When Nigeria announced its energy transition plan in early September, the federal government knew from on start the enormity of work and resources that are required to achieve that daunting task.
This is because the country’s energy sector which has witnessed funding constraints is faced with depressed challenges emanating from European community which has raised the red flag towards funding fossil projects.
At the transition flag off, Nigeria opened up to international funders for a $10bn jumpstart to the programme which includes solar expansion and a doubling of gas power generation.
The government aspires to provide universal access to electricity, and transition to cleaner energy sources, hoping to raise 100 million people out of poverty by 2030.
By then, the mission aims to provide electricity to almost 90 million people without power while putting the country on track to reach net-zero emissions by 2060.
Nigeria is counting on gas as a transition fuel to provide electricity and estimates the cost at $410 billion by 2060.
Understanding the difficulty convincing the European Union, to jettison campaign against fossil fuel funding, Vice President Yemi Osinbajo, at the dinner of the 60th anniversary of the Oil Producers Trade Section (OPTS) of the Lagos State Chamber of Commerce and Industry (LCCI), made a passionate appeal for group to key into the plan of action.
Osinbajo, spoke on the Theme: Nigeria Transitioning to Green Energy.
He began by thanking Rick Kennedy, Chair of the Oil Producers Trade Section of the LCCI, and acknowledged the group for its outstanding role in the growth and development of the oil and gas sector in Nigeria and for the numerous social development projects undertaken by its members through the years.
Laying foundation for the discussion the Vice President first highlighted some problematic issues in the transition process.
The most consequential subject globally in the next few decades will undoubtedly be Climate Change, he said.
Already, it is evident from so many adverse climate occurrences, floods, desertification, rising water levels, and record high temperatures that there is a global climate crisis.
The obvious, if difficult solution to the crisis is to stop carbon emissions and use green energy. The staple wisdom is that coal and fossil fuels are major pollutants. That being the case, it is proposed that countries and corporations should gradually reduce the use of these high pollutants and instead use renewable energy such as solar and wind, hydro and completely stop the use of these carbon emitters by the agreed target date of 2050.
“Now most countries including Nigeria of course agree that we must reduce global emissions to zero, in our case by 2060. We are major victims of the effects of climate change, but there are a few important issues that we have flagged to our wealthier brother-countries in the global north.” he said.
Osinbajo went to say that Nigeria along with other developing nations are faced with two, not one crisis, which he said included climate change and extreme poverty, the cause and consequence of which is energy poverty.
He said that lack of access to electricity for millions is a cause of deepening poverty.
The second he stated is that African countries are the least emitters of carbon today- less than 1 per cent of cumulative C02 emissions and that even if it triples electricity consumption in African countries (aside from South Africa) solely through the use of natural gas this would add just 0.6 per cent to global emissions.
So a lot of the flooding and adverse weather events that we are experiencing here are from emissions caused by the wealthier countries.
The third he mentioned is that the defunding of gas projects in order to force gas rich countries like Nigeria to stop using gas and use renewables instead is faulty.
These proposals to ban the funding of fossil fuel projects make no distinction between upstream oil and coal exploration; and gas power plants for grid balancing. Osinbajo, argued that no economy in the world has been known to use renewables, solely, to industrialize as solar power simply does not have the base load capacity yet for industry.
Fourthly, he continued is stopping the use of gas which then implies that we cannot use Liquified Petroleum Gas, LPG for clean cooking stoves to replace the use of kerosene, firewood and charcoal which are dirtier fuels that are widely used for cooking and other domestic purposes particularly in the rural areas. The use of firewood means deforestation, cutting down trees and of course desertification and then the loss of our carbon sinks.
The fifth is the double standards that wealthier countries have adopted on this issue. Today in the wake of the energy crisis, many European nations have made recent announcements to increase or extend their use of coal fired power generation through 2023, and potentially beyond. This is in violation of their climate commitments, and analysis suggests that this will raise power sector emissions of the EU by 4 per cent a significant amount, given the high base denominator of EU emissions.
The sixth and perhaps most crucial point is that we must take quick and informed actions in our National interest. “We must take the threat of no investments in fossil fuels including gas seriously. For an example, many European and other global North countries are setting aggressive targets for use of electric vehicles and the banning of combustion engine vehicles. Soon there may be only a few countries using combustion engines. It is also evident that while the Russia invasion of Ukrainian has shown the double standards in not allowing public funding for fossil fuel projects, the wealthier nations are still of the view that this is the correct policy and that even if public funding is to be allowed financing should not go beyond 2035.”
This he said Nigeria’s response has been the Energy Transition Plan which incorporates a comprehensive, data-driven and evidence-based plan, designed to deal with the twin crises of climate change and energy poverty.
Providing better understanding of the initiative, he said, “We anchored the plan on key objectives, including lifting 100 million people out of poverty in a decade, driving economic growth, bringing modern energy services to the full population and managing the expected long-term job loss in the oil sector due to global decarbonization.”
