed by this framework. A target
aggregate price will be set by the Gas Regulator based on the known portfolio of domestic

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demand. The portfolio will be balanced continually to ensure that the aggregate price does not fall
below the threshold. In essence, the suppliers have a fixed price whilst the buyers will pay the
sector price proposed in the framework. The aggregate pricing will ensure that regardless of their
geographical location all suppliers are able to benefit from the high priced customers as well as
from the low priced buyers. The aggregate price will ensure that the suppliers receive an
acceptable return for their domestic obligation.
A strategic aggregator will manage the implementation of the domestic reserves and production
obligation and the aggregate price. It will ensure a balanced growth of the domestic portfolio such
that the target minimum aggregate price is achieved whilst not compromising the nation’s primary
objective for economic growth by ensuring the availability of adequate volumes of gas to the
strategic domestic sectors. Conceptually, the strategic aggregator acts as a one stop intermediary
point between the suppliers and the diverse demand sectors and will ensure that gas is supplied at
the aggregated price.
In July 2009, The Minister of Petroleum Resources gave the approval for setting up the strategic
aggregator company, which would be a limited liability company and would have exclusive rights to
perform the duties of an aggregator as outlined in the Nigerian Gas Master Plan, for an initial
period of five years. It is expected that the company will be subject to strict regulatory oversight by
the proposed Mid-Stream Regulator anticipated in the Petroleum Industry Bill (PIB). However,
pending the establishment of such regulator, the office of the Minister of Petroleum Resources will
carry out all necessary oversight roles in respect of the company.
NNPC given its role as the most dominant gas supplier will coordinate the Joint Venture partners
and other relevant stakeholders to formalize the proposed company that will be the strategic
aggregator.

Gas Supply Obligation and Portfolio Rationalisation

To facilitate the availability of gas for various demand sectors, the Government has introduced a
domestic gas supply and reserves obligation that will be imposed on all operators in the country.
The domestic gas obligations will require all gas (AG and NAG) asset holders will to dedicate a
specific proportion of their gas reserves and production for supply to the domestic market.

The reserve obligation will be broken down annually to a production obligation for the same period.
The sum total of all obligations will equal the planned domestic requirement for the stated period.
Periodical reviews to the domestic obligation will take place to reflect the changing demographics
of the demand and supply landscape i.e. new demand will be allocated accordingly as new
suppliers come on stream.

It is expected that the allocation of the obligation across operators will be based on the principles of
equity to be determined by the Minister.

Gas Infrastructure Blueprint

An infrastructure blueprint has been developed to ensure connectivity between major gas reserve
sources and the demand centres. The blueprint is aimed to reducing the overall cost of
infrastructure development by exploring synergies across JVs and leveraging most of the existing
infrastructure. The fundamental strategy is the creation of a gas infrastructure that supports the
supply of gas to the domestic, regional and international markets. This approach provides for
flexibility of supply, and cost effectiveness.

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At the core of the proposed infrastructure are three (3) gas gathering and processing systems each
of which will gather gas across a delineated area, process the gas to a national specification and
transport the dry gas into the network of gas transmission systems. The processing facilities will
enhance the LPG capacity in the country and hopefully address the issue of LPG availability within
Nigeria.
The three proposed transmission systems, part of which is already in place, are
– The Western transmission system comprising the existing Escravos-Lagos Pipeline
System (ELPS) and a proposed offshore extension
– The South-North system from Calabar/Akwa-lbom through the East to Ajaokuta and
then to Abuja and Kano. This will ultimately progress to be the Trans-Saharan
pipeline when mature
– The Inter-connector system from Ob-Ob to Oben and then to Ajaokuta. This will be
the link line between the East, West and the South-North
With the proposed network of infrastructure, the ability to supply gas will increase rapidly and
flexibly, and Nigeria will be better positioned to respond to growth in demand both domestically,
regionally and for export.
Please see figure 2-27 below for a copy of the approved Infrastructure map. An enlarged picture of
the map can be obtained at www.ngmproadshow.com.
Private sector participation is expected to be significant in the delivery of these infrastructure
elements. 15 Companies have been shortlisted from an initial 48 firms that had expressed interest
in investing in Nigeria's gas sector based on their technical, operational, financial and project
management capabilities. Some of the shortlisted Companies include Shell, Chevron Corp, Exxon
Mobil, Gazprom, Gail India, Eon, Centrica and Statoil Hydro.

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Figure 2-24: The approved Nigerian Gas Infrastructure Map

Domestic LPG Development Strategy

In response to the shortage of LPG supply in the domestic market, NLNG has offered to enter into
a charter and management contract with Caverton Marine to provide a mother ship capable of
lifting LPG from the NLNG jetty in Bonny and effecting ship-to-ship transfer to shuttle tankers that
will move the products to the jetties. NLNG pledged to supply 13,000MT of LPG to the local market
and has signed contracts with indigenous firms for steady and reliable supply.
The six (6) local companies appointed by NLNG as off-takers are; Harig, Hyson, LeGlobal,
Chimons, Linetrade and Greenfield. Together with NLNG, these companies have developed a
short-term, workable approach, which will ensure reliable and affordable delivery of LPG to
consumers.
Gas Agreement Standardisation
Standard templates for gas supply and purchase agreements (GSPA) and gas transportation
agreements (GTA) have been developed to address the issue of bankability. The GSPA will define
the minimum requirements for gas supply for the domestic market. This will include: credit
guarantees, take or pay terms etc. Also, a World Bank scheme is being developed to securitize
payments for gas supplied to Government owned plants.

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It is expected that these efforts will put in place an acceptable legally binding and template for
commercial supply agreements in the Domestic gas sector.

2.3.3. Coal
Coal of sub-bituminous grade occurs in about 22 coal fields spread in over 13 states of the
Federation, including Adamawa, Anambra, Bauchi, Benue, Cross-River, Edo, Enugu, Gombe, Imo,
Kogi, Kwara, Nassarawa, Ondo and Plateau states. The proven coal reserves so far in the country
are about 639 million tones while the inferred reserves are about 2.75 billion tones consisting
approximately of 49% sub-bituminous, 39% bituminous and 12% lignitic coals. Coal deposits are
found in Nigeria.
Coal mining in Nigeria started in 1906 and recorded an output of 24,500tons in 1916. Production
rose to a peak of 905,000 tons in 1958/59 with a contribution of over 70% to commercial energy
consumption in the country as shown in figure 2-28 below. Following the discovery of crude oil in
1958 and the conversion of railway engines from coal to diesel, production of coal fell from the
beginning of the sixties to only 52,700 tonnes in 1983. Currently, coal is not part of the country’s
energy consumption mix as shown in Figure 2-7 above.

Figure 2-25: Coal Production in Nigeria (1916 - 2002)

Source: Ministry of Mines and Steel Development

S/ Mine State Type Estimated Proven Borehol Coal Depth Mining

N Location of Reserves Reserv e Outcrop of Method
coal (Mil. T) es Records and seam coal
(Mil. T) Thickness (M)
(M)
1 Okpara Enugu Sub- 100 24 20 Many 180 Underground
Mine Bituminous (1.5m)
2 Onyeama Enugu Sub- 150 40 Many Many 180 Underground

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S/ Mine State Type Estimated Proven Borehol Coal Depth Mining

N Location of Reserves Reserv e Outcrop of Method
coal (Mil. T) es Records and seam coal
(Mil. T) Thickness (M)
(M)
Mine Bituminious (1.5m)
3 Ihioma Imo Lignite 40 N.A Nil Many 20-80 Open-cast
4 Ogboyog Kogi Sub- 427 107 31 17 20-100 Open-cast/
a Bituminous (0.8.2.3m) Underground
5 Ogwashi Delta Lignite 250 63 7 4(3.5m) 15-100 Open-cast/
Azagba/ Underground
Obomkpa
6 Ezimo Enugu Sub- 156 56 4 (10.06- 30-43 Open-cast/
Bituminous 2.0m) Underground
7 Inyi Enugu Sub- 50 20 4 (0.9-2.0m) 25-78 Open-cast/
Bituminuos Underground
8 Lafia/Obi Nassara Bituminous 156 21.42 123 Nil (1.3m) 80 Underground
wa (Cokable)
9 Oba/Nne Anambr Lignite 30 N.A 2 14 18-38 Underground
wi a (0.3-4.5m)
10 Afikpo/Ok Ebonyi/I Sub- 50 N.A Nil N.A 20-100 Underground
igwe mo Bituminous
11 Amasiod Enugu Bituminous 1000 N.A 3 N.A. 563 Underground
o (Cokable)
12 Okaba Kogi Sub- 250 3 Many (0.8-2.3m) 20-100 Open-cast/
Bituminous Underground
13 Owukpa Benue Sub- 75 57 Many (0.8-2.3m) 10-100 Open- cast
Bituminous
14 Ogugu/A Enugu Sub- N.A. N.A. Nil N.A. N.A. Underground
wgu Bituminous
15 Afuji Edo Sub- N.A. N.A. Nil N.A. N.A. Underground
Bituminous
16 Ute Ondo Sub- N.A. N.A. Nil N.A. N.A. Underground
Bituminous
17 Doho Gombe Sub - N.A N.A Nil N.A. N.A. Underground
Bituminous
18 Kurumu Gombe Sub - N.A N.A Nil N.A. N.A. Underground
Bituminous
19 Lamja Adama Sub - N.A N.A Nil N.A. N.A. Underground
wa Bituminous
20 Garin Bauchi Sub - N.A N.A Nil N.A. N.A. Underground
maigungu Bituminous
21 Gindi Plateau Sub - N.A N.A Nil N.A. N.A. Underground
Akwati Bituminous
22 Jamato Kwara Sub - N.A N.A Nil N.A. N.A. Underground
koji Bituminous
Table 2-4: Existing Potential Mine Sites with Reserves in Nigeria
Source: www.methanetomarket.org

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Nigerian coal is of very high quality suitable for fuel in power generation, cement and steel
production, brick factories, foundries, laundries and bakeries, tire manufacture, battery
manufacture, and domestic cooking fuel (i.e., smokeless coal briquettes).
In 2005, the percentage contribution of coal to electricity generation in Poland, South Africa, China,
India, USA and Israel were 93%, 93%, 78%, 70%, 50% and 71% respectively. Globally, within the
same period, coal contributed about 23% of world’s primary energy consumption and 40% of
electricity generated. It is projected that coal will continue to play a large and indispensable role in
an environment conscious world; the challenge for governments and industry is to use coal within
sustainable development context of higher efficiencies and lower emissions taking advantage of
the clean coal technologies.
The Nigerian Minerals and Mining Act 2007, the National Energy Policy and the draft National
Energy Masterplan include provisions for the development and utilization of coal for electricity
generation and other uses but these policies have not been fully implemented.

2.3.3.1. Institutional Structure of the Nigerian Coal Industry

From the onset of coal production in Nigeria, the Nigerian Coal Corporation had been the only
institution active in the coal industry. In 1990, the Federal Government approved the full
commercialization of the corporation. During the last decade, joint venture arrangements with
foreign partners have been developed for the exploitation of some of the coal deposits.

2.3.3.2. Key Challenges facing the Nigerian Coal Industry

The nation’s coal industry faces some daunting challenges, which need to be addressed if the
potential for coal utilization is to be optimally exploited. These include;
• Uncertainties in the actual reserves of coal on which long-term projects could be based
• Creating and finding markets for the coal,
• Low productivity of the coal mines
• Reducing cost of production through mechanization
• Absence of a cost-effective transportation system through an expansion of the rail system
and port facilities for the export of coal
• Low level of mechanization of production facilities

2.3.4. Nuclear Energy

Nuclear energy is one of the major sources of base load electricity generation in the world today.
The technology for harnessing nuclear energy demands great responsibility and expertise.
Therefore, it requires careful planning of the manpower development and material resources.

Coordinated approach to research, training and development in the areas of nuclear science and
technology in Nigeria started in 1977 when nuclear energy research centers were established in
two Universities. Another nuclear science and technology centre was also established in 1993. The
few trained personnel in the area are concentrated in these centers. There is therefore an urgent
need to accelerate the manpower development programme in view of the diverse peaceful
applications of nuclear energy.

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Crucial to any nuclear programme is the availability of nuclear minerals such as uranium and
thorium. In 1947, pyrochlore containing uranium was found in appreciable quantities on the Jos
Plateau and its environs, but there is still no established method of commercial extraction of the
uranium. By 1979, about 617,000 km2 of land area had been covered by aerial radiometric surveys
and another 90,000 km2 had been covered by other surveys. Since then no further work has been
done.

There is the need to extend investigations to other areas of the country suspected to have traces of
any of the radioactive minerals. Uranium ores are complex assemblages of minerals and therefore
differ widely in details of composition and texture. The characterization of the known uranium ore
minerals in the country has been carried out. There is however the need to develop the extraction
processes for each of them, on the basis of which a commercially viable pilot plant could be
established.

In addition to the generation of electricity, nuclear energy finds many other peaceful applications. In
fact, it has been in use in the country for decades for various peaceful applications in health care
delivery system, petroleum industry, agriculture, food preservation, animal husbandry, water
resources management, pest control, industry, materials analysis, and mineral exploration. All
these applications will be enhanced by the commissioning of the recently acquired nuclear
research reactor and the completion of the nuclear accelerator project and the industrial irradiator.

The Nigerian Nuclear Regulatory Authority (NNRA), established in 2001 is responsible for nuclear
safety and radiological protection regulation in Nigeria.

Recently, in June 2009, Russian and Nigerian leaders signed a memorandum of understanding to
cooperate on peaceful nuclear development. The agreement calls for Russia's state-owned
Rosatom to help Nigeria build its nuclear energy infrastructure. It also calls for developing capacity
in licensing, siting, design, construction and operation of nuclear power plants.

Also included is a partnership in exploring for uranium and developing uranium fields.

2.4. Renewable energy sources

Renewable Energy development in Nigeria has been slow in the absence of a comprehensive
framework to plan, coordinate and implement a national policy and strategy. Also, there are no
clear and consistent institutional champions to address barriers and create expanded opportunities
for renewables. Several ad hoc initiatives are currently being undertaken by various actors.
The Energy Commission of Nigeria has a few technology-driven pilot projects on solar PVs, two
wind power demonstration projects located in Sokoto, and a small hydro plant that has been
operating in Jos for several years. Vast opportunities for small hydro remain untouched. Recently
several state governments have embarked on solar projects for rural water supply, residential
lighting and lighting of clinics, schools and community centers.

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2.4.1. Key Challenges facing the development of renewable energy sources in

Nigeria
Some of the key challenges facing the development of renewable energy sources in Nigeria
include:
Policy, Legal and Regulatory Framework
The focus of national policy has consistently been on developing conventional energy sources for
electric power generation. Several incentives were established to promote investments in
conventional power generation. Subsidizing grid power has so far not encouraged investments in
alternative energy solutions. This lack of a level playing field for all energy sources and
technologies has constituted a formidable barrier to the growth of alternative electricity services.
Under the 2005 Act, independent power producers are permitted to operate, however, the legal
framework for successfully implementing PPA is still evolving. The perception of significant
regulatory risks by potential investors and financial institutions compound the challenges faced by
potential renewable electricity investors. Moreover, guaranteed access to the grid is an important
element of an investment decision to embark on grid-connected power projects. At present, a non-
discriminatory open access to the national electricity grid, for renewable power, is not assured.
Achieving adequate energy supply where renewables play a role necessitates the creation of
appropriate policy framework of legal, fiscal and regulatory instruments that would attract domestic
and international investments. Clear rules, legislation, roles and responsibilities of various
stakeholders along every stage of the energy value chain from supply to end-use are key elements
of the overall policy framework needed to promote renewable energy technologies.
Non-existing Framework for Power Purchase Agreements (PPA)
Currently there is no PPA framework for renewable energy generation to the grid. A system of
rational expectations between renewable electricity producers and the grid operators are an
imperative for the growth in grid-based renewables. The PPA sets the terms by which power is
marketed and/or exchanged. It determines the delivery location, power characteristics, price,
quality, schedule, and terms of agreement and penalties for breach of contract.
Legally binding long-term PPAs provide comfort to the developers as well as lenders, and would
also encourage the expansion of renewable electricity development through investments.
Institutional Framework
In Nigeria, coordination between Government Ministries and Agencies responsible for rural
development and renewable energy development is weak and rather complex.
Unlike oil and gas, no agency has a clear mandate to oversee the development of renewable
energy. The lack of a clear champion robs the sector of a driving force for its growth and
development.
Affordability
Even though renewables have low operation and maintenance costs, most renewable energy
technologies have high up- front capital cost compared to their conventional energy alternatives.
Apart from the higher capital costs, most renewable energy technologies (RET) face the barrier of
being perceived as untested technologies. Given these twin barriers to RET, investors face higher
risks and uncertainties when making investment decisions. Therefore in a capital constrained
economy like Nigeria, where there are many competing demands for available scarce capital
resources, the promoters of RET face the problems of high transaction costs and restricted access
to capital.

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End users of RET, especially the poor, face problems of access to credit. Lack of access to micro
financing, high interest rates, poor business development skills by system vendors and
unsupportive climate for investments are some of the primary barriers to market growth.
Capacity
Human and institutional capacity building at all levels would be required to sustain the scientific,
engineering and technical skills relevant for the design, development, fabrication, installation and
maintenance of RET. In particular, capacity building in four areas are most lacking, namely; training
of manpower to install, operate and maintain RET, development of manufacturing capabilities,
development of critical mass of scientists, engineers, and economists, and design and effective
functioning of institutional framework.
Public Awareness
Awareness of the opportunities offered by renewable energies and their technologies is low among
public and private sector stakeholders. This lack of information and awareness creates a market
distortion that results in higher risk perception for potential renewable energy projects. The general
perception is that RETs are not yet mature technologies, hence are only suited for niche markets
and even then will require heavy subsidy to make it viable.
There is therefore a need for dissemination of information on RE resource availability, benefits and
opportunity to the general public in order to raise public awareness and generate activities in the
sector. Such process is key to building public confidence and acceptance of RET. Providing
information to selected stakeholder groups like the investors can help mobilize financial resources
needed to promote RET projects.
The Renewable Energy Master Plan proposes the set up of a National Renewable Energy Agency
(NREA), which together with non-governmental organizations (NGOs), can assist in increasing
public awareness and providing information and assistance to interested stakeholders.
Poorly Developed Cross-sectoral Linkages
In some of the most successful renewable energy programs, it is an imperative that key sectors of
the economy drive the demand for renewable power production. In Nigeria, renewable energy is
inadequately linked to key drivers of the national economy such as the growth in small and medium
enterprises, growing demand for water supply, developments in the telecommunication industry
and the drive towards integrated rural development. Developing these cross-sectoral interfaces is
crucial to expanding renewable energy opportunities.
Standards and quality control
A major constraint to the development of the renewable energy market in Nigeria is the poorly
established standard and quality control of locally manufactured and imported technologies.
Creating quality assurance is a precondition for building consumer confidence and in growing the
market for renewable energy. Two important dimensions to issues of quality include the perception
of potential users, poorly developed regime for standards setting, testing and certification as well
as professionalism among operators.
Inadequate resource assessment
The growth of the renewable power industry will depend to a large extent on the availability of a
solid resource database. Reliable and up-to-date sources of data will assist investors in making
decisions on renewable electricity.
Intermittency of resource availability

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An underlying barrier affecting all renewable electricity resources is the intermittency of their
availability. The challenge of energy storage and system management presents a major challenge
and adds to the complexity and costs of renewable electricity.
The Policy Guideline establishes a framework to addresses the above barriers. It creates
measures that enable market expansion and private sector participation in renewable electricity
business. It further facilitates grid-connected and off-grid operations as well as increased role for
renewable electricity in rural electrification.

2.4.2. Hydropower
Nigeria is endowed with abundant water resources. Hydropower is one of the major sources of
base load electricity generation. Despite its high initial capital cost, hydropower provides one of the
cheapest and cleanest sources of electricity. The country is well endowed with large rivers and
some few natural falls which are together responsible for the high hydropower potential.

Hydropower is derived from the potential energy available from water due to the height difference
between its storage level and the tail water to which it is discharged. Power is generated by
mechanical conversion of the energy into electricity through a turbine, at a usually high efficiency
rate. Depending on the volume of water discharged and height of fall, hydropower can be large or
small. Although there may not be an international consensus on the definition of small hydropower,
an upper limit of 30MW can be considered for small hydropower.

Many dams were constructed and operated by the Government. Examples of these large
hydropower dams are the Kainji(760MW), Jebba (640MW) and Shiroro power stations (600MW)
which supply about 30% of the installed commercial electric power capacity, see Figure 2-29 below
for their locations.

Figure 2-26: Location of Hydropower Dams in Nigeria

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Source: www.hydroworld.com

The total technically exploitable large scale hydropower potential of the country is estimated at over
10,000MW (see table 2-5), capable of producing 36,000GWh of electricity annually. Only about
one-fifth of this potential had been developed as at 2000. The small scale hydropower potential is
estimated at 734MW as shown in figure 2-6. Current hydropower generation is about 14% of the
nation’s hydropower potential and represents about 30% of the total installed grid-connected
electricity generation capacity.

