Renewed concerns over energy transition, declining oil investment
Oil and gas experts, yesterday, reiterated concerns about Nigeria’s declining investment profile, poor fiscal environment and growing pressure to transit from fossil fuels.
Already, funding of activities that ignore environmental impacts is being reviewed, posing a setback to countries like Nigeria that lag behind the transition exercise.
Speaking at the hybrid session of the Society of Petroleum Engineers (SPE), Oloibiri Lecture Series, which focused on ‘Operational Excellence and Portfolio Optimisation, Way Forward for the Oil and Gas Industry Post COVID-19’, the Minister of State for Petroleum Resources, Timipre Sylva, said optimisation and reduction in the cost of upstream and downstream operations remained sacrosanct as prevailing global trends threatens the future of oil and gas industry.
Given the pressure from energy transition and challenging oil market, Sylva expressed concern about the sustainability of oil and gas businesses, stressing that unless processes are automated, return on investments and earnings by the government could remain a mirage.
The minister, who was represented by his Chief of Staff, Moses Olamide, noted that there was a need to recalibrate portfolios in the upstream and downstream sectors.
Sylva said the Petroleum Industry Bill (PIB) being considered by the National Assembly would be a game-changer to the existing gloomy state of the sector, adding that deployment of technology is a way forward for operators.
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, also noted that achieving cost efficiency was a major concern for the industry, adding that reducing operational cost to enable government to raise funds and ensure profitability for investors was necessary in the face of prevailing challenges.
“There have been also declining investments in oil and gas exploration,” Kyari said, adding: “It will further affect the growth of the market.”
He said the country had been forced to renegotiate all ongoing contracts to ensure process optimisation and manage the challenges posed by Covid-19.
According to him, the industry may not become profitable unless oil companies become more efficient, adding that “there are emerging concerns on the importance of fossil fuel against the backdrop of transiting to cleaner energy sources.”
To mitigate the fleeting importance of crude oil, Kyari said the country would harness gas resources, stressing that the resource would make up a substantial percentage of the global energy mix in the coming decades, especially in developing countries.
“Companies are starting to find ways to diversify their portfolio by investing across new business frontiers like renewables. Research and technology will become more efficient and relevant in Nigeria, particularly with a focus on increasing oil production, growing domestic gas utilisation and hydrocarbon reserves to generate revenue for the nation,” he said.
The Director of the Department of Petroleum Resources (DPR), Sarki Auwalu, said health, safety and environment, cost performance and return on investments for all stakeholders across all assets as well as use of appropriate and consistent standards across the entire business must be prioritised in the sector.
He said it also included continuous adoption of culture that strives to exceed set targets, human capital development and improved reputation based on efficient operations and sustainable business practices.
“DPR will regularly review the industry performance on operational excellence based on the above measures and provide appropriate feedback to respective companies and the industry in general,” he said.
According to him, the DPR will only use regulations as tools to grow the industry and enable investors to operate their assets safely, reliably, sustainably and efficiently.