Oil & Gas
ENERGY transition discussions should revolve around the implementation of a fair, equitable and sustainable energy mix that entrenches the principles of inclusiveness and guarantees energy security, the Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Engr. Gbenga Komolafe, told participants at this year’s Offshore Technology Conference (OPC) holding in Houston, Texas, USA.
Komolafe who presented a paper on “Energy Transition and Nigerian upstream oil and gas landscape: The Journey, Challenges and Way forward,” in Houston, on Tuesday, believes that while deliberations on the global transition to renewable and sustainable energy is going on, proponents should consider the right of nations to harness their energy resources for their development goals. They should also consider the freedom of nations to attain the right energy mix in multiple pathways and sustainable energy supply.
The theme for this year’s Luncheon and Panel Session at the OPC which opened on Monday, May 1, is “Energy Transition in Africa: The Journey, Challenges and Way Forward;” and the Commission Chief Executive’s presentation was in line with the overall theme of the conference, but with main focus on the Nigerian upstream sector.
He said the perspective was relevant considering the momentum in energy transition, the attendant changes in energy economy, as well as the expectations of stakeholders on the implementation of the Petroleum Industry Act (PIA) 2021.
After detailing the vast oil and gas potentials of Nigeria and reviewing the cautions by the Intergovernmental Panel on Climate Change (2021) on reduction of carbon emissions, and the Roadmap for global energy sector issued in 2022 by the International Energy Agency (IEA) on Net Zero by 2050, Komolafe said these provided the context within which Nigeria’s response to the energy transition and consequently the role of gas should be discussed. These perspectives indicate a new direction of travel that fossil fuel dependent economies needed to anticipate and prepare for, he added.
Nigeria has for long recognised that the global shift towards decarbonized 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.
Aside the SDGs challenges, we also have the world’s largest 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. 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.
Arising from this context, it becomes self-evident that we could not do away with our fossil fuels just yet; a balance had to be struck between the energy transition and the human transition. Nigerian Government was left with no choice but to reject the notion of a single 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, 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 pathway to achieve this target through Nigeria’s Energy Transition Plan, ETP.
Now that gas is our pathway to the energy transition, Government has designed a programme that ensures that gas actually plays a role to lift us out of the challenges that confront us in order to drive industrial development. In this direction, 2021 to 2030 was declared the Decade of Gas; coming on the back of 2020 which was our ‘Year of Gas’. 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.
The work done so far has aggregated the gas demand and supply views, infrastructure 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. 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.
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 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.
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 investors.
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 interesting 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 operationalization 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.
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 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 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.
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Tags: energy transition Engr. Gbenga Komolafe NUPRC