Location River Potential Capacity (MW)

Donka Niger 225
Zungeru II Kaduna 450
Zungeru II Kaduna 500
Zurubu Kaduna 20
Gwaram Jamaare 30
Izom Gurara 10
Gudi Mada 40
Kafanchan Kongum 5
Kurara I Sanga 25
Kurara II Sanga 15
Richa II Daffo 25
Richa I Mosari 35
Mistakuku Kurra 20
Korubo Gongola 35
Kiri Gongola 40
Yola Benue 360
Karamti Kam 115
Beli Taraba 240
Garin Dali Taraba 135
Sarkin Danko Suntai 45
Gembu Dongu 130
Kasimbila Katsina Ala 30
Katsina Ala Katsina Ala 260
Makurdi Benue 1,060
Lokoja Niger 1,950
Onitsha Niger 1,050

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Location River Potential Capacity (MW)

Ifon Osse 30
Ikom Cross 730
Afokpo Cross 180
Atan Cross 180
Gurara Gurara 300
Mambilla Danga 3,960
Total 12,220

Table 2-5: Estimate of Current Exploitable Hydropower Sites in Nigeria

Source: Renewable Energy Masterplan, Energy Commission of Nigeria, 2005

S/n State (pre 1980) River Basin Total Sites Total Capacity (MW)
1 Sokoto Sokoto – Rima 22 30.6
2 Katsina Sokoto – Rima 11 8
3 Niger Niger 30 117.6
4 Kaduna Niger 19 59.2
5 Kwara Niger 12 38.3
6 Kano Hadeija – Jamaare 28 46.2
7 Borno Chad 28 20.8
8 Bauchi Upper Benue 20 42.6
9 Gongola Upper Benue 38 162.7
10 Plateau Lower Benue 32 110.4
11 Benue Lower Benue 19 69.2
12 Rivers Cross River 18 258.1
Total 277 734.2

Table 2-6: Small Hydro Potential in some States in Nigeria

Source: Renewable Energy Masterplan, Energy Commission of Nigeria, 2005

2.4.3. Solar Energy

Nigeria lies within a high sunshine belt and, within the country solar radiation is fairly well
distributed. The annual average of total solar radiation varies form about 12.6MJ/m2-day in the
coastal latitudes to about 25.2MJ/m2-day in the far north. Solar energy is renewable and its
utilization is environmentally friendly.

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The total thermal energy resource of Nigeria is the totality of the solar radiation falling on its
923,768km2 land area. This total solar radiation includes the direct radiation as felt on sunny days;
diffuse radiation scattered by clouds and atmospheric gases and vapors and felt on cloudy days
even when the sun is not visible.

Studies relevant to the availability of the solar energy resource in Nigeria have fully indicated its
viability for practical use. Although solar radiation intensity appears rather dilute when compared
with the volumetric concentration of energy in fossil fuels, it has been confirmed that Nigeria
receives 5.08 x 1012 kWh of energy per day from the sun and if solar energy appliances with just
5% efficiency are used to cover only 1% of the country's surface area then 2.54 x 106 MWh of
electrical energy can be obtained from solar energy. This amount of electrical energy is equivalent
to 4.66 million barrels of oil per day.

Apart from some limited work on materials for solar cell production at Obafemi Awolowo University
IIe-Ife, and thin film Growth at the NCERD, Nsukka, most of the studies on Solar-PV in the country
have been on components and systems testing, economic viability studies, pilot plant and other
application projects. The largest single pilot plant is 7.2kW village electrification project at
Kwalkwalawa in Sokoto State, put up by the Energy Commission for Water pumping, health center
power supply and village lighting and TV viewing.

2.4.4. Biomass Energy

The biomass resources in Nigeria consist of wood, forage grasses and shrubs, animal wastes
arising from forestry, agricultural, municipal and industrial activities as well as aquatic biomass. The
primary way to utilize biomass is through direct combustion. The total land available in Nigeria for
agriculture and under vegetation is a measure of biomass potential. The total land area of Nigeria
is distributed among the various uses as shown in table 2-7 below.

Nigeria Quantity (Million ha) Percentage (%)

A. SIZE
Total area 92.4 100
Water bodies (rivers, lakes, 79.4 85.9
e.t.c.)

B. LAND USE
Agricultural land 71.9 77.8
Arable cropland 28.2 30.5
Permanent cropland 2.5 2.7
Pasture land 28.3 30.6
Forest and woodland 10.9 11.6
Fadama 2 2.2
Other land 7.5 8.1
Table 2-7: Nigeria's Size and Land Use Parameters
Source: Renewable energy masterplan, Energy commission of Nigeria, 2005

The biomass energy resources of the nation have been estimated to be 144million tones/year. It is
estimated that Nigeria consumes about 43.4x109kg of fuel wood annually. Over 60% of Nigeria’s
population depends on fuel wood for cooking and other domestic uses. The consumption of fuel

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wood is worsened by the wide spread use of inefficient cooking methods, the most common of
which is still open fire. The rate of consumption of fuel wood far exceeds the replenishing rate to
thus resulting in desert encroachment, soil erosion and loss of soil fertility.

Plant biomass can be used as fuel in thermal power plants or converted to produce solid briquette,
which can then be utilized as fuel for small scale industries. Biogas digesters of various designs
are capable of sustaining household, industrial and institutional energy needs. Biofuels can also be
derived from biomass and biowaste, e.g. manure, crop residue. These are used to produce power,
heat, steam and fuel through a variety of processes. These fuels are used mainly to power
vehicles and industrial machines and provide heating. Biofuel is renewable and its use has
expanded throughout the globe with Brazil, US, France, Sweden and Germany emerging the
leaders in biofuel development.

2.4.5. Wind Energy

Nigeria is subject to the seasonal rain bearing south-westerlies, which blow strongly from April to
October and to the dry and dusty north-east trade winds which blow strongly from November to
March every year. Most areas sometimes experience some periods of doldrums in between these
periods. Wind energy reserves are measured in terms of wind speeds at 10m above the ground
level.

Seasonal and locational variations in the energy received from the sun affect the strength and
direction of the wind. Due to the varying topography and roughness of the country, large
differences may exist within the same locality. Hence within a few kilometres, the wind speed may
vary. The values range from a low 1.4 to 3.0m/s in the Southern areas and 4.0 to 5.12m/s in the
extreme North. Peak wind speeds generally occur between April and August for most sites. Initial
study has shown that total actual exploitable wind energy reserve at 10m height, may vary from 8
MWh/yr in Yola to 51 MWh/yr in the mountain areas of Jos Plateau and it is as high as 97 MWh/yr
in Sokoto.

A number of wind powered water pumps have been installed in some northern states, notably at
Goronyo in Katsina State, Kedada in Bauchi States and in Sokoto State. Recently, a 5KW pilot
wind turbine/generator is under tests at Sayya Gidan-Gada village in Sokoto State.

2.5. Energy Utilization - Electricity

The history of electricity in Nigeria dates back to 1896 when electricity was first produced in Lagos,
fifteen years after its introduction in England. Despite the fact that its existence in the country is
over a century, its development has been at a slow rate.
The national electricity grid comprises three (3) hydro and six (6) thermal generating stations with a
total installed capacity of about 6000MW. However, between 2,000 and 3,000MW of electricity is
generated. Figure 2-30 below shows Nigeria’s electricity generation by source.

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Figure 2-27: Nigeria's Electricity Generation by Fuel Type

Source: PHCN

2.5.1. Institutional Structure of the Nigerian Power Sector

The electric power sub-sector in Nigeria is dominated by the Power Holding Company of Nigeria
(PHCN), a Government parastatal. PHCN co-exists with Independent Power Producers (IPPs),
some of which it has power purchase agreements.
Following the introduction of the Electric Power Sector Reform Act in 2005, NEPA was transformed
into a holding Company (PHCN) which was subsequently unbundled into 18 companies, including
6 generators, 11 distributors and one transmission company. These companies are being powered
to carry out the functions relating to the generation, transmission, trading, distribution and bulk
supply as well as resale of electricity. Also, the Nigeria Electricity Liability Management Company
(NELMCO), a company limited by guarantee has been established to take over some of the
functions of PHCN as the Special Purpose Entity (SPE) provided for in the Act guiding the
operations of the industry. This means that the legacy contractual obligations of PHCN such as
PPAs and GSAs will be handed over to NELMCO.
The reform of the power sector, initiated in 1999, has introduced a new set of players, the
independent power producers (IPPs). About 29 power generation licenses have been issued to
independent power producers by the National Electricity Regulatory Commission (NERC) since
2006.These IPPs are at various stages of their projects implementation.
The Federal Ministry of Power is responsible for policy making in the industry. The power sector is
regulated by the new National Electricity Regulatory Commission (NERC). The major functions of
NERC include:
• Ensuring adequate, safe, reliable and affordable supply of electricity to all Consumers
• Promoting competition and providing stable legal framework
• Providing clear, predictable, light-handed and transparent Regulation
• Setting operating codes, safety, security, reliability & quality standards
• Providing incentives to invest in sector
• Protecting consumers and public interest
• Licensing and regulating generation, transmission, distribution

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2.5.2. Key Challenges facing the Nigerian Power Industry

The key challenges facing the Nigerian Power Industry are as follows;
Inadequate power generation capacity
The total installed capacity of the combined hydro and thermal power stations in Nigeria is
7,941.1MW as at December 2008.
According to PHCN, about 4,428 MW of power generation capacity is available in Nigeria, of which
3,273MW is from PHCN facilities and 1,155MW from IPPs. However, between 2,000MW and
3,000MW of power is currently generated primarily due to gas constraints. There is a need to
improve the capacity utilization of the existing power generating plants by massive rehabilitation
and development of new power stations to meet up with the presidential target of 6,000MW by
December 2009 and 10,000MW by December 2011.
Even though the generation sector of the industry has witnessed the licensing of over 20 firms
since the commencement of the reform, many of the licensed generators haven’t commenced
operation. This is due to the normal gestation period for developing power plants and other
challenges facing private sector such as gas supply constraints, inadequate commercial
framework. Timely intervention in generation is therefore a major challenge.
Inadequate transmission and distribution network
The transmission network is overloaded with a wheeling capacity less than 4,000 MW. It has a
poor voltage profile in most parts of the network, especially in the North, inadequate dispatch and
control infrastructure, radial and fragile grid network, frequent system collapse, exceedingly high
transmission losses.
There are significant line voltage and power losses (as high as 25% compared with 3% in the US
and 0.5% in Japan) in the transmission systems due to the large average distances (between 300
and 500km) over which electrical energy is distributed. Low transmission grid voltages, typically
330kV and 132kV compared with 765kV in developed countries also cause significant transmission
and distribution losses.

Figure 2-28: Nigeria's Electric Power Transmission and Distribution Capacity

Source: PHCN

Obsolete and Inefficient transmission and distribution equipment

Significant portions of the transmission and distribution network are obsolete, especially in the
major cities. The Energy Commission of Nigeria estimates that the sector has significant
transmission and distribution losses in the region of 8.25% and 33% respectively.

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Figure 2-29: Power Losses as a percentage of Generation

Source: National Energy Data Bank, www.nationalenergydatabank.org

Low access to electricity grid

Access to electricity services is low. About 60 % of the population – over 80 million people are not
served with electricity and rural and semi-urban access to electricity estimated to be about 35%.
Per capita consumption of electricity is approximately 125kWh against 4500kWh, 1934 kWh and
1379kWh in South Africa, Brazil and China, respectively. The Rural Electrification Program which
began in 1981 focuses exclusively on grid extension; costs per connection remain high and annual
rate of connection is low. With the chronic shortage of available generating capacity and low tariffs
for rural areas, there is little incentive for PHCN to champion an expansion program. In all, rural
electricity capital assets continue to deteriorate through neglect, vandalism and theft.
Industry regulation
There are still some capability and capacity gaps in the National Electric Regulatory Commission
(NERC) saddled with the responsibility of regulating the power industry. This needs to be
addressed to create a viable and competitive power sector. The independence of the regulator also
needs to be strengthened in order to give confidence to investors.
Industry and market structure
The implementation of the Electric Power Sector Reform Policy has introduced a number of new
players in the power industry. However, there are still needs to be some clarity in the roles and
responsibilities of the various market players across the value chain.
The industry is still predominantly public and even the licensed generators upon commencement
of operation may have to do business with mainly government owned companies and thus be
exposed to the usual tension and friction in the relationship between public owned and purely
private owned business
Insufficient gas for power generation
Recently, there have been frequent Gas supply disruptions and inadequate Gas supply to the Gas
fired plants and this has caused a lot of power load shedding across the Country. These Gas
supply disruptions are mainly caused by militant attacks on upstream Gas supply equipment,
vandalism of Gas pipelines, non-payment by PHCN for Gas supplies and build-up of condensates
in Gas pipelines. This situation has highlighted the importance of ensuring synergies between the

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Gas and the power sector to ensure regular and adequate Gas supplies to drive the growth
agenda in power generation.
Billing and revenue collection
One of the major problems facing the Nigerian Power Industry is the poor efficiency in revenue
collection. In a survey carried out in 2002, the revenue customer base of NEPA (now PHCN) was
about 3.05 million with 83% residential, 16% commercial and 0.4% Industrial. It is estimated that
about 35% of the 83% residential customers do not pay for the electricity they enjoy.
Inappropriate electricity Pricing
Prior to the current regime, Nigerian electricity tariffs were last reviewed in February 2002 (from an
average of N4.00/KWh to about N6.00/KWh) where they remained until July 2008. From July 2008,
the MYTO was introduced. This has resulted in a tariff band of N10 and N11 for distribution and
N3.20 for wholesale generation over the next 5 years. Investors say this is not cost reflective.
Without putting an appropriate tariff regime and firm off-take arrangement in place, it will be
challenging to convince the private sector to invest in the industry.
Low level of human capacity development
There is a need to enhance human capacity in the Nigerian power sector. Currently, PHCN is
considered to be overstaffed with a lot of redundancies and this has to be addressed to pave way
for a well trained workforce that can move the sector forward. This has also given rise to apathy
and more active union activity.
To address this challenge, a National Power Training Institute, similar to the Petroleum Training
Institute, was set up to take over the operations of the existing training schools of PHCN. This is
expected to raise the competency level of the workforce for improved productivity and
performance.

Vandalization of transmission and distribution lines

The incidence of vandalization has significantly impacted negatively on grid equipment capacity
development. Vandals target various equipments at every level from distribution flow voltages of
415 to 330Kv super grid levels. These include transmission lines at every level and transformers at
distribution level only. Usually these vandals pilfer the distribution transformers, line conductors,
insulators and other line equipments that they resell to the grid on the open market.
There have been a few incidences of vandalization that has been traceable to pure sabotage as
nothing was looted from the vandalized lines. The mode of line vandalization at the higher voltages
is usually very disruptive and destructive, frequently resulting in grid collapses, supply disruption
and line section collapses with attendant damage to several line support towers, the cables and
insulation fittings. The time and cost for reconstructing these towers and restoring the lines are
usually enormous.

Inadequate maintenance of equipment

Maintenance of grid equipment in the power sector is constrained by several factors some of which
are;
• Age of grid equipment and the difficulty in spares procurement even with OEMs
• Practically all the equipment on the grid has to go through importation as have virtually no
power equipment manufacturers in the country. This introduces long lead times for
equipment maintenance.

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• There is currently a death of skilled maintenance personnel in the sector. This results in
heavy dependence on foreign personnel in many cases especially when dealing with
OEMs.
These maintenance constraints severely impacts grid equipment availability.

Inadequate modern control systems

Control systems such as frequency governors, voltage control regulators at several power stations
are obsolete and so have had to be disabled, resulting in manual control methods.
Also on systems operations side, the necessary Supervisory Control and Data Acquisition
(SCADA) facilities are either obsolete or inadequate to cope with system monitoring and moment
by moment control of the power system.
The consequence of foregoing is that power system quality components such as frequency and
voltage are kept at very abnormal levels which severely impacts on the stability of the grid and the
now frequent unpleasant experiences of grid collapse.
It is important to note that system collapses impose further stresses on already stressed grid
equipment many times causing equipment damage.

Inadequate study of domestic power requirements

Actual electric power demand estimates are unknown. This is caused mainly by the growth of non-
metered self generated electricity which necessitates very detailed enumeration and study of the
domestic power demand market. In this regard, currently available studies of the domestic power
requirements are considered inadequate.

Commercial framework to support private investments

Although Government has commenced implementation of the Power Sector Reform Program, the
appropriate commercial framework to support private investments has not been clearly spelt out
and the existing framework is not attractive enough to investors

2.5.3. Ongoing Government Initiatives to grow the Power Sector

In order to address the challenges of the Power sector, the Government introduced some of the
key initiatives. Most of these initiatives have however not yielded the desired results. The initiatives
are as listed below:

Structural and Legal Reforms

In response to the industry challenges, the Government initiated structural and legal reforms in the
power sector through the Electric Power Sector Reform Act (EPSRA), 2005.
The EPSRA includes provisions for the transformation of the National Electric Power Authority
(NEPA) vertically and horizontally into a holding Company (PHCN). PHCN has been unbundled
into seven generation companies (GenCos), one transmission company (TCN) and eleven
distribution companies (DisCos). This arrangement is expected to encourage private sector
investment particularly in generation and distribution. An industry regulator, the Nigerian Electricity
Regulatory Commission (NERC) was also set up to regulate tariffs and oversee the industry
effectively.
BPE and the newly established ICRC will be responsible for privatizing the unbundled entities.

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National Integrated Power Project

To further boost the power generation capacity, the Government initiated the National Integrated
Power Project (NIPP) and encouraged its JV partners to embark on independent power projects
(JV IPPs).
Elements of the NIPP project include:
• Five Greenfield natural Gas fired plants (2,250 MW total) in the Niger Delta region
comprised of 18 GE Gas turbines
• One 2,600 MW hydroelectric power plant in Mambila, Taraba State
• 22 power transmission sub-projects including 17 new substations and expansion of 32
existing substations;
• 250 power distribution projects
• Several new Gas pipelines and other related equipment and infrastructure

The JV IPPs include:

• 480 MW Kwale/Okpai IPP by NNPC/Agip JV
• 930 MW Afam IPP by NNPC/ShelI JV
• 450 MW Obite IPP by NNPC/TotaI JV
• 780 MW ljede IPP by NNPC/ChevronTexaco JV
• 350 MW Bonny River Power LNG by NNPC/ExxonMobil JV

Some of these IPPs have been commissioned but they are yet to start generating power due to the
unavailability of Gas.
Rural Electrification
As part of its commitment to accelerate power supply to homes in Nigeria, the Federal Government
under the Electric Power Reform Act 2005 established the Rural Electrification Agency (REA) to
provide reliable and affordable electricity to rural dwellers through the use of grid and off-grid
electricity supply. A bill has been sent to the National Assembly to amend the ESPRA and scrap
REA.
It is expected that States and Local Governments will be responsible for expanding the national
electricity grid to rural areas where grid connection is not easily accessible and using mini grid
systems with renewable energy generation options for remote places in isolated areas.
Introduction of the Multi Year Tariff Order
To address the low electricity tariff, the FG has introduced the Multi Year Tariff Order (MYTO),
which is expected to address the tariff concerns of the existing players in the sector as well as
encourage the emergence of independent power producers. The MYTO has set electricity tariffs for
consumers over the 15-year path (1 July 2008 to 30 June 2023). The tariffs are set at levels that
support the viability and growth of the Nigerian Electricity Supply Industry (NESI).To cushion the
effect of the rate increase, the Government will provide subsidies in the first three years of the
introduction of the MYTO.

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The new Tariff Order – the Multi-Year Tariff Order (MYTO) – sets what are intended to be cost-
reflective prices for electricity over a period of 15 years (July 2008 to June 2023) with provisions for
minor adjustments every year and major reviews every five years. It should be noted that the
procedures and rules for minor reviews under MYTO—covering gas, CPI, and the exchange rate—
are not clearly documented and lack transparency and are likely to require significant review.
Consumers will be expected to pay the full estimated cost-reflective tariff with effect from 2011.

Introduction of Domestic Gas Obligations

The introduction of domestic Gas supply obligations which mandates the Oil and Gas operating
companies to set aside a portion of their Gas production for supply to the domestic market is
expected to address the Gas supply challenges being experienced in the power sector. The
Government estimates that the domestic Gas supply obligations to the power sector will give
Nigeria about 8000MW of electricity by 2010.

2.6. Performance Assessment of the Nigerian Energy Sector

The performance of the Nigerian Energy sector will be evaluated relative to stated goals and
objectives which fall into two categories:
1. Operational Performance
2. Economic Performance
Operational performance indicators evaluate the technical and operational efficiency of the Energy
industry while the economic performance indicators will help to assess the contribution and
relevance of the energy sector to the Countries’ growth and economic performance.
The Operational and Economic performance indicators are as shown in the table 2-8 below;

Economic Performance
Operational Performance Indicators
indicators
Oil and Gas
• Reserves CAGR % (2002-2007) • Consumption per capita (bbl
• Production CAGR %(2002-2007) per 1000 per day)
• Reserve to Production ratio (years) • Domestic consumption as %
• Reserve Replacement Ratio of total production
• Gas flaring • Contribution to GDP
Power • CAGR of electricity Generation (2002-2007) % • Electricity Generation (KWh)
• CAGR of electricity consumption (2002-2007) % per capita
• Power supply reliability indices • Electricity consumption
– System average interruption duration index, SAIDI (KWh) per capita
– System average interruption frequency index, SAIFI • Access to Electricity (%
population) *
– Customer average interruption duration index,
CAIDI
– Average service availability index, ASAI
Table 2-8: Operational and Economic Performance Indicators

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2.6.1. Operational Performance

2.6.1.1. Oil and Gas

Growth in Oil Reserves and Production
Nigeria’s proven oil reserves have grown over the years from about 34 billion barrels in 2002 to 36
billion barrels in 2007. However, crude oil production has been on the decline from about 2.6
million barrels per day in 2005 about 2.4 million barrels per day in 2007. The decline in crude oil
production is due to oil well shut-ins as a result of the Niger delta crisis. In March 2009, about
606,500 barrels of oil per day were shut in due to sabotage to oil facilities.
Between 2002 and 2005, crude oil reserves have grown at a cumulative annual growth rate
(CAGR) OF 7% while crude oil production grew at about 1.8% in the same period.
There is sufficient reserves capacity to underpin a capacity growth in Nigeria. Besides, significant
additional potential exists from unexplored basins or previously under explored basins using
enhanced recovery methods. Some of these additional potentials are unexplored basins and new
frontiers, highly prospective deep and ultra-deep offshore blocks, poorly explored blocks, prospects
and deep pool targets as well as bye-passed oil and undeveloped marginal fields.

