Sylva: Nigeria’s and Others’ Oil and Gas Industries Have a Bright Future Despite Energy Transition Threats

By Adeleye Kunle

Chief Timipre Sylva, Minister of State for Petroleum Resources, stated yesterday that the future of Africa’s oil and gas industry remains very bright, despite the challenges posed by energy transition.

The minister made the remarks in Lagos at the Society of Petroleum Engineers (SPE) Nigeria Council’s 45th Nigeria Annual International Conference and Exhibition (NAICE), which had the theme “Global Transition to Renewable and Sustainable Energy and the Future of Oil and Gas in Africa.”

However, speaking at a four-day stakeholders’ consultation on domestic gas pricing organized by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) in Abuja yesterday, Sylva, in response to questions, stressed that the oil and gas sector had yet to be deregulated, noting that any recent increase in fuel pump prices was at the whims of marketers.

“Well, I can state unequivocally that we have not deregulated.” “The government is still subsidizing, and if there are price increases, it is most likely due to the marketers,” he told participants.

He did, however, assure that the authorities were doing everything possible to ensure that the queues seen in recent weeks vanished as soon as possible.

Speaking further in Lagos, Sylva said Africa has a key role to play in securing a greener world where clean natural gas is used to power the continent’s economies sustainably, charging petroleum engineers and other industry stakeholders present at the event to not fail the continent

“I have no doubt that the future of Africa’s oil and gas industry is still bright, despite the global energy transition uptake. You are central to making this a reality. Don’t fail us,” Sylva said.

While observing that it was generally acknowledged that transition to low carbon energy sources would make the world a better living place with a cleaner climate, Sylva noted, however, that energy transition was better viewed as providing clean energy, and not as abandoning some energy sources.

He maintained that while current forecast indicated that the global cost of renewable energy was declining steadily, the reliability and sustainability of renewable energy supplies had been challenged by the recent energy crisis in Europe and the Americas, which has re-awakened new interest in fossil fuel supplies.

“We have seen coal plants being fired up in several European Countries recently, and a renewed interest in natural gas supply from Africa. There are also reports of increased oil and gas drilling operations in the USA with spontaneous permits being granted recently.

“Anticipated economic growth and rising global population, especially in Asia and Africa, will significantly push energy demand upward to a level that renewable energy sources only cannot meet by 2050.

“All these imply that the global energy mix will remain with us, amidst greater dominance by hydrocarbon energy sources, at least in the foreseeable future. It also indicates that energy transition will remain a gradual process, as against a rapid and radical shift as some have presented it,” the minister said.

For Africa, he noted that adaptive strategies for the energy transition should be adopted across the continent, adding that it meant that the different socio-economic, political and developmental peculiarities of individual nations should be taken into account in their transition plans.

Arguing that Africa was still bedeviled with chronic energy poverty in this modern age, with about 600 million people having no access to electricity, and about 900 million having no access to clean cooking fuel, he described the situation as unjustifiable.

He insisted that all available energy sources would be required to end the high level of energy poverty in Africa and achieve the United Nations Sustainable Development Goal (SDGs) of providing access to affordable, reliable, sustainable and modern energy for all.

According to Sylva, Africa’s approach towards the climate-change-net-zero-emission should be to optimise the use of the continent’s abundant gas resource as a transition fuel option.

Sylva further said, “Africa’s energy poverty would have to be addressed by responsibly developing and utilising Africa’s abundant natural resource – Fossil fuels, from where the renewable energy would be funded amidst a gradual energy transition.

“Nigeria, as the oil and gas industry leader in Africa, is committed to pursuing the energy transition to promote economic growth, and is gradually investing in renewable energies, primarily solar, to reduce carbon emissions, whilst continuing to exploit hydrocarbon resources, especially natural gas – recognised as the energy transition fuel for Nigeria.

“Nigeria has the most extensive gas resource in Africa with proven gas reserves of over 200 trillion cubic feet. It is envisaged that with the Petroleum Industry Act 2021 in full implementation across the broad spectrum of the oil and gas industry, Nigeria is well positioned for a reformed oil and gas industry that could sustain the local demand for natural gas and a high export income.

“On a relevant note, the campaign for reduced funding of fossil fuels explorations has led to a gale of divestment by the international oil companies in Nigeria. I strongly believe that this is an opportunity for oil and gas exploration in the country because Nigeria’s independent producers have developed capacity to fill-in the gap.”

The minister stated that it must be admitted that the risk of limited international financing of oil and gas projects could jeopardise Africa’s energy transition and roadmap to attaining net-zero.

“Hence, Africa will have to look inward and harness its resources, while accelerating technology development, to face the global energy transition onslaught.

“We need to develop cross-border infrastructure and expand regional energy market to guarantee long-term energy security,” he added.

In his presentation, the President of SPE International, Mr. Kamel Ben-Naceur, said an estimated five trillion cubic meters (5TCM) of natural gas had been discovered in some African countries including Namibia, Mauritania, Senegal and other basins.

The Tunisian-born president of SPE International also projected that Africa could supply another 30 billion cubic meters by 2030.

While describing that as good news for the continent, he said none of those 5TCM has achieved Final Investment Decision (FID).

“We estimate that about five trillion cubic meters of natural gas have been discovered in Africa including the latest ones in areas like Namibia, in areas like the MSGBC Basin: Mauritania, Senegal and so on basin.

“So, this is very good news for the continent. But those 5tcf have no FID yet. So, we have to go to the next stages. And it’s estimated that Africa could supply another 30 billion cubic meters by 2030,” Ben-Naceur stated.

In the sustainable future, Ben-Naceur predicted that oil and gas would remain a significant part of the energy mix for the next three or four decades, adding, “This is a fact that we all have to reckon and pass the message. Oil and gas industry will be very strong today, tomorrow and in the future.”

He said the world had experienced 30 per cent reduction in upstream investment between 2019 and 2020, worse than the 26 per cent drop in 2015 and 2016.

He said the situation had compounded over the last five to six years, with the global upstream investment declining by almost 50 per cent, adding that this has been compensated by the investment in other parts of energy.

However, upon the recovery of the industry, he said the world was hit by very high oil and gas prices especially in Asia where energy import costs went up by a factor of 15.

“We have never seen that on a year-to-year basis. And so, these are things that are leading to very strong inflationary pressures around the world and also creating very deep concerns about the sustainability and affordability of energy.

“So looking forward to next year, we see that the oil and gas demand will come back above the levels of the pre-pandemic which is very good news for our industry. But we are not prepared. We have underinvested in oil and gas industry and this is the reason for those prices,” the SPE president stated.

Also speaking, the Managing Director, Assa-North Ohaji-South Gas Plant, subsidiary of Seplat Energy Plc, Mr. Okechukwu Mbah, said with the investments being committed to gas business, the company would become a one-billion cubic feet per day (1bcf/d) of gas producing company in the country.

He also disclosed that the $700 million gas plant would come on stream next year, saying that would raise the company’s gas production to 800 million standard cubic feet per day.

“So next year, we’ll bring on stream the Assa-North Ohaji-South Plant on production. That’s a $700 million investment. That takes us to almost 800 million standard cubic feet of gas per day producer, when combined with our gas investment in Western asset.

“So we’re aiming to be a one BCF gas per day company before the 2025. So that means we’re really really very aggressive in the gas business. And we strongly believe that, with the cash flow out of a mainstream business and upstream business, will then be able to invest heavily in the new energy space,” he stated.

NMDPRA Begins Consultations on Gas Pricing, Petroleum Shipment Regulations, Others

Meanwhile, the NMDPRA yesterday commenced a four-day stakeholders’ consultation on the much-talked-about gas pricing domestic demand and delivery regulation as well as the petroleum transportation and shipment regulation.

For investors, gas pricing in Nigeria remains a major issue, particularly since they believe that by controlling prices at which the product is sold to high consumers like the power sector, the government has removed the motivation for new investments.

In addition, the prevailing situation has made the international market more attractive for producers in Nigeria who would rather export their product rather than sell locally.

Flowing from the Petroleum Industry Act (PIA), other regulations to be discussed by stakeholders in the next three days include the ones on assignment and transfer of licence and permit, midstream and downstream petroleum (operations) and petroleum pipeline regulations.

Others include: Natural gas pipeline tariff regulations, midstream and downstream decommissioning and abandonment regulations, environmental regulations for midstream and downstream operations, midstream and downstream gas infrastructure fund regulations as well as environmental remediation funds regulations.

Speaking at the event, Sylva, noted that it was the first engagement of key industry stakeholders of the midstream and downstream value chain since the enactment of the PIA in August last year.

The minister noted that the meeting was in fulfilment of the provisions of Sections 33 and 216 of the PIA 2021 which mandate the NMDPRA to consult with relevant stakeholders prior to finalising and making any regulations concerning the processing, refining, transmission, distribution, supply, sale and storage of petroleum products.

Stressing that the administration understands the need to have an all-encompassing, well thought-out, and unambiguous regulatory instrument, Sylva stated that it was required to attract much needed investments and create opportunities in the sector.

While noting that the current state of the local energy landscape is dire and in need of ingenious solutions, Sylva stated that the consultative forum has an opportunity to ameliorate the situation through the new set of regulatory instruments.

According to him, the regulations would provide clarity and certainty for investors, promote and build investor confidence, increase and improve foreign and indigenous participation in the sectors and optimise value for all stakeholders.

Also speaking, the Authority Chief Executive, Mr. Farouk Ahmed, explained that the consultation fulfilled a key promise of the PIA 2021, noting that unlike in the past, stakeholders in the industry will henceforth participate in the making of regulations which impact on them.

While appreciating all those who ensured the passage of the PIA, he assured that the new guidelines would deliver opportunities to the industry which he said had been waiting for nearly two decades for the ‘unique’ legislation.

“As you are all aware, Section 216 of the PIA mandates the Authority to consult with stakeholders prior to finalising any regulations or amendments to regulations.

“However, we do not consider this an obligation or box-ticking exercise as continuous engagement with our stakeholders to enable their business is at the core of our regulatory philosophy.

“To this end, the Authority consistently provides avenues for our industry partners to engage with us on regulatory and operational issues. We are proud to say that the learning outcomes from such conversations are reflected in the regulations to be considered over the next few days,” he said.

Ahmed added that the NMDPRA had also commenced the issuance of the next phase of regulations and will from yesterday publish the petroleum measurement regulations and midstream and downstream petroleum (safety) regulations.

He added that the new policies would enable investment and ease of doing business, create employment opportunities for Nigerians and prevent undue burdens on its partners.

“We are also conscious of the fact that effective regulations must, amongst many outcomes, ensure fairness, equity, transparency, and certainty for all players in the regulatory space,” he declared.

While 1,156 submissions were received in all, the highest number of input came from the Oil Producers Trade Section (OPTS), with 276, followed by Chevron Nigeria Limited (CNL), with 275 while NLNG made 103 presentations.

Others who made submissions included: The World Bank, Independent Petroleum Producers Group (IPPG), Major Oil Marketers Association of Nigeria (MOMAN), among others.