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Shell to focus on Nigeria, Gulf of Mexico and others as it seeks to cut 40% of costs

Shell is seeking to cut 40% of operating costs in its upstream oil and gas.

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Royal Dutch Shell announced that it would focus its operations on Nigeria, Gulf of Mexico, The North Sea and a few others as it looks to reduce oil and gas production costs by 40%.

This was announced by Reuters in an exclusive report Monday after speaking with sources. Shell sources also reveal it would direct the saved costs into more renewable energy investments. The new project would be called Project Reshape, and would be implemented in all three divisions of the company with the aim of saving $4 billion due to the effect of the pandemic on the industry.

It was reported in July that Shell warned in its second-quarter 2020 outlook that it could write down between $15 billion – $22 billion in post impairment charges for Q2, due to the heavy effect of the pandemic in their business. Shell had earlier this year, shocked investors by cutting dividend by 2 thirds for the first time since World War 2.

A source told Reuters that the new reshape of the company would not only shake up the structure but also the culture and “type of company we want to be”, as the company fancies investments into the power and renewable sector with historical low margins, and also competition from other oil companies seeking to go green.

Shell is seeking to cut 40% of operating costs in its upstream oil and gas to make the new vision possible and focus on just key assets in Nigeria, Gulf of Mexico and others.

In the Downstream sector, Shell also plans on cutting costs in its fuel stations business with about 45,000 in service. A spokeswoman from the company announced that a cost competitive total strategic view of the organization is in place, “which intends to ensure we are set up to thrive throughout the energy transition and be a simpler organization.”

CEO, Van Beurden said Shell would deliver $billion in its cost savings drive by Marche 2021, which includes suspended bonuses and job cuts. Shell also plans to reduce it refineries from 17 to 10 and announced plans of selling 3.

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ENERGY

FG to meet with State Governors over electricity, fuel prices

The State Governors and the FG are set to meet in order to discuss the issues of electricity and fuel pricing in the country.

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The  Federal Government has disclosed that it will meet with State Governors and the Nigerian National Petroleum Corporation (NNPC) on Thursday to find solutions to issues of fuel and electricity pricing in Nigeria.

This was disclosed by the Minister of Labour, Chris Ngige, in a meeting with newsmen in Abuja after the FG met with organised labour.

The Minister added that the ongoing meetings with organised labour had been peaceful so far and stated that the issue about PMS prices was a work in progress that would also involve the Governors at the NEC meeting.

As for the issue of the price of PMS, it is a work in progress. The governors are to discuss this on Thursday at the National Economic Council and hopefully there will be a way out of the situation,” he said.

Mr Ngige said that organised labour also handled negotiations on the topic of electricity price tariffs and would continue negotiations on the topic.

Meanwhile, the NLC President, Mr Ayuba Wabba, said that Labour was still not in full agreement with the report on PMS pricing.

“This means that we import 100 per cent of all the PMS used in the country, whereas we have refineries” he said.

“The reports were presented and we pointed out areas that we are not comfortable with and also made some suggestions which will form the basis of decisions on the matter,” he added.

What you should know 

Nigerian National Petroleum Corporation (NNPC) last week assured organised labour and Nigerians that there was no plan to increase the price of Premium Motor Spirit (PMS), otherwise known as petrol, in the month of February.

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ENERGY

FCCPC to begin electricity billing enforcement

The Federal Competition and Consumer Protection Commission says it will commence enforcement of the NERC billing cap order.

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The Federal Competition and Consumer Protection Commission (FCCPC) announced that it will launch a billing capping order enforcement of the Nigerian Electricity Regulatory Commission (NERC) to protect Nigerian consumers.

This was disclosed by Mr Babatunde Irukera, the Executive Vice Chairman of the commission in an interview with NAN on Sunday in Abuja. He disclosed that the scheme was necessitated by multiple customer complaints on billing.

“There are certain industries that require special treatment, one of them is electricity,”he said.

He added that the Commission plans to implement stronger enforcement in 2021 and has commenced talks with the NERC for it.

“Secondly, we want to plan a more strategic approach to intervening in the complaints.

“And so through the year, periodically, we take some of our teams to locations where we have seen that there are a lot of complaints and spend some time there ensuring that DisCos address complaints to make sure that issues that people are dissatisfied with are resolved.

“That is a very important one for that sector this year,” Irukera said.

What you should know 

  • Recall it was reported that the Nigerian Electricity Regulatory Commission (NERC) announced that 62.63% of electric customers in Nigeria were under the estimated billing package as at September 2020.
  • The Federal Government also revealed that electricity consumers who paid for meters under the Meter Asset Provider (MAP) scheme, will have a refund of their money.
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ENERGY

World Bank to boost Nigeria’s power distribution with $500 million

World Bank has approved $500 million to support DisCos in Nigeria.

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The World Bank has approved $500 million to support Nigeria in improving electricity distribution in the country.

This was disclosed by the global financial institution firm via a statement seen by Themoneymetrics on Friday.

In the statement, Shubham Chaudhuri, World Bank’s Country Director, explained that the project will help boost electricity access by improving the performance of the Electricity Distribution Companies (DisCos) through a large-scale metering program desired by Nigerians for a long time.

Also, financial support would be provided to private distribution companies only on achievement of results in terms of access connections, improved financial management and network expansion.

Chaudhuri said, “Improving access and reliability of power is key to reduce poverty and unlocking economic growth in the aftermath of the global COVID-19 pandemic.

“The operation will help improve the financial viability of the DISCOs and increase revenues for the whole Nigerian power sector, which is critical to save scarce fiscal resources and create jobs by increasing the productivity of private and public enterprises.”

He added that the Nigeria Distribution Sector Recovery Program (DISREP) will help improve service quality, as well as the financial and technical performance of distribution companies by providing financing based on performance and reduction of losses.

What it means

The World Bank initiative will ensure that the DisCos make necessary investments to rehabilitate networks, install electric meters for more accurate customer billing and to improve quality of service for those already connected to the grid.

It will also help strengthen the financial and technical management of DISCOs to improve the transparency and accountability of the distribution sector.

The program will reduce the CO2 emissions of the Nigerian power sector by reducing technical losses, increasing energy efficiency, replacing diesel and biomass with grid-electricity, and investing more in on- and off-grid renewable energy.

What they are saying 

Nataliya Kulichenko, Task team leader for the project, said,

“The program will only be eligible to those DISCOs that transparently declare their performance reports to public with actual flow of funds based on strict verification of achieved performance targets by an independent third party. The program would also make meters available at affordable prices to all consumers in Nigeria, a long pending demand of Nigerians.”

What you should know

  • About 85 million Nigerians don’t have access to grid electricity. This represents 43% of the country’s population and makes Nigeria the country with the largest energy access deficit in the world.
  • According to World Bank, the lack of reliable power is a significant constraint for citizens and businesses, resulting on annual economic losses estimated at $26.2 billion (₦10.1 trillion), which is equivalent to about 2% of GDP.
  • According to the 2020 World Bank Doing Business report, Nigeria ranks 171 out of 190 countries in getting electricity and electricity access is seen as one of the major constraints for the private sector.
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