Day 10: Energy Law

DAY 10: Energy Law

DATE: March 15, 2024

MODERATOR: Peace Eseyin 

TIME: 5pm

SPEAKER: Ozioma Agu

Biography of the speaker

Ozioma is a Partner heading the Energy, Finance and Infrastructure Practice Group at Stren & Blan Partners. She has garnered years of experience advising on various aspects of banking and projects financing of cumulatively over USD$3 billion, involving Nigerian and foreign financial institutions, export credit agencies, government funds and the private sector.

Over the years, Ozioma has also advised on several key infrastructure and energy projects within Nigeria and Africa. She has advised on significant deals, including the acquisition of major IOCs in Nigeria, the financing of Liquified Petroleum Gas depots, and facilitating funding for key oil and gas companies. Ozioma is currently playing an instrumental role in the establishment of a state and private sector led electricity market in eastern Nigeria.

She recently advised a leading telecommunications provider in a headline PPP intervention road project with the Federal Government of Nigeria which saw to the implementation of the Road Infrastructure Tax Credit Scheme (RITC).

Ozioma's Legal expertise has been recognized by both the IFLR and Legal 500 Directories.

What is Energy Law?

Energy law is a complex and ever-evolving field that governs the entire spectrum of energy-related activities. It goes beyond simply regulating the use and taxation of energy. It encompasses a vast legal framework that ensures:

• Responsible Development: Energy law dictates the rules for exploration, extraction, production, and transportation of all energy sources, both traditional (fossil fuels) and renewable (solar, wind, etc.). It ensures these activities are conducted safely, ethically, in order to minimize environmental impact.

• Market Functioning: Energy law establishes a framework for a fair and competitive energy market.

• Contracts: Energy Laws govern the drafting and execution of contracts for energy exploration, production, transmission distribution, and sale.

• Licensing: Energy Regulations determine who can participate in energy activities and set licensing requirements for the exploration, production, and operation of energy facilities.

• Competition: Energy Laws promote fair competition within the energy sector, preventing monopoly and ensuring fair pricing for consumers.

• Consumer Protection: Energy law safeguards consumer rights. This includes ensuring:

1. Reliable supply: Energy Laws establish standards for safe, reliable, and consistent energy delivery to consumers.
2. Fair pricing: Energy Regulations aim to prevent price gauging and ensure fair pricing structures for consumer.
3. Information access: Consumers have the right to clear and transparent information about energy sources, pricing structures, and their rights.

Why is Energy Law important in Nigeria?

• Economic importance: Nigeria is a major oil producing country, and energy exports from a significant part of its economy. Energy law governs the exploration, production, and export of oil and gas, which are crucial for the country's economic development.

• Energy Security: Nigeria's population is rapidly growing, leading to an increase in energy demand. Energy law helps ensure that there is a reliable and secure supply of energy to meet the country needs.

• Environmental Protection: The production and consumption of energy can have significant environmental impacts such as air and water pollution and greenhouse gas omissions. Energy law includes regulations aimed at minimizing these impacts and promoting sustainable energy practices.

• Investment and Development: A clear and robust legal framework for the energy sector is essential to attract investment and promote development of energy infrastructure. Energy law provides the necessary legal certainty and protection for investors.

• Social Welfare: Access to affordable and reliable energy is essential for the well-being of the population. Energy includes provisions aimed at ensuring that energy is accessible to all segments of society including the poor.

Key aspects of Energy Law

1. Power
2. Oil and Gas
3. Renewables 

OIL & GAS

Nigeria is a major player in Africa's oil and gas sector, boosting the continent:

Largest oil Producer: Nigeria pumps out significant volumes of crude oil. Nigeria's oil output increased in October 2023 tο 1.351 million barrels per day (bpd).

Top LNG Exporter: Nigeria ranks among the world's top five exporters of liquefied natural gas (LNG), a cleaner burning fuel.

The Good:

i. Economic driver: Oil and gas contribute roughly 9% to Nigeria's GDP and a whopping 90% of its export earnings. The revenue fuels government programs and development. 

ii. Global player: Nigeria exports oil and gas to Europe, Asia, and even the United States, making it a key player in the global energy market.

The Challenges:

i. Reliance on oil: Nigerian dependence on oil makes it vulnerable to price fluctuations and global market shifts.

ii. Infrastructure issues: Oil theft and pipeline vandalism are significant problems, impacting production and revenue. 

iii. Environmental Concerns: Oil production in the Niger Delta has led to environmental pollution, raising concerns about sustainability, however, Nigeria is now looking to diversify its energy mix by investing in renewable resources like solar and wind power to reduce reliance on oil.

Nigeria's oil and gas sector is a significant economic force but faces challenges. Embracing diversification, security and sustainability will be key to navigating the future of this vital resource.

