Tag Archives: Nigeria

Egbin Power Plant plans to build a liquefied natural gas terminal to solve a severe shortage of gas

Liquefied Natural Gas (LNG) for export is great… However, LNG to power has become imperative for an energy starved Lagos!
Light Up Lagos!

Lagos is reported to have a population of over 20 million people and is still growing, Lagos is said to consume over 40% of the premium motor spirit consumed by Nigeria as a whole on a daily basis. Governor Akinwunmi Ambode has been drumming up support for his light up Lagos plan, this liquefied natural gas terminal might just be the tipping point for him…

Lagos has the opportunity to become the LNG import hub for Nigeria and Africa as a whole.
Egbin to the rescue…

Owners of Nigeria’s largest power plant located at Egbin Power Plant near Lagos are planning to build an LNG import terminal, as it seeks to solve an acute shortage of gas according to Chief Executive Officer Dallas Peavey.

What is LNG?
LNG is gas frozen to liquid reducing its original size by 1/600. LNG is a liquid which can be shipped in, this might give Egbin some respite from the constant attacks on pipelines, which has reduced its gas supply, switching to LNG may also open Egbin up to multiple suppliers of LNG struggling for new markets. It is plausible that Egbin may be able to ensure the stability of gas supply to the market with a floating LNG terminal for importation.

What is an LNG Terminal?
An LNG terminal is a purpose built port used exclusively to export or import LNG.

“LNG import terminals” as a service?
The LNG terminal can be used strictly for Egbin or/and for other players who may also want access to LNG.
Egbin has the opportunity to champion the use of LNG import terminals for its sole use, or the use of LNG import terminals as a service to other gas consumers…

LNG Pricing
Concerns about LNG prices rising are a real concern, it is hoped that the price indexation/decoupling of LNG prices may have ended.
Historically there has been some relationship between the price of crude oil and that of natural gas that is, barring any unforeseen occurrences like natural disasters etc.

Decoupling of prices is usually temporary. However three factors tend to point to a possible permanent decoupling of prices and a possible dip in some areas. They are:
1. The globalization of natural gas
2. Specialization in all parts of oil and gas industry by companies
3. The emergence of Shale Gas.
Quite a number of industry experts agree that LNG prices change with time, thus, Egbin may consider benchmarking its projections on possible higher prices or hedge against a rise in LNG prices.

Egbin may do well, to avoid the mistake some indigenous oil companies made; those oil companies banked on higher crude oil prices, which eventually fell.

Egbin should be wary of banking on low LNG prices, which may eventually rise, when demand rises or supply falls.
Egbin should avoid limiting its LNG supply to “local sources”. Our “local sources” of LNG may be given a right of first refusal, but at no point should Egbin limit itself, as our “local sources” of LNG may be fixated on export of their product…

Buyers Market v Sellers Market
It is now a buyer’s market in the LNG world; sellers are aggressively wooing buyers…

Qatar LNG recently gave a huge discount to India, waived a penalty and has been selling on the “spot market” too.
“The new formula between the two companies is in the interests of a win-win. Where the previous contract meant that Petronet had to buy LNG at $12-13 per mmBtu, the new contract means a price of $6-7 per mmBtu,”.

Iran has started supplying LNG to Kenya, Tanzania and South Africa.
Long Term Contracts v Spot Markets
Egbin should try spot markets and negotiate a long term deal if the price is right, preferably with a major player like Qatar Gas LNG or a player like Iran keen on gaining market share.

Long term LNG contracts have given way to spot markets, it’s no longer a seller’s market, it’s now a buyer’s market. There are quite a few LNG projects on the ground, floating and in the pipeline but consumption is not spiking per se.

India renegotiated a long term LNG contract recently and got a 50% discount. I believe Egbin should negotiate for the best deal it can get, since it’s building an LNG terminal.
Egbin may consider prospecting for a seller, willing to finance the construction of the LNG terminal…

Hydraulic fracturing has increased the supply of natural gas available. It has been reported that, 5 (five) LNG export terminals are being built along the U.S. East Coast alone, making the possibility of an LNG glut more feasible. Egbin LNG import terminal will be very handy for gas exporters from the U.S.A, Qatar and Iran to enter the Nigerian market.
In Africa, it is reported that there are at least 5 (five) planned LNG import terminals , Cotonou LNG Import Terminal, Benin, Ghana FSRU LNG Import Terminal, Ghana, Jorf Lasfar LNG Import Terminal, Morocco, Mombassa LNG Import Terminal, Kenya and Mossel Bay LNG Terminal, South Africa.