He added, “Given those objectives, the plan recognizes the role that natural gas must play in the short term to facilitate the establishment of base load energy capacity and address the nation’s clean cooking deficit in the form of LPG. Gas is of course critical to integrating a greater share of renewable energy in Nigeria’s energy mix. Also natural gas (methane) is an important chemical feedstock especially for ammonia production for fertilisers.”
To achieve these objectives by 2060, he said Nigeria would need $410b or $10b per annum above business as usual spending.
Opening Space For OPTS
Because funding the prgramme is capital intensive he said the OPTS has a major role to play in that space.
Osinbajo asked the group, “Where do we get this from? In addition to conventional capital flows both from public and private sources local and international, we also made the case that we should be on the G7 Climate partners list which should attract significant funding ( I have held recent meetings with World Bank, US Treasury Secretary and only last week with the US special envoy on climate change).”
He said, It is also essential that we participate fully in the global carbon finance market. So we think the Voluntary carbon markets can play a significant role in directing private capital into climate action.
How do they work? A developer sets up a project that avoids certain emissions ( e.g. methane capture from landfills or removes carbon from the atmosphere by reforestation or replacement of diesel generators with solar power. The project is registered under a standard VCS, gold standard, and validation and verification is done by an independent body.
Carbon credits equivalent to the mitigation achieved are issued to the project subject to verification. The developer then sells the carbon credits to companies , governments or individuals seeking to compensate and or neutralize their emissions. Some Nigerian companies have already been doing lucrative carbon avoidance or removal projects that have yielded carbon credits. Amazon energy were contracted to do a Gas Flare Down project for an IOC in Kwale and the IOC utilized the carbon emissions reduction for carbon credits
Also given the escalating debt situations of many developing countries including Nigeria, especially in the aftermath of COVID 19 and the Russian- Ukrainian conflict, I think we should also bring Debt for Climate Swaps into the climate finance mix.
Debt for Climate (DFC) swaps are a type of debt swap where bilateral or multilateral debt is forgiven by creditors in exchange for a commitment by the debtor to use outstanding debt service payments for national climate action programs, he explained.
The creditor can use the transaction as a contribution to its on Nationally Determined ContributionsNDC. So we can increase the fiscal space for climate related investments and reduce our debt burden.
Osinbajo therefore added, “I think the Private sector must up its participation in the transition to Green energy journey. I suggest at least three ways to do so:
Greater involvement in the crucial conversations about what an economically just transition to zero emissions should be, The implementation of the Energy Transition Plan.
For example, the off-grid Solar space in Nigeria is becoming one of the most exciting in the world and Nigeria has programs such as the FGN’s Solar Power Naija, the Nigerian Electrification Program with the World Bank Group, & the African.
Development Bank and also the Rural Electrification Fund providing almost $1 billion in financing and subsidies to drive 10 million connections.
“We are also working on clear guidelines for on-grid Solar before COP-27 to initially provide the structure for the rollout of at least 1,000MW.
“We are particularly pleased with the good work that All-On and Konexa have been doing all with funding from Shell (one of your key OPTS members), we also have NNPC partnering with the Rural Electrification Agency to rollout Solar Mini grids and Solar Home Systems across the country.
“We encourage OPTS to take the lead in Solar to help drive improvements in our energy mix and also accelerate the transition to having “energy” companies not just oil companies .”
NATIONAL ECONOMY reports that Mr. Shubham Chaudhuri, Nigeria Country Director for World Bank confirmed that the bank plans “to commit over USD 1.5 billion towards the Energy Transition Plan on renewable energy, on power sector reforms, on clean cooking, and wherever opportunities arise.”
Also, Mr. Adam Cortese, CEO, Sun Africa stated that “the launch of Nigeria’s Energy Transition Plan has further accelerated our efforts, proving Nigeria to be fertile grounds for investments in the sector”. The company looks forward to seeking a USD 1.5 billion financing package from a US-based financial institution in support of Nigeria’s energy transition.
Speaking on the effects of Climate Change in Africa, Osinbajo explained that “climate change threatens crop productivity in regions that are already food insecure, and since agriculture provides the largest number of jobs, reduced crop productivity will worsen unemployment.
“It is certainly time for decisive action, and we just cannot afford to delay. African nations are rising to the challenge. All African countries have signed the Paris Agreement and some countries, South Africa, Sudan, Angola, and Nigeria have also announced net-zero targets.”
Giving more details on energy poverty in Africa, the VP noted that “the current lack of power hurts livelihoods and destroys the dreams of hundreds of millions of young people.
“And although Africa’s current unmet energy needs are huge, future demand will be even greater due to expanding populations, urbanization, and movement into the middle class.
“It is clear that the continent must address its energy constraints and would require external support and policy flexibility to deliver this. Unfortunately, in the wider responses to the climate crisis, we are not seeing careful consideration and acknowledgement of Africa’s aspirations.”
