Nigeria’s petroleum downstream is positioned for transformative changes including merger and growth of alternative energy sources especially gas following the removal of fuel subsidy, analysts at PwC Nigeria have said.
The leading professional services firm at a press conference organised in Lagos on Wednesday, to discuss the outlook for the downstream sector post subsidy era, said subsidy removal opens up a plethora of opportunities for investors, businesses, the government, and the energy sector.
“What we see is that opportunity is created for the government to deepen the market in terms of gas alternatives,” Tosin Labeodan, partner, PwC Nigeria.
“It’s not going to happen quickly, but we’re headed in the right direction,” he added.
Pedro Omontuemhen, Partner & Africa Oil and Gas Leader, PwC Nigeria, who was represented by Cyril Azobu, Partner & Mining Leader, said that as subsidy era comes to an end, Nigeria’s oil and gas downstream sector faces a transformative opportunity.
“Subsidy shielded companies from the reality of their profits. Now, companies will confront the true market dynamics. In addition to navigating risks from global economic shifts, fluctuating energy prices, Nigeria’s macroeconomic conditions, and forex regime, companies must embrace operational excellence to stay competitive.”
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Akinyemi Akingbade, Partner, Energy, Utilities & Resources, PwC Nigeria, who gave the lead presentation at the session said the downstream sector will evolve rapidly post subsidy removal. He noted that:
“We anticipate a consolidation of players in the sector as size and economies of scale will play a major role in shaping competition in the market.
“As the sector becomes more competitive, companies would need to review their supply chain management, leverage digital technology and have a sound risk management system to manage cost and deliver value to their stakeholders. For growth and sustainability, they should invest in other energy options e.g. Compressed Natural Gas (CNG) and auto Liquefied Petroleum Gas (LPG) as the world embraces low carbon energy.”
Nigeria holds the 9th largest gas reserves in the world and the Federal Government is developing programmes to deepen local production and consumption of natural gas making the commodity a viable alternative fuel.
Small and Medium-sized Enterprises (SMEs) facing difficulties in accessing affordable power are motivated to see opportunities in clean energy by embracing cleaner options like electric vehicles, biofuels, or solar-powered technologies.
Petroleum subsidy removal has sparked a renewed interest in electric vehicles (EVs). As consumers seek more affordable and sustainable transportation options, experts say the demand for EVs will rise.
This presents an opportunity for automakers to expand their electric vehicle portfolios and for entrepreneurs to invest in charging infrastructure development. Companies like Oando and the Lagos state government are already working out a partnership to test the model in the city Bus Rapid Transport System.
The prevailing high cost of petrol will undoubtedly stimulate investments in affordable renewable energy infrastructure, leading to a greener economy and sustainable transportation systems, experts say.
