BusinessDay 21 Aug 2018

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Tuesday 21 August 2018 24 BUSINESS DAY C002D5556 Aramco charges Nigeria, other OPEC members to turn on the taps ISAAC ANYAOGU Saudi Aramco has charged other oil producers to ramp up production to offset $1 trillion investment loss since the market downturn began address declining production in matured fields. In the organisation’s latest report, Saudi Aramco Annual Review, Khalid Al- Falih, chairman of Aramco’s board said mature oil fields are seeing an increase in declining production rates, and this must be offset by continued investments in the industry if the world is to meet what is thought to be an 1-1.5 million barrel per day annual demand growth rate in coming years. “To respond to this situation, significant new investments are required in additional capacity and expanded and upgraded infrastructure, as well as the development of pioneering technology to make petroleum energy more sustainable and accessible,” Al-Falih said in his opening message to the 42-page report published on Friday. Aramco’s annual report cites the International Energy Agency’s World Energy Outlook 2017 New Policies Scenario estimates that call for a 30 percent increase in global energy needs between now and 2040. Saudi Aramco, for now the world’s top oil producer, is doing its part to meet this future demand, according to the report. “Saudi Aramco is committed to playing its unique part in meeting the world’s energy needs today and tomorrow by continuing to invest wisely throughout the cycle and across the value chain, reinforcing our preeminent leadership position in the industry,” Energy Report Nigeria ignores coal as Trump sets new emission rules to boost use …environmentalists fear rise in emissions STEPHEN ONYEKWELU Nigeria’s vast coal resource wastes away for inefficiency as the Trump administration plans to formally overhaul climate change regulations that would allow individual states to decide how, or even whether to curb carbon dioxide emissions from coal plants, come August 21, according to three people who have seen the full proposal. The plan would also relax pollution rules for power plants that need upgrades. That, combined with allowing states to set their own rules, creates a serious risk that emissions, which had been falling, could start to rise again, according to environmentalists. The proposal, which President Trump is expected to highlight August 21at a rally in West Virginia, amounts to the administration’s strongest and broadest effort yet to address what the president has long described as a regulatory “war on coal.” It would considerably weaken what is known as the Clean Power Plan, former President Barack Obama’s signature regulation for cutting planetwarming emissions at coalfired plants. Back to Africa’s most populous and energy hungry nation, Nigeria’s coal industry suffered a blow in the 1950s when oil was discovered. Up until this point, the Nigerian Railway Corporation was the largest consumer of coal in the country. However, after the discovery of oil, the Railway Corporation began to replace its coal burning trains with diesel-powered engines. An additional negative impact came when the Electricity Corporation of Nigeria began converting its power generation equipment from coal to diesel and gas as well. The Nigerian Civil War also negatively impacted coal production; many mines were abandoned during the war. Following the war, production never completely recovered and coal production levels were erratic. Attempts at mechanising production ended badly, as Al-Falih added. Aramco referenced its new discoveries in the Sakab and Zumul oil fields, as well as its gas reservoir find in Sahba field. Other projects in 2017 that Aramco has invested include Khurais field (300,000 bpd by 2018), Fazran field (75,000 bpd by 2020), Dammam field (25,000 bpd by 2021; 75,000 by 2026). Fadhili Gas Plant (start up 2019, 2.5 billion scfd), Hawiyah Gas Plant (1.1 billion scfd). However for OPEC producers in Africa especially Nigeria and Libya, this will be a tough call considering the internal crises in these countries. Libya has to check activities of different groups fighting for political and economic power. The challenge for Nigeria is to raise production by attracting new investments. But in order to do this, it must embark on deep reforms in a sector that is beset by challenges. both the implementation and maintenance of imported mining equipment proved troublesome, and hurt production. After the civil war, the Nigerian coal industry was not able to return to its peak production, this is hurting industries because the cost of electricity eats away profit margins. Against the backdrop of severe shortages in much needed supply of electricity, it is inevitable that Nigeria must move from rhetoric to concrete action in the OLUSOLA BELLO Following public scepticism over the execution of the Ajaokuta Kaduna – Kano gas pipeline projects the group managing director of the Nigerian National Petroleum Corporation (NNPC), Maikanti Baru has directed the Chinese Consortium and the NNPC team working on the Project to ensure timely finalization of the term sheet for the project’s contractor financing agreement The Chinese consortium is made up of Bank of China and Sinosure. Baru maikanti, who had to cut short his trip to Saudi Arabia for a stop-over in Dubai to meet with the Chi- NNPC want timely delivery of gas project development and addition of coal-fired electricity to the nation’s electricity supply mix. Two of the biggest cement markers in Nigeria, Dangote Cement Plc and Lafarge Plc have been investing massively in coal as source of energy to power its plants. “Companies are turning to coal for their energy needs. What we tend to forget is that coal as a major source of energy might not be clean and it is ultimately cheaper to use liquefied natural gas (LNG) rather than coal because of social and environmental concerns” Eddy van Den Broeke, founder of Abujabased Greenville Oil and Gas Limited said at a gas development roundtable in Lagos. Dangote Cement switched to using coal at its cement plants in response to disruption to gas supplies and to lower input costs. The cement producer uses 12,000 metric tonnes (MT/day) of coal. Ashaka Cement, a fully-owned subsidiary of Lafarge Africa, said coal