Gas to the Rescue

As the debate over the long-term relevance of crude oil rages, Nigeria appears to be shifting its attention to the exploration of the country’s huge gas deposits, writes Emmanuel Addeh

The year 2020, unarguably remains the most devastating period in the history of oil and gas in history as the product hit its lowest point.

In the heat of the Covid-19 pandemic, Nigeria, Africa’s biggest economy, entered recession for the second time in five years, after a contraction in its Gross Domestic Product (GDP) for a second consecutive quarter.

Largely dependent on revenues from crude oil export for its survival, the country’s economy contracted by 3.62 per cent in the third quarter of 2020, after having already declined by 6 per cent in the previous quarter, according to the National Bureau of Statistics (NBS).

Nigeria’s revenues dipped by as much as 60 per cent while the International Monetary Fund (IMF) stated that it expected Nigeria’s GDP to decline by 5.4 per cent in that turbulent year.

But while experts continued to debate the waning relevance of crude oil in the global marketplace, the growing place of renewal sources of energy and other emerging issues, Nigeria maintains that it is not oblivious of global trends in the industry, oil and even gas are not going extinct soon.

It notes that oil is not going into oblivion soon and that with renewed attention being given to its gas resources, it is moving closer to gas sufficiency as a replacement for dirty fuels.

Yet again, the Atlantic Council Global Energy Forum, 2021, offered major players in the industry including the Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari and the Secretary General, Organisation of Petroleum Exporting Countries (OPEC), Dr Sanusi Barkindo, the opportunity to speak on the issues which have been on the front burner in recent years.

Kyari, who spoke on the second day of the programme on the topic, “Delivering Energy Access in the Developing World”, noted that although the country aligns with the push for renewables, it is now focused on using its oil and gas resources in developing infrastructure till when the commodities become less relevant in about 40 years.

He disclosed that Nigeria with significant gas reserves, has approximately $3 to $4 billion projects currently ongoing in the sector, some of which have reached advanced stages, in the country’s effort to rev up production for domestic use and for export.

“We are not a petroleum country in the real sense. It’s agreed that we have the 10th largest reserve of oil and a significant gas reserves. Of course what everybody recognises is the oil.

“The reality today is that we have a country in excess of 200 million people. Seventy per cent of this population is well below 30, with a growing middle class and one of the fastest growing economies in Africa.

“More importantly, for us today, an energy deficient country, over 60 per cent of our country is not electrified, poverty level is very high, extremely challenging. But so much is going on to see how we can reverse this trend. When you combine all these, you will see that as a country of focus today, many things are happening in the energy sector.

“For instance, we are seeing investment in our energy infrastructure, especially in the area of gas in excess of $10 billion, this is ongoing. There are a number of gas-based projects about 3 to 5 billion dollars and some of them are at Final Investment Decision (FID) stage,” he stated.

He maintained that Nigeria as a country is currently in transition and not necessarily in energy transition, but added that the country was not oblivious to the changes in the global oil and gas sector.

According to the NNPC boss, Nigeria is at the moment witnessing increased domestic gas demand in the industrial and power sectors, leading to increased production and reduced gas flaring.

Kyari, explained that the country is also witnessing increasing household access to gas networks and natural gas in the main cities, saying that there are deliberate plans to expand that access to rural areas.

He added that the federal government’s recent plan aimed at deepening domestic gas consumption, led to the advent of Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) and that it was part of the policy to deploy resources in the right places.

“The best of forecasts have said that in 30 years we will still have at least 100 million bpd of oil consumption.
“So, oil and gas will still remain relevant in the near future, but transition is real. What countries and nations are doing is to move towards much cleaner fuel and this cleaner fuel is clearly gas and that’s why we as a company are focused on gas resources, making sure to supply the domestic market and create opportunities for export.

“So, what we see as an energy resource-based country is to utilise the available resources of today to create the enabling environment for growth and prosperity in the country and that clearly aligns with the reality on the ground.

“We have significant goodwill and understanding across countries, nations and companies. For instance , we have significant engagement with the United States department of energy in the sense that we receive some support in our transition to cleaner fuels, so that we can develop our gas infrastructure so that we move away from the liquids to gas ultimately,” Kyari noted.

On the question of whether Nigeria can survive without oil, especially given the current crisis in the global oil market, the GMD explained that Nigeria was gradually moving away from its dependence on oil.

“What does this mean for a country like ours which depends on oil for cash? Obviously, we have seen how we can transit to something better for our country, so we don’t depend on that today. You may be aware that today, the country’s resources are mostly coming from taxes and those taxes are growing because population and prosperity is growing and we want to get more work done.

“As a country, we are facing the new realities and we are moving towards the use of gas and also we are developing our resources as quickly as possible so that when the real transition comes in 30 to 40 years’ time, we will be in a position to say this is a developed country that has taken advantage of its resources,” he stated.

In a different forum, Kyari stated that the NNPC is now focusing on condensates, which are excluded from the April 2020 production cuts announced by the Organisation of Petroleum Exporting Countries (OPEC), to curtail the crude oil supply glut and boost government revenue.

On the country’s renewed focus on gas and condensates for revenue generation, he said that the country’s plants now produce as much as 250,000 to 350,000 barrels of condensates daily, while projects to rev up gas production were in the offing.

The position of the OPEC boss, Barkindo, was not also markedly different from Kyari’s as he argued that the notion that renewable sources of energy would overtake the use of fossil fuels in the coming decades was still a long way away.
Speaking on the, “The Geopolitics of the Energy Transformation,” the former Group Managing Director of the NNPC maintained that though renewable sources of energy will continue to develop, oil and gas will remain very relevant, occupying over 50 per cent of the energy mix by 2045.

He noted that with the world’s population projected to grow by 1.7 billion over the next two and a half decades and the world economy more than doubling, oil and gas will remain relevant.
Highlighting the continued role of oil and gas in the global economy and its role in the energy transition, Barkindo insisted that though OPEC was not opposed to the growth of renewable energy, all the talk about oil and gas suddenly becoming useless was not founded on hard facts.

“Although, there are some who believe the oil and gas industries should not be part of the energy future, that they should be consigned to the past, and that the future is one that can be dominated by renewables and electric vehicles, it is important to state clearly that the science does not tell us this.

“And the statistics related to the blight of energy poverty do not tell us this either. The science and statistics tell us that we need to reduce emissions and use energy more efficiently.

“Renewables are coming of age, with wind and solar expanding quickly, but—even by 2045 in our WOO—they are only estimated to make up just over 20 percent of the global energy mix.

“Oil and gas combined are forecast to still supply over 50 percent of the world’s energy needs by 2045, with oil at around 27 percent and gas at 25 percent.
“We appreciate that some will view this as an OPEC forecast, dispute the numbers, and state that the organisation is against renewables.

“In response, it is clear that many OPEC member countries have great solar and wind resources, and huge investments are being made in this field. OPEC welcomes the development of renewables.
“However, we do not see any realistic outlook projecting in their business-as-usual base cases that renewables will come anywhere close to overtaking oil and gas in the decades ahead,” he said.

The OPEC helmsman stated that the world will continue to need more energy in the decades ahead, in the near term as the world recovers from the Covid-19 pandemic—and looking longer term to 2045, as the world prepares to rid itself of the scourge of energy poverty.

“Looking at the scale of the challenge of the energy transition, we need to utilise all available energies, and it is crucial that we appreciate just what each energy source can provide in the decades ahead.

“The challenge of tackling emissions has many paths, and we need to explore them all. Complex problems require comprehensive solutions. The oil and gas industries are part of the solution; they possess critical resources and expertise that can help unlock our carbon-free future,” he said.

Barkindo reiterated that globally, the oil and gas market would require over $12 trillion investment between now and 2045, warning that there might be further energy shortfall without the needed investment.

“The future requires massive investments, with the WOO 2020 highlighting that the global oil sector alone requires a cumulative investment of $12.6 trillion through to 2045.
“It is vital that the required investments are made, in all energies, to ensure stable and continuous supplies, and to help reduce and, ultimately, eliminate emissions.

“Without the necessary investments, there is the potential for further volatility and a future energy shortfall, which is not in the interests of either producers or consumers,” he stated.

The Global Atlantic Council event also coincided with Nigeria’s continuing efforts to rev up its operations in the gas sector, with President Muhammadu Buhari pledging to continue the federal government’s diversification drive through the efficient use of the revenues from oil and gas resources in the country.

The president further declared that Nigeria will continue to strengthen its position as a regional leader in the oil and gas industry, even as his administration will spare no effort in ensuring maximum benefit from the nation’s huge natural deposits.

Speaking during the inauguration of the National Oil and Gas Excellence Centre (NOGEC) at the Department of Petroleum Resources (DPR) headquarters, Lagos, which was partly virtual and partly physical, the president declared that through the deployment of revenues from oil and gas , he planned to reduce poverty and grow the economy.

The newly commissioned project is expected to house the various flagship centres to comprehensively cover key areas of the industry, including the Search, Rescue and Surveillance (SeRAS), Command and Control Centre and the National improved Oil Recovery Centre (NIORC).

It also comprises the Oil and Gas Dispute Resolution Centre (DRC), Oil and Gas Competence Development Centre (CDC) and the Integrated Data Mining and Analytics Centre (IDMAC).
The latest project adds to the other ones that are ongoing in the sector including the AKK pipeline project, the NLNG Train-7 project, and the completion of the 5,000 barrels per day Waltersmith Modular refinery.

The president explained that the integrated centre will enhance the contribution of the oil and gas sector to the nation’s GDP as well as strengthen Nigeria’s position as regional leader in the industry.
He noted that the centre had opened a new set of opportunities for the Nigerian petroleum industry in terms of investments, cost reduction, safety in operations and capacity development.

At the event, the Nigerian leader urged all industry practitioners and stakeholders to support the task of nation building to realise the abundant opportunities in the country.
Minister of State for Petroleum, Mr. Timipre Sylva, in his comments stated that the project would lead to the realisation of the $10 per barrel oil production cost target.

He said: “Let me at this point to highlight the main elements of each of these centres to underscore its role in driving cost reduction, increasing production and enhancing value in the industry.
“Search, Rescue and Surveillance (SeRAS) is a flagship programme of the centre designed to enhance safety management, emergency preparedness and response and routine transportation for bed space management.

“SeRAS will, therefore, drive cost reduction and improve operational efficiency across the industry.
“Conservatively, it is projected that upon full implementation of SeRAS, the annual industry expenditure for offshore and remote locations, flight logistics and emergency response will reduce by up to 50 per cent, a significant gain towards our target of reducing cost-per-barrel across our operations.”