Nigeria, OPEC, others kick against plans to end fossil fuels investment

Vice President, Yemi Osinbajo, the Organization of the Petroleum Exporting Countries (OPEC), Nigeria National Petroleum Corporation (NNPC), Department of Petroleum Resources (DPR) and other stakeholders yesterday, kicked against plans to end investment for fossil fuels and the financing of net-zero ambition, which stands around $5 trillion yearly.

The concerns for the industry leaders were the lopsidedness of the plan against developing nations, particularly Africa and the uneven approach, which may throw developing countries into further debt if they must borrow to transit towards the net-zero plan.

With oil prices already standing at $77 per barrel, the stakeholders also expressed worry over looming demand and supply imbalance, which may worsen energy security challenges.

Speaking at the Nigeria Oil & Gas Conference in Abuja, Osinbajo told the industry stakeholders that the country is not unmindful of the impacts of insecurity and infrastructure deficits on oil and gas operations in the country.

He noted that the government would do everything possible to address prevailing challenges in order to aid the passage of the petroleum industry bill.

“Let me assure you that the bill when transmitted to the presidency, will receive necessary and timely consideration. Infrastructural development, security issues, high cost of operations, and other various issues are well covered in this all-encompassing bill,” Osinbajo said.

Represented by the Minister of State for Petroleum Resources, Timipre Sylva, Osinbajo said administration, governance and fiscal issues would be adequately resolved in the bill.

While Sylva further canvassed for alternative funding for oil and gas projects on the continent, OPEC at the event said the calls for investments in oil and gas to be discontinued, remained dangerous.

Stressing that raising $5 trillion yearly for net-zero by 2050 emissions remained unrealistic and may endanger the Africa continent,

Secretary-General of OPEC, Muhammad Barkindo told energy experts that 790 million people worldwide did not have access to electricity in 2020, while as many as 2.6 billion people didn’t have access to clean cooking fuels.

With over 35 per cent of the people in sub-Saharan Africa, 25 per cent in India and 15 per cent in China, Barkindo said achieving the net-zero plan would be daunting for developing countries, especially Africa countries.

In the light of rising crude oil prices, the OPEC helmsman equally raised concerns about looming energy security as the prevailing situation may force demand to outweigh supply.

“Oil and gas have an important role to play in the energy transition. Let me be clear, OPEC supports the need to reduce emissions, bolster efficiency and embrace innovation, but we must be aware of the risk we run of not adequately investing in the future of this industry.

“We are already dealing with the harsh impacts the COVID-19 pandemic has had on investment, which declined by 30 per cent in 2020.

“If this were to continue, we could see demand exceed supply, posing a significant energy security risk to both producers and consumers,” Barkindo said.

With many oil dependence countries like Nigeria still having challenges to diversify their economies, OPEC raised concern over revenue crisis for hydrocarbon dependence countries.

“Different countries around the world have varying capabilities and diverse needs. Thus, reducing emissions has many paths, as set out by the Intergovernmental Panel on Climate Change (IPCC), and we must consider all of them as viable options,” Barkindo said, adding that the oil and gas industries have much to offer in energy transition, including cutting-edge technologies and advanced innovations, which can all be leveraged to promote a lower carbon future.

Director of DPR, Sarki Auwalu said the while the overall industry financial position must necessarily improve for sustainability, as much as $10 billion additional investments would be required for developments in deep offshore, inland and frontier basins, marginal field development as well as for gas infrastructure and gas-based industrial development.

“Be that as it may, a stable political, legal and fiscal environment is critical to improving the investment attractiveness index of Nigeria. We are confident that with the legislative certainty that comes with the passage of the PIB into law, existing operators would have the reasons to consolidate their portfolios in the Nigerian petroleum industry whilst we witness the influx of new investments from second-generation International Oil Companies (IOCs) and the likes,” he noted.

Auwalu added that there was a need for in-sector diversification for economic sustainability and growth, stressing that while the government is driving economic diversification, which entails the expansion of other sectors of the economy, the oil and gas sector must look inwards and leverage the potentials for in-sector growth and expansion.

“In-sector diversification is central to grow the industry from an oil-export based industry to an integrated oil & gas industrial economy where the raw materials mentality is replaced by in-country value addition to guarantee job creation, youth empowerment, poverty eradication & infrastructural development,” he said.

The Group Managing Director of NNPC, Mele Kyari stated that the reality of the 30 per cent reduction in investment into the oil and gas sector has started to hurt the country.

He noted that there could be an inability for the sector to meet demand given a reduction in investment, adding that energy transition must not be about moving from fossil fuel to renewable but creating the right balance.
Kyari said as a developing country, the nation’s still need to develop existing resources to meet energy needs, especially power and infrastructure, adding that the proposition of net-zero is “very questionable”.