accounted for 82 percent of its power usage over the period, while work is ongoing on its 16-megawatt lignite-fired coal power plant at its factory in Gombe State. “Coal business is booming. I have some Chinese companies that need about a million metric tonnes (MT) of coal from me every month and I don’t meet up with the demand. Dangote Cement Plc is ready to buy up every piece of coal we excavate in Kogi state for its Obajana cement factory” Leo Nwankwo, a commodities analyst and trader told BusinessDay. “There are jobs to be created, when we develop our coal industry. I trade in commodities and coal is just one of the many commodities I trade in. When you visit our coal excavation sites in Kogi state and see the level of unemployment and poverty, I fear for this country. Let us focus on developing our economy and not let the shouts about clean energy deter us from creating jobs for our bulging youth population” Nwankwo said. Trump’s plan is the latest move in a string of efforts, including prodding grid operators to purchase more electricity from coal plants and asserting that coal plant retirements are threatening the reliability of the national power grid, to end what Trump has called his predecessor’s war on coal and a sure sign to the industry that the Trump administration still has its back, even as coal production continues to decline. nese consortium reiterated the need for both parties to ensure speedy conclusion on the details of the agreement towards its full execution during President Muhammadu Buhari’s state visit to China next month. The is scheduled to attend the Forum of China-Africa Cooperation (FOCAC) Summit holding from the 1st to 4th September, 2018 in the Chinese capital, Beijing and it is expected that AKK Project will be top on Mr. President’s agenda. The NNPC had earlier clarified that the execution of the AKK gas pipeline project is progressing under the original concept of 100 percent contractor financing model contrary to some media report of a possible resort to ‘’proceed of gas tariffs’’ as new means of funding because of purported collapse of negotiation with Chinese lenders. The Corporation noted that the successful conclusion of the contractor financing terms would pave way for the historic groundbreaking ceremony which would take place after the conclusion of the front-end activities. Already the Corporation had concluded the vital Front End Engineering Design (FEED) and the Environmental Impact Assessment (EIA) report while work on the detailed engineering design is nearing conclusion. Upon completion within a projected 24-month window, the NNPC stated that the AKK gas pipeline would enable connectivity between the East, West and North, which is currently non-existent. It would also enable gas supply and utilization to key commercial centres in the Northern corridor of Nigeria with the attendant positive spin-off on power generation and industrial growth.
Tuesday 21 August 2018 C002D5556 BUSINESS DAY 25 In association with RoI in prime office space under pressure as market continues to struggle …rich development pipeline means investors in for stiff competition CHUKA UROKO For investors in prime office market in the main cities of Nigeria notably Lagos, Abuja and Port Harcourt, improvement in macro-economic environment means little or nothing as the market’s continued struggle piles downward pressure on the return on their investment (RoI). Whereas increased supply from project completions and the rise and rise of co-working space is exerting a pull on demand in the Lagos market, security risks and environmental hazards in Port Harcourt sent office rents to their lowest in over five years. Grade-A office vacancies remain high and it appears the economy would need to strengthen much more to reverse this trend. The wait for the global brands looking to open up shop in Grade-A signature addresses worthy of their presence may be taking too long. As at the first half of this year (H1 2018), there was an average of 28 percent decline in office rents per square metres across the major cities. In the Central Business District (CBD) of Abuja, rents dropped 30 percent to N40/$0.11 per square metre per month down from N57/$0.16 per square metre per month. On Olu Obasanjo Way in Port Harcourt, rents declined from N16/$0.04 per square metre per month in 2017 to N12.5/$0.03 per square metre per month in H1 2018, representing -23 percent drop. This is slightly better than the situation in Ikoyi, Lagos, where rents dropped -33 percent to N207/$0.57 per square metre in H1 2018, down from N309/$0.85 per square metre per month in 2017. The implication of this is that investors will be under pressure from their financiers who are no Father Christmas and so, would get their agreed repayment sum plus the interest in spite of the market situation. Those who are not exposed to bank credit may decide to stick to old rents, leading to high vacancy factor which, in turn, leads to depreciation and high maintenance cost. But, on the other hand, demand for grade B and smaller office space remained stable when compared with last year and, according to a new report by Northcourt Real Estate, coworking spaces continue to grow in popularity with a few service providers opening more locations. The report hopes that with increased flexibility in pricing and terms, a renewed focus on volume, partnerships and programmes will drive profitability. “The development pipeline remains rich and is much more active in comparison to H1 2017. With over 100,000 square metres of office currently available for lease on the market, completions scheduled for 2018 already have significant competition for the few multinationals and big brands that can afford grade-A space, not accounting for the brands that are willing to settle for the more flexible and affordable co-work option”, said Tayo Odunsi, Northcourt’s CEO. The retail market also continued to struggle with shrinking middle class and dwindling purchasing power of the customer. It however, differs from the office market because stable exchange rate regime makes planning around operational costs and profit projections much more feasible for retailers. Local investors, emboldened to make further investments, softly opened the Next Mall in Port Harcourt and The Atlantic in Lagos and the Novare Central Mall in Abuja. Unlike the