Figure 2-30: Growth in Oil Reserves and Production

Growth in Gas Reserves and Production

Gas reserves have grown at a CAGR of 8% between 2002 and 2007, from 124TCF to 182 TCF.
Gas production has grown at about 9% CAGR between 2002 and 2007. The growth in gas
reserves is as a result of oil exploration and the increase in associated gas field discoveries.
According to a recent United States Geological Survey report, Nigeria’s proven gas reserves has
the potential to grow to about 600TCF with dedicated gas exploration.

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Figure 2-31: Growth in Gas Reserves and Production

Reserves to Production Ratio

It is estimated that Nigeria’s crude oil reserves will last for another 42 years if it continues to
produce at the 2007 production level. Gas reserves on the other hand are estimated to last for
another 150 years.

Figure 2-32: Oil and Gas Reserves to Production Ratio

Reserves Replacement Ratio

Nigeria’s oil and gas reserves are not growing proportionately with the production rate. This is
because to date most of the gas reserves discovered have been through oil exploration and not
through dedicated gas exploration. In 2007, oil and gas reserve replacement ratio was zero
showing that there is a need to make more discoveries to replenish reserves. The low reserves
replacement ratio can be attributed to the fact that there hasn’t been dedicated Gas exploration in
Nigeria.

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Figure 2-33: Reserves Replacement Ratio

Gas Flaring
Gas flaring in Nigeria has reduced over the years from about 52% of gas production in 2002 to
33% in 2007.
The previous Gas flare-out deadline set by the Government for January 1, 2008 and subsequently,
December 2008 was not met as a result of inadequate funds, undeveloped domestic Gas market,
the Niger Delta security situation and delayed completion of Gas utilization projects. However, the
Government has set a new for end of December 2010.

Figure 2-34: Gas Flaring in Nigeria

Source: NNPC Statistical Bulletin

2.6.1.2. Power
Growth in Electricity Generation and Consumption
The growth in electricity generation in Nigeria over the years is driven largely by the increase in
private generation. Distribution and transmission losses account for the difference between
electricity generation and consumption.
It is estimated that the demand of power in Nigeria is suppressed demand and that with adequate
supply and extensive grid connection, national demand for power has the potential to go as high as
10,000MW.

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Figure 2-35: Growth in Electricity Generation and Consumption

To make up the deficit in the supply-demand, businesses and households incur significant costs.
Self generation levels are not known but were estimated at 2,400 MW in 2000. The Ministry of
Power estimates that current grid demand is 6,500MW based on a tractable report conducted in
2009. Given the growth in the economy, it is assumed that self-generation is significantly higher
and that it exceeds by a large margin the supply available from the power sector itself. Estimates
of the unit cost of self-generating electricity for different classes of consumer are given below.

Consumer type Cost per kWh

Larger companies N20 to N30

Smaller companies over N30

Households N30 to N60

Table 2-9: Cost of Private Power Generation in Nigeria

Electricity constitutes on average, between 20 to 40% of the cost of production in a typical

manufacturing company. The high cost of self-generation means that it costs a typical Nigerian
company more that double what a company in another emerging economy or in a developed
nation would pay for the same quantum of electricity.
Power reliability
Power reliability is a measure of the availability of power with respect to the frequency of power
outages.
Based on a recent study conducted by MAN (Manufacturers’ Association of Nigeria), Nigeria has
an average system interruption index of over 60,000min compared with about 88min in the United
States and 52 mins in France.
Also, it is estimated that the total number of interruptions of supply that customers experience
annually in Nigeria is over 600 compared to Singapore and France where these interruptions are
negligible.

Estimates of the power reliability indices in Nigeria, compared to the United States, Singapore and
France is as shown in table 2-10 below:

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USA Singapore France Nigeria (PHCN Nigeria (MAN

data) study)
System average interruption duration index, SAIDI – Annual average total duration of power
interruption to a customer, in minutes
SAIDI, min 88 ≈ 1.5 52 900 ≥ 60,000
System average interruption frequency index, SAIFI – Annual average total number of interruptions
of supply that a customer experiences annually
SAIFI, no. 1.5 NA NA 5 ≥ 600
per year
Consumer Average Interruption Duration Index, CAIDI – Average duration of an interruption of
supply for a consumer who experiences the interruption on an annual basis, in hours
CAIDI, hr 0 NA 0 9 15
Average Service Availability Index, ASAI – Ratio of (Consumer hours service
availability)/Consumer hours service demanded)
ASAI 1 1 1 NA ≥ 0.4

Table 2-10: Power Supply Reliability Indices

Source: National energy data bank, www.energydatabank.org

2.6.2. Economic Performance

2.6.2.1. Oil and Gas

Contribution to GDP
Despite Nigeria’s huge energy resources, the energy sector has not contributed significantly to the
Nation’s GDP. In 2007, Oil and Gas contributed about 19% to GDP as shown in figure 2-39 below.
The National Bureau of statistics reports that crude petroleum and natural gas contributed about
18% to the GDP in 2008.

Figure 2-36: Oil Contribution to GDP and Government Revenue, 2007

Source: CBN Annual Reports and Statement of Accounts, 2007

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Also, the contribution of the Oil industry to Nigeria’s GDP growth rate has been declining in recent
years and was negative in 2006 and 2007 are as shown in Figure 2-40 below.
12
10
GDP Growth Rate

8
6
4
2
0
-2
2003 2004 2005 2006 2007
Oil 6.02 0.84 0.12 -0.93 -1.08
Non-oil 3.44 5.36 6.04 6.65 6.99
Total 9.57 6.58 6.51 6.03 6.22

Oil Non-oil Total

Figure 2-37: Sectoral Contribution to Nigeria's GDP Growth Rate (2003-2007)

Source: CBN Annual Report 2007

Oil and Gas consumption per capita

Per capita consumption of Oil and Gas has increased over the years. However, it is estimated that
petroleum products export accounted for about 20% of the consumption in 2007. This is due to the
inability of the domestic refineries to meet local demand.

Figure 2-38: Oil and Gas Consumption Per Capita

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2.6.2.2. Power
Power Generation and Consumption per capita
There hasn’t been significant growth in Nigeria’s power generation per capita and consumption per
capita over the years. This shows that the power available for the population to consume hasn’t
improved over the years and this is evident in the regular blackouts experienced in the country.

Figure 2-39: Power Generation and Consumption Per Capita

Access to Electricity
In 2007, the World Bank estimated that only about 40% of the Nigerian population had access to
electricity.

2.7. Comparative Benchmarking Analysis

The benchmark analysis compares the operational and economic performance of Nigeria’s energy
sector with that of best practice countries in the world. This will help to understand Nigeria’s
position today within the context of where other countries are. Also, key learning points from these
best practice countries will serve as a valuable input in the strategic visioning for the Nigerian
Energy sector.

2.7.1. Definition of Comparator Set

The table below highlights the countries selected for benchmarking in each of the energy sub-
sectors and the rationale for selecting them.

Country Rationale for Selection

Oil Brazil • Significant success in achieving local content in the oil
and gas sector with an estimate of 70% in 2001
• Exploratory efforts in new frontiers in order to assure a

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Country Rationale for Selection

sustainable reserve / production ratio
Malaysia • Oil production started at around the same time with
Nigeria
• Malaysian Government’s focus on reducing dependency
on oil income
Gas Norway • Mature upstream gas industry with a unique operational
model
• Coordination of investments has been key distinguishing
feature
Egypt • High penetration of gas in local communities
• Differential gas pricing for key industry sectors as the
basis for developing gas industry, LNG and domestic
demand
Power United • Extensive use of coal for power generation
Kingdom • Natural gas-fired power stations are replacing coal as
the principal source of power supply
• Mix of power generating sources including conventional
thermal sources, nuclear, renewables and hydro
Pakistan • Similar challenges to Nigeria with respect to power
generation and population
• Achieved a GDP growth in the 6% - 8% range between
2004 to 2007 despite severe electricity shortfalls
South Africa • Extensive use of coal in generating electricity and a
significant proportion of its liquid fuels
• The Government recently developed a plan to reduce
electricity demand by pricing electricity correctly as well
as promoting energy efficiency
Renewables Germany • Large share of renewable energy sources are used for
power generation
• Strong technological base in the electricity sector
Brazil • Strategic focus on meeting energy demand with
renewable energy using bio-fuels
Table 2-11: Definition of Comparator Countries

2.7.2. Baseline Data of Comparator Countries

The baseline data for each of the comparator countries, with 2007 as the baseline year, are as
shown in table 8 below:

Oil
s/n Countries GDP Population GDP Per Proven Production,
(PPP) (million) Growth Capita Reserves, 2007
(Billions Rate, Income 2007 (bbl) (moped)
USD) 2007 (PPP)
(%) (USD)
1. Nigeria 338.1 140.00 6.4 2,192.83 36.22 2.355
2. Brazil 1,849.0 189.00 5.4 9,731.03 11.77 1.748

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s/n Countries GDP Population GDP Per Proven Production,

(PPP) (million) Growth Capita Reserves, 2007
(Billions Rate, Income 2007 (bbl) (moped)
USD) 2007 (PPP)
(%) (USD)
3. Malaysia 361.2 27.72 6.3 14,552.03 0.60 0.588

Gas
s/n Countries GDP Population GDP Per Proven Production,
(PPP) (million) Growth Capita Reserves, 2007 (TCF)
(Billions Rate, Income 2007
USD) 2007 (PPP) (TCF)
(%) (USD)
1. Nigeria 338.1 140.00 6.4 2,192.83 187.0 1.23
2. Norway 246.6 4.68 3.7 53,285.21 82.3 3.17
3. Egypt 405.4 80.34 7.1 5,046.37 58.5 1.64

Power

s/n Countries GDP Populati GDP Per Installed Generati Consum

(PPP) on Growth Capita Capacity on ption
(Billions (million) Rate, Income (MW) (Million (Million
USD) 2007 (PPP) KWh) KWh)
(%) (USD)
1. Nigeria 338.1 140.00 6.4 2,192.83 5,960 22,110 15,850
2. United 2,215.0 61.00 3.1 36,500 80,417 371,000 348,500
Kingdom
3. South 476.4 44.82 2.8 9,800 41,105 264,000 241,400
Africa
4. Pakistan 427.9 176.24 5.8 2,500 19,528 93,261 68,396
Table 2-12: Baseline information for Comparator Countries

2.7.3. Benchmarking Analysis

2.7.3.1. Oil Sector Performance

Operational Performance

s/n Countries Oil Reserves Oil Production Reserve to Reserve

CAGR % (2002- CAGR % (2002- Production Replacement
2007) 2007) ratio (years) Ratio
1. Brazil 5.65 3.10 18.45 0.30

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s/n Countries Oil Reserves Oil Production Reserve to Reserve

CAGR % (2002- CAGR % (2002- Production Replacement
2007) 2007) ratio (years) Ratio
2. Malaysia 0.00 -2.82 2.79 0.00
3. Nigeria 7.10 1.75 42.17 0.15

Between 2002 and 2005, Nigeria’s oil reserves grew at a faster rate than that of Brazil and Egypt.
However, within the same period, oil production did not grown at a commensurate rate. This is due
to sabotage of facilities and the Niger Delta security issue. Malaysia’s oil production is also
declining and its reserves are fast running out as shown in the reserve to production years, 2.79
years.

Economic Performance

s/n Countries Change in annual Oil consumption per Ratio of Domestic

Production capita (bbl per 1000 Production to
(2006/2007) % per day) Domestic
Consumption
1. Brazil 1 12.698 0.945
2. Malaysia -4 19.733 1.079
3. Nigeria -4 1.936 0.193

Nigeria’s domestic demand for petroleum products is largely met by imports unlike Brazil and
Malaysia where the petroleum products consumed are refined locally. Despite the augmentation of
petroleum product consumption through importation, Nigeria’s oil consumption per capita is the
lowest amongst other major oil producing countries as shown in the table above.

2.7.3.2. Gas Sector Performance

Operational Performance

s/ Countries Gas Gas Reserve to Reserve Gas Flare

n Reserves Production Production Replacement (% of
CAGR CAGR Ratio Ratio Production)
(2003 - (2003-2007) (years)
2007) % %
1. Norway 0.47 0.66 25.99 -0.61 0.00
2. Egypt 0.00 1.43 35.61 0.00 3.72
3. Nigeria 8.21 8.68 147.29 -2.23 32.45

In 2007 Nigeria flared over 32% of gas produced, making her the top gas flaring nation in the world
by percentage flare of production. Gas comparator countries including Norway and Egypt flare 0%
and 4% of their gas production respectively.

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60
Billion cubic metres (bcm) 50
50
38.9
40

30

20 16.8
10.6
10 7 5.3 5.2 3.7 3.5 3.4 2.9
0
ria

Iran

Iraq

Libya
ia

ria

la

bia

world
r
tan

Qata
Ango
Ru ss

Nig e

Alge

i Ara
khs

f the
Kaza

Saud

o
Rest
Figure 2-40: 2007 Gas Flaring Countries

Economic Performance

s/n Countries Gas consumption per capita Domestic consumption as % of

(bcf/ 100,000 people) total production
1. Norway 0.49 7%
2. Egypt 1.52 68%
3. Nigeria 0.03 37%

Despite Nigeria’s huge gas reserves, the effect is scarcely felt by the population as shown by the
low gas consumption per capita relative to Norway and Egypt. Currently, most of Nigeria’s natural
gas is either flared or converted to LPG and exported.

Norway consumes very little of the gas produced domestically because it generates most of its
power from hydro resources. Norwegian gas is exported, accounting for 16% of the total European
gas consumption and is the second largest gas exporter to Europe after Russia and third largest in
the world. For Egypt, the decreasing oil production caused the Government to increase its focus on
gas production and utilization. There has been an increased in the demand for natural gas from
Egyptian thermal power plants resulting in the high gas consumption per capita. Egypt also exports
natural through the Arab Gas Pipeline to Jordan and Syria.

2.7.3.3. Power Sector Performance

Operational Performance

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s/n Countries Access to CAGR of electricity CAGR of

Electricity (% Generation (2002- electricity
population) 2007) % consumption
(2002-2007) %
1. United Kingdom 100 0.36 0.39
2. South Africa 66 1.71 0.77
3. Pakistan 53 5 5
4. Nigeria 40 -1.17 3.95

Based on a United Nations World Development Indicators report of 2002, only 40% of Nigerians
have access to electricity. Also, between 2002 and 2007, Nigeria’s electricity generation declined
by 1.17% while electricity consumption increased by 3.95%. Compared with the benchmark
countries, Nigeria has not been able to grow its generation capacity to match electricity demand.

Economic Performance

s/n Countries Electricity Generation (KWh) Electricity consumption

per capita (KWh) per capita
1. United Kingdom 6,081.97 5,713.11
2. South Africa 5,890.26 5,386.02
3. Pakistan 529.17 388.08
4. Nigeria 157.93 113.21

Nigeria’s electricity generation and consumption per capita is the lowest amongst developing
economies in her category and other oil and gas producing countries. This is also evident from the
incessant power failures that occurs throughout the country

2.7.4. Key Learning Points for Nigeria

Egypt
Egypt seems to have developed a clear long-term strategic vision for the oil and gas industry
including the manufacture of gas-based petrochemicals. Apart from restructuring our oil and gas
sector as is currently being planned through the Petroleum Industry Bill, there needs to be a clear
long-term vision for the sector. The Nigerian Gas Master Plan (NGMP) attempts to capture the gas
sector vision, but this needs to be anchored by legislation to ensure national commitment and
ownership.
The Egyptian national oil company (EGPC) had been, for decades, the sole holding company for
government participation in the oil and gas sector. However, in the last few years Egypt has
established three holding companies for gas, petrochemicals and exploration in frontier areas. We
need to do this in particular for gas, if the objectives of the NGMP are to be accomplished.
Nigeria needs to be more aggressive in inviting more international players to bring in capital,
technology and management by creating the right environment and structures that respond to
business enquiries. We must bear in mind that there are other countries in competition with us for
investment globally.

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UK
It is pertinent that efficient operational practices are restored in the Nigerian Power sector. The UK
grid developed a contiguous grid structure that ensured what we call high grid inertia, which is an
outcome of many generating machines connected together, improving stability.
In the UK, there is an operational practice of system quality through the enforcement of sound
frequency & voltage control techniques. To achieve this, system generation & transmission
reinforcement must go beyond just building any type of new machinery, without due consideration
for grid frequency and voltage control equipment inclusion. A major reason behind much of our grid
instability arises from non standard frequency & voltage control practice.
The restoration of sound business practice can only be realized through deliberate & carefully
executed privatization program, which ensures proper tariffs. This in turn stimulated investment
and set the pace for end user choice of electricity supplier.
The UK privatization program was not just enacted by law. The successive companies at all levels
of the industry were taken through a transparent and open public IPO program, much as occurred
during our banks consolidation era. Shares were publicly listed and the public were able to buy into
the new Power companies whose business like investors and managers eventually grew their
markets beyond the UK into even continental USA.
There is no reason why the success story in the UK can not be replicated here in Nigeria.
Pakistan
Nigeria needs to harmonize all its renewable energy plans and to set up an agency which will
ensure the implementation of these plans. The Pakistani Government set up an Alternative Energy
Development Board (AEDB) in May 2003 to act as the central national body on the subject of
renewable energy. The main objective of the AEDB is to facilitate, promote, and encourage
development of renewable energy in Pakistan.
The AEDB has also been charged with providing electricity services to the 7,874 villages in the
Sindh and Balochistan provinces that lie too far from the national electricity grid to be economically
served.
The Pakistani Government created a one-stop shop, the PPIB, for private investors in the power
sector. In Nigeria currently, an independent power producers has to deal with a lethargy of
Government agencies form licensing to full operations. By creating the PPIB, Pakistan attracted
about US$4.5billion between 1994 and 2006. Nigeria needs to set up an agency which can cater
for all the needs and enquiries of private power producers.

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3.0 Energy Sector 2020 Vision & Strategic Plan

3.1. The Global Energy Industry in 2020

An expanding global economy will increase demand for many raw materials, such as oil. Most
experts believe that there are enough energy resources worldwide to meet the projected demand.
Despite the trend towards more efficient energy use, total energy is projected to increase by 1.2%
per year between 2005 and 2030. Substantial part of world’s energy need will continue to be
provided by fossil fuels mainly oil, gas and coal. It is estimated that the three sources will meet
close to 80% of global energy demand with renewable energy sources such as hydrogen, solar,
and wind energy accounting for only about 13% of the energy supply in 2020 as shown in Figure 3-
1 below.

Figure 3-1: Projected Global Energy Mix in 2020

Growing demands for energy— especially by the rising powers, especially China and India, —
through 2020 will have substantial impacts on geopolitical relations. It is expected that the
developed world will still consume more energy than developing countries in absolute terms but its
share of world demand will fall. Experts believe China will need to boost its energy consumption by
about 150% and India will need to nearly double its consumption by 2020 to maintain a steady rate
of economic growth. Europe’s energy needs are unlikely to grow to the same extent as those of the
developing world, in part because of Europe’s expected lower economic growth and more efficient
use of energy.

Demand in the energy sector will depend critically on the pace at which energy efficiency continues
to improved, especially in the transport sector. With some 75 % of future energy demand expected
to come from the transport sector, especially from developing countries, the pace of future energy
demand growth (and its composition) will depend heavily on future efficiency gains in car
technology. Prospects for such improvements are good, if policy continues to be supportive of both
conservation and efficiency measures. Already existing technologies—available either in initial
rollout phases or as prototypes (flex-fuel and hybrid cars, plug-in hybrids, and electric and
hydrogen-powered vehicles)—could help to more than double fuel efficiency. An ambitious (and
successful) policy to speed the development and diffusion of these technologies could see the

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share of these vehicles rise to 90% in the high-income world and to 75% in developing countries by
2050, substantially reducing private transportation’s dependency on liquid fuels.

The International Energy Agency assesses that with substantial investment in new capacity, overall
energy supplies will be sufficient to meet growing global demand. Continued limited access of the
international oil companies to major fields could restrain this investment, however, and many of the
areas—the Caspian Sea, Venezuela, West Africa and South China Sea—that are being counted
on to provide increased output involve substantial political or economic risk. Traditional suppliers in
the Middle East are also increasingly unstable. Thus sharper demand-driven competition for
resources, perhaps accompanied by a major disruption of oil supplies, is among the key
uncertainties to 2020.

3.1.1. Growth Projections for the Global Energy Industry

OIL

Demand
It is estimated that the dominance of oil in the energy supply chain will continue to 2020. OPEC
projects that oil demand will rise by 20 mb/d from 2008–2030, when it reaches almost 106 mb/d.
Developing countries are set to account for most of the rise, with consumption rising by 23 mb/d
over the period 2008–2030 to reach 56 mb/d (see figure 3-2 below). Almost 80% of the net growth
in oil demand from 2008– 2030 is in developing Asia (see figure 3-3 below). OECD oil demand falls
over the entire projection period, having ‘peaked’ in 2005. Nevertheless, it is important to stress
once more the fact that energy poverty will remain a pressing issue over this period. Focusing just
on oil, per capita oil use in developing countries will remain far below that of the developed world.
For example, oil use per person in North America in 2030 will still be more than ten times that of
South Asia.

Figure 3-2: Projected World Oil Demand

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The transportation sector is identified as being the main source of future oil demand growth.
However, there is an anticipated decline in oil use in this sector in the OECD. This arises from the
combined effects of more rapid efficiency improvements and saturation. For developing countries,
the growth in transportation is the single most important sectoral source of demand increase, but
the combined volumes of other sectors amount to an increase almost as large. For Russia and the
other transition economies, practically the only source of increase is transportation.

Figure 3-3: Growth in Oil Demand, 2008 - 2030

Supply
Massive new hydrocarbons reserves are unlikely to be discovered, although quite a few smaller
new resources, most of them in the Middle East and Latin America, could be brought on-stream.
Energy companies will have to work much harder to get resources out of the ground. Offshore and
deepwater exploration will become more common, and messier oil sources, such as bitumen-rich
oil sands, will be the focus of greater attention.

Russia, as the largest energy supplier outside of OPEC, will be well positioned to marshal its oil
and gas reserves to support domestic and foreign policy objectives. Algeria has the world’s eighth
largest gas reserves and is also seeking to increase its exports to Europe.

