As world looks at the future offshore energy and global transition to renewable and sustainable energy, the Nigerian government has reiterated that energy transition discourse should revolve around the implementation of a fair, equitable and sustainable energy mix that entrenches the principles of inclusiveness and guarantees energy security.
Also, the federal government noted that the discourse should consider the right of nations to harness their energy resources for their development goals, attain the right energy mix in a multiple energy pathways and sustainable energy supply.
The Commission Chief Executive Nigerian Upstream Petroleum Regulatory Commission (NUPRC) Engr. Gbenga Komolafe stated this while speaking on the topic “Energy Transition And Nigerian Upstream Oil And Gas Landscape: The Journey, Challenges & Way Forward” at the 2023 Offshore Technology Conference, Houston, Texas, USA
Daily Champion reports that the event is organized by Petroleum Technology Association of Nigeria (PETAN) in Wyndham Hotel, with the theme” Energy Transition in Africa: The Journey, Challenges and the Way Forward.” and the event is being attended by prospective investors, investors and other stakeholders in the Nigerian Oil and Gas industry.
Komolafe affirmed that for now Nigeria has declared gas at its pathway to the energy transition, and Government has designed a programme that ensures that gas actually plays a role to lift the nation out of its challenges that confront it in order to drive industrial development.
He noted that as a nation, Nigeria boasts of 36.966 billion barrels of oil reserves and 208.83 trillion cubic feet of natural gas reserves with a daily production of over 1.5 million barrels of oil and 7.5 billion standard cubic feet of gas. In terms of oil reserves, Nigeria ranks 2nd in Africa, 8th in OPEC and 11th in the World. On the other hand, she ranks 1st in Africa, 6th in OPEC and 15th in the World in terms of crude oil production.
According to him ‘’Nigeria is indeed a nation where needs meet opportunity. In addition to the 4 catalogued hydrocarbon potentials, Nigeria is blessed with potentials for blue energy, solar, wind, biomass as well as other sources of renewable energy to leverage the right mix in the energy transition regime. It is also on course in its transition pathway to carbon neutrality by 2060.
He expressed that given the abundance of gas in the nation, 2021 to 2030 was declared the Decade of Gas; coming on the back of 2020 which was our ‘Year of Gas’.
He explained ‘’At the heart of this programme is the country’s vision to drive infrastructure and industrial development in order to prosper our citizens and make life more meaningful to all. Natural gas ticks all the boxes as the vehicle to help Government achieve this aspiration which is why we embraced the resource to help turn around the economy.’’
He said ‘’The work done so far has aggregated the gas demand and supply views, infrastructure 10 requirements and the suitable pricing framework which will serve as the enabler for unlocking the investments for the required infrastructure that will drive the convergence of demand and supply. That work reveals that gas demand grew at an average of 3.3% p.a. between 2010 and 2020.’’
Also, ‘’This was driven largely by growth in domestic demand enabled by an improvement in Domestic Supply Obligation fulfilment to 33% in 2020, compared to 22% in 2010. Between 2020 and 2030, demand is expected to grow at a compound annual growth rate of 16.6% p.a., driven by major projects such as the Nigeria Liquefied Natural Gas (NLNG) Train 7, in the base case scenario, and Nigeria/Morocco pipeline, NLNG Train 8 and Ajaokuta-Kaduna-Kano (AKK) pipeline, in the high case scenario’ he stated
He revealed that ‘’A comprehensive analysis shows that gas demand in Nigeria could grow to 22.5 billion cubic feet per day by 2030 compared to 4.9 billion cubic feet per day in 2020. Furthermore, domestic 11 consumption could account for 60% of total demand by 2030 compared to 30% in 2020. In just a decade, the demand landscape could change exponentially, especially if the power sector challenges are resolved.
‘’However, on the supply side, it is projected that onshore Non-Associated Gas will account for 47% of total gas supply by 2030. The import of this is to showcase opportunities in gas development in the Nigerian upstream sector. ‘’he noted
He said that given the fact that most players within the international financial ecosystem are progressively moving away from funding fossil fuel development, decarbonisation story will need to be incorporated into Field Development Plans (FDPs) in order to attract funding. Nevertheless, the opportunity for investment and fantastic returns remains undiminished and is continually available to prospective investor.
