Boris Johnson, prime minister of Britain promised on Friday to end direct taxpayer support for fossil fuel projects overseas as soon as possible, a decision that has significant implications for Nigeria, a beneficiary of previous subsidies. The development adds urgency to the call for Nigeria to plan for life after oil.
Next year, Britain will host the United Nations climate negotiation in Glasgow and is eager to burnish its reputation as a climate change proponent after years of funding fossil fuel. European countries like Germany and France have made similar commitments.
According to a recent report by the Catholic Agency for Overseas Development (Cafod), between 2010 and 2017, 60 percent of the UK’s support for energy in developing countries was fossil fuel energy. During that time, 97 percent of the UK export finance’s support for energy projects – or £3.6bn – went to fossil fuel developments.
Nigeria benefited to the tune of £186million from the United Kingdom energy support programmes within this period.
Between 2010 and 2017, the UK provided support for energy in developing countries with a total value of £7.8 billion and Nigeria benefited to the tune of £195milion, the highest of any developing country according to the Cafod data.
UK’s support for overseas fossil fuel projects has since grown tremendously. The International Institute for Sustainable Development estimates Britain’s total public support for fossil fuel projects at $16.4 billion or £12.2 billion from 2017 to 2019.
In January this year, the country hosted the UK-Africa investment summit in London – a one-day event that signaled its intention to compete for African business with China, Russia, Germany, and France. The summit saw 16 African leaders in attendance including leaders of Egypt, Kenya, and Nigeria.
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After the summit, the UK inked five oil and gas deals worth £2.1bn, with fossil fuel contracts with the African countries. A significant investment in Nigeria announced at the summit was the Savannah investment of £315m in the acquisition of ingas assets.
Now with the UK, planning to exit fossil fuel project subsidies, these kinds of projects and development assistance will cease. One industry expert told BusinessDay that the UK may soon begin transitional plans for ongoing projects.
According to a statement from the prime minister’s office, Britain would end financing, aid, and trade promotion for new projects overseas to extract or use crude oil, natural gas, or the type of coal burned to generate electricity.
But there are will be a few limited exceptions for gas-fired power plants and other projects, within parameters that align with the Paris Agreement on climate change, the government said.
“Climate change is one of the great global challenges of our age, and it is already costing lives and livelihoods the world over. Our actions as leaders must be driven not by timidity or caution, but by ambition on a truly grand scale,” Johnson said in a statement.
Aside from Britain, European Union leaders last week said they would cut net carbon emissions over the next decade by 55 percent of their 1990 levels.
Analysts say these will significantly impact new projects in Nigeria and other developing nations because Britain, along with other wealthy countries, are important sources of funds for fossil fuel projects abroad, through loans to British companies involved in oil projects or underwriting loans from British banks.
The Organization for Economic Cooperation and Development and the International Energy Agency have called on countries to curb or stop government subsidies for fossil fuel.
The British prime minister had earlier announced the UK’s government’s decision to ban the sale of new gas and diesel vehicles by 2030. To hasten the shift to electric vehicles, the UK government would spend $1.7 billion or £1.2billion, installing charging points, and hundreds of millions of dollars in grants for consumers to make the cars more affordable.
Africa’s biggest oil producer has a litany of oil and gas projects waiting on investments including the 120,000bpd Zabazaba-Etan project; 140,000bpd Bosi project; 110,000bpd Uge project and 100,000bpd Nsiko deepwater project and the 1billion barrel Owowo field development all stalled in Nigeria.
Though African countries like including Nigeria are on track to suffer the worst impacts of climate change and biodiversity loss despite being the least polluters, some industry operators say Africa will still need fossil fuels for a long time due to its burgeoning population.
However, the challenge is that they lack both the cash and technical expertise to leverage their oil and gas assets. Worse still, analysts say their leaders are not making the right policy decisions to harness their fossil fuel resources.
“In Nigeria, security is a big issue, there is also regulatory uncertainty and contracting issues which raise the cost of production for oil companies so they seek alternatives elsewhere,” says Chuks Nwani, an energy lawyer based in Lagos.
Some Nigerians have criticized the Federal Government’s decision to spend billions drilling for oil in the north when it should be developing assets it already has in the Niger Delta. Now insecurity in the north had derailed the plans.
Many are urging the government to turn its focus on alternative sources of energy. “We should be investing in renewables, targeting energy efficiency and management,” says Ayodele Oni, energy lawyer, and partner at Bloomfield law firm.