Non-OPEC non-conventional oil supply increases by more than 7 mb/d over the entire period
2008–2030. The key growth is expected to come from Canadian oil sands and biofuels in the US,
Europe and Brazil. On top of this, non-OPEC NGLs are also expected to increase, from 5.5 mb/d in
2008 to 7.2 mb/d in 2030 (see figure 3-4 below). Over the long-term, OPEC NGLs also increase
rapidly, rising by close to 4 mb/d over the whole period 2008–2030. A small increase in GTLs
supply is also expected.

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The projected demand figures, non-OPEC supply expectations, and the increase in non-crude
OPEC supply suggests that the amount of OPEC crude required will continue to rise after the
medium-term period, reaching just over 41 mb/d by 2030. The share of OPEC crude in total supply
by 2030 is 39%.

Figure 3-4: World Oil Supply Outlook

NATURAL GAS

Demand
Europe’s increasing preference for natural gas, combined with depleting reserves in the North Sea,
will give an added boost to political efforts already under way to strengthen ties with Russia and
North Africa, as gas requires a higher level of political commitment by both sides in designing and
constructing the necessary infrastructure. According to a study by the European Commission, the
Union’s share of energy from foreign sources will rise from about half in 2000 to two-thirds by
2020. The OECD will also still account for more natural gas consumption in 2020— even though

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the volumes consumed by the developing world are expected almost to treble in the same period
(see figure 3-5 below).

Figure 3-5: Natural Gas Demand, 1960 - 2030

COAL

Close to 40% of the global electricity generated comes from coal. Coal use is predominantly for the
electricity generation sector, which utilizes more than three times as much as the industry sector,
incorporating such sectors as iron and steel. The prospects for future coal use are therefore
inevitably bound to the evolution of the electricity sector.

Coal use has recently been growing faster than oil or gas use, particularly in China. This has been
driven by several forces. One important perspective is energy security. There is inevitably a strong
appeal in using a fuel for which there is an abundance of easily accessible resources. This is
certainly the case for China, Russia, the US and India, which between them account for more than
two-thirds of the world’s coal reserves, and are correspondingly among the world’s largest coal
users.

The 2009 World Oil Outlook by OPEC estimates that demand growth for coal in developing
countries will rise by an average of 2.6% p.a.(see figure 3-6 below). There is assumed to be little
growth in Russia’s use of coal, with future power plants expected to take advantage of domestic
natural gas or new nuclear.

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Figure 3-6: World Coal and Gas Demand Growth, 1990 - 2007, 2007 - 2030
Source: 2009 World Oil Outlook, OPEC

For the OECD, the coal use projections are lower than historical rates as a result of lower
economic growth because of the global financial crisis, and the impact of a rising renewables share
in the energy mix. OPEC estimates that coal’s share in electricity generation will continue to fall,
despite the spate of applications for new coal-fired based generation.

RENEWABLE ENERGY
Technological advances, environmental pressures, issues of security of supply and high oil prices
are driving rapid progress with regards to alternative energy sources,. Wind generation now
provides a substantial contribution to electricity supply in some areas; tidal generation is an
alternative and less erratic option. By some estimates, the cost of producing electricity from solar
panels is not far above the real peak cost of power from some countries’ electricity grids. Fuel cells
continue to make technological advances, and clean coal technologies are being developed to
reduce carbon dioxide emissions from the world’s most abundant fossil fuel. It is expected that
alternative technologies will be able to meet only a small share of total energy demand by 2020,
not least because of the enormous advantages of fossil fuels for transport uses. The extent to
which governments will intervene to push renewable energy sources is likely to depend more on
security concerns than climate change.

Hydropower
With a current share of approximately 16%, hydropower remains the third largest contributor to
global electricity generation. While the sustainable potential in developed countries has already
been largely exploited, developing countries, where considerable resources remain untapped, are
expected to continue developing hydropower, although environmental concerns and the impact of
population resettlement could constrain the full exploitation of the available resources.

The 2009 World Oil Outlook estimates that between 2007 and 2030, global demand for
hydropower will grow at an average annual rate of 2.3% p.a. The fastest growth will be witnessed

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in China, with an average growth rate of 4.4% p.a. Demand for hydropower will be highest in Latin
America by 2030, surpassing the current leader North America.

Biomass
Modern biomass use is growing the world over, including in the industrial, residential agriculture
and commercial sectors, but especially as an input to electricity generation and for biofuels
production. OPEC estimates that global modern biomass use expands between 2007 and 2030 at
an average annual rate of 3.4% p.a., with growth in OECD countries greater than that in
developing countries.

With regards to biofuels, which represents the fastest growth component in biomass use between
2007 and 2030, it has become increasingly clear that biofuels have their limitations. The large-
scale expansion of first-generation biofuels — those that are produced from grains, sugar, seeds
and other food crops — are now widely seen as having been a contributing factor to rising food
prices. Furthermore, it is evident that even the environmental benefits of biofuels have recently
come under closer scrutiny. It has been recognized that they negatively impact water resources,
both in terms of physical availability and access to water, as well as biodiversity, in terms of soil
erosion and nutrient leaching due to large-scale mono-cropping.

Second-generation biofuels, which do not rely on food crops, are seen as potentially resolving
most of the sustainability concerns surrounding biofuels. However, these are still largely in the R&D
phase and are not expected to become commercially available and contribute significantly to
biofuels supply before 2020.

Other Renewables
Solar, wind, tidal and small hydro, in addition to geothermal, are kept high on the agenda of many
governments as sources of energy that can potentially achieve the two goals of securing energy
supply and mitigating climate change. The stance of President Barack Obama on alternative
energy has provided some much-needed encouragement to the industry in the US in the face of
the global financial crisis, which negatively affected several renewables projects. In other regions,
such as the EU, renewables are also expected to enjoy the support of governments in various
forms. Nevertheless, renewables, starting from a low base, are still expected to contribute only
modestly to global energy supply, even by 2030. OPEC estimates that the largest growth to 2020
will be in power generation, where modern biomass will grow at 4.2% p.a. and other renewables by
6.9% p.a.

NUCLEAR POWER
Nuclear power is drawing renewed interest because it may provide a cost-competitive and low-
emissions source of electricity production while also enhancing energy security. Next generation
nuclear technology could make nuclear power safer. Concerns about the proliferation and safety of
nuclear fuel and waste remain, however, and will need to be addressed.

The next decade will see a gradual shift in the energy generation mix in favor of gas, nuclear and
renewable energy away from coal despite its worldwide usage. According to the IAEA
(International Atomic Energy Agency), the role of nuclear power is expected to increase as newer
plants resulting from innovative technology are being built and existing older ones are re-licensed.

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3.1.2. Key Growth Drivers for the Global Energy Industry

Energy use has increased steadily, quadrupling since 1960, as a result of economic growth, rising
population and social progress. The reliable, efficient and economic supply of energy has helped
world economies grow, create jobs and improved the living conditions of billions of people.

Global population in 2005 was about 6.4 billion. In most parts of the world, birth rates are slowing
down. Nonetheless world population is expected to grow by an average of 1% per annum over the
years to 2030. Seemingly insignificant as this growth may sound, however, in reality it translates
into a global population increase to 8 billion by 2030. This is more than a billion more energy users
than exist today.
It is projected that global economic growth measured by gross domestic product at market
exchange rates will increase at approximately 3% per annum to 2030. This growth will be led by
expanding economies of developing countries.

The combination of population and economic growth will push global energy demand higher, at an
average rate of 1.2 % per annum. In 2030, global energy demand will be higher than twice the
level of 1980. Over the years, indeed since 1980, the global economy has been growing at the rate
of approximately 3 per cent per annum accompanied by improved energy efficiency. And it is
anticipated that the decline in energy intensities will continue at a 70 % faster pace than in the
past. This notwithstanding, global energy demand from all sources is projected to increase by 42%
from 2007 to 2030. Developing countries will account for most of these increases by virtue of
higher population and economic growth. Global assessment reveals that by 2030, the highest GDP
of any region in the world, approximately $30 trillion will be recorded by Asia Pacific, followed by
North America about $26 trillion and Europe at about $19 trillion. India and China will also continue
to experience significant population growth.

The key drivers for the renewables – solar, wind, geothermal, small hydro and modern biomass-
including nuclear are security of supply and climate. These factors have stimulated the emergence
of new industries and services for planning, manufacturing, operating and maintenance.
Technological innovations and government policy developments have combined to increase the
strength of the new industries, which are in turn driving further growth.

3.2. The Vision for the Nigerian Energy Sector

The broad vision for the energy sector is targeted at meeting the demand for energy in all sectors
of the Nigerian economy, including the energy needs of households in all parts of the country with
safe, clean and convenient energy at an affordable cost. This must be done in a technically
efficient, economically viable and environmentally sustainable manner using different energy
sources, conventional and non-conventional, as well as new and emerging energy sources to
ensure supply at all times with minimal disruption.

The vision statement for the energy industry is:

“By 2020, the energy sector will be the major engine of the nation’s sustainable social,
economic and industrial growth, delivering affordable and constant energy supply
efficiently to other sectors of the economy”

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The vision 2020 plan for the energy sector defines the five (5) strategic priorities for the sector.
These priorities have been set to address the critical issues identified in the Nigerian energy
sector. These priorities will also enable the achievement of the primary goals of the Government of
Nigeria as stated in the 7-pooint agenda. The strategic priorities identified for the Nigerian Energy
sector are as follows:

Provide necessary commercial and market incentives in order to attract private

investments (local and foreign) required to facilitate the necessary energy capacity
expansions in a rapidly growing economy
The anticipated growth for the Nigerian energy sector will require a total annual investment in
excess of $ 18 Billion in the next 10 years ($ 12 Billion for oil & gas and $ 6 Billion for power).
Of this, the projected affordable FG allocation will be $ 6 Billion ($ 5 Billion and $ 1Billion for oil
& gas and power respectively). The $ 12 Billion shortfall will require private funding, including
JV partner operating contributions. It is therefore imperative that alternative funding schemes,
such as third party and venture capital financing, at appropriate costs, are explored.

Currently, majority of the investments in the energy sector, especially in power generation and
refining, is provided by the Government. However, it is proposed that the significant capacity
expansions envisaged for the Nigerian energy sector will be driven by the private sector.
Appropriate fiscal terms need to be developed in order to attract global partners and investors
for the development of the gas infrastructure as proposed in the gas masterplan. Also
adequate incentives must be provided to attract private investments in power generation and
distribution, coal –to-power generation and local manufacturers of solar photovoltaic
technologies.

Consolidation of ongoing structural and economic reforms targeted at establishing

effective institutional and regulatory frameworks in the energy sector
The timely completion and success of the ongoing institutional and regulatory reforms, in the
power sector and the oil and gas sector, will improve the current environment and facilitate the
accomplishment of the Government’s goals in the energy sector. It is expected that once
completed, these reforms will improve the funding and efficiency of operations in the energy
sector.

In the power sector, it is imperative that the currently ongoing reforms, as proposed in the
electric sector reform act, are completed with the total privatization of the generation and
distribution assets. Also, the necessary regulatory and structural framework to support an
efficient oil and gas industry needs to be put in place. The petroleum industry bill, currently in
the National Assembly, includes provisions for the establishment of efficient and commercial
institutions in the oil and gas industry.

Achieve energy supply security by utilizing the nation’s renewable energy resources
(including wind, solar, hydro and biomass) to diversify the energy consumption mix

Currently, Nigeria’s energy mix is dominated by the fossil fuels, i.e. oil and gas. However, to
attain the vision 2020 intent, Nigeria needs to diversify its energy mix with renewable energy
sources. Nigeria has vast renewable energy resources including hydro (small and large hydro
power), solar, wind and biomass. Utilization of the nation’s renewable energy resources will

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reduce the country’s dependence on fossil fuels and provide an economically stable source of
energy to the power generation mix.

The country needs to develop a technologically driven renewable energy sector that will
harness the nation’s resources to complement its fossil fuel consumption and guarantee
energy security.

Development of efficient and sustainable energy generation and consumption patterns
Although there is currently insufficient energy to meet demand in households and industries, it
is necessary for the country to embark on energy conservation and energy efficiency initiatives
which will require Industries and homes to move to energy saving equipment and utilities for
reduction in total power demand.

Presently, energy utilization in Nigeria is far from being efficient. Apart from the direct loss due
to energy wasted, using energy inefficiently has three major implications in Nigeria. These are:
o The investment in some energy supply infrastructure is far in excess of what the
energy demand is
o The environmental problems associated with energy utilization are more aggravated
due to large energy consumption
o Excessive energy consumption adds to the costs of goods produced especially in
energy intensive industries like cement, steel works and refineries

In the power sector, demand side management principles targeted at ensuring efficiency in
electricity consumption need to be introduced.

Consolidation of ongoing local content campaign by expanding linkages to other
sectors of the economy
The ongoing Nigerian content development initiative is aimed at ensuring that substantial
proportion of activities, materials, engineering parts and human capital utilized in different
sectors of the Nigerian economy is domiciled within the country. The domiciliation focus on
local value addition is targeted at building global collaboration, attracting foreign direct
investments and promoting technology transfer. To sustain the current drive for Nigerian
content development it is important for Government to evolve policies to encourage both local
and foreign companies to enter into joint venture agreements to operate in Nigeria.

Human capacity development specifically targeted at the low technical and high value skills
e.g. fabrication and welding, should also be continuous through the integration of human
development programs in all projects. An example is the focus on capacity development of
fabrication yards to increase total tonnage and lifting capacity leading to integration of FPSO
topsides locally.

Also, the development of a reliable local steel industry to cater for the demand of the oil and
gas industry will help to develop deep and functional linkages between the mining industry and
the oil & gas industry.

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Figure 3-7: Strategic priorities for the Nigerian Energy Sector

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3.3. Objectives, Goals/Targets, Strategies and Initiatives for the Nigerian Energy Sector

ENERGY SOURCE: OIL

Vision: A globally competitive oil sector with multiplier effects and cross-sectoral linkages in the economy. We envision a deregulated and
vibrant downstream oil sector where the supply and distribution facilities are efficiently run to meet the local demand while exporting to the
international market

Objective 1: Increase oil reserves and production using environmentally friendly petroleum exploration and production
methods to minimize environmental degradation in oil producing areas

Goals Strategies Initiatives

To grow reserves from Invest in and embark on Structure oil bloc bid rounds (including Sao Tome and
32billion barrels to 40 billion aggressive exploration for oil Principe JDZ) in line with international best practices on a
barrels by 2015 and 50 billion reserves and production in all parts periodic basis
barrels by 2020 and grow of the country
crude oil production capacity Adhere to the local content principle in the allocation/bidding
from 1.8mbpd to 3.2 mbpd by for oil blocks
2015 and 4.5mbpd by 2020 Establish and maintain a comprehensive geological and
seismic survey program with digitalized maps in order to
promote and accelerate exploration programs
Ensure the enforcement of the marginal fields law
Establish a special fund for indigenous upstream operators
Deploy appropriate modern technology and reservoir
engineering practices in fields and recover marginal fields to
indigenous E&P companies
Carry out regular maintenance and upgrade of existing oil
production facilities including flow stations and pipelines

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Recover erstwhile production capacity of 3mbpd and grow

production capacity rapidly by revamping and expanding
existing production facilities
Drill in-fill wells in existing oil fields and Embark on new oil
field developments

Provide appropriate fiscal incentives Develop a framework of fiscal terms that will attract
to attract investments in oil investments to accelerate the development of
exploration, at the same time underdeveloped and un-explored terrains in the country
ensuring reasonable returns for the Conduct a periodic review of policies guiding the licensing of
nation new exploration acreages to reflect the strategic objectives of
the Government
To increase OPEC Quota Pursue a capacity reflective Prepare a business case to engage OPEC on quota allocation
allocation from 1.67mbpd to approach for OPEC allocation mechanism
3.2mbpd in 2015 and rather than current allocation
4.5mbpd in 2020 formula

Objective 2: To grow national content value add in the Nigerian energy sector , thereby expanding linkages to other sectors
of the economy and making Nigeria the West African hub for the provision of oil and gas services to the Gulf of Guinea

Goals Strategies Initiatives

Attain a national content value of 50% by Develop a reliable steel industry to Resuscitation of Ajaokuta Steel plant, rolling
2015 and 70% by 2020 cater for the demand of the oil and mills and others
gas industry, thereby developing Set up new steel plants to support anticipated
deep and functional linkages between local steel demand
the oil & gas and mining industries Promote the in-country manufacture of steel
plates, section and pipes to feed the thousands
of tonnage of fabrication and pipeline in planned
E&P and gas projects
Enhance the in-country capacity for Set up a deepwater port with supporting
the fabrication of steel structures used fabrication facilities operated by world class
in the oil and gas industry fabrication companies to integrate FPSO
topsides in Nigeria

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Upgrade Oron marine academy and establish

additional Marine academies to facilitate human
capital development in seafaring
Encourage the use of locally available Identify, quantify and qualify bentonite and
materials such as bentonite, class G barite deposits in Nigeria
cement and barites in exploration Conduct studies on national demand and export
activities possibilities for locally produced drilling fluids
and mud
Establish a barite and bentonite processing
plant in Nigeria
Develop capacity for local production of class G
cement
Enact a law to ensure 100% local sourcing of
bentonite and barite for oil exploration activities
in-country
Establish a common and comprehensive local
content measurement standard for the oil and
gas industry

Objective 3: To create an efficient oil and gas industry, with low operating costs, maximized revenue and efficient regulation
Goals Strategies Initiatives
Reduce operational costs by 5% in 2015 Put in place the necessary regulatory Review existing petroleum arrangements and
and 10% in 2020 through improved and structural framework to support consider alternative contractual arrangements
industry efficiencies an efficient and competitive oil and and structures
gas industry Review current fiscal policies and schemes in
the oil and gas industry
Carry out major restructuring and transformation
of government agencies including DPR, NNPC
in consonance with the ongoing OGIC reforms
Reduce contracting process for oil and Improve the decision making cycle/ Review the current contracting process and
gas projects to 6-8 months contracting time for oil and gas pproval limits for oil and gas projects
projects Review contracting process for recurring
contracts and make proposals for a fair and
timely approval process

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Objective 4: To ensure that oil and gas operations meet global health, safety and environment (HSE) standards

Goals Strategies Initiatives

Attain total oil spill of not more than Strengthen the relevant regulatory Review the terms of reference and laws of
2000bbls per annum in 2015 and agencies in order to ensure the relevant regulatory institutions with a view to
1000bbls per annum by 2020 enforcement of appropriate standards strengthening them
and entrench global HSE standards Ensure continous environmental impact
and principles in the Nigerian oil and assessment of all oil and gas projects and strict
gas sector adherence to the recommendations of EIA on all
projects
Reduce gas flares to operational and Encourage oil and gas producing Provide necessary funding required to ensure
technical requirements only by 2010 companies to gather and utilize the timely completion of on-going and new gas
associated gas to eliminate flaring by utilization projects
2010
To manage naturally occurring Ensure the enforcement of Streamline and strengthen the regulatory bodies
radioactive materials (NORM) generated appropriate regulations related to the for efficient and effective control of NORMs
from exploration activities to meet global control of NORMS
standards

Objective 5: To create a well secured operating and business environment in oil producing communities

Goals Strategies Initiatives

Reduce the occurrence of attacks on oil Promote economic empowerment Facilitate the rapid implementation of the Niger
and gas producing facilities by militants programmes targeted at capacity Delta Master Plan
building Foster cooperation with Government for
intelligence gathering and networking
Organize capability building programmes and
training for employability targeted at the
acquisition of vocational skills in oil producing
communities
Work with NGOs as key Identify credible NGOs with track records of
implementation mechanism for successfully implemented projects in the oil
community related projects producing communities and liaise with them for
the implementation of community related

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projects

Create employment opportunities in Ensure greater consultation and needs

oil producing communities by assessment prior to agreeing MOUs with oil
upgrading and building new facilities producing communities
Accelerate the approval of community related
projects

Objective 6: To transform the national oil company into a world class, commercially driven and globally competitive
organization
Goals Strategies Initiatives
Grow NOC production to over Develop the NOC into a medium oil Identify opportunities to acquire other small oil
250,000bpd in 2015 and 400,000 bpd in and gas producing company that can and gas companies , both local and foreign
2020 operate internationally Ensure preferential oil bloc allocation to the
National oil company (NOC)
Intensify human capital development Encourage major oil companies to establish
in the NOC by collaborating with other R&D outfits in Nigeria and conduct part of their
world class NOCs research in-country in conjunction with local
educational and research institutions
Collaborate with other NOCs, educational
institutions, and other R&D centers (local and
foreign)

Objective 7: To increase local refining capacity to serve both domestic and regional markets

Goals Strategies Initiatives

Grow in-country refining capacity to over Create an enabling environment to Completely deregulate and liberalize the
750,000bpd in 2015 and 1,500,000bpd in attract foreign and local investments downstream sector
2020 in refineries
Provide incentives and attractive fiscal terms to
encourage the establishment of private
refineries in the country
Award new refining licenses to credible and
competent downstream operators

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Objective 8: To develop adequate distribution infrastructure to facilitate efficient delivery of petroleum products to every
part of the country
Goals Strategies Initiatives
Enhance the capacity of downstream Carry out a partial privatization of old Cluster existing depots into geographical areas,
distribution assets to handle refined distribution assets owned by the separate pipelines from depots and privatize the
products from 0.75Mbpd of crude in 2015 Government assets on that basis
and 1.5Mbpd in 2020 Upgrade old distribution assets and develop a
public -private JV ownership of the petroleum
products’ pipeline network
Create an enabling environment to Provide incentives and attractive fiscal terms to
attract new investments in encourage private investments in downstream
downstream storage and distribution distribution and storage assets in every part of
assets the country

Objective 9: To ensure provision of adequate funding for oil and gas projects

Goals Strategies Initiatives

Increase accessible funding for oil and Complete structural and legal reforms Explore alternate funding schemes, such as
gas projects by 30% in 2015 and 50% in in the oil and gas sector targeted at third party financing and venture capital
2020 creating an efficient, transparent and financing for current JVs
commercially viable industry

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ENERGY SOURCE: GAS

Vision: A fully commercial and vibrant gas sector, developed in a comprehensive and integrated manner to accelerate the growth of the
economy.

Objective 1: Develop Nigeria’s gas industry, separate from the oil industry while delivering significant capacity additions
to serve local and export gas markets
Goals Strategies Initiatives
Grow proven gas reserves from Create an enabling environment, with Clearly define the fiscal and commercial
180TCF to 215 TCF by 2015 appropriate legal and regulatory agreements for non-associated gas and gas
and 250TCF by 2020 framework, to attract private investments produced under the PSC
(local and foreign) in gas exploration and
production Develop appropriate fiscal terms to attract global
partners and investors for the development of the
gas infrastructure proposed in the gas master plan:
3 central gas gathering and processing
facilities(CPFs)
West Delta (Warri/Forcados area)
Obiafu (North PortHarcourt)
Akwa--Ibom/Calabar Area
3 gas pipeline transmission system (including
compressor stations)
1200km South--North Line
700km Western System with 200km offshore
extension
200km Interconnector System
License pre-qualified investors interested in
developing, owning and operating gas
infrastructure as proposed in the gas master plan:

Develop incentives to encourage dedicated

exploration for natural gas, especially in the
unexplored basins

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Objective 2: Meet Nigeria’s domestic gas demand, especially to the power and manufacturing sector, and maximize the
multiplier effect of gas in the domestic economy while optimizing Nigeria’s share and competitiveness in high-value
export markets

Goals Strategies Initiatives

Increase gas exports: Strategically position Nigeria’s gas Implement new gas export projects including:
LNG and LPG from 22mtpa to development assets and infrastructure for Train 7 expansion of NLNG
50mtpa to 40bcm per annum growth in high yielding export markets, Brass LNG
Pipeline to XX with local content as a key driver OK LNG
WAGP Expansion
Centrica - StatoilHydro - CCC LNG Project
Trans-Saharan Gas Pipeline Project
Ensure enforcement of the local content policy in
the development of natural gas projects

Grow domestic gas demand to Give domestic gas supply projects priority Ensure rigorous enforcement of the domestic gas
5bscf/d in 2015 and 8bscf/d by over gas export projects to ensure that supply obligations to guarantee the availability of
2020 local gas demand, especially to power, is gas for domestic gas utilization projects
met
Develop a standard gas sales and purchase
agreement for gas sales to the domestic market

Implement the gas infrastructure blueprint for gas

infrastructure development to guide investment in
gas infrastructure
Provide price incentives to encourage industrial and
domestic consumers to convert to gas usage

Fully set-up the strategic gas aggregator to manage

the implementation of the domestic reserves and
production obligation and the aggregate price in the
domestic gas market in the short term

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Delineate and address supply-side Develop a long term gas pricing strategy to attract
challenges of availability, FDI in the domestic gas sector
affordability/commerciality of supply and
deliverability of gas supplies to the
domestic market

Objective 3: Accelerate development of the Nigerian domestic gas sector thereby achieving aggressive GDP growth while
assuring long-term energy security
Goals Strategies Initiatives
Increase the use of LPG gas in Promote LPG use as a viable alternative Develop fiscal incentives and subsidies to ensure
homes and industries and LPG for kerosene and firewood for domestic affordability of LPG in the domestic market
penetration from current 0.5kg cooking including manufacture of cylinders and cookers
to 3kg per capita per year in
2015 and 5kg per capita per
year in 2020
Grow gas based petrochemical Stimulate the growth of the Develop fiscal incentives and pricing models to
manufacturing capacity by 60% petrochemicals sector by increasing gas- provide subsidies and ensure affordability of gas to
in 2015 and 80% based manufacturing of petrochemicals gas-based petrochemical industries ( e.g. methanol
and fertilizer plants) and in the domestic steel
industry

ENERGY SOURCE: COAL

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Objective 1: To promote the effective utilization of coal to complement the nation’s energy needs

Goals Strategies Initiatives

To achieve a 10% and 20% Promote the production of coal for power Provide adequate fiscal incentives for coal to
contribution of coal to the generation by creating a favorable business power investors
national power generation mix environment for coal-to-power investors
by 2015 and 2020 Re-introduce integrated coal to power transport
respectively system (rail, pipe, conveyor etc.)
Intensify the search for more coal reserves to To carry out more detailed exploration for coal to
make coal a sustainable and reliable determine most economic deposits
alternative energy source

Ensure transparency in the allocation of coal

mining titles

Acquire and provide up-to-date geological data on

the coal deposits in the country
To achieve a 20% contribution Promote the use of coal in households as an Provide adequate incentives for large scale
of coal to the household alternative to fuelwood in order to check production of coal stoves at affordable prices
energy consumption by 2020 deforestation
Create public awareness for the use of smokeless
coal briquettes as an alternative to fuelwood

Establish a coal briquetting plant for mass

production of coal briquettes
Organize a national programme for selecting
efficient coal briquette burning stoves for adoption
as national models for mass production

Encourage Research and Development Collaborate with tertiary institutions and research
activities in the production, processing and institutes to develop local coal briquetting and coal
utilization of coal stove technology

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Establish programmes for manpower training for

the coal industry in polytechnics, technical
colleges and vocational schools
Partner with relevant foreign centers of excellence
in clean coal technologies to facilitate capability
building and manpower development

ENERGY SOURCE: NUCLEAR ENERGY

Objective 1: To pursue the development and exploitation of nuclear energy for peaceful purposes

Goals Strategies Initiatives

Achieve 1500MW and 3000 Establish unambiguous policy guidelines Establish, by law, the Nuclear Power Programme
MW national electricity for the nuclear energy sector, clearly Coordination and Implementation Organization
contribution from nuclear defining the role of relevant governmental (NPPCIO) to serve as the planning, coordinating and
technology by the year 2015 organizations and the private sector as the implementing organization for nuclear power
and 2020 respectively main drivers of the nuclear power programme
programme Pass the Nuclear Safety, Safeguards and Security
(NSSS) Bill and the new Nigerian Atomic Energy
Commission (NAEC) Act
Strengthen the Nigerian Nuclear Regulatory Authority
for efficiency and independence
Domesticate all international instruments,
agreements, conventions and treaties entered into by
Nigeria
Carry out public enlightenment on the country’s
Nuclear Power Potential and the activities of various
agencies in the sector

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Objective 1: To pursue the development and exploitation of nuclear energy for peaceful purposes

Goals Strategies Initiatives

Establish long term, legally binding agreements on the
operational structure of the nuclear power plants e.g.
build-operate and transfer or build, operate and own

Intensify manpower training and Strengthen, streamline and upgrade the existing
development and the provision of adequate nuclear research and development institutions
Infrastructure for nuclear science and Establish the nuclear safety institute for the regulatory
technology authority

Establish centers of excellence (CE) in nuclear

science and technology in these institutions :ABU,
IBADAN, NSUKKA, IFE, KADPOLY and YABATECH

Establish bilateral relationship with friendly countries

for manpower and infrastructural development

Provide vendors and suppliers (both local and foreign)

tax incentives to organize workshops and establish
training institutions in Nigeria

RENEWABLE ENERGY SOURCES

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Vision: A technologically driven renewable energy sector that harnesses the nation's resources to complement its fossil fuel consumption
and guarantee energy security

ENERGY SOURCE: HYDRO

Objective 1: To fully harness the hydro power potential available in the country for electricity generation

Goals Strategies Initiatives

To achieve a 15% and 20% Utilize mini and micro hydropower Zone the entire country into potential hydropower
contribution of hydro schemes to extend electricity to rural and generating zones and present the zones for
electricity to the nation’s remote areas competitive bidding by potential hydropower producers
electricity generation mix by
2015 and 2020 respectively
Sensitize the Federal, State and LGCs rural
electrification agencies on the potential of small
hydropower as source of electricity
Establish small hydropower pilot schemes in each
geopolitical zone to create awareness and facilitate
technology acquisition
Adapt existing irrigation dams with hydropower
generation potential for power generation and supply
to the national grid

Conduct a national survey of hydropower potentials in

the country
Establish more hydrological and meteorological
stations
Create an enabling environment (fiscal, Undertake BOT- Build Operate and Transfer
administrative , regulatory e.t.c.) to attract arrangements on new hydropower stations sites in the
private investments in establishing and country and prepare to privatize the business entity
operating hydropower plants after completion and startup

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Objective 1: To fully harness the hydro power potential available in the country for electricity generation

Goals Strategies Initiatives

Initiate the partial privatization of old hydropower
generation stations i.e. Kainji, Jebba, Shiroro,Oji river
etc, currently owned by the Government

Provide incentives and appropriate commercial terms

for privately owned hydropower IPPs

ENERGY SOURCE: WIND

Objective 1: To commercially develop the nation’s wind energy resource and integrate with other energy resources for off-
grid electricity supply to rural areas
Goals Strategies Initiatives
To achieve a 1% Utilize wind power plants to extend Update and expand the Nigerian wind atlas
contribution of wind energy electricity to rural and remote areas
to the nation’s electricity Execute and commission wind energy pilot projects in
generation mix by 2020 select locations around the country

Sensitize the Federal, State and LGCs rural

electrification agencies on the potential of wind energy
as source of electricity
Aggressively drive to optimize the Provide fiscal incentives such as import duty
components of wind water pumping and exemptions, tax holiday, investment grants to
electricity generation and - to de- encourage investments in wind powered generating
emphasize diesel powered water pumps plants and water pumps
wherever the wind speed will allow wind
water pumping

ENERGY SOURCE: SOLAR

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Objective 1: To fully harness the hydro power potential available in the country for electricity generation

Goals Strategies Initiatives

Objective 1: To harness the nation’s solar energy resources for electricity generation, especially to rural and remote areas

Goals Strategies Initiatives

To achieve a 1% Continuous active support of research and Collaborate with universities, Research institutes and
contribution of solar energy development activities centers (local and foreign) to develop home grown
to the nation’s electricity to cater for site specificity of designs for all solar photovoltaic applications
generation mix by 2020 parts of
the country Introduce competitive national scholarships and
/awards on solar technology proposals/designs

Create an enabling environment to attract Provide fiscal incentives such as import duty
private investments in manufacturing, exemptions, tax holiday, investment grants to
establishing and operating solar energy encourage investments in solar powered generating
systems plants and local manufacturing of solar systems
Provide fiscal incentives to encourage local and
foreign investors to establish factories for the
porduction of major components (such as inverters,
deep cycle batteries, charge controllers, e.t.c.)

Support demonstration and pilot projects to Create public awareness programmes on the potentials
ensure that of solar energy for water heating and electricity backup
the general public is aware of the
potentials of solar Develop and maintain a comprehensive database on
energy technologies which will as well solar energy resources, technologies, systems, end-
assist in creation of use appliances, market operators e.t.c.
markets for solar energy systems

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Objective 1: To fully harness the hydro power potential available in the country for electricity generation

Goals Strategies Initiatives

ENERGY SOURCE: BIOMASS

Objective 1: Integrate biomass energy resources, including agricultural residues, animal and human wastes, with other
energy resources through the adoption of an efficient conversion technology
Goals Strategies Initiatives
To replace 50% of firewood Create a sustainable legal, institutional and Enact a biomass act backed by legislation, which
consumption for cooking commercial framework that encourages incorporates incentives and appropriate commercial
with biomass energy public private sector investment in the terms for use of biomass fuels
technology by 2020 sector Introduce efficient wood-burning stoves in rural areas
at subsidized rates

Provide commercial and market incentives to

encourage the use of biogas digesters to cater for the
cooking energy needs of especially large households
and institutions like boarding schools, hospitals,
barracks, prison houses etc.
Promote R&D activities in biomass energy Encourage collaboration between tertiary institutions,
technology research institutes and centres with biomass energy
operators
Institute a national and international fair on innovative
designs and development models for biomass
technologies
Develop extension programmes and Identify and select appropriate sites for biofuel, biogas,
establish pilot projects to facilitate the biomass briquette pilot projects
general use of new biomass energy
technologies Conduct public enlightenment programme to highlight
the potentials for biomass energy

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Objective 1: To fully harness the hydro power potential available in the country for electricity generation

Goals Strategies Initiatives

To achieve an power Create an enabling environment to attract Conduct a comprehensive feasibility study on the
generation capacity of 1,000 private investments in biomass – to- power potentials of biomass resources in Nigeria
MW using biomass resource projects
Introduce a special tax incentive to encourage use of
biomass for power generation
Achieve a biofuel blends not Create a sustainable legal, institutional and Enact national act that will enforce production of
exceeding 10% by 2020 commercial framework that encourages second generation biofuels from non-food crops and
using locally produced public private sector investment in the use of biofuels in blend of at least 10% with
renewable biofuels from sector convectional fuel
secondary biomass
Enact a biomass act backed by legislation, which
incorporates incentives and appropriate commercial
terms for use of biomass fuels
Create public awareness programme to highlight the
bebefits of second generation biofuels

ENERGY UTILIZATION: POWER

Vision: A power sector that efficiently delivers sustainable adequate, qualitative, reliable and affordable power in a deregulated market
while optimizing the on- and off-grid energy mix

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Objective 1: Increase generation, transmission and distribution capacity in order to provide adequate and sustainable
power supply
Goals Strategies Initiatives
To achieve 20,000MW by 2015 Create a deregulated and Complete the privatization of the generation & distribution
and 35,000MW installed competitive electric power sector to assets currently owned by the Government to ensure
generation and distribution attract foreign and local investments effective service delivery
capacity by 2020 with 80% of
the generation capacity to be
provided by the private sector, Ensure the independence of the market regulator
and 100% private ownership of
the distribution assets Strengthen the market operator to carry out duties as
assigned in the electric sector reform act

Ensure a viable commercial Enact a Government policy which incorporates incentives

framework for the electric power and commercial terms for IPPs. (A model form GSA &
sector, including a tariff regime that PPA to be included)
promotes transparency, guarantees
security of investment and a Create a Government agency which will serve as a one-
reasonable rate of return on stop shop for private investors interested in power
investments generation and distribution
Extend and optimize the gas infrastructure and grid
network to allow for the construction of gas fired power
plants across the country

To strengthen the transmission Enhance the transmission capacity Source private capital and management for the
network to wheel 20,000MW and provide redundancies in the development and operation of the transmission network
by 2015 and 35,000MW by transmission system so as to ensure whilst retaining ownership by Government
2020 a fully integrated network that
minimizes transmission losses while
strengthening grid security

To increase electricity access Intensify rural electrification efforts in Assist the state and local governments in the
to 60% by 2015 and 80% by a more efficient manner development of alternative power solutions for rural areas
2020 from the current 40%

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Objective 2: To achieve optimal energy mix using most appropriate technologies

Goals Strategies Initiatives
To achieve an electricity Increase utilization of alternative Establish a coordinating agency for alternative energy
generation mix shown below: energy in the National energy mix development
Gas fired plants 18,000
Coal 7,000
Nuclear 2,000
Hydro 7,000
Other renewables 1,000
Wind
Solar Construct mini power stations in rural communities using
Biomass locally appropriate technologies (possibly hybrid) –
hydro, wind, biomass, solar
Total 35,000MW

Objective 3: To significantly reduce electricity wastage by promoting energy efficient practices

Goals Strategies Initiatives

Increase the average load Introduce demand side management Launch massive public campaign towards promoting
factor in the power sector by principles targeted at ensuring efficient usage of electricity and energy conservation
30% in 2015 and 50% in 2020 efficiency in energy consumption in
the electricity industry
Introduce discriminatory tariffs targeted at encouraging
off-peak electricity load, especially for large volume
electricity consumers
Introduce discriminatory tariffs to encourage low
electricity utilization in households
Introduce and encourage the use of energy efficient
appliances at all levels of the electricity industry

Liaise with the Manufacturing sector and encourage the

transformation of their production processes to highly
energy efficient technologies

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Objective 4: To encourage local production of inputs required for development of the power sector
Goals Strategies Initiatives
To produce 20% and 30% of Establish Industrial parks for Power input producers &
the material inputs for the Provide incentives to encourage local other manufacturers such that these parks are provided
power sector locally by 2015 manufacturing and production of with uninterrupted electricity supply
and 2020 respectively consumables used in the power
sector, initially of relatively low tech
power equipment such as Provide tax holidays & guaranteed patronage to local
conductors, insulators, cables, power input producers and Industries
transmission and distribution
structures etc.
Ensure local manpower development Develop and equip the newly created National Power
by establishing effective training Training Institute, in collaboration with tertiary institutions,
institutions and programmes as well to facilitate human capital development
as enforcing minimum local content
components of power sector Enforce a minimal percentage (50%) of local manpower
development and operational involvement at all levels of every EPC project, Plant
activities operations and maintenance in the power sector

Objective 5: To improve the billing and collection efficiency of power distribution companies in the power sector

Goals Strategies Initiatives

To achieve billing and Completely privatize distribution Conclude privatization of distribution assets as a matter
collection efficiencies of 100% assets in order to provide efficient of priority
and 95% respectively for billing and collecting infrastructure
power consumed by 2020 and ensure international best Carry out public enlightenment programmes targeted at
practices in electricity distribution highlighting the effect of unpaid electricity bills on
electricty generation

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Deploy prepaid meters in all the major electricity

consumption area in the country

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3.4. Key Growth Enablers

3.4.1. Legal & Regulatory Regime

A fundamental prerequisite for a well-functioning energy sector is the introduction and sustenance
of a sound legal and regulatory regime. This function of law as a framework for the energy sector is
crucial as there cannot be efficiency without appropriate legal regulation and a framework to
determine what kind of relationships will exist between the various parties and the conditions
subject to which they will operate. It is also required to determine their competencies, duties,
powers and rights. Many of the associated legal and regulatory reforms must be in place before a
truly efficient energy market can evolve.
In Nigeria today, legal and regulatory reforms have been proposed but are yet to become
functional. These reforms must be completed for our energy sector to thrive:

3.4.2. Human Capital & Infrastructure Requirements

To attain the vision 2020 intent, it is necessary that human capacity development be a major focus
of attention in energy sector. We need to develop in-country training institutions to enhance the
support, design and fabrication in the oil and gas industry. We should also develop locally coal
technology, solar, hydro, wind, biomass and nuclear energy. Research in these areas will be
pursued by encouraging collaboration between the industry and the territory institutions to foster
world class technological development locally.

The provision of required infrastructure for our growing energy sector will be rigorously pursued.
More depots from oil and gas will be built in addition to existing ones, will be clustered into
geographical zones and privatized. Adequate pipelines for crude refined production and gas will be
built and managed efficiently. Adequate transmission and distribution lines will also be provide and
efficiently managed.

3.5. Environmental Implications of the Energy Vision 2020 Plan

Like any other scientific progress, energy installations and processes, even though making life
easier and comfortable, pose impacts to environment that are preventable in most cases.
Notwithstanding the apparent difficulties encountered in resolving these cases, imbalance of the
natural environment do occur especially in exploitation of fossil fuels. It is apparent that oil spills
associated with oil production and activities are almost unavoidable. Effects of spillage and spill
mitigation, response and technological breakthroughs are minimizing the effects of that
environmental degradation and avoiding the occurrences in most instances. Processing of the
produced oil and gas downstream are also not without effects to the environment and water
systems.

Overall, these impacts can be assessed in environmental impacts studies including both pre-and
post assessments. Off-shore oil production might as well alter the ecological balance of marine life
if not properly managed. Usage of fossils is always associated with unwanted hydrocarbon
emissions and particulates that usually dirty the environment.

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As part of the vision 2020 plan for the energy sector, adequate assessments need to be conducted
to ensure that the development of the energy sources, including coal, nuclear, oil and gas and
renewable energy sources do not impact the environment negatively. Also, necessary institutional
arrangements to enforce existing environmental protection laws must be put in place.

3.6. Critical Success Factors

Nigeria certainly has the potential to become one of the top 20 economies in the world by the year
2020 by virtue of its rich human and material resource endowment. But much of its abundant
potentials have remained untapped. With the vision 20:2020 intent, the time has therefore, come to
unlock the potentials to initiate and sustain high and broad based growth and development.

As mentioned earlier in this report, to achieve the objectives of the vision 20:2020, the energy
sector is expected to play a critical role. Energy, especially power, is a major and critical industrial
input and no nation could attain sustainable growth and development without adequate and
constant electricity supply. Unfortunately, electricity supply in the country has been inadequate,
epileptic and unreliable that it has been a clog in the wheel of economic growth, process and social
well being.
In order to ensure the attainment of the vision 2020 intent in the energy sector, the following key
success factors must be considered:

Political Commitment
There is absolute willingness and high level commitment on the part of the political leadership at
the Federal and State levels to fix the energy sector. This is quite evident in the priority given to the
sector in the 7- point Development agenda of President Yar’Adua. The huge investments and
resources at all levels of government being deployed to the sector is a pointer to the commitment
of Government to revamp the sector.

Reforms
There is a consensus and commitment among key stakeholders in the economy to a significant
change and reform of the sector. With these reforms, the sector is being deregulated and
liberalized and the private sector is being encouraged to invest heavily I the sector. Significant
investments are required in the energy and the government alone cannot fund these investments.
The reforms once completed will help to create an enabling environment for private investments in
the sector.

Political stability
The country has continued to experience political stability since 1999. This is very crucial to
guaranteeing stable and consistent policy in the energy sector in pursuing the realization of energy
reform and goals of the sector as encapsulated in the vision document.

