The threat of a world marching inexorably away from fossil fuels is rousing the Nigerian government from inertia precipitating long-awaited reforms in the oil and sector.
After 20 years of stalling, the country is set to proceed with the Petroleum Industry Bill (PIB). Ahmed Lawal, Senate president, at the fourth edition of the Nigerian International Petroleum Summit (NIPS) on Monday, said lawmakers would pass the PIB this month as both committees in the upper and lower chambers were writing a final report.
His speech followed remarks by Femi Gbajabiamila, speaker of the House of Representatives, who said though the lawmakers imposed a deadline of April to pass the bill, it could not meet the deadline because it was important to get it right after 20 years of failed attempts.
“It is the role of the National Assembly to play a balancing act against many competing interests, but what is most important is the national interest,’ Gbajabiamila said.
The Senate President said previous attempts from 2007 were unsuccessful because either the lawmakers or members of the executive branch decided to go it alone.
Nigeria’s state-oil firm, once reputed as the poster child for opacity, has now published two financial statements for the last two years and the current one is almost ready, according to Mele Kyari, group managing director of the Nigerian National Petroleum Corporation (NNPC). Prior to this, it operated for over 40 years under a cloud.
The Nigerian government is also ditching the cavalier attitude; now, it calls them partners, with a newfound respect for what the word connotes.
This in part explains the pains the NNPC is taking to smoothen relations with oil producer partners. A few weeks ago, the NNPC resolved a long-delayed dispute over terms in the $10 billion Shell Bonga South West project.
The key feature of the terms of the settlement includes clear terms on block ring-fencing, gas commercialisation terms, replacement of disputed tax credits for clearer investment allowances, trade-offs on in-block consolidation and cost limits, early lease renewals, assurance of fiscal stability for investors, protection of profit-sharing schemes and settlement of disputed past, among others.
Nigeria has also declared a Decade of Gas to harness its vast gas potentials as natural gas is seen as a bridge fuel for the energy transition. It is now making policies that could drive the expansion of gas use domestically and for exports.
The reality of energy transition is that investors are funnelling money into cleaner energy investments, and Western countries are pushing for cleaner alternatives to fossil fuels over climate concerns.
Even the shareholders of big oil firms such as Royal Dutch Shell, ExxonMobil, and Chevron have staged rebellions that toppled board members who were apathetic towards energy transition.
But the Nigerian government, many operators, as well as African nations want the transition to cleaner energies at a much slower pace so they can harness over a 100 billion barrels of oil reserve on the continent.
Speaking at this year’s Nigeria International Petroleum Summit (NIPS), an event organised by the Federal Government of Nigeria aimed at charting the way forward in the post-COVID-19 pandemic era, Timipre Sylva, minister of state for petroleum resources, said while he agreed that energy transition would make the world a better place, however he disagreed it would happen overnight.
“Hydrocarbons have provided the majority of the world’s energy for centuries, and that path is not going to change all of a sudden,” Sylva said at the event with the theme “From crisis to opportunities: New approaches to the future of hydrocarbons.”
He siad, “I have yet to see that disruptive technology with enough flexibility, affordability, and applicability to replace oil and gas.”
Despite the global warning, Nigeria has over time remained stuck in the oil era. The country relies on crude oil sales for around 90 percent of its foreign exchange earnings and more than half of government revenue.
Big Oil has lately come under a plethora of attacks from all directions, ranging from uncooperative financiers and investors amid a global shift to renewable energy to hostile governments and hard-line climate activists.
Some of the world’s major funds are divesting from fossil fuels. The New York State’s pension fund, one of the world’s largest investors with $226 billion in assets, said it would drop many of its fossil fuel stocks in the next five years and sell its shares in other companies that contribute to global warming by 2040.
Realising that energy transition presents an existential threat, oil companies and oil-producing countries are preparing for life after oil. Saudi Arabia is investing $30 billion in the renewable energy sector by 2025 in order to diversify the energy mix and Norway with a $1 trillion sovereign wealth fund, is funnelling money on clean energy projects.
Commenting on how Nigeria’s energy sector can survive in a post-COVID-19 pandemic era, Sylva said the new approach was collaboration, saying, “I know that collaboration has been impossible in the oil and gas industry for years. But the industry has equally paid lip service to it.”
There is no better strategy for success, especially for Nigeria’s new set of marginal field winners, the minister of state noted.