office market again, vacancy rates reduced largely across the Grade-A malls. For instance, The Palms and Ikeja City Mall had the lowest vacancies at 0 percent and 2 percent respectively. Novare Mall came in at 28 percent, down from 47 percent at the end of 2017. Artee’s Port Harcourt Mall, Big Treat and Genesis Centre had 8 percent, 15 percent and 25 percent respectively. But whereas Ceddi Plaza and Gateway Mall in Abuja recorded 21 percent and 38 percent respectively, Abuja’s largest mall – Jabi Lake (20,000square metres) recorded the highest vacancy rate in city at 40 percent and this was due to a number of stores that closed down in Q1 2018 coupled with high rentals. These high vacancy rates find explanation in some international investors finding business conditions in Nigeria less favorable and are instead pursuing retail interests in Eastern Europe and Eastern Africa, local HNI’s (High Networth Individuals) who are not disturbed by currency risks amongst others, are moving into the retail space to make large-scale investments. “Outside purpose-built and A-grade malls, high street retail within central locations continue to experience high demand. Larger malls, though more appealing to international retailers due to better infrastructure, are less attractive to local brands due to higher rents and service charge costs, Odunsi noted. “Events, entertainment and leisure features continue to be a traffic pull for large malls with car park payments remaining a key income stream and a counter-weight to the pain of declined rents in major malls,” he added. Data from the Nigeria Bureau of Statistics (NBS) shows that payment channel transactions reached an all-time high of ₦86.1 trillion in 2017, representing a 32 percent increase from ₦65.1trillion recorded in 2016. Within this period too, online transactions came up thick, rising by 39.5 percent from ₦132 billion in 2016 to ₦185 billion a year later. “As such, it was only reasonable that online retailer, Konga, join forces with Yudala, an e-commerce company to become one of the largest online and ecommerce firms in Africa”, Odunsi said, pointing out however, that Jumia, a prominent player in Nigeria’s online retail space saw its adjusted loss before interest, tax, depreciation and amortisation widen to €80.7 million in the first nine months of 2017 even though revenues moved up to €57.3 million. Infrastructure Maintenance With Tunde Obileye Importance of key performance indicators in FM The role of a facilities manager in determining a facility’s performance is dependent on a holistic key performance indicator (KPI) approach and this is important for performance assessment. There are many KPIs that can be applied. However, the selected ones must be fit for purpose and must be calculated, analyzed and evaluated to allow for the future state of the facility to be acceptable to all stakeholders. A useful maintenance KPI drives reliability growth whilst guiding the choices for improving maintenance effectiveness and efficiency. The application of these KPIs allows the facilities manager to identify issues and helps in selecting the right strategy to support or correct the activities producing the results. Maintenance KPIs are of two types – those that improve maintenance impact on business performance and those that drive reliability. The KPIs assist the facilities manager to understand what maintenance is doing, what it is achieving and what more they can do to improve operational performance. Efficient maintenance is doing maintenance right so that higher equipment reliability and operational risk reductions are achieved with minimum resources and time. It is important that when a variety of maintenance KPIs is selected, they improve equipment reliability and maintenance performance and not simply indicate that problems exist. The facilities manager’s maintenance plan needs to support the business objectives and operating strategy. The best way to demonstrate this is to have a maintenance performance linked to the reasons for the company’s business. To develop maintenance KPIs require the creation of a KPI pathway from top to bottom which connects the operational activities with corporate goals. This clear connection enables everyone to see the benefits these maintenance activities bring to the built environment. In applying these KPIs, a facilities manager is able to identify opportunities as well as errors. As a result, the facilities manager in conjunction with senior management can correct problems expediently and take advantage of the opportunities to reduce cost. Some FM related KPIs to consider are: 1)Preventive Maintenance Programme Compliance: This KPI gives a clear understanding of how much time is spent on completing preventive maintenance activities rather than constantly fire-fighting issues. It allows the facilities manager to recalibrate the work to become less reactive. A disciplined PM programme managed by a competent maintenance team will produce results and success may be measured by a 99 percent PM activities completed on time. This may be measured on a monthly basis to make changes in real time and reduced cost. 2)Average Time To Complete Work Order: This helps the facilities manager to understand where gaps exist in the processes if a work order takes more than reasonable time to complete. For instance, a job of few hours takes two days to complete. It may also be used to determine skill gap within the maintenance team if a plumbing issue takes much longer to fix whilst an electrical issue is fixed on time. This KPI may indicate where work orders are held up in a process. Improvement can, therefore, be made. 3)Total Number Of Work Orders: Tracking the number of completed work orders in a given period will assist in determining the maintenance team’s workload and overall productivity. It can also assist in justifying budget requests where there’s a need to increase staff strength as a result of increase in work orders. KPIs can answer numerous questions which, in turn, will make a facilities manager to continually improve and create business value. Finally, a facilities manager can help make facilities management a key partner in achieving organizational goals by knowing which KPIs to consider and how to relate them to overall business goals.
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