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4.0 Implementation Roadmap

4.1. Implementation Roadmap for the Energy Sector

ENERGY SOURCE: OIL

Strategies Initiatives Timelines Implementin Collaborating Funding

g Agencies Agencies Sources
S3 M4 L5
Invest in and embark on Structure oil bloc bid rounds (including Sao X FMPR DPR FGN
aggressive exploration Tome and Principe JDZ) in line with
for oil reserves and international best practices on a periodic
production in all parts of basis
the country Adhere to the local content principle in the X FMPR DPR FGN
allocation/bidding for oil blocks

Establish and maintain a comprehensive X FMPR NOC, IOC FGN, IOC,

geological and seismic survey program with NOC
digitalized maps in order to promote and
accelerate exploration programs
Ensure the enforcement of the marginal X FMPR DPR FGN
fileds law

Establish a special fund for indigenous X FMPR DPR FGN

upstream operators
Deploy appropriate modern technology and X X X DPR NOC, IOC,

3
Short Term :2010 - 2012
4
Medium Term : 2013 - 2015
5
Long Term: 2016 - 2020

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reservoir engineering practices in fields and LOC
recover marginal fields to indigenous E&P
companies
Carry out regular maintenance of existing oil X X X NOC, NOC, LOC,IOC NOC,
production facilities including flow stations LOC,IOC LOC,IOC
and pipelines
Recover erstwhile production capacity of X X X NOC, NOC, LOC,IOC NOC,
3mbpd and grow production capacity rapidly LOC,IOC LOC,IOC
by revamping and expanding existing
production facilities
Drill in-fill wells in existing oil fields and X X X NOC, DPR NOC,
embark on new oil field developments LOC,IOC LOC,IOC
Provide appropriate Develop a framework of fiscal terms that will X FMPR DPR FGN
fiscal incentives to attract investments to accelerate the
attract investments in oil development of un-explored and
exploration, at the same underdeveloped terrains in the country
time ensuring
reasonable returns for Conduct a periodic review of policies guiding X FMPR DPR FGN
the nation the licensing of new exploration acreages to
reflect strategic objectives of the
Government
Pursue a capacity Prepare a business case to engage OPEC X FMPR DPR, NOC FGN
reflective approach for on quota allocation mechanism
OPEC allocation rather
than current allocation
formula
Develop a reliable steel Resuscitation of Ajaokuta Steel plants, X X MMSD FMPR, NOC FGN
industry to cater for the rolling mills and others
demand of the oil and Set up new steel plants to support X X MMSD Private FGN,
gas industry, thereby anticipated local steel demand investors Private
developing deep and investors

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functional linkages Promote the in-country manufacture of steel X X MMSD NOC, Private Private
between the oil & gas plates, section and pipes to feed the investors investors,
and mining industries thousands of tonnage of fabrication and NOC, FGN
pipeline in planned E&P and gas projects
Enhance the in-country Set up a deepwater port with supporting X X Private Ministry of Private
capacity for the fabrication facilities operated by world class investors Transport, investors
fabrication of steel fabrication companies to integrate FPSO Nigerian Ports
structures used in the oil topsides in Nigeria Authority, FGN
and gas industry Upgrade Oron marine academy and X X
establish additional Marine academies to
facilitate human capital development in
seafaring
Encourage the use of Identify, quantify and qualify bentonite and X X Private MMSD, NOC Private
locally available barite deposits in Nigeria investors investors
materials such as
Conduct studies on national demand and X X MMSD NOC, IOC FGN
bentonite, class G
export possibilities for locally produced
cement and barites in
drilling fluids and mud
exploration activities
Establish a barite and bentonite processing X X FMPR NOC, IOC, FGN
plant in Nigeria Nigerian
Content
Division
Develop capacity for local production of class X FMPR, NOC, IOC FGN
G cement Nigerian
Content
Division

Enact a law to ensure 100% local sourcing of X FMPR, NOC, IOC FGN
bentonite and barite for oil exploration Nigerian
activities in-country Content
Division

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S3 M4 L5
Establish a common and comprehensive X FMPR, NOC, IOC FGN
local content measurement standard for the Nigerian
oil and gas industry Content
Division
Put in place the Review existing petroleum arrangements X X X FMPR NOC, DPR FGN
necessary regulatory and consider alternative contractual
and structural framework arrangements and structures
to support an efficient
Review current fiscal policies and schemes X FMPR NOC, IOC FGN
and competitive oil and
in the oil and gas industry
gas industry
Carry out major restructuring and X X X FMPR FGN FGN
transformation of government agencies
including DPR, NNPC in consonance with
ongoing OGIC reforms
Improve the decision Review the current contracting process and X X X FMPR FGN FGN
making cycle/ approval limits for oil and gas projects
contracting time for oil
and gas projects Review contracting process for recurring X X X FMPR FGN FGN
contracts and make proposals for a fair and
timely approval process
Strengthen the relevant Review the terms of reference and laws of X X X FMPR, DPR FGN FGN
regulatory agencies in relevant regulatory institutions with a view to
order to ensure the strengthening them
enforcement of Ensure continuous environmental impact X X X FMPR, DPR FGN FGN
appropriate standards assessment of all oil and gas projects and
and entrench global strict adherence to the recommendations of
HSE standards and EIA on all projects
principles in the Nigerian
oil and gas sector
Encourage oil and gas Provide necessary funding required to X X X FMPR, DPR FGN FGN
producing companies to ensure the timely completion of on-going and
gather and utilize new gas utilization projects
associated gas to
eliminate flaring by 2010

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S3 M4 L5
Ensure the enforcement Streamline and strengthen the regulatory X X X FMPR, DPR FGN FGN
of appropriate bodies for efficient and effective control of
regulations related to the NORMs
control of NORMS
Promote economic Facilitate the rapid implementation of the X X X FMPR, NOC, FGN
empowerment Niger Delta Master Plan NDDC
programmes targeted at
building community Foster cooperation with Government for X X NOC, LOC, FMPR, NDDC NOC,LOC,
capacity intelligence gathering and networking IOC, LGs States, LGs
IOC
Organize training for employability and X X X NDDC, NOC, FMPR NDDC,
capability building programme for vocational IOC, LOC NOC, IOC,
skills in oil producing communities LOC
Work with NGOs as key Identify credible NGOs with track records of X X X NDDC, NOC, FMPR NDDC,
implementation successfully implemented projects in the oil IOC, LOC NOC, IOC,
mechanism for producing communities and liaise with them LOC
community related for the implementation of community related
projects projects
Create employment Ensure greater consultation and needs X X X NDDC, NOC, FMPR NDDC,
opportunities in oil assessment prior to agreeing MOUs with oil IOC, LOC NOC, IOC,
producing communities producing communities LOC
by upgrading and Accelerate the approval of community X X X NDDC, NOC, FMPR NDDC,
building new facilities related projects IOC, LOC NOC, IOC,
LOC
Develop the NOC into a Identify opportunities to acquire other small X X FMPR NOC, DPR FGN
medium oil and gas oil and gas companies , both local and
producing company that foreign
can operate Ensure preferential oil bloc allocation to the X X X FMPR NOC, DPR FGN
internationally National oil company (NOC)

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S3 M4 L5
Intensify Human capital Encourage major oil companies to establish X X X FMPR, DPR Ministry of FGN
development in the NOC R&D outfits in Nigeria and conduct part of Education,
by collaborating with their research in-country in conjunction with Research
other world class NOCs local educational and research institutions Institutes
Collaborate with other NOCs, educational X X X NOC NOC, NOC
institutions, and other R&D centers (local Educational
and foreign) Institutions and
R &D centres
Create an enabling Completely deregulate and liberalize the X X FMPR DPR, NOC FGN
environment to attract downstream sector
foreign and local Provide incentives and attractive fiscal terms X X X FMPR NOC, DPR FMPR
investments in refineries to encourage the establishment of private
refineries in the country
Award new refining licenses to credible and X X FMPR DPR, NOC FGN
competent downstream operators
Carry out a partial Cluster existing depots into geographical X X NOC, JVs DPR NOC, JVs
privatization of old areas, separate pipelines from depots and
distribution assets privatize the assets on that basis
owned by the Upgrade old distribution assets and develop X X NOC DPR NOC
Government a public -private JV ownership of the
petroleum products’ pipeline network
Create an enabling Provide incentives and attractive fiscal terms X X FMPR DPR, NOC FGN
environment to attract to encourage private investments in
new investments in downstream distribution and storage assets
downstream storage and in every part of the country
distribution assets
Complete structural and Explore alternate funding schemes, such as X X FMPR NOC FMPR
legal reforms in the oil third party financing and venture capital
and gas sector targeted financing for current JVs
at creating an efficient,
transparent and

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S3 M4 L5
commercially viable
industry

ENERGY SOURCE: GAS

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Agencies ng Sources
S M L Agencies
Create an enabling Establish a national holding company for x FMPR/FEC/N FG
environment, with gas to ensure a focused development of ASS
appropriate legal and the gas sector
regulatory framework, to Clearly define the fiscal and commercial x FMPR FMF FG
attract private investments agreements for non-associated gas and
(local and foreign) in gas gas produced under the PSC
exploration and production Develop appropriate fiscal terms to x x x FMPR, NGMP FG/Investo
attract global partners and investors for Team rs
the development of the gas
infrastructure proposed in the gas
master plan:
3 central gas gathering and
processing facilities(CPFs)
West Delta (Warri/Forcados area)
Obiafu (North PortHarcourt)
Akwa--Ibom/Calabar Area
3 gas pipeline transmission system
(including compressor stations)
1200km South--North Line
700km Western System with 200km
offshore extension
200km Interconnector System
License pre-qualified investors x FMPR, NGMP FMF FG
interested in developing, owning and Team
operating gas infrastructure as proposed
in the gas master plan:
Develop incentives to encourage x FMPR, DPR FMF FG
dedicated exploration for natural gas,
especialy in the unexplored basins

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Agencies ng Sources
S M L Agencies
Strategically position Implement new gas export projects X X X FMPR/ IOCs FG/
Nigeria’s gas development including: Private
assets and infrastructure Train 7 expansion of NLNG investors/I
for growth in high yielding Brass LNG OCs
export markets, with local OK LNG
content as a key driver WAGP Expansion
Centrica - StatoilHydro - CCC LNG
Project
Trans-Saharan Gas Pipeline Project
Ensure enforcement of the local content x FMPR, DPR FMF FG
policy in the development of natural gas
projects
Give domestic gas supply Ensure rigorous enforcement of the x FMPR, DPR FMF FG
projects priority over gas domestic gas supply obligations to
export projects to ensure guarantee the availability of gas for
that local gas demand, domestic gas utilization projects
especially to power, is met Develop a standard gas sales and x FMPR, DPR FMF FG
purchase agreement for gas sales to the
domestic market

Implement the gas infrastructure X X X NGMP Team

blueprint for gas infrastructure and FMPR
development to guide investment in gas
infrastructure
Provide price incentives to encourage x FMPR, DPR FMF FG
industrial and domestic consumers to
convert to gas usage
Fully set-up the strategic gas aggregator x FMPR, DPR FMF FG
to manage the implementation of the
domestic reserves and production
obligation and the aggregate price in the

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Agencies ng Sources
S M L Agencies
domestic gas market in the short term

Delineate and address Develop a long term gas pricing strategy x FMPR, DPR FMF FG
supply-side challenges of to attract FDI in the domestic gas sector
availability,
affordability/commerciality
of supply, deliverability and
its cost effectiveness, legal
and regulatory framework,
and funding
Promote LPG use as a Develop fiscal incentives and subsidies x FMPR, DPR FMF FG
viable alternative for to ensure affordability of LPG in the
kerosene and firewood for domestic market including manufacture
domestic cooking of cylinders and cookers
Stimulate the growth of the Develop fiscal incentives and pricing X X FMPR Ministry of FMCI
petrochemicals sector by models to provide subsidies and ensure Industry
increasing gas-based affordability of gas to gas-based
manufacturing of petrochemical industries ( e.g. methanol
petrochemicals and fertilizer plants) and in the domestic
steel industry

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ENERGY SOURCE: COAL

Strategies Initiatives Timelines Implementing Collaborating Funding

Agencies Agencies Sources
S M L
Promote the production Provide adequate fiscal incentives X X X FMP, MMSD FMP, MMSD FGN
of coal for power for coal to power investors
generation by creating
a favorable business Re-introduce integrated coal to X X MMSD, FMP Investors FGN,
environment for coal- power transport system (rail, pipe, Investors
to-power investors conveyor etc.)

Intensify the search for To carry out more detailed X X MMSD NGSA MMSD
more coal reserves to exploration for coal to determine
make coal a most economic ally viable deposits
sustainable and reliable
alternative energy Ensure transparency in the X X X MMSD FGN FGN
source allocation of coal mining titles
Acquire and provide up-to-date X X X MMSD, NGSA FGN FGN
geological data on the coal
deposits in the country
Promote the use of Provide adequate incentives for X X X NCC MMSD MMSD
coal in households as large scale production of coal
an alternative to stoves at affordable prices
fuelwood in order to Create public awareness for the X X X NCC MMSD MMSD
check deforestation use of smokeless coal briquettes
as an alternative to fuelwood
Establish a coal briquetting plant X X X MMSD MMSD, Investors
for mass production of coal Investors
briquettes
Organize a national programme for X X X NCC MMSD MMSD
selecting efficient coal briquette
burning stoves for adoption as
national models for mass

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S M L
production

Encourage Research Collaborate with tertiary institutions X X X NCC MMSD MMSD

and Development and research institutes to develop
activities in the local coal briquetting and coal
production, processing stove technology
and utilization of coal Establish programmes for X X X NCC MMSD MMSD
manpower training for the coal
industry in polytechnics, technical
colleges and vocational schools
Partner with relevant foreign X X X NCC MMSD MMSD
centers of excellence in clean coal
technologies to facilitate capability
building and manpower
development

ENERGY SOURCE: NUCLEAR ENERGY

Strategies Initiatives Timelines Implementing Collaborating Funding

Agencies Agencies Sources
S M L
Establish unambiguous Establish, by law, the Nuclear X NASS, FMJ NPC, FMF, FGN
policy guidelines for the Power Programme Coordination FMST, FIC, ,
nuclear energy sector, and Implementation NSA,
clearly defining the role of Organization (NPPCIO) to serve PHCN,NNRA
relevant governmental as the planning, coordinating , NGSA,
organizations and the and implementing organization NAEC, NIMET
private sector as the main for nuclear power programme

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S M L
drivers of the nuclear power Pass the Nuclear Safety, X NASS, FMJ NNRA, NAEC FGN
programme Safeguards and Security
(NSSS) Bill and the new
Nigerian Atomic Energy
Commission (NAEC) Act
Strengthen the Nigerian Nuclear X X X FMPR IAEA, NNRA FGN
Regulatory Authority for
efficiency and independence
Domesticate all international X X NASS , FMJ NNRA FGN
instruments, agreements,
conventions and treaties entered
into by Nigeria
Carry out public enlightenment X X X NPPCIO, FMIC FGN
on the country’s Nuclear Power NAEC, NNRA
Potential and the activities of
various agencies in the sector
Establish long term, legally X X NPPCIO, FMJ, NNRA FGN
binding agreements on the NAEC
operational structure of the
nuclear power plants e.g. build-
operate and transfer or build,
operate and own
Intensify manpower training Strengthen, streamline and X X X FMST, NAEC, FMST, NUC, FGN, IAEA
and development and the upgrade the existing nuclear IAEA
provision of adequate research and development
Infrastructure for nuclear institutions
science and technology
Establish the nuclear safety X X X NNRA IAEA FGN, IAEA
institute for the regulatory
authority

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S M L
Establish centers of excellence X X X FMST, NUC, ABU, UI, FGN
(CE) in nuclear science and NBTE, NAEC NSUKKA,
technology in these institutions IFE,
:ABU, IBADAN, NSUKKA, IFE, KADPOLY,
KADPOLY and YABATECH YABATECH
Establish bilateral relationship X X X FMFA, FME, IAEA, FGN
with friendly countries for NPPCIO, Respective
manpower and infrastructural NNRA, NAEC Nigerian
development Foreign
Missions and
the host
Countries

Provide vendors and suppliers X X X FMF NPPCIO, FGN

(both local and foreign) tax NAEC
incentives to organize
workshops and establish training
institutions in Nigeria

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ENERGY UTILIZATION: POWER

Timelines Implementing Collaborating Funding

Agencies Agencies Sources
Strategies Initiatives S M L
Create a deregulated and Complete the privatization of the X BPE/ICRC FMP Budgetary
competitive electric power generation & distribution assets Allocations
sector to attract foreign currently owned by the
and local investments Government to ensure effective
service delivery
Ensure the independence of the X FMP FMJ
market regulator
Strengthen the market operator to X FMP
carry out duties as assigned in the
electric sector reform act
Ensure a viable Enact a Government policy which X FMP/FMJ NERC Budgetary
commercial framework for incorporates incentives and Allocations
the electric power sector, commercial terms for IPPs. (A
including a tariff regime model form GSA & PPA to be
that promotes included)
transparency, guarantees Create a Government agency X FMP FMF Budgetary
security of investment and which will serve as a one-stop /FMEH/NERC/ Allocations
a reasonable rate of return shop for private investors NELMCO
on investments interested in power generation and
distribution
Extend and optimize the gas X FMPR FMP Budgetary
infrastructure and grid network to Allocations /
allow for the construction of gas Private
fired power plants across the Sector
country

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Strategies Initiatives S M L
Enhance the transmission Source private capital and X FMP/ TCN FMF/Banks/Capit Private
capacity and provide management for the development al Market Sector
redundancies in the and operation of the transmission Operators through
transmission system so as network whilst retaining ownership equity and/or
to ensure a fully integrated by Government debt.
network that minimizes
transmission losses while
strengthening grid security
Intensify rural Assist the state and local X X X FMP, States, FGN FMP, States,
electrification efforts in a governments in the development Local Local
more efficient manner of alternative power solutions for Governments Governments
rural areas
Increase utilization of Establish a coordinating agency X FMP FMJ/NNPC/ECN/ FMP
alternative energy in the for alternative energy development NERC
National energy mix
Construct mini power stations in X X X FMP, States, FGN FMP, States,
rural communities using locally Local Local
appropriate technologies (possibly Governments Governments
hybrid) – hydro, wind, biomass,
solar
Introduce demand side Launch massive public campaign x FMP NERC FMP
management principles towards promoting efficient usage
targeted at ensuring of electricity and energy
efficiency in energy conservation
consumption in the Introduce discriminatory tariffs to X NERC Generation and
electricity industry encourage low electricity utilization Distribution
in households Companies
Introduce and encourage the use X FMP
of energy efficient appliances at all
levels of the electricity industry

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Strategies Initiatives S M L
Liaise with the Manufacturing X FMP MAN
sector and encourage the
transformation of their production
processes to highly energy
efficient technologies
Establish Industrial parks for X FMCI FMP FMCI
Provide incentives to Power input producers & other
encourage local manufacturers such that these
manufacturing and parks are provided with
production of consumables uninterrupted electricity supply
used in the power sector, Provide tax holidays & guaranteed X FMF FMP
initially of relatively low patronage to local power input
tech power equipment producers and Industries
such as conductors,
insulators, cables,
transmission and
distribution structures etc.
Ensure local manpower Develop and equip the newly X FMP Universities and FMP
development by created National Power Training Polytechnics
establishing effective Institute, in collaboration with
training institutions and tertiary institutions, to facilitate
programmes as well as human capital development
enforcing minimum local Enforce a minimal percentage X FMP
content components of (50%) of local manpower
power sector development involvement at all levels of every
and operational activities EPC project, Plant operations and
maintenance in the power sector
Completely privatize Conclude privatization of X ICRC/BPE FMP
distribution assets in order distribution assets as a matter of
to provide efficient billing priority

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Strategies Initiatives S M L
and collecting Carry out public enlightenment x FMP NERC FMP
infrastructure and ensure programmes targeted at
international best practices highlighting the effect of unpaid
in electricity distribution electricity bills on electricity
generation
Deploy prepaid meters in all the X Distribution FMP Distribution
major electricity consumption area Companies Companies
in the country

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RENEWABLE ENERGY SOURCES

ENERGY SOURCE: HYDRO

Timelines Implementing Collaborating Funding

Agencies Agencies Sources
Strategies Initiatives S M L
Utilize mini and micro Zone the entire country into potential PHCN, FMP ECN, FMAWR FGN,
hydropower schemes to hydropower generating zones and PPP
extend electricity to rural present the zones for competitive
and remote areas bidding by potential hydropower
producers
Sensitize the Federal, State and X PHCN, FMP, FMAWR FGN,
LGCs rural electrification agencies States and State
on the potential of small hydropower Local Govt and
as source of electricity Local
Govt,
PPP
Establish small hydropower pilot X PHCN, FMP ECN, FMAWR FGN,
schemes in each geopolitical zone to PPP
create awareness and facilitate
technology acquisition
Adapt existing irrigation dams with X PHCN, FMP, FMAWR FGN,
hydropower generation potential for State Govt State
power generation and supply to the Govt.,
national grid PPP
Conduct a national survey of X PHCN, FMP ECN, FMAWR FGN,
hydropower potentials in the country PPP
Establish more hydrological and X X PHCN, FMP ECN, FMAWR FGN,
meterological stations PPP

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Strategies Initiatives S M L
Create an enabling Undertake BOT- Build Operate and X FMP, BPE PPP, FMAWR PPP,
environment (fiscal, Transfer arrangements on new FGN
administrative , regulatory hydropower stations sites in the
e.t.c.) to attract private country and prepare to privatize the
investments in business entity after completion and
establishing and startup
operating hydropower Initiate the partial privatization of old X BPE, FMF, FMP PPP
plants hydropower generation stations i.e. PHCN
Kainji, Jebba, Shiroro,Oji river etc,
currently owned by the Government
Provide incentives and appropriate X NASS, FMF, ECN, FMP FGN
commercial terms for privately PHCN
owned hydropower IPPs

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ENERGY SOURCE: WIND

Timelines Implementing Collaborating Funding

Agencies Agencies Sources
Strategies Initiatives S M L
Utilize wind power plants Update and expand the Nigerian wind X FMST Nigerian FGN
to extend electricity to atlas Metrological
rural and remote areas Dept, ECN

Execute and commission wind energy X FMP, PHCN State Govt, FGN,
pilot projects in select locations LG councils State &
around the country Local
Govt,
PPP
Sensitize the Federal, State and X FMP, PHCN State Govt, FGN,
LGCs rural electrification agencies on LG councils State
the potential of wind energy as source Local
of electricity Govt,
PPP
Aggressively drive to Provide fiscal incentives such as X FMP, PHCN State Govt, FGN,
optimize the components import duty exemptions, tax holiday, LG councils State
of wind water pumping investment grants to encourage Local
and electricity generation investments in wind powered Govt,
and - to de-emphasize generating plants and water pumps PPP
diesel powered water
pumps wherever the wind
speed will allow wind
water pumping

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ENERGY SOURCE: SOLAR

Strategies Initiatives Timelines Implementing Collaborating Funding

Agencies Agencies Sources
S M L
Continuous active Collaborate with universities, X ECN, NNPC, Tertiary PTDF,
support of research and Research institutes and centers (local FMST institutions ETF,
development activities and foreign) to develop home grown PPP
to cater for site solar photovoltaic applications
specificity of designs for Introduce competitive national X X ECN, NNPC Tertiary PTDF,
all parts of scholarships and /awards on solar institutions ETF,
the country technology proposals/designs PPP

Create an enabling Provide fiscal incentives such as X State Govts, ECN, FMP FGN,
environment to attract import duty exemptions, tax holiday, PPP states,
private investments in investment grants to encourage PPP
manufacturing, investments in solar powered
establishing and generating plants and local
operating solar energy manufacturing of solar systems
systems Provide fiscal incentives to X State Govts, ECN, FMP FGN,
encourage local and foreign investors PPP states,
to establish factories for the PPP
production of major components (such
as inverters, deep cycle batteries,
charge controllers, e.t.c.)

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Support demonstration Create public awareness programmes X X ECN, FMP FMIC FGN
and pilot projects to on the potentials of solar energy for
ensure that water heating and electricity backup
the general public is
aware of the potentials Develop and maintain a X ECN, FMP Tertiary
of solar comprehensive database on solar institutions
energy technologies energy resources, technologies,
which will as well assist systems, end-use appliances, market
in creation of operators e.t.c.
markets for solar energy
systems

ENERGY SOURCE: BIOMASS

Timelines Implementing Collaborating Funding

Agencies Agencies Sources
Strategies Initiatives S M L
Create a sustainable Enact a biomass act backed by X NASS, ECN, FGN FGN
legal, institutional legislation, which incorporates incentives FMP
and commercial and appropriate commercial terms for
framework that use of biomass fuels
encourages public Introduce efficient wood-burning stoves X X ECN FGN FGN
private sector in rural areas at subsidized rates
investment in the
sector

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Timelines Implementing Collaborating Funding

Agencies Agencies Sources
Strategies Initiatives S M L
Provide commercial and market X X FGN NASS FGN
incentives to encourage the use of
biogas digesters to cater for the cooking
energy needs of especially large
households and institutions like boarding
schools, hospitals, barracks, prison
houses etc.
Promote R&D Encourage collaboration between tertiary X X X ECN, NUC FGN
activities in biomass institutions, research institutes and
energy technology centres with biomass energy operators
Institute a national and international fair X X ECN, FMST FGN
on innovative designs and development
models for biomass technologies
Develop extension Identify and select appropriate sites for X X ECN FGN
programmes and biofuel, biogas, biomass briquette pilot
establish pilot projects
projects to facilitate
the general use of
new biomass energy Conduct public enlightenment X X X ECN, FMIC Media Houses FGN
technologies programme to highlight the potentials for
biomass energy
Create an enabling Conduct a comprehensive feasibility X X ECN FGN
environment to study on the potentials of biomass
attract private resources in Nigeria
investments in
biomass – to- power Introduce a special tax incentive to X FGN, FMF FMP FGN
projects encourage use of biomass for power
generation

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Timelines Implementing Collaborating Funding

Agencies Agencies Sources
Strategies Initiatives S M L
Create a sustainable Enact national act that will enforce X X NASS, ECN NNPC FGN
legal, institutional production of second generation biofuels
and commercial from non-food crops and use of biofuels
framework that in blend of at least 10% with convectional
encourages public fuel
private sector Enact a biomass act backed by X X NASS, ECN FGN
investment in the legislation, which incorporates incentives
sector and appropriate commercial terms for
use of biomass fuels
Create public awareness programme to X X X ECN, FMIC Media Houses FGN
highlight the bebefits of second
generation biofuels

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4.2. Implementation Monitoring Plan for the Energy Sector

ENERGY SOURCE: OIL

Goal 1: To grow reserves from 32billion barrels to 40bbls by 2015 and 50bbls by 2020
% Issues Risks
Monitoring Monitoring compl Mitigati
Strategy Initiatives Agencies Frequency KPI etion on
Embark on Structure oil bloc bid rounds FMPR Periodic Attain >70% bid
aggressive (including Sao Tome and Principe round objectives
exploration JDZ) in line with international best
for oil practices on a periodic basis
reserves in Establish and maintain a DPR Quarterly >40% from
all parts of comprehensive geological and 2010,
the country seismic survey program with >90 from 2015
digitalized maps in order to of digitized
promote and accelerate seismic survey
exploration programs to uncover
the oil and gas potentials in the
entire hydrocarbon bearing zones
in various parts of the country and
territorial waters
Maintain a strategic balance FMPR Yearly % of national
between oil and gas production prod from non-
from traditional oil fields in onshore traditional areas
terrain, inland basins, continental
shelves, offshore, and the
deepwater offshore fields
governed by PSCs
Deploy current and appropriate National Oil Half Yearly

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Goal 1: To grow reserves from 32billion barrels to 40bbls by 2015 and 50bbls by 2020
% Issues Risks
Monitoring Monitoring compl Mitigati
Strategy Initiatives Agencies Frequency KPI etion on
technologies for improved & Gas
reservoir management and Research
seismic acquisition Center

Goal 2:To grow crude oil production capacity from 1.8mbpd to 3.2mbpd by 2015 and 4.5mbpd by 2020
%
Monitoring Monitoring
KPI compl Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives etion
Recover erstwhile Carry out regular DPR Half yearly %
production capacity of maintenance of existing completion
3mbpd and grow oil production facilities of
production capacity including flow stations preventive
rapidly by revamping and pipelines maintenanc
and expanding existing e plan
production facilities
Recover erstwhile Drill in-fill wells in existing DPR Half yearly No. of infill
production capacity of oil fields wells drilled
3mbpd and grow Embark on new oil field DPR Yearly No. of new
production capacity developments field
rapidly by revamping developmen
and expanding existing ts
production facilities

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Goal 3:To increase OPEC Quota allocation from 1.67mbpd to 3.2mbpd in 2015 and 4.5mbpd in 2020
%
Monitoring Monitoring Mitigatio
KPI completi Issues Risks
Agencies Frequency n
Strategy Initiatives on
Increase OPEC Prepare a business case NPC Half Yearly
Quota through the to engage OPEC on quota
pursuit of capacity allocation mechanism
reflective approach
rather than current
OPEC allocation
formula

Goal 4: Attain a national content value of 50% by 2015 and 70% by 2020
%
Monitoring Monitoring Mitigatio
KPI complet Issues Risks
Agencies Frequency n
Strategy Initiatives ion
Develop a reliable Resuscitation of Ajaokuta NPC Half Yearly Tonnes of steel
steel industry to Steel plants, rolling mills produced locally
cater for the and others
demand of the oil Set up new steel plants to NPC Half Yearly No. of new steel
and gas industry, support anticipated local plants
thereby developing steel demand
deep and functional
linkages between Promote the in-country MMSD Half Yearly % locally
the oil & gas and manufacture of steel produced steel
mining industries plates, section and pipes consumed in
to feed the thousands of E&P projects

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Goal 4: Attain a national content value of 50% by 2015 and 70% by 2020
%
Monitoring Monitoring Mitigatio
KPI complet Issues Risks
Agencies Frequency n
Strategy Initiatives ion
tonnage of fabrication and
pipeline in planned E&P
projects

Enhance the in- Set up a deepwater port FMT / BPE Half Yearly
country capacity for with supporting fabrication
the fabrication of facilities operated by
steel structures world class fabrication
used in the oil and companies to integrate
gas industry FPSO topsides in Nigeria
Upgrade Oron marine No. of seafaring
academy and establish graduates
additional Marine trained in local
academies to facilitate marine
human capital academies
development in seafaring
Encourage the use Identify, quantify and FMMS Half Yearly
of locally available qualify bentonite and
materials such as barite deposits in Nigeria
bentonite, class G Develop capacity for local FMP Quarterly Tonnes of locally
cement and barites production of class G produced class
in exploration cement G cement
activities
Establish a common local NCD Board Quarterly
content measurement
standard for the oil and
gas industry

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Goal 5: Reduce operational costs by 5% by 2015 and 10% by 2020 through improved industry efficiencies
%
Monitoring Monitoring
KPI complet Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives ion
Put in place the Review existing FMPR Periodic
necessary petroleum arrangements
regulatory and and consider alternative
structural contractual
framework to arrangements and
support an efficient structures
oil and gas industry Revamp existing fiscal FMPR Periodic
schemes
Carry out major FMPR Quarterly
restructuring and
transformation of
government agencies
including DPR, NNPC

Goal 6: Reduce contracting process for oil and gas projects to 6-8 months
Monitoring Monitoring %
KPI Issues Risks Mitigation
Agencies Frequency completion
Strategy Initiatives
Improved decision Review current approval FEC Half Yearly
making/ contracting limits for oil and gas
time for oil and gas projects

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Goal 6: Reduce contracting process for oil and gas projects to 6-8 months
Monitoring Monitoring %
KPI Issues Risks Mitigation
Agencies Frequency completion
Strategy Initiatives
projects Review contracting process FEC Half Yearly Average
for recurring contracts and approval
make proposals for a fair time for
and timely approval contract
process s

Goal 7: Ensure zero fatality from oil and gas operations

Monito
ring Monitoring % Mitiga
KPI Issues Risks
Agenci Frequency completion tion
Strategy Initiatives es
Entrench global Strengthen regulatory role to DPR Quarterly
HSE standards and ensure compliance with
principles in the HSE standards
Nigerian oil and
gas sector

Goal 8: Attain total oil spill of not more than 2000bbls per annum by 2015 and 1000bbls per annum by 2020
%
Monitoring Monitoring
KPI compl Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives etion
Ensure the Streamline and strengthen DPR, FME Monthly No. and volume
enforcement of the regulatory authorities for of spills, Average
appropriate speedy and efficient oil spill response time
environmental response
protection

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Goal 8: Attain total oil spill of not more than 2000bbls per annum by 2015 and 1000bbls per annum by 2020
%
Monitoring Monitoring
KPI compl Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives etion
regulations Ensure regular DPR , FME Periodic No. of
environmental impact environmental
assessment of all oil and impact
gas projects assessments

Goal 9: Reduce gas flares to operational and technical requirements only by 2010
Monitori
%
Monitoring ng
KPI complet Issues Risks Mitigation
Agencies Frequenc
ion
Strategy Initiatives y
Encourage oil and Provide necessary funding DPR , FME Quarterly % of total
gas producing required to ensure the timely gas flared
companies to completion of on-going and
gather and utilize new gas utilization projects
associated gas to
reduce flaring to
Operational
requirements only
by 2010

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Goal 10: To manage naturally occurring radioactive materials (NORM) generated from exploration activities to meet global standards
Monitoring Monitoring % Mitigati
KPI Issues Risks
Agencies Frequency completion on
Strategy Initiatives
Ensure the Streamline and strengthen
enforcement of the regulatory bodies for
appropriate efficient and effective
regulations control of NORMs

Goal 11: Reduce the occurrence of attacks on oil and gas producing facilities by militants
%
Monitoring Monitoring Mitigati
KPI complet Issues Risks
Agencies Frequency on
Strategy Initiatives ion
Promote economic Partner with host FMPR Quarterly Actual
empowerment communities to achieve spend on
programmes sustainable development community
targeted at building developmen
community capacity t projects
Facilitate the rapid FMND, Quarterly No. of Niger
implementation of the NDDC delta
Niger Delta Master Plan projects
completed

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Goal 11: Reduce the occurrence of attacks on oil and gas producing facilities by militants
%
Monitoring Monitoring Mitigati
KPI complet Issues Risks
Agencies Frequency on
Strategy Initiatives ion
Foster cooperation with FMPR, Half Yearly
Government for State Govt,
intelligence gathering Local Govt
and networking
Organize training and FMPR, Half Yearly No. of
capacity building State Govt, training
programmes for Local Govt programs
vocational skills in oil completed
producing communities
Create employment Ensure greater FMPR, Half Yearly No. of jobs
opportunities in oil consultation and needs State Govt, created
producing assessment prior to Local Govt within
communities by agreeing MOUs community
upgrading and
Utilize NGOs as key FMPR, Half Yearly No. of
building new
implementation State Govt, projects
facilities
mechanism for Local Govt managed by
community related NGOs
projects
Accelerate the approval FMPR Half Yearly Approval
of community related time for
projects community
related
projects

Goal 12: Grow NOC production to over 250,000bpd in 2015 and 400,000bpd in 2020

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Monitori %
Monitoring
ng KPI complet Issues Risks Mitigation
Frequency
Strategy Initiatives Agencies ion
Develop the NOC Grow by acquisition of FMPR Yearly No. of oil and
into a medium oil other small oil and gas gas
and gas producing companies where acquisitions
company that can possible
operate Ensure preferential oil FMPR Periodically No. of blocks
internationally bloc allocation to the assigned to
National oil company NOC
(NOC)
Expand and Collaborate with major oil FMPR Periodically No. of
promote research companies to establish identified R&D
and development R&D outfits in Nigeria and opportunities
activities in the conduct part of their
industry research in-country in
conjunction with local
educational and research
institutions
Collaborate with other NOC Half Yearly No. of
NOCs, educational agreements
institutions, and other signed with
R&D centers (local and other NOCs
foreign) and
international
R&D centres

Goal 13: Grow in-country refining capacity to over 750,000bpd in 2015 and 1,500,000bpd in 2020
%
Monitoring Monitoring
KPI completi Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives on

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Goal 13: Grow in-country refining capacity to over 750,000bpd in 2015 and 1,500,000bpd in 2020
%
Monitoring Monitoring
KPI completi Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives on
Create an enabling Deregulate and FMPR Half yearly Complete
environment to liberalize the deregulation of
attract foreign and downstream sector by downstream
local investments in converting the
refineries refineries, product
haulage facilities and
distribution network into
joint ventures
Award new refining FMPR Periodic No. of new
licenses to credible and refinery
competent downstream licenses,
operators % of successful
start ups

Goal 14: Upgrade old distribution assets and build new ones with the capacity required to handle refined products from
0.75Mbpd in 2015 and 1.5Mbpd in 2020
%
Monitoring Monitoring Mitigatio
KPI comp Issues Risks
Agencies Frequency n
Strategy Initiatives letion
Develop a public - Cluster existing depots FMPR Half Yearly
private JV into geographical areas
ownership of the and privatize the assets
petroleum on that basis

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Goal 14: Upgrade old distribution assets and build new ones with the capacity required to handle refined products from
0.75Mbpd in 2015 and 1.5Mbpd in 2020
%
Monitoring Monitoring Mitigatio
KPI comp Issues Risks
Agencies Frequency n
Strategy Initiatives letion
products’ pipeline Separate pipelines from FMPR Yearly % independent
network depots and operate as depots
separate independent
entities

Goal 15: Increase accessible funding for oil and gas projects by 30% by 2015 and 50% by 2020
%
Monitoring Monitoring
KPI comple Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives tion
Complete structural and legal Explore alternate FMPR, Periodic % of
reforms in the oil and gas funding schemes National funding
sector targeted at creating an for current JVs Assembly gotten
efficient, transparent and from
commercially viable industry alternativ
e funding
schemes

ENERGY UTILIZATION: POWER

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Goal 1: To achieve 20,000MW and 45, 000MW installed generation and distribution capacity by 2015 and 2020 respectively
Monitoring Monitoring %
KPI Issues Risks Mitigation
Agencies Frequency completion
Strategy Initiatives
Create a Complete the FEC Quarterly Number of Unionism
deregulated and privatization of the successor
competitive generation & distribution companies National
electric power assets currently owned privatized Security
sector to attract by the Government to
foreign and local ensure effective service
investments delivery

Ensure a viable Enact a Government NERC Annually Frequency of

commercial policy which incorporates IPP’s
framework for incentives and completion
the electric commercial terms for
power sector, IPPs. (A model form GSA
including a tariff & PPA to be included)
regime that Create a Government NASS/FMP Annually Rate of Favorable
promotes agency which will serve successful Climate,
transparency, as a one-stop shop for private sector Tax
guarantees private investors investment in Incentives,
security of interested in power power sector Security of
investment and generation and Investment,
a reasonable distribution PPA
rate of return on Extend and optimize the FEC Annually Kilometers of Vandalizatio
investments Gas infrastructure and domestic gas n, right of
grid network to allow for pipelines laid way
the construction of gas in a given
fired power plants across year
the country

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Goal 2: To strengthen the transmission network to wheel 20,000MW by 2015 and 35,000MW by 2020
Monitoring Monitoring % Mitigati
KPI Issues Risks
Agencies Frequency completion on
Strategy Initiatives
Improve Source private ICRC Annually Volume of N/A National Sabotage
transmission capital and (Infrastructur Investme security
capacity and management for e nt in Monopoly
provide Concession Transmis Extension Of
development and
redundancies in Reg, sion Grid, the Grid to
the transmission operation of the Commission) Efficiency cover the
system so as to transmission /Stability Country
ensure a fully network whilst of the
integrated retaining ownership Grid
network that by Government
minimizes
transmission
losses while
strengthening grid
security

Goal 3: To increase electricity access to 60% by 2015 and 80% by 2020 from the current 40%
Monitoring Monitoring
KPI % completion Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives
Intensify rural Assist the state Alternative Annually %
electrification and local Energy access to
efforts in a governments in Development rural
more efficient the development Agency.(to be electricity
manner of alternative created)
power solutions
for rural areas

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Goal 4: To achieve an electricity generation mix as follows by 2020: Gas fired plants: 20,000MW, Coal: 5,000MW, Nuclear:
2,000MW, Hydro: 5,000MW, Other Renewables (wind, solar, biomass): 3000MW – Total: 35,000MW
Monitoring Monitoring %
KPI Issues Risks Mitigation
Agencies Frequency completion
Strategy Initiatives
Construct mini Review all existing Alternative Annually Proven
power stations in Coal mine block Energy coal
rural communities allocations without Development reserves
using locally provisions for coal Agency for
appropriate fired power electricity
technologies generation generation
(possibly hybrid) Empower The FEC/NSA
– hydro, wind, Nigerian Atomic
biomass, solar Energy Commission
(NAEC) towards
accelerated Nuclear
Power development
that will ensure
generation of
3000MW by 2020
Increase Establish a FMP N/A
utilization of coordinating agency
alternative energy for alternative energy
in the National development
energy mix

Goal 5: Increase the average load factor in the power sector by 30% by 2015 and 50% by 2020
Monitoring Monitoring
KPI % completion Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives
Introduce Launch massive NOA Weekly
demand side public campaign
management towards promoting
principles efficient usage of

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Goal 5: Increase the average load factor in the power sector by 30% by 2015 and 50% by 2020
Monitoring Monitoring
KPI % completion Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives
targeted at electricity
ensuring Introduce
efficiency in discriminative tariffs
energy that encourages low
consumption in electricity utilization
the electricity Introduce and TCN Monthly
industry encourage the use of
energy efficient
appliances at all levels
of the electricity
industry
Liaise with the NERC Quarterly
Manufacturing sector
and encourage the
transformation of their
production processes
to be highly energy
efficient

Goal 6: To produce 50% of the material inputs for the power sector locally by 2020
Monitoring Monitoring
KPI % completion Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives
Establish Industrial parks ICRC Annually
Provide incentives for Power input producers
that will encourage & other manufacturers will
local manufacturing be provided with
and production uninterrupted electricity
initially of relatively supply

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Goal 6: To produce 50% of the material inputs for the power sector locally by 2020
Monitoring Monitoring
KPI % completion Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives
low tech power Provide tax holidays & FEC Annually
equipment such as guaranteed patronage to
conductors, local power input
insulators, cables, producers and Industries
transmission and
distribution structures
etc.
Ensure local Develop and equip the FMP Annually
manpower newly created National
development by Power Training Institute, in
establishing effective collaboration with tertiary
training institutions institutions, to a level
and programmes as where it can produce
well as enforcing power sector professionals
minimum local that are world class
content components Enforce a minimal FMP/FMLP Annually
of power sector percentage (50%) of local
development and manpower involvement at
operational activities. all levels of every EPC
project, Plant operations
and maintenance in the
power sector

Goal 7: To achieve billing and collection efficiencies of 100% and 95% respectively for power consumed by 2020
Monitoring Monitoring %
KPI Issues Risks Mitigation
Agencies Frequency completion
Strategy Initiatives

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Goal 7: To achieve billing and collection efficiencies of 100% and 95% respectively for power consumed by 2020
Monitoring Monitoring %
KPI Issues Risks Mitigation
Agencies Frequency completion
Strategy Initiatives
Completely Conclude privatization of NCP Annually
privatize distribution assets as a
distribution assets matter of priority
in order to provide
efficient billing and Deploy prepaid meters in all
collecting the major electricity
infrastructure and consumption areas where
ensure viable
international best
practices

Goal 8: To create an efficient industry and market structure

Monitoring Monitoring
KPI % completion Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives
Continue the Ensure the NERC Annually
implementation independence of
of power sector the market
reforms to regulator
provide a fully Strengthen the NERC Annually
deregulated market operator
market to carry out duties
as assigned in
the electric sector
reform act

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Goal 8: To create an efficient industry and market structure

Monitoring Monitoring
KPI % completion Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives
Enact policies NERC Annually
that clarify all
commercial terms
and incentives for
private sector
participation in
the power sector.

