McKinsey speaks on future of African oil & gas

McKinsey & Company said African energy demand will continue to grow over the decade, adding that there will be rising demand for fossil fuels in Africa driven by industrialisation and population growth.

McKinsey also identified a set of enablers that can support African oil and gas producers in the energy transition. This includes: creating an enabling environment to stimulate investment; attracting skills and developing capabilities required for the energy future; and accessing available capital pools.

The global management consulting firm noted this last Saturday at the industry lecture and send-forth party in honour of ABC Orjiako who retired from the Seplat Energy Board on May 18, 2022 after 13 years of meritorious service and Board leadership of the Company.

While making their presentations during the event at Lagos Oriental Hotel, Peter Gaius-Obaseki, partner and co-lead of West Africa Oil and Gas Practice, McKinsey & Company and Oliver Onyekweli, associate partner and co-lead of West Africa Oil and Gas Practice, McKinsey & Company noted that Africa’s energy demand in 2040 could be 30percent higher than it is today, compared to 10percent higher for global energy demand.

“Energy demand growth will be led by Nigeria, and this will create tailwinds for energy suppliers like Seplat. Africa’s growing energy demand also creates opportunities for Seplat to explore renewable energy solutions (example solar, blue hydrogen),” according to McKinsey & Company at the industry lecture on “The future of African oil and gas: Positioning for the energy transition” chaired by Edmund M. Daukoru, chairman NLNG who is also a former Minister of Petroleum.

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While noting that decarbonising production and cost leadership will be key to the energy company, it said indigenous producers will define the future of African oil and gas. It also added that African energy infrastructure is a compelling opportunity.

“Biofuels demand in Africa will remain significant, while oil and renewable energy will grow more rapidly. Oil demand could peak in the next two to five years, while global gas demand is expected to peak in the mid-2030s. Gas demand scenarios diverge after 2030, driven by increasing decarbonization pressure in buildings and industry.

“There are signs that the energy transition is accelerating. To date, 139 countries (covering 91percent of global GDP) have committed to achieving net zero. Developed countries are leading the way in setting Net-Zero targets into law. From an investor perspective, incumbent utilities with significant renewable portfolios are attracting double the valuation of oil and gas majors,” McKinsey & Company further stated.

It noted further that: “Energy is expected to attract increasing investment, with strongest growth in RES and decarbonisation technologies. These shifts in capital flows are driving IOCs to divest away from fossil fuels and invest in the green economy”.

“In line with the theme of today’s Industry Lecture, ‘The Future of Africa Oil and Gas: Positioning for the Energy Transition’, Seplat Energy in 2021 repositioned for a more significant Sustainability impact. We identified the critical need for the energy transition in Nigeria and our outstanding role in driving sustainable development as the leading indigenous independent energy provider. As a result, we took steps to reposition the Company, rebranded and redefined our purpose and mission, and refocused the business as an energy solutions provider.

Today, Seplat Energy aims to drive the right energy transition suitable for Nigeria and offers excellent opportunities for our business, investors, employees, and the nation.

“We have adopted a balanced approach to addressing Energy transition within the context of Sustainability that is consistent with our situation in Nigeria. Seplat’s Energy transition programme embodies ESG commitment and mitigation of Energy Poverty in our society. It is about providing the right social benefits to drive the country’s socio-economic development.

“Once more, I sincerely thank Dr ABC Orjiako for his meritorious 13 years of service to the company, and wish him good health and greater successes in his future endeavours,” said Basil Omiyi, Chairman, Seplat Energy Plc.

Also speaking, Roger Brown, CEO, Seplat Energy Plc said, “ Today essentially is to celebrate Dr Orjiako, who has done tremendously well to deepen the industry and grown the company during his tenure. The Seplat Energy Board under Dr. Orjiako’s leadership drove our corporate commitment to efficiency in project delivery, cost optimisation and robust revenue generation. Seplat Energy today is a committed, responsible, ESG/Carbon neutral advocates.”

“Seplat Energy has continued to consolidate on its gas-to-grid power-drive where we are industry leaders and strive to capture the available opportunities down the Energy value chain (3cents per Kwhr across our fence compared to about 60cents per kwhr at off grid end user diesel generators). Dr. Orjiako drove Seplat Energy’s long-term imperