New Energy Mix: Time for Africa to Plan for the Harsh Reality

Drawing the continent’s attention to the inevitable transition to other sources of energy, the 2018 WAIPEC provided participants with the up-to-date information on industry trends. To industry players and stakeholders, the conference was a good step in the right direction as it sent a timely wake-up call to Nigeria and other countries from the continent of Africa in readiness for the new energy mix.

The West African International Petroleum Exhibition and Conference, WAIPEC in its 2018 edition with a theme, “Sustaining West African Oil and Gas Production through Innovation and Collaboration” discussed industry trends and charted the way forward towards attaining a profitable growth in the sector.  Converged at Eko Hotels and Suits between February 7 and 8, seasoned industry experts, key players and stakeholders in the oil and gas industry around the world, dissecting the conference theme provided exclusive insights to stakeholders and key players in Nigerian and Western African’s oil and gas supply and value chains. The conference among others provided insight on how to unlock strategic value from the untapped opportunities in the sector as well as revealing how to leverage innovation, best practice, and technology to grow the industry as well as how to remain competitive in a tough global market.

In his presentation titled, “Global Energy Transition: Way Forward for Nigeria”, the Managing Director, Nigeria LNG Limited, Tony Attah said that global energy transition is real and cannot be wished away. He noted that oil and gas executives’ argument and denial that the advent of renewables will not succeed or last, has no indices supporting their denial position and that the world is moving on with the renewables.

Asking rhetorically, Attah said, the question for Nigeria is: “Are we ready because we are aware that countries are making moves in preparation for the energy transition?” According to him, “Nigeria needs to develop gas in readiness for the challenge ahead of her. We can power our economy just on the strength of gas and gas alone can lift Nigeria,” the LNG boss proposed.

Speaking further, the industry expert noted that the thirst for cleaner energy is increasing and a lot of it has to do with increasing environment-friendly policies. And that in response to the need for cleaner energy, countries like the United Kingdom, Sweden, Norway and many other countries are making moves to significantly reduce their carbon footprint.

Citing example with India, which he said aims for 40% renewable energy by 2030, stressing that the United Kingdom will join France to ban fossil-fuel cars by 2040. He further revealed that Norway aims for all new passenger cars and vans sold in 2025 to be zero-emission vehicles while Sweden has committed to 100% renewable energy by 2040.

Charting the way forward, the LNG boss said, “The best bet for Nigeria is gas. It is available in abundance and three times cleaner than oil in terms of carbon content. Nigeria has to begin to think about the relevance of oil in the future. Nigeria has to start to develop its gas resources in readiness for the future. Some critics say gas is not profitable but let me draw your attention to Qatar, a small fishing economy which was transformed from a GDP per capita of $2,000 in1970 to a GDP per capita of $124, 000 in 2017 using gas.

“Gas can lift Nigeria, which is where NLNG comes in. NLNG is producing 22 Million Metric Tonnes Per Annum (MMTPA) but we are not resting on our oars. We want to construct a Train 7 that will increase our capacity to 30 MTPA. It is time for gas. It is time to unleash Nigeria’s potentials. That is how we can survive the future with increasing appetite for renewable energy.

“The world’s population will grow by an additional 2 billion people by 2050. They will need energy. Where will it come from? Most stakeholders in the future will not accept the carbon emission levels that are prevalent now. Renewables play a significant role in the growth of electricity, contributing almost 40% of the growth in global power generation in 2016. By 2040, EIA estimates that 31% of world electricity consumption would come from renewables, roughly half of which will be from hydropower, as wind and solar power will grow rapidly in the coming decades.”

“The energy mix is fast changing and Nigeria has to come to terms with that. Nigeria’s proportion of global total proven oil reserves is 2.2% and gas, on the other hand, is 2.8%. What are we going to do with these resources? There is still coal in Enugu and all these fossil fuels will still exist in the future but will they be acceptable as a source of energy? I think that is the harsh reality we have to prepare for,” he said.

Meanwhile, the CEO of Seplat Petroleum Development Company (Nigeria), Mr. Austin Avuru in his keynote address titled, “The Future of the Global Oil and Gas Industry in the next Decade and the Impact on the African Region” said that while attention is shifting to renewable energy, Africa should strive to attain domestic energy security in the region.

The industry expert explained that as the improvement on the continent’s GDP continues, that it will certainly attract increased energy demands. To the CEO, the African region should concentrate its effort on building structures that would guarantee a sustained supply of energy over the next 20 year. According to him, the replacement of the fossil fuels by renewable energy may not be as swift as it is being presented, after all.

“We seem to suggest in an alarmist way that by 2035 perhaps there will be no place for oil and in gas in the world. Multinationals are investing substantial funds today away from oil and gas into renewable around the world.

“However, within Africa, as the GDP improvement continues, we will naturally see increased consumption of energy. Therefore, for us in Africa, the emphasis over the next five years so that we can sustain our consumption over the next 20 years will be on domestic energy security.

“So, as emphasis and investment funds are moving away into new frontiers of renewable. We, as Africans and operators in this continent need to recongise that a lot of those new frontiers when they are fully developed will take another 20 years to return to Africa for our consumption and therefore in the meantime as they are moving into those new frontiers, we, here in Africa need to emphasis domestic energy security so that on our own internally, we can survive,” Seplat boss averred.

Speaking on the oil balancing, Avuru said that the industry will be better off with a stable oil price that will translate to a reliable oil rebalancing result, rather than the rise in the oil prices that may unleash more pain on the industry as was the experience in the past. “We will rather have a stable $60 oil than an $80 oil that will draw us out with our investment funds and then crash back to $30. But the rebalancing we are referring to is the fact that when the prices get to a certain threshold, certain volumes of unconventional become attractive to develop.

Stressing that the present positive changes in the prices of crude oil was a combination of factors, Avuru said, “When the prices crashed that it become too low like we saw in 2016, a lot of projects were deferred. The $69 you are seeing today are results from projects that were differed or cancelled 24 months ago. Over that period of time, was the OPEC influence, the Paris agreement, carbon dioxide emission, among others.”

Earlier in his address, the PETAN President, Bank Anthony Okoroafor, welcoming participants to the second edition of the WAIPEC conference, said that PETAN through the conference wants to promote the region’s oil and gas industry, seek industry best practice, explore new technologies and develop commercial opportunities for business and international investment.

According to Okoroafor, the WAIPEC second edition was commissioned by PETAN to serve the industry as an integrated platform for business organized by the industry. He further disclosed that the organizers of the conference had carefully selected keynote speeches, topics for discussion, and panel sessions to be handled by seasoned industry experts. Adding that critical issues affecting industry would be discussed.

Speaking further, the PETAN President noted that the conference theme was apt. “At a time when the industry is grappling with the daunting challenges of oil discoveries everywhere and the attendant oil price hovering around $69 with their effects on the affected economies.  The WAIPEC conference offers a veritable opportunity to oil industry stakeholders to gather, deliberate and articulate ideas on relevant developments, strengths and challenges.

“It is noteworthy that this conference is organized by the industry and for the industry. That is, it is the best conference this year.  Following our current realities, including depleting oil production and reserve, security challenges becoming complex, high and increasing unit cost of production, crude budget indices, low industry activities and uncertainty of physical framework.

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“We have assembled seasoned industry stakeholders and operators who will dissect this theme from their perspectives and experiences. The conference is rich in technical content. It is our belief that the sessions will enrich us in the issues we discuss, showing our willingness to make necessary sacrifices to sustain the industry towards a viable, stable and prosperous,” Okoroafor said.