Africa’s oil and gas economy ready for clean energy era- stakeholders
Africa is taking a new look at its oil & gas economy with a new resolution to prepare itself for an era of clean energy. In view of the projected fall in global crude oil demand, thought leaders and experts in oil and gas and energy industry have reached a consensus that the only way forward for the continent is to shift its investment focus to cleaner sources of energy.
This was the view expressed by experts and industry stakeholders at the ongoing Oil Trading and Logistics Expo 2021 Africa Downstream Week which kicked off on Tuesday, in Lagos.
They emphasized that this is the only way the region can position itself as a choice destination for foreign investments and remains relevant in the international energy market, in decades to come.
They also advised Nigerians and the government to start seeing the nation as a gas-rich nation rather than an oil-rich nation as it is currently sitting on a larger reserve of gas than of crude oil.
They maintained that the country is presently oil-dependent, not oil-rich, and so must begin to channel more efforts towards transiting to gas utilization and the commercialization of its economy through the resource.
The deregulation of the petroleum downstream of the country’s oil sector was a major subject of discussion during the event.
Nigeria, an oil-dependent nation with a population of over 200 million people, has decided to utilize the new legal, administrative, regulatory and fiscal framework of its oil and gas sector – the Petroleum Industry Act (PIA) – to redirect investments and investors towards cleaner sources of energy against a possible fall in crude oil demand.
The Act is supposed to construct a framework for the creation of a commercially-oriented and profit-driven national petroleum company, ensure transparency, good governance, conducive business environment for investors and accountability in the administration of the country’s petroleum resources.
The PIA created two new regulatory authorities – the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for the upstream sector and the Nigerian Midstream & Downstream Petroleum Regulatory Authority (NPRA) for the midstream and downstream sectors, eliminating defunct Department of Petroleum Resources (DPR), the Petroleum Products Pricing Regulatory Agency (PPPRA), and the Petroleum Equalization Fund (PEF) who used to be the regulators of the sector.
Some stakeholders, however, believe that the policies which were being deployed by the former regulators to govern the sector will still be utilized in the new era.
Mr Clement Isong, Executive Secretary and Chief Executive Officer, Major Oil Marketers Association of Nigeria (MOMAN), during his speech, expressed optimism about and advocated for the removal of petroleum subsidy which he explained can be achieved if the federal government takes out the price control system, through the new Act.
“The PIA is supposed to drive reforms. What reforms is it supposed to drive? By it, we are saying that we have some challenges that we must overcome.
“So, with respect to the upstream in particular, we have reached a stage where we are no longer a destination for foreign investment.
“But I believe that will create a more attractive fiscal system which the PIA is doing. More particularly on the downstream, what is the PIA supposed to reform or do? It was supposed to remove Price Control and it does so.
“Because, by removing Price Control, it is supposed to eliminate the concept of subsidy. And I believe we are on our way to doing so.
“It is supposed to promote price competition at the top. All of these are supposed to lead to sustainability of the downstream,” he said.
“To lead and guide us along this line, the PIA is supposed to provide a regulator for the sector that will ensure that we generate the benefits of this reform we are looking for.
He also questioned the rate at which gas is being flared in the country, stressing that the government is losing so much potential revenues to it.
“One thing that we must be honest about, though, is that PMS price cannot and will not remain N162 per litre. This is where leadership comes into play.
“When you have a sole interest, you must ask yourself what you want to achieve.
“If it is the sustainability of the industry, sustainability of the society, sustainability of your country, can you really continue to spend trillions on burning fuel?”, hsaid.
Mr. Isiyaku Abdullahi, MD, Petroleum Products Marketing Company (PPMC), while speaking on the theme: “Nigeria Fuels Congress”, advocated for the deregulation of the Nigeria petroleum downstream sector.
He noted that it has the potential of helping the country generate an estimated N4 trillion in 4 years, which could be used for equipping tertiary health centres, acquire about 27,000 additional solar systems for households and construct more roads.
