Prof. Iledare, Avuru, Nwokedi recommend deliberate investment in oil, gas, energy security as strategies for fast-tracking Nigeria’s energy transition

 

Oredola Adeola

 

Experts have suggested that Nigeria should be deliberate about prioritizing energy security and optimizing the value of its oil and gas resources before committing more to its energy transition agenda.

 

 

This was the major highlight of the first-panel session on the theme: “Nigeria’s Energy Transition: Enhancing Investment Opportunities & Addressing Challenges in the Energy Sector”, during the Association of Energy Correspondents of Nigeria (NAEC) annual International Strategic Conference 2023, held on Thursday, in Lagos.

 

 

Austin Avuru, Executive Chairman, AA Holdings, stated that the main drivers of the energy transition are energy security and the optimization of the available energy resources that every country has. 

 

According to him, energy transition is a lot more serious than an issue that has to do with carbon emissions in the country. He said, carbon emissions reduction has been the key factor that all the energy transition argument has been hinged on.

 

“Most countries have focused on addressing energy security and optimizing the available resources while driving the transition. Every country will address these two things before coming to what some people think is the residual matter of reduction of carbon emission.

 

He emphasized that Nigeria should prioritize energy security for both now and in the future and optimize the value of the numerous energy resources that it has today, while still pushing the energy transition agenda.

 

Avuru therefore hinted that if the government about the energy transition agenda, it should have raised the country’s crude oil output level to about 3 to 4 million barrels a day presently to taper down to 1 million barrels per day in 2040. 

 

He added that the country should have achieved domestic gas production of 4 billion cubic feet per day between now and 2030.

 

“By 2030/2050, when we say gas is our transition fuel, Nigeria should have retained the value of the crude oil and gas resources and thereby be in the right standing to position itself for the energy transition agenda in 2030 and 2060.

 

“However, Nigeria is, unfortunately, doing the opposite at a time when it should be doing 3 mbpd of crude oil, we are doing less than 1.2 mbpd.

 

“At a time when domestic gas production should be heading towards 3bcf per day, the country has stagnated at 1.1bcf per day for the past five years. This is happening because investment has not come into the sector since 2012.

 

“Our average investment in the sector had peaked between 2011 and 2012 at about $ 22 billion per annum. It has tapered down to about $5bn per annum.

 

The CEO A. A Holding therefore hinted that Nigeria will need about $25 billions of annual investment in the next ten years if it is committed to achieving crude oil output of 4mpd and 3mcfpd.

 

“Even if Nigeria has the cash to do so, the country will still have to possess the technical and execution capacity to achieve the kind of production level that the country desire.”

 

“Where are the rigs and the service companies with the capacity to achieve this goal? There is a lot of deep thinking that has to go into this process.

 

“We have to reconstruct our energy transition agenda, otherwise Nigeria and Venezuela would be the two countries with both oil and gas resources stocked to the ground when the rest of the world has moved on, ” Avuru warned.

 

Professor Wumi Iledare, Professor of Petroleum Economics and Policy Research, who joined the session via a webinar predicted that it would take 60 to 70 years for another energy resource to dominate the global energy market in the same way that oil and gas have done.

 

Professor Iledare said, “It is so important to adopt an energy unique strategy where optimization of one particular energy resource is more important.   Our energy transition strategy should have a mixture of all the existing energy resources and use them in such a way we optimize the value created by the use of the energy resources that the country is endowed with.

 

“I think we much to focus on the policy perception, that is what the investors would think before they think of the value they can get.

 

“There is nothing to support the argument that energy resources can ever transit in any era of our human existence.  Firewood and charcoal are still with us as energy resources.

 

Professor Iledare has urged Nigerian leaders attending the Conference of the Parties (COP 28) in Dubai from November 30 to December 12, 2023, to tell the world that defunding petroleum resources is the worst mistake that the global community has ever made in recent times.

 

He emphasized that petroleum resources are not about to leave the world energy market, and most international oil companies, including Shell and ExxonMobil, have realized this and are thinking differently.

According to him, the Nigerian government should focus more on implementing the Petroleum Industry Act (PIA) to the letter, and there is a need for a new way of thinking to implement the PIA without being mindful that energy is evolving.

Professor Iledare further emphasized that the focus should be on how Nigeria can expand its crude oil and gas production capacity, which can help Nigeria to strategically think about the evolving energy landscape. The PIA implementation is key, and one of the key objectives is to separate the role within the regulatory, commercial, and petroleum policy institutions and further capture them within the evolving energy landscape.

He suggested that three important things are critical to attracting investors, including domestication of the energy technology, which means that all the tertiary institutions in Nigeria must be developed to raise the human capacity needed to drive the energy sector.

 

“The second is the fiscal regime, including the tax policies, which should be structured in a manner that will attract more investment to the petroleum industry landscape and ease investment in the sector.

 

“The third aspect is the government policy, which should also be consistent by providing incentives for investment to grow,” Professor Iledare said. 

 

He therefore emphasised that industry regulators should not be concerned about collections of revenue and penalties, and regulations geared towards revenue generation are bad regulations.

 

Akachukwu Nwokedi, President of the Nigerian Gas Association, emphasized the importance of energy transition that improves access to electricity and makes it more accessible and affordable.

He stated that the transition must be deliberate about inclusive economic growth, focused on creating jobs across the gas value chain and the renewable sector.

Nigeria, being a gas nation with very little crude oil, natural gas has to be the main driver of the country’s energy transition.

To make Nigeria an investor destination, Nwokedi said that the fundamental issues of insecurity, assets vandalization, and community unrest must be addressed.

He also emphasized the need for the sanctity of contracts and a properly structured fiscal framework to encourage investors.

The Petroleum Industry Act (PIA) has done a lot to bring good fiscal terms to the industry, but there is a need to focus more on implementation.

Nwokedi further noted that the over 3000km of aging pipelines must be addressed, overhauled, and rehabilitated to distribute petroleum products from the fields to the export terminals and other refineries and plants.

He also emphasized the need to streamline the regulatory environment to make the process of activating investment from production onward to the market smooth

 

The President of the NGA also suggested that the contracting cycle in the industry needs to be streamlined. He stated that petroleum industry regulators need to change, as they can be overreactive and discouraging, leading to threats to investors.

 

Nwokedi said, “Investors need an enabling framework, and the government should test regulations against investment coming into the country to ensure their viability. Some regulators must set KPIs to attract the right investment and increase production output.”

 

Sola Adebanwo, General Manager of Government, JV & External Relations at Heritage Energy Operational Services Limited (HEOSL), who spoke on behalf of the CEO of HEOSL, Mr. Ade Oseragbake, emphasised the importance of creating an attractive environment for investment to thrive in the petroleum industry. 

 

Adebanwo stated that capital is always attracted to places where it is welcomed, emphasising that difficult investment, regulatory, and unprotected legal environments would drive investment away.

 

He suggested that the government should strengthen the ease of doing business and provide a legal and policy framework that provides predictability in terms of the investment cycle to attract investors.

 

Adebanwo also mentioned that the fiscal regime is a major policy issue that has been addressed in the Petroleum Industry Act (PIA) but called for more clarity and government’s commitment to proper implementation.

 

He noted that the PIA is giving attractive tax regimes that are likely to enhance and invite investment but stated that the policy must protect investors in such a way that would ensure that investment funds are recoverable. 

 

He also stressed the need to making business entry attractive and reducing the bottleneck of business registration in Nigeria would help attract investors into the country.

 

“We need to intentionally position the Nigeria’s investment landscape in such a way that it is attractive foreign capital.”Adebanwo said.