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ENERGY SOURCE: COAL

Goal 1: To achieve a 10% contribution of coal to the nation’s energy mix by 2015 and a 20% contribution by 2020
%
Monitoring Monitoring Mitigati
KPI completio Issues Risks
Agencies Frequency on
Strategy Initiatives n
Provide adequate Establish Nigerian MMSD, NCC Continuous
incentives for large scale Coal Research Trust until Trust
production of coal Fund (NCRTF) Fund is
briquette, stoves established
andother appliances at
Encourage tertiary FMST, FMCI, Continuous
affordable prices
institutions and NCC,
research institutes and NCRTF
centers to carry out
research into coal
briquetting and coal
stove technology
Establish a coal FMST FMCI, Continuous No. of coal
briquetting plant for NCC, briquettes
mass production of NCRTF produced
coal briquettes
Create public awareness Organize sensitization MMSD, Continuous
for the use of smokeless workshops on the use NCC, FMI&C
coal briquettes as an of coal briquettes
alternative to fuelwood
Intensify the search for To carry out more MMSD Continuous
more coal reserves to detailed exploration for until quantity
make coal a sustainable coal to determine most of all coal
and reliable alternative economic deposits of reserves are
energy source about 100 tonnes ascertained
proven reserve each
(size of deposit to
sustain 1000 MW for
30 years)

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Goal 1: To achieve a 10% contribution of coal to the nation’s energy mix by 2015 and a 20% contribution by 2020
%
Monitoring Monitoring Mitigati
KPI completio Issues Risks
Agencies Frequency on
Strategy Initiatives n
Issue license to FMP, MMSD, Continuous No. of coal
prospective investor in FMT until exploration
a transparent manner selection of licenses
investors is issued to
complete investors
To attract investors to Re-introduce integrated FMP, MMSD, Half -yearly %
coal to power exploration, coal to power FMT contribution
production and marketing infrastructure including of coal fired
transport system (rail, plants to
pipe, conveyor etc. electricity
generation
Provide adequate FGN, FMP, Continuous
incentives to coal MMSD
investors

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ENERGY SOURCE: GAS

Goal 1: Grow proven reserves from 180TCF to 215 TCF by 2015 and 250TCF by 2020
%
Monitoring Monitoring Mitigati
KPI complet Issues Risks
Agencies Frequency on
Strategy Initiatives ion
Create an Establish a national holding FMPR Quarterly N/A
enabling company for gas to ensure a
environment, focused development of the gas
with appropriate sector
legal and Clearly define the fiscal and FMPR Quarterly N/A
regulatory commercial agreements for gas
framework, to produced under the PSC and non-
attract private associated gas
investments License investors interested in FMPR/DPR Quarterly N/A
(local and developing, owning and operating
foreign) in gas gas infrastructure franchises as
exploration and proposed in the gas master plan
production Develop appropriate fiscal terms FMPR/NGM Monthly N/A
to attract global partners and P Team
investors for the development of
the gas infrastructure proposed in
the gas master plan

Goal 2: Increase gas exports: LNG and LPG from 22mtpa to 50mtpa, Pipeline exports to 40bcm per annum
Monitorin
Monitoring % Issue Mitig
g KPI Risks
Frequency completion s ation
Strategy Initiatives Agencies
Strategically position Implement new gas NNPC/DP Quarterly N/A
Nigeria’s gas export projects including: R
development assets
Train 7 expansion of
and infrastructure for NLNG
growth in high yielding
Brass LNG

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Goal 2: Increase gas exports: LNG and LPG from 22mtpa to 50mtpa, Pipeline exports to 40bcm per annum
Monitorin
Monitoring % Issue Mitig
g KPI Risks
Frequency completion s ation
Strategy Initiatives Agencies
export markets, with
OK LNG
local content as a key
WAGP Expansion
driver
Centrica – StatoilHydro
- CCC LNG Project

Trans Saharan Gas
Pipeline Project

Goal 3: Grow domestic gas demand to 5bscfd by 2015 and 8 bscfd by 2020
%
Monitoring Monitoring Mitiga
KPI completio Issues Risks
Agencies Frequency tion
Strategy Initiatives n
Give domestic gas Ensure rigorous FMPR/DPR Half Yearly N/A
supply projects enforcement of the
priority over gas Domestic Gas Supply
export projects to Obligation Regulation to
ensure that local guarantee the demand and
gas demand, supply of gas for domestic
especially to gas utilization projects
power, is met Develop a standard gas FMPR/NGMP Monthly N/A
sales and purchase Team
agreement for gas sales to
the domestic market
Implement the Gas FMPR/NGMP Quarterly N/A
Infrastructure Blueprint for Team
gas infrastructure
development to guide
investment in gas
infrastructure

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Goal 3: Grow domestic gas demand to 5bscfd by 2015 and 8 bscfd by 2020
%
Monitoring Monitoring Mitiga
KPI completio Issues Risks
Agencies Frequency tion
Strategy Initiatives n
Fully set-up the strategic Monthly N/A
gas aggregator to manage FMPR/NGMP
the implementation of the Team
domestic reserves and
production obligation and
the aggregate price in the
domestic gas market in the
short term
Delineate and Develop a long term gas N/A
address supply- pricing strategy which will FMPR/NGMP Monthly
side challenges of attract FDI in the sector Team
availability,
affordability/comm
erciality of supply,
deliverability and
its cost
effectiveness,
legal and
regulatory
framework, and
funding

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RENEWABLE ENERGY SOURCES

ENERGY SOURCE: HYDRO

Goal 1: To achieve a 15% contribution of hydro electricity to the nation’s electricity generation mix in 2015 and 20% in 2020
Monitori
%
Monitoring ng Mitigati
KPI comple Issues Risks
Agencies Frequen on
tion
Strategy Initiatives cy
Utilize mini and Zone the entire country into PHCN, ECN, Quarterly Water 100% Verify None None
micro hydropower potential hydropower NERC, FMP volume accuracy
schemes to extend generating zones and present per and
electricity to rural the zones for competitive dam/zone present
and remote areas bidding by potential zoning
hydropower producers to
potential
bidders
Sensitize the Federal, State FMP,ECN,NE Quarterly Water
and LGCs on the potential of RC,PHCN, volume
small hydropower as source of per
electricity dam/zone
Establish small hydropower FMP, Quarterly Number of
pilot schemes in each ECN,NERC,P Hydropow
geopolitical zone to create HCN, er pilot
awareness and facilitate schemes/z
technology acquisition one
Adapt existing irrigation dams FMP, Quarterly
with hydropower generation ECN,NERC,P
potential, by installing HCN, FMAWR
necessary infrastructure (e.g.
turbines), for power generation
to the national grid

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Goal 1: To achieve a 15% contribution of hydro electricity to the nation’s electricity generation mix in 2015 and 20% in 2020
Monitori
%
Monitoring ng Mitigati
KPI comple Issues Risks
Agencies Frequen on
tion
Strategy Initiatives cy
Undertake BOT- Source private capital and FMP, Quarterly Number of
Build Operate and management for the ECN,NERC,P private
Transfer development and operations to HCN, investors
arrangements on FMAWR, PPP in
undertake BOT arrangements
new known hydropow
potential for new hydro plant stations. er
hydropower stations generating
sites in the Country plants
and prepare to
privatize the
business entity after
completion and
startup.
Undertake ROT- Complete the privatization of FMP, Half Number of
Rehabilitate the old hydropower generation ECN,NERC,P yearly privatized
Operate and stations i.e. Kainji, Jebba, HCN, old Hydro
Transfer FMAWR, PPP power
Shiroro,Oji river etc, currently
arrangements on all stations
old hydropower owned by the Government, but
stations in the retain some shares ownership
country by Government to about 20%

Create an enabling Enact a Government policy, FGN, NASS Half

environment to backed by legislation, which FMP, yearly
attract private incorporates incentives and ECN,NERC,P
investments in appropriate commercial terms HCN,
establishing and for hydropower IPPs FMAWR,PPP
operating
hydropower plants

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ENERGY SOURCE: WIND

Goal 1: To achieve a 1% contribution of wind energy to the nation’s electricity generation mix
Monitori
%
Monitoring ng Mitigati
KPI compl Issues Risks
Agencies Frequen on
etion
Strategy Initiatives cy
Utilize wind Update and expand the ECN, NIMET, Half e
power plants to Nigerian wind atlas FMP, yearly
extend electricity NERC,PHCN,
to rural and FMAWR,PPP
remote areas Execute and ECN, FMP, Yearly Number of
commission wind energy NERC,PHCN, completed
pilot projects in select FMAWR,PPP wind power
locations around the pilot schemes
country in each zone
Sensitize the Federal, ECN, NIMET, Monthly Number of
State and LGCs on the FMP, Enlightenment
potential of wind energy NERC,PHCN, campaigns at
as source of electricity FMAWR Federal,states
and LGC
Create an Provide fiscal incentives FGN, Hydro Monthly
enabling such as import duty Power
environment to exemptions, tax holiday, investors, PPP
attract private investment grants to
investments in encourage investments
establishing and in wind powered
operating wind generating plants
power plants

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ENERGY SOURCE: SOLAR

Goal 1: To achieve a 1% contribution of solar energy to the nation’s electricity generation mix
Monitori
Monitorin %
ng Mitigati
g KPI completi Issues Risks
Frequenc on
Agencies on
Strategy Initiatives y
Intensify research Collaborate with universities, ECN,PHC Biannuall Number of
and development in Research institutes and N, Tertiary y developed patents/
the development of centers (local and foreign) to institutions, technologies
solar energy develop home grown solar PTDF,ETF
technology energy technologies
Introduce competitive Tertiary Annually Number of
national scholarships and institutions, scholarships and
/awards on solar technology PTDF,ETF /awards offered
proposals/designs
Develop and maintain a ECN,PHC Monthly
Comprehensive database N, Tertiary
on solar energy resources, institutions,
technologies, systems, end- PTDF,ETF
use appliances, market
operators e.t.c.
Create an enabling Provide fiscal incentives FGN, Solar Monthly
environment to such as import duty Power
attract private exemptions, tax holiday, investors,
investments in investment grants to PPP
manufacturing, encourage investments in
establishing and solar powered generating
operating solar plants and local
energy systems manufacturing of solar
systems

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ENERGY SOURCE: BIOMASS

Goal 1: Achieve a biofuel blends not exceeding 10% by 2020 using locally produced renewable biofuels
Monitoring Monitoring %
KPI Issues Risks Mitigation
Agencies Frequency completion
Strategy Initiatives
Create a Enact national act NNPC,NAS Quarterly
sustainable legal, that will enforce S,ECN,
institutional and production and use of FMAWR,
commercial biofuels in blend of at FMP
framework that least 10% with
encourages public convectional fuel
private sector Enact a biomass act NNPC,NAS Half yearly
investment in the backed by legislation, S,,ECN,
sector and rapid which incorporates FMAWR,
technological incentives and FMPR
deployment appropriate
commercial terms for
use of biomass fuels

Create an alternative FGN,ECN Half yearly

energy agency to
serve as a one stop
shop for private
investors in biofuels
Develop and create a FGN,ECN Half yearly
special tax incentives
targeting increase in
use and exploitation
of biomass resources

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Goal 2: To incorporate use of biomass for achievement of optimal energy mix contributing up to 5% biomass-to-power by 2020
%
Monitoring Monitoring
KPI complet Issues Risks Mitigation
Agencies Frequency
Strategy Initiatives ion
Create an enabling Establish a coordinating FGN,ECN Half yearly
environment to agency for alternative
attract private energy development
investments in
biomass – to- Conduct a ECN,NNPC,P Half yearly Number of
power projects Comprehensive feasibility TDF, Tertiary studies
studies on biomass institutions, completed
resources in Nigeria and PHCN
their possible conversion
to power (electricity)
Introduce a special tax FGN,ECN Half yearly
incentive to encourage
use of biomass for power
generation
Decentralize biomass-to- PHCN, ECN, Quarterly Number of
power projects in order to FGN, PPP decentralize
be an off-grid operation d off-grid
for rural areas areas

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ENERGY SOURCE: NUCLEAR ENERGY

Goal 1: Achieve 1500MW and 3000MW national electricity contribution from nuclear technology by the year 2015 and 2020
respectively
%
Monitoring Monitoring Mitigati
KPI completio Issues Risks
Agencies Frequency on
Strategy Initiatives n
Establish unambiguous Establish, by law, the NNRA, Continuous
policy guidelines for the Nuclear Power NAEC until the
nuclear energy sector, Programme organization
clearly defining the role Coordination and is set up
of relevant governmental Implementation
organizations and the Organization (NPPCIO)
private sector as the to serve as the
main drivers of the planning, coordinating
nuclear power and implementing
programme organization for
nuclear power
programme
Pass the Nuclear NNRA, Continuous
Safety, Safeguards and NAEC until the bills
Security (NSSS) Bill are passed
and the new Nigerian
Atomic Energy
Commission (NAEC)
Act
Strengthen the NNRA, yearly
Nigerian Nuclear MPR
Regulatory Authority to
be effectively
independent and
efficient

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Goal 1: Achieve 1500MW and 3000MW national electricity contribution from nuclear technology by the year 2015 and 2020
respectively
%
Monitoring Monitoring Mitigati
KPI completio Issues Risks
Agencies Frequency on
Strategy Initiatives n
Domesticate all NNRA, Continuous No. of all
international MPR, internatio
instruments, NAEC, nal
agreements, FMST, MFA instrumen
conventions and ts
treaties entered into by domestic
Nigeria ated
Carry out public FMIC, Continuous
enlightenment on the NPPCIO,
country’s Nuclear NNRA,
Power Programme and NAEC
the activities of various
agencies in the sector
Establish long term, NPC, Continuous
legally binding NPPCIO,
agreements on the NAEC
operational structure of
the nuclear power
plants e.g. build-
operate and transfer or
build, operate and own
Intensify manpower Strengthen and FMST, Continuous
training and upgrade the existing NAEC
development and the nuclear research and
provision of adequate development institution
Infrastructure for nuclear Establish the nuclear NNRA Continuous
science and technology safety institute for the
regulatory authority
Establish centers of NUC, FME, Continuous
excellence (CE) in NAEC

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Goal 1: Achieve 1500MW and 3000MW national electricity contribution from nuclear technology by the year 2015 and 2020
respectively
%
Monitoring Monitoring Mitigati
KPI completio Issues Risks
Agencies Frequency on
Strategy Initiatives n
nuclear science and
technology in these
institutions :ABU,
IBADAN, NSUKKA,
IFE, KADPOLY and
YABATECH
Establish bilateral MFA, Continuous No. of
relationship with NPPCIO, bilateral
friendly countries for NAEC, agreemen
manpower and NNRA ts for
infrastructural manpowe
development r and
infrastruct
ural
developm
ent
Encourage vendors FMI, MAN Continuous
and supplies to NPPCIO,
establish workshops
and training institutions
in Nigeria
Provide vendors and FMF, NCS, Continuous
suppliers tax incentives NPPCIO
appropriate to the life
span of the nuclear
power plant project

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References
1. Nigeria’s Dual Energy Problems: Policy Issues and Challenges, International Association for
Energy Economics, Akin Iwayemi
2. www.eia.doe.gov
3. www.earthtrends.com
4. www.nigeria.gov.ng
5. EIA short term Energy Outlook, March 2009, http://www.eia.doe.gov/steo
6. The International Comparative Legal Guide to: Gas Regulation 2009, Nigeria, www.ICLG.co.uk
7. www.allbusiness.com
8. www.nigeriamuse.com
9. www.marketresearch.com
10. www.OilGasarticles.com
11. www.bpeng.org
12. “Power Sector Reforms in Nigeria” by O.I Okoro, P. Govender and E. Chikumi
13. “Issues & Challenges of Power Sector Reforms in A Depressed Economy” By, Ekeh J.C
14. Nigeria: Expanding Access to Rural Infrastructure, Issues and Options for Rural Electrification,
Water Supply and Telecommunications, ESMAP Technical Paper 091, December 2001
15. BP Annual Statistical Bulletin, 2008
16. Plunkett Research, Ltd., Industry Statistics, Trends and In-depth Analysis of Top Companies
17. International Atomic Energy Agency, www.iaea.org
18. GCC and the World Economy in 2020, Economist Intelligence Unit, March 2009
19. OPEC Statistical Bulletin, 2007
20. OPEC World Outlook 2008
21. National Energy Policy, Energy Commission of Nigeria, 2003
22. Draft National Energy Masterplan, Energy Commission of Nigeria, 2007
23. Renewable Energy Masterplan, Energy Commission of Nigeria, 2005
24. National Energy Databank, www.energydatabank.org

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5.0 Appendices

5.1. Analysis of Power Generation Capacity Required to support 20:2020

Economic Vision
In 2007 the world’s 20th largest economy according to UNdata statistics was Indonesia with a GDP
of $432,817m.
Country GDP
(m USD)
(nominal 2007)

1 United States 13,776,472

2 Japan 4,379,624
3 China 3,400,351
4 Germany 3,317,377
5 United Kingdom 2,767,982
6 France 2,545,696
7 Italy 2,095,141
8 Spain 1,436,893
9 Canada 1,425,778
10 Brazil 1,314,199
11 Russian Federation 1,289,582
12 India 1,141,346
13 Korea, South 956,788
14 Australia 945,674
15 Mexico 893,365
16 Netherlands 766,251
17 Turkey 487,552
18 Sweden 454,792
19 Belgium 454,580
20 Indonesia 432,817

If Indonesia’s economy grows at an annual rate of 3% (in real terms), it will have an annual GDP
(2007 prices) of $635,607m in 2020. It is likely that Indonesia’s economic growth will exceed 3%
annually but, since other more mature economies in the 2007 ‘top twenty’ are likely to grow at this
rate or less, 3% p.a. annual growth is a reasonable assumption to make in determining the
approximate level of GDP that Nigeria will need to achieve to become a ‘top twenty’ economy by
2020.
Nigeria’s GDP in 2007 was $173,184m according to UNdata. To achieve annual output of
$635,607m in 2020, the Nigerian economy will have to grow at an annual average compound rate
of approximately 10.5%.
To establish the approximate size of electricity sector that would be necessary to support national
economic activity consistent with this level of output it is necessary to make assumptions
regarding:

• the future electricity intensity of the Nigerian economy (electricity consumed per unit of
GDP);
• The achievable load factor (electricity consumed per unit of installed capacity).

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Nigeria is likely to wish to follow an energy efficient growth path, i.e. to achieve a relatively low level
of electricity intensity6. It is also likely to wish to achieve high levels of capacity utilization in the
electricity sector, which would be reflected in a relatively high load factor.
Nigeria’s electricity intensity is currently around 0.11kWh per $ of GDP. While this is very low by
international standards, this does not reflect a high level of efficiency of electricity usage in
economic activity but, rather, the fact that electricity consumption data do not capture the high
levels of own generation. It is an indication of performance failure not economic efficiency.
Nigeria’s load factor is currently around 31% (based on UNdata figures). This is low by
international standards and indicative of the poor overall performance of the sector. In making
predictions about the size of electricity sector needed to support ‘top 20’ status, it is reasonable to
assume that both intensity and load factor will be higher.
The following table combines figures on electricity intensity and load factor to derive a matrix of
installed capacity consistent with a ‘target’ GDP of $635,607m in 2020 (at 2007 prices).

Installed capacity consistent with achieving GDP of $635,607m at different levels of electricity intensity and load factor ('000MW)

Electricity intensity (kWh/USD)

Nigeria Best T20 Lower q'ile Spain USA Indonesia Average Turkey Brazil China
T20 T20
0.11 0.15 0.2 0.21 0.29 0.30 0.32 0.35 0.36 0.91
Best T20 68% 12 15 21 22 31 32 34 37 38 97
China 65% 12 16 22 23 32 34 36 39 40 101
Indonesia 54% 15 19 27 28 39 41 43 47 48 122
Load factor

Upper q'ile T20 52% 15 20 28 29 41 42 45 49 50 127

Average T20 50% 16 21 29 30 43 44 47 51 52 133
Brazil 48% 16 22 30 31 44 46 49 53 54 138
USA 46% 17 23 32 33 46 48 51 56 57 145
Spain 45% 18 23 32 33 47 49 52 56 57 146
Turkey 44% 18 24 33 34 48 50 53 58 59 151
Nigeria 31% 26 34 47 49 69 72 76 83 84 216

The table shows values consistent both with the electricity intensity and load factors actually
achieved by a range of ‘top 20’ (T20) economies based on 2006 data and with statistical measures
of these figures achieved by the current (2007) economies as a group. A combination of the best
in T20 class electricity intensity and load factor would require installed capacity of approximately
15,000MW. Conversely, a growth path that combined China’s very high electricity intensity with
Turkey’s relatively poor load factor would require installed capacity of around 150,000MW. The
following table gives reference data for selected T20 countries.

6
A more complete analysis would focus on the overall energy intensity of the Nigerian economy in
terms of tonnes of oil equivalent (TOE) per unit of GDP and then on an analysis of how this would split
across different energy sources. The simplified analysis made in this note is, however, considered
adequate for present purposes.

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Economic and electricity sector data for selected 'top twenty' economies

Rank* GDP Population Net elec' Installed Electricity Load factor

consumption capacity intensity
(m USD) (m) (bn kWh) (m kW) (kWh/USD)
United States 1 13,132,900 298 3,817 957 0.29 45%
China 3 2,773,835 1,314 2,529 443 0.91 65%
Spain 8 1,230,591 40 254 64 0.21 50%
Brazil 10 1,072,453 188 382 91 0.36 48%
Turkey 17 403,459 70 141 37 0.35 44%
Indonesia 20 364,599 232 111 23 0.30 54%
Nigeria 39 145,430 132 16 6 0.11 31%

Notes: All data relate to 2006 with the exception of *

* based on 2007 GDP data

Sources: GDP and population data - UNdata

Power sector data - Energy Information Administration

Other things being equal, it is reasonable to assume that Nigeria will wish to adopt a growth path
that takes it as far as possible towards the upper leftmost values shown in the highlighted quadrant
in the first table above. Given that other countries can be expected to seek to achieve
improvement over the forthcoming decade in their own electricity sector performance and in the
efficiency with which electricity is utilized in economic production a ‘target’ of 25,000 to 40,000MW
of installed capacity in 2020 would appear to be consistent with Nigeria’s vision to achieve
the status of a top 20 economy by 2020.

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