He said ‘we cannot discuss the role of gas in the energy transition without touching on the subject of methane emission reduction. Reducing methane leakage is the single most important and cost-effective way to bring down emissions and improve efficiency in the oil and gas industry.
‘’Due to the high global warming effect, methane emissions from gas production, transport and use, whether fugitive or vented, can completely undermine the benefits of the use of gas over other fossil fuels in terms of their carbon footprint. ‘’
‘’It is remarkable to note that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has intensified its efforts towards elimination of flared gas while arresting methane and other fugitive gas emissions. With the recently issued “Guidelines for Management of Fugitive Methane and Greenhouse Gases Emissions in the Upstream Oil and Gas Operations in Nigeria”, the Commission is advancing progress towards the operationalisation of the Global Methane Pledge, by fostering peer-learning on regulatory approaches to tackling flaring, venting and methane emissions in the upstream oil and gas sector.
It could be recalled that in 2021, the Intergovernmental Panel on Climate Change issued a stark warning to the global community thus: “act now to reduce emissions by 45% by 2030 and reach net zero by 2050, otherwise we will fail to limit global warming to relatively “safe” levels of 1.5 degrees on pre-industrial times”. Later that year, the International Energy Agency (IEA) published a report entitled “Net Zero by 2050 – A Roadmap for the Global Energy Sector”. This report described in detail how a carbon neutral future can be achieved by 2050, and proposed a Roadmap based on the assumption that no further investment should be made on oil and gas exploration, appraisal and new 5 developments.
To them, only development of fields that have already been approved and reinvestment in already producing fields should be allowed go forward. 5. The foregoing provides the context within which Nigeria’s response to the energy transition, and the role of gas thereto should be discussed, as they indicate a new direction of travel that fossil fuel dependent economies needed to anticipate and prepare for.
He said that Nigeria has for long recognised that the global shift towards decarbonised economies will lead to a structural decline in demand for unabated fossil fuels, and that the increasing cost competitiveness of renewable energy sources will present key risks and challenges for fossil fuel dependent economies. Chief among these are reduction in national revenue and consequential fiscal vulnerabilities that may arise therefrom.
It was further recognised that reduction in fossil fuel revenue without sufficient time and support to manage macroeconomic risks and the structural transformation required to build a diversified, sustainable and resilient economy, will be disadvantageous to the Nigerian economy.
Again, as a nation our performance in terms of the Sustainable Development Goals (SDGs) is a very strong indicator that energy transition policy for Nigeria should equitably be formulated within the context of improving the achievement of the SDGs; that is, reducing poverty and hunger, improving good health, well-being and quality education, achieving clean water and sanitation, creating decent work and economic growth, achieving improved environment through deployment of carbon capture technology amongst others.
He said aside the SDGs challenges, Nigeria also suffers huge energy deficit, with an estimated 85 million Nigerians lacking access to grid-supplied electricity or clean cooking fuel. This is equivalent to 43% of the population, a situation that results in an estimated annual economic loss of up to 2% of GDP.
He noted that Renewable energy holds significant potential to alleviate these challenges, but absorption capacity issues limit the amount of variable power generation which can be accommodated by the grid. There are also issues relating to technology, resource and manpower constraints, dearth of know-how, capacity development and utilization as well as the prohibitive cost of renewable energy which collectively constitute barriers to uptake and deployment. Meanwhile, the strength of our economy is closely tied to a volatile oil price, with petroleum exports accounting for 86% of total export revenue. 8.
He said with the challenges in the country , it becomes self-evident that Nigeria could not do away with its fossil fuels just yet; a balance had to be struck between the energy transition and the human transition.
Stressing that Government was left with no choice but to reject the notion of a single 8 pathway to net-zero, preferring instead the concept of ‘just’ energy transition which takes into cognisance the specific circumstances of each nation in developing the energy transition pathway that best achieves the environmental, social, political and economic objectives of the transition in that specific nation. Multiple pathways to energy transition should and must exist in order to ensure that no country is left behind in the process of achieving net-zero by 2050.
Accordingly, Government then declared natural gas as our transition fuel. Unfolding event has equally shown that natural gas is our destination fuel, with a projection that gas will form a significant part of energy mix for Nigeria by year 2030 and beyond. President Muhammadu Buhari, GCFR, President and Commander in Chief of Nigeria’s Armed Forces, declared at COP26 that our target end date for achieving net-zero was not 2050 but 2060. As a country, we have also defined our decarbonisation 9 pathway to achieve this target through Nigeria’s Energy Transition Plan (ETP).
Also, the ongoing Nigerian Gas Flare Commercialisation Programme (NGFCP) for 49 flare sites is expected to harness a combined volume of about 300 million standard cubic feet of gas per day through established technologies such as mini-LNG, Compressed Natural Gas (CNG), Liquefied Petroleum Gas (LPG) and Gas-to-Power, etc. The flare commercialisation programme is part of the Commission’s initiatives in compliance with Section 108 of the PIA and is aimed at driving Nigeria’s target to end routine gas flaring within this decade, supporting the Nigeria Energy Transition Plan (ETP), creating value from her gas resources and boosting supply to the rapidly growing gas market. The 14 significance of this is that more gas would also be available for domestic utilization as LPG, feedstock for power generation plants, fertilizer plants and petrochemicals, to mention but a few. Each of these areas provides a unique entry point for willing investors and opportunities to build capacity locally.
In the gas flare commercialisation journey, the Commission has partnered with relevant global players to leverage the carbon credit market mechanism that should improve the bankability of some of the flare elimination projects. Interestingly, Africa Carbon Markets Initiative (ACMI) was launched recently by a coalition of organisations to help shape and harness the potential of carbon markets in Africa, to drive a dramatic increase in the production of African carbon credits while ensuring that carbon credit revenues are transparent, equitable, and create good jobs.
In response to this development, the Commission has established a 15 new Department, “Energy Transition and Carbon Monetization”, saddled with the regulation of the oil and gas carbon market. The new Department will also provide a mechanism to identify suitable opportunities to promote decarbonization effort, track progress of implementation and monitor results. Also, as part of its contribution on Climate Action, the Commission is currently facilitating and advancing an International Finance Corporation/World Bank’s Industrial Carbon Capture Utilisation and Storage (CCUS) Diagnostic and Scoping project in Nigeria aimed at identifying opportunities to develop industrial CCUS in the country.
He noted that given the huge opportunities presented by abundant oil and gas reserves in Nigeria and against the need to optimize our oil and gas production while energy transition gathers momentum, the NUPRC as a business enabler has chosen to adopt alternative fund mechanism that leverages the technical capacity of indigenous and foreign investors to create robust synergy among the oil services providers , financing institutions commodity traders and awardees to accelerate oil and gas production while the conversation on Energy Transition continues to gather momentum.
In the operationalization of this mechanism, the NUPRC as a regulator and on behalf of the Federal Government of Nigeria (FGN) shall provide the confidence assurance to the participants in the funding model. This is to ensure that all parties within the business collaboration agreement fully honour the terms of the agreement under the watch of the Regulator.
It is the expectation in this roadshow that investors in this bracket will seize the opportunity to interact and begin to develop the required synergy for the success of the initiative. 20. Ladies and gentlemen, in the days ahead, the Commission intends to host a larger investment 17 forum in the capital city of Abuja, Nigeria to further attract and enlist investors interest in the alternative funding mechanism. We are further extending invitation to investors in this forum to attend the Abuja event and benefit from the scheme.
He commended the leadership of the Petroleum Technology Association of Nigeria (PETAN) for sustaining effort in organizing and hosting of the Nigerian Pavilion and the exhibition at the OTC.
He said besides providing great networking opportunities for participants, it has greatly helped to showcase professionalism and technical capacity in the development of upstream oil and gas industry in Nigeria and other parts of Africa.