The Croatian Paradigm

Land Based LNG terminal v Floating LNG terminal

Croatia has been reported to have opted to go for an FLNG (Floating LNG) terminal to commence LNG import over a land-based LNG terminal.

This FLNG import terminal is expected to reduce the construction costs of an LNG terminal and will require only two years to be fully operational. It will be the world’s first offshore LNG regasification terminal. It is 47-metre (154 ft) high, 88-metre (289 ft) wide, and 180-metre (590 ft) long.

It was reported that, the FLNG terminal will be operated by Qatar Terminal Ltd., a subsidiary of Qatar Petroleum and some other companies.

Conclusion
The benefits of an LNG import terminal may far outweigh its cost, avoiding gas supply disruptions due to ruptured pipes may be the least of such benefits, while the possibilities range from security of gas supply, to the possibility of long term storage tanks, to opening the window for the use of gas for transportation and helping a nation complete its energy circle.

Olufola Wusu is a Commercial, Oil and Gas and I.P. Lawyer based in Lagos
Olufola Wusu Esq. © 2016
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And Now that Bunkering’s Back, the Legal Issues…

 

The Director, Department of Petroleum Resources (DPR), Mr. George Osahon, last Wednesday, the 8th of January 2014 informed stakeholders at a one day forum held in Lagos, titled “Resuscitation of Bunkering Operations in Nigeria”, that President Goodluck Jonathan had approved the return of bunkering operations to the nation’s territorial waters after its suspension since 2003.

History of Bunkering
Some reports have it that the word “bunkering” came into use when coal was still being used to “fire” steam ships. The “bunker” is a dump where coal, the main fuel for the steam ship, was being stored. In those days when people used the expression ‘bunker the ship, they meant, take coal and fuel the ship.
However, society moved away from coal powered engines to engines powered by Oil and Gas but they still retained the word ‘bunker tank,’ that is, where you keep bunker fuel, whether coal or oil, in recent times we now have ships that run on LNG.

Bunkering as a Legitimate Business
Bunkering is defined as a downstream business involving the fuelling of ships of all kinds on the high seas, inland water ways and within the ports of Nigeria. Bunkering is therefore a hospitality business that provides fuel, water and other victuals to ships at sea.
Traditionally bunkering was done in the main ports, but today it may be done in all the ports.  It provides fuels such as marine diesel; low pour fuel oil, lubricants, LNG, water and other supplies to vessels operating in the country’s territorial waters.

Nigerian Street definition of Bunkering
“Oil Bunkering” in Nigeria informally means, crude oil theft and dealing in stolen crude oil or other petroleum products.

Regulatory Body Covering Bunkering
All interested companies must apply to the Department of Petroleum Resources (DPR) for a license to carry out the bunkering business and operate a downstream operation on water.  Illegal bunkering means running bunkering operations without being licensed by the Department of Petroleum Resources.

Other Regulatory Agencies involved are:
Bunkering operators will need to comply with the requirements of the Nigerian Navy, Nigerian Maritime Administration and Safety Agency (NIMASA), Nigerian Customs Service and Federal Ministry of Fisheries before commencing operations. In this writer’s opinion, this may amount to ample regulatory compliance that will cost stakeholders a bit of time and money, which are crucial factors in any shipping based business. If we intend to become a hub, we should make it easier to do business in Nigeria without creating avenues for cutting corners.

Rebirth of the Law Relating to the Sale and Use of Marine Fuels in Nigeria?
The commencement of bunkering may increase activities in ship acquisition, leasing, project financing etc. This is because bunkering is a technical and capital intensive business. Legal aspects of bunkering include contracts, defaults, ship arrest and dispute resolution.

Benefits of Bunkering
It should help generate revenue for the government, help act as a stimulus for growth in shipping activities in inland ports and water ways (cabotage). It should help develop linkage industries and generate employment opportunities. It may help fight Oil theft as ships would have accredited fuel suppliers to patronise and may lead to cheaper freight.
It will make it easy to identify illegal vessels as the DPR may wish to publish the list of licensed bunkering companies.

Basic Nature of Bunkering Operations
It can be Shore based/Static; this will require the use of jetties and depots.
It can be Mobile/ Vessel based, this may involve the use of a big ship, say an FPSO and other smaller ships to supply fuel to the ships at sea.

Possibility of Nigeria as a Bunkering Hub
Presently shippers in Nigeria have to go through the trouble of going to Senegal, Cape Verde and Cote D’ Ivoire to fuel vessels that operate in the Nigerian territorial waters, thereby incurring extra cost and marking up the cost of freight in Nigeria.
With the rebirth of the bunkering industry in Nigeria, Nigeria will have to meets its domestic needs, attract foreign ships and contend with established bunkering hubs like Singapore, Senegal, Rotterdam, Cape Verde and Cote D’ Ivoire.   Some questions arise. Can this be the rebirth of the Legitimate Bunkering Industry? Will this make shipping and freight cheaper, as ships will carry fewer bunkers and more goods?

A “One Stop Shop” for regulatory compliance?
Judging by the long list of regulatory bodies bunkering operators will need to relate with and obtain approval from, is there a need for a one stop shop to facilitate easy compliance? Does the bureaucracy involved in legal compliance in Nigeria aid our desire to be a hub for bunkering in the world?

Financing Options
Are there plans to assist operators to acquire sea-worthy vessels rather than the scrap vessels that are readily affordable and within reach?

Need for a Government/3rd Party Laboratory to Certify Bunker Supplies
There is a need for supplies to be bunkered, to be certified fit for use by a laboratory, so we don’t have bunker operators supplying substandard fuels and other supplies. This should be the first step in a series of quality control mechanisms to be used to safeguard the newly approved bunkering business.

Fantastic Public Sector Branding by DPR
DPR has in recent times been having interactions and communicating with members of the public and stakeholders. Its informative and navigable website has made regulatory compliance a bit easier. Besides, sometime late last year it held a couple of road shows for the Marginal Field Bid rounds 2013; it just held a sensitisation forum for the resuscitation of bunkering activities in Nigeria. The DPR seems to be reaching out and now comes across as nimble and responsive to the needs of its consumers, i.e. the industry it regulates. Perhaps due to the wisdom and foresight of witty and seasoned Director, Department of Petroleum Resources (DPR), Mr George Osahon, the DPR seems to be rebranding.

Innovation/Intellectual Property in Bunkering Operations
Processes and systems have been developed that make bunkering cheaper, better, faster and safer. LNG bunkering anyone? We now have ships that run on LNG and will need specially fitted ships using proprietary technology that supply LNG.
GPS systems have made it easier to track both bunker operators and ships utilizing their services. Some supply ships now have robotic arms protected by patents that aid in the supply of bunker supplies to the recipient vessels. Bunker fuel metering systems are now computerised with various firms owning proprietary software and hardware.

Conclusion
Can this be the rebirth of the Legitimate Bunkering Industry? Will this make shipping and freight cheaper, as ships will carry less bunker and more goods? Developing a framework for bunkering operations will involve both existing legal framework regulating shipping and the development of commercial practices to encourage bunkering. This will require legal knowledge, foresight and common sense. The information contained in this piece should help inform the Government and stakeholders and possibly foster frank discussion between the Government and the stakeholders prior to the drawing up of guidelines covering bunkering operations in Nigeria and stakeholders investing their funds in the business.

 

By Olufola Wusu

 

Olufola Wusu Esq. © 2014

folawusu@yahoo.com

Commercial Lawyer, Oil and Gas Contracts Specialist and I.P. Consultant

Please connect with me on LinkedIn http://www.linkedin.com/pub/olufola-wusu/22/317/587

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Legal implications of the naira and kobo patents

Legal implications of the naira and kobo patents.

ON August 23, 2012, the Governor of Central Bank of Nigeria at a press briefing announced the apex’s banks plan entitled “PROJECT CURE” to restructure Nigeria’s currency by the coining of the N20 (twenty), N10 (ten), and N5 (five) naira notes and the introduction of the five thousand naira note.

Understandably, the announcement was greeted with varied reactions, in an attempt to justify the proposed plan of the apex bank; a director in the said bank was quoted by a national newspaper as saying that

“It was quite shocking to us when we discovered that the patent rights of some of our notes are owned by non-Nigerians.”

The said director was also quoted as having said that the patent rights of the new designs of the naira would be owned fully by Nigerians.

Meanwhile, a former President of the Chartered Institute of Bankers of Nigeria, was quoted as having said that:   “It is not the standard practice to have the patents of national currency held by foreigners. It is because Nigeria lacks the technology and trained personnel to manage its own printing. It is dangerous because if we have to get it back we will pay heavily”.

However, without dwelling on the legality or illegality of the above action this paper will attempt to examine the Intellectual Property ramifications of the proposed course of action and the ambits of Intellectual Property protection for bank notes.

Olufola Wusu Esq.
 
Lead Partner
 
Megathos Law Practice  

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