Danger looms for Nigeria in an evolving crude oil market

The Centre for Petroleum Information, a knowledge resource centre for the petroleum industry recently organised Petroleum Policy Roundtable on July 20 in Lagos to keep stakeholders abreast of changing trends in the sector and the implications for Nigeria. Chambers Oyinbo, chairman board of governors and Victor Eromosele, executive director and secretary highlights important takeaways from the sessions.

Following the 2015 UN Paris Climate Change Summit, Nigeria is one of the 188 countries that in April 2016 signed commitments to reduce carbon dioxide/greenhouse gas (GHG) emissions by 2030, pledging nationally determined contributions (NDCs). A low carbon future is one in which transport is dominated by electric vehicles and electricity generated significantly from renewable energy sources. The CPI roundtable is designed to sensitize petroleum industry policy makers and decision takers on the need to have a robust plan now and prepare to deal with the inevitable consequences of the certain low carbon future (LCF) ahead.

Be prepared

Nigeria and its petroleum industry cannot afford to “play ostrich” in the face of the anticipated rapid change in the complexion of global energy within the next decade and beyond. Matching policy with urgent action required, recognising the imperatives imposed by the ongoing changes such as the exponential growth in the number of hybrids and electric vehicles (EVS). According to the International Energy Agency (IEA), by 2030, there would be 100 million such vehicles worldwide and expected to grow by 100 million every five years. Consumers of Nigeria’s crude oil, China and India would have more than half the number.

Plan for refinery obsolescence

Not only would the configurations of new refineries be flexible and more compatible with the imperatives of the low carbon era, the configuration of old refineries would need to be reviewed for potential technological obsolescence. There would be a significant drop in the demand for gasoline (PMS) and diesel. The emphasis would necessarily shift to petrochemicals, past President of the African Refining Association, Anthony Ogbuigwe, observed.

Develop gas as ‘transition’ fuel

As the cleanest of fossil fuels, gas would stay relevant in the transition to a low carbon future. The roundtable congratulated the Nigeria LNG CEO, Tony Attah for the previous week’s signing of front-end engineering and design (FEED) contracts with two consortia towards the realisation of Final Investment Decision (FID) for the 7.7-MTPA Train 7 expansion of the Bonny Island plant. Nigeria is the world’s fifth largest LNG supplier.

Replicate Azura-Edo IPP gas supply model

The roundtable recommends more support for gas to power arrangements, such asthat between Seplat and the hugely successful Azura-Edo independent power plant. The “willing buyer, willing seller” gas pricing model worked well (as Azura is the only power plant in Nigeria without gas supply issues) and ought to be replicated for all such new gas to power projects. Nigeria must learn to celebrate and build on its success.

Learn from Total renewable energy diversification example

The roundtable is impressed to see an international oil company (IOC) on a global-scale aggressively investing in renewables across the value chain. It plans by 2021 to solar-power 250 Nigerian filling stations, up from 20 currently. Rural dwellers are benefiting from solar lanterns sold by Total (even though, it is in competition with kerosene, which it also sells). Many more large-corporate firms should emulate this laudable forward-looking initiative.

Rethink renewable energy strategy at NNPC

Given the challenges in getting the otherwise laudable efforts by NNPC’s Renewable Energy Division at developing automotive biofuel (from cassava, sugar cane and oil palm), after 11 years, the roundtable suggests it is time to rethink strategy. NNPC should consider partnering with IOCs such as Total to get utility-scale solar power projects off the drawing board, in consonance with the now urgent demands of a low carbon future.

Way forward

Clearly, a credible petroleum industry policy/action plan is now crucial to ensure Nigeria does not risk belated action when it is too late.

STEPHEN ONYEKWELU