Underscoring the importance of collaboration, he noted that “we developed our Energy Transition Plan to engage with the rest of the world in a serious, thorough and data-backed manner.”
Osinbajo explained that “there is a clear need for African nations to engage more critically and vocally in conversations on our global climate future.
“More importantly, we need to take ownership of our transition pathways and design climate-sensitive strategies that address our growth objectives. This is what Nigeria has done with our Energy Transition Plan.”
Making Positive Pledge
Chairman of the Oil Producers Trade Section, OPTS, Rick Kennedy, earlier said the OPTS members have demonstrated resilience and commitment in the face of economic, security, environmental And funding challenges and have continued to make significant contributions to Nigeria’s development.
Kennedy, through his vice, Osagie Okunbor who is also the Managing Director of The Shell Petroleum Development Company of Nigeria Ltd (SPDC) and the Country Chair, Shell Companies, said as a group, the OPTS accounts about 90 per cent of Nigeria’s oil production and contributes significantly to the domestic and export gas production and supply.
“Over the last decade, OPTS member companies accounted for 40-60% of government revenue and 85-95% of export earnings.
The chairman recommitted the group to consistent exploration, development and production of Nigeria’s oil and gas resources in a manner that is sustainable and beneficial to the Nigerian people.
He also reassured of his members commitment to protecting the environment through safe and reliable operations consistent with industry standards and in compliance with government laws and regulations.
He added that members are continuing with efforts towards zero routine gas flaring and lowering emissions, as they have made forays into new energies in-country while evolving with the world’s movement towards cleaner, affordable energy.
According to him, OPTS are equally passionate about the implementation of the United Nations 17 Sustainable Development Goals because we recognize that business success is linked to society’s progress.
Towards that end, OPTS members continue to invest in good relations with host communities and partner with the government and the people to address gaps in accessing social amenities that enable and support good quality livelihoods.
Through their individual Corporate Social Responsibility programs, members have awarded over 138,300 national and international scholarships, contributed over $909 million to community development projects, over $58 million to medical facilities and programs and over $89 million to educational initiatives.
Most recently, OPTS members as responsible citizens, in partnership with the NNPC, have provided $30 million worth of aid to help government address the ravages of the coronavirus pandemic.
Members of the group have also been actualizing government’s intent with respect to increasing local content; namely developing human capacity and expanding technical capability and resources. For example: Chevron upgraded the Training and Conference Centre in Ogere, Ogun State from where over 400 trainees on operations and maintenance have graduated; ExxonMobil have delivered training to over 700 industry technicians at the Eket Technical Training Centre; Total Energies have continued to support the Institute of Petroleum Studies at University of Port Harcourt in order to provide students with theoretical and practical skills in the oil and gas industry; Shell has over the years embarked on several training and certification campaigns to develop local capabilities and training capacity; ENI provided subsea engineering training to graduate engineers as well as further project-based trainings to over 500 Nigerians; and so many more examples.
The group is working closely with the Nigerian Content Development Monitoring Board to ensure we achieve the local content mandate to create more jobs for Nigerians and shore up the technical expertise available in-country.
They have the intention to continue to invest in different trainings and education of Nigerians to be able to excel in local content as we want to create over 300,000 direct and indirect jobs over the next 10 years.
Recently, Nigeria launched its ‘Decade of Gas’ initiative, under the theme ‘Towards a gas-powered economy by 2030,’ that will work with the National Gas Expansion Programme to increase gas production.
The industry supports these important steps towards ensuring Nigeria’s vast natural gas resources are utilized for the benefit of the nation. The gradual shift to gas is welcome and OPTS members are ready to partner with government and other stakeholders to deliver the country’s roughly 200 trillion cubic feet of gas resource. We are interested in the National Gas Expansion Programme and members are ready to invest more with the right fiscal environment.
The recent passage and signing into law of the Petroleum Industry Act (“PIA”) by President Muhammadu Buhari represents a major milestone in the reform of Nigeria’s oil and gas industry. OPTS will be working in partnership with all stakeholders to ensure a smooth and successful implementation of the PIA that will bring certainty to the regulatory and fiscal framework for the oil and gas industry.
To sustain the critical role of supporting the economy, OPTS continues to advocate for industry-wide collaboration with government to further address issues related to security of personnel and assets as well as reducing operating expenses. Furthermore, we, along with our many partners, are committed to helping further unlock Nigeria’s oil and gas resources to sustain and, where commercially competitive opportunities exist, invest and grow production in an efficient, responsible, and cost-effective manner.
As the strength of the nation’s economy, OPTS members continue to partner and collaborate with each other and collectively with government and other industry stakeholders as we jointly develop Nigeria’s vast resources in the oil and gas sector to achieve sustainable economic development and contribute positively to the Nigerian economy.