POWER

Nigeria's power sector is a complex system with immerse potential and significant hurdles to overcome. Here's a balanced overview:

The good:

i. Resource rich: Nigeria has abundant natural gas, hydropower potential and sunshine. This diversity offers options for a robust energy mix.

ii. Growing capacity: The country has steadily increased its installed generation capacity, reaching over 11,000 megawatts.

iii. Renewable push: There's a growing focus on renewable energy sources like solar power, with recent projects like the Ashama solar farm showcasing this commitment.

iv. Government action: The government is actively involved in reforming the sector, attracting private investment, and improving efficiency.

The challenges:

Supply vs demand gap: Despite the growing capacity, the available power often falls short of what's needed, leading to frequent blackouts.

RENEWABLES

Nigeria is blessed with an abundance of natural resources and potential for considerable renewable hydropower and solar. Nigeria is committed to achieving a net zero emission by 2060, and adoption of renewables by 2030.

The Good:

1. Environmental sustainability
2. Economic Opportunities
3. Energy Access

Challenge

i. Cost: while the cost of renewable energy technologies has decreased significantly over the years, they can still be more expensive than conventional fossil fuels, particularly when accounting for storage and grid integration costs.

Terms in the Oil and gas sector 

• Upstream: Finding (explore) and extracting the oil and gas from underground.

• Midstream: This involves the transportation of the crude into the various refineries for the process of refining.

• Downstream: The refining process which involves turning crude oil into usable products and distributing them to the various market forces. Example: Dangote's refinery which produces over 605,000 barrels per day.
• Licenses

• Joint venture: These are the partnerships between the Nigerian government and the international oil producing companies. Joint ventures are a common way to develop and manage oil and gas projects in Nigeria sharing risks and expertise.

• Concession: A concession typically refers to a contractual agreement between a government entity and a private company granting the company the right to explore, develop, and/or operate energy resources, such as oil, gas, or minerals, within a specified area or region.

Terms in the Power sector

• Power generation: Power generation in Nigeria is the process of producing electricity from different sources like fossil fuels, renewables, and nuclear energy. It's critical for meeting residential, commercial and industrial electricity needs nation wide.

• Power transmission: this involves the transportation of electricity produced through the power plants to various consumers.

• Power distribution: power distribution in Nigeria is the delivery of electricity from generation sources to end users, including residential, commercial and industrial consumers. It's a crucial sector for delivering electricity nationwide.

• National grid: The national grid refers to the interconnected network of power transmission lines, substations, and generating stations that deliver electricity from power plants to consumers across a country or region. It allows for the efficient distribution and sharing of electricity, ensuring reliability and stability in the supply.

How is power distributed to various locations in Nigeria?

• Generating companies - Gencos.

• Electricity is generated by public and private generating companies that own and operate power plants using various resources like natural gas, hydropower and even solar.

• Transmission Company - TCN

• This government owned company remains responsible for managing the national electricity grid. They handle the high voltage transmission lines that carry electricity from the GenCos to various regions across the country.

• Distribution companies - DisCos

There are 11 DisCos in Nigeria each with a designated region. They are responsible for the final stage of electricity delivery, distributing power to consumers within their respective franchise areas.

Nigeria Bulk Electricity Trading PLC - NBET

NBET purchases electricity from the GenCos and sells it to the transmission company of Nigeria (TCN), however, under MYOT 2024, DisCos can now bypass the NBET and purchase electricity directly from GenCos through bilateral agreements.

Legal framework for energy regulation in Nigeria 

1. Petroleum Industry Act
2. Electricity (Amendment) Act 2024
3. Climate Change Act
4. National Renewable Energy and Energy Efficiency Policy (NREEEP)
5. Nigeria Energy Transition Plan
6. Nigerian Constitution

Regulatory bodies governing the Energy sector

1. Nigeria National Petroleum Commission (NNPC)
2. Nigerian Electricity Regulatory Commission (NERC)
3. Nigeria Upstream Petroleum Regulatory Commission (NUPRC)
4. Nigeria Mid-stream Downstream Regulatory Authority (NMDRA)

Career opportunities available for Lawyers in the energy sector

• Energy Law Practice: specialising in energy law allows lawyers to advice clients on regulatory compliance, contracts, and dispute resolution in the energy sector.

• In-house Counsel: lawyers can work as in-house counsels for energy companies, providing legal advice and support to the companies operation and business activities.

• Academia: Lawyers can pursue a career in teaching and conducting research in energy law and related fields.

• Dispute Resolution: Lawyers can specialise in resolving disputes in the energy sector including litigation, arbitration and mediation related to energy projects and transactions.

• Project Finance: Lawyers can work on project finance transactions, helping to structure and negotiate financing arrangements for the energy projects.

• Policy αnd Advocacy: Lawyers can work in policy and advocacy roles, shaping energy policy and representing clients' interests in legislative and regulatory proceedings.