He also said that global and regional market dynamics, trends and competitive landscape will continue to tilt towards only favourable investment destinations with ROIs (Returns on Investment).
He said, “The NLC and the NNPC are changing their dynamics and methods of operations.
“For us, NNPC Ltd has just been passed, and so, we will take advantage for optimization and ensure that we are competitive in the market.
“And so, for us, international competitive landscape will keep moving towards places where there are only favourable investment.
Meanwhile, Mr Stilian Mitakev, the Group Managing Director of Swift Oil, held a pessimist’s view about the chances of the planned petroleum subsidy removal scaling through by the end of June 2022.
He further said that the PIA has not properly addressed PMS.
He, however, expressed the view that the downstream sector should be deregulated.
“There is a problem with the new PIA. And the problem is one – PMS.
“There are no problems for the other products of crude oil. There’s no scarcity with them and people use them judiciously. But this is not the case with the PMS.
“The downstream part is supposed to be fully deregulated and all refined products should be subsidized.
“But the Federal Government is planning to end subsidy by the end of June 2022, which was admitted by the Minister of Finance, yesterday.
“But I don’t think subsidy will stop by the end of June 2022 because it may be extended to 2023.
“It is true that the Department of Petroleum Resources (DPR), the Petroleum Products Pricing Regulatory Agency (PPPRA), and the Petroleum Equalisation Fund (PEF) have been scrabbed, but the policies used by them will still be recycled for the new agencies.
“But I believe the CEOs of the newly formed agencies are seasoned professionals and I am sure they will definitely drive better results than their predecessors, in their respective fields,” he said.
He equally noted that the level of unemployment in the country is responsible for the current insecurity faced by the nation.
He said that about 40% 0f the population is unemployed, and creating more jobs for the populace would mean reduced insecurity for Nigeria.
The federal government of Nigeria on March 29 2021, flagged off its “Decade of Gas” initiative to send a message to the rest of the world that Nigeria has also joined the global war against greenhouse gas emissions, but has opted for gas because it is its largest alternative energy source to oil.
Meanwhile, Labour is worried about the planned attempt to deregulate the downstream. It has repeatedly emphasized that it would only be in support of the move if the job security of its members is guaranteed.
Dr. Ogbonna Obinna, National Vice Chairman, Joint Health Sector Unions (JOHESU), during his, said that the major interest of the trade unions in Nigeria is that the implementation of the new PIA is carried out in such a way that it doesn’t affect the employment of its members.
It advocated that the PIA should be used to create more jobs for Nigerians, including in the new Nigerian National Petroleum Limited.
He also noted that, in implementing the PIA, oil exploration in the basins should be looked into with attention paid to its health implications on communities where the poor masses who may not be able to speak for themselves live.
“For Labour, we are not only advocating that we should have increased energy production for the economy, but we are also talking about the safety of the masses, moving forward.
“The downstream is on transit, but we are not yet there. We are concerned about the factors that will help us get it right .
“That is why Labour is saying that, yes, we have considered the 2021 PIB and have seen some areas of interest.
“Firstly, we should not only think of the economic benefits of the exploration, but we should also think about the health hazards. And that’s why we should think about clean energy now.
“Again, in the privatization of the NNPC, the government must assure organized labour that no job must be lost.,” he said.
He advised the government to start diversifying by redirecting its focus and looking for other ways of generating revenues than crude oil, as the resource is daily depleting and may not interest the international market, at some point in the future.
“We have observed that it is making a significant reform by reviewing laws that have been in existence since 1969.
“It is trying to make it better, to create avenues for new institutions and investors to come and play and also make sure that the privatization of the NNPC is intact.
“90 per cent of our economic energy is solely on crude oil; 90 per cent of our gross earnings is also on the same.
“Supposing the oil dries up today, what will drive our economy? Secondly, supposing all other international players decide not to take our oil again, what will happen to our economy?
“We should not only be thinking of this hydrocarbon means of generating income. We should start thinking of other sources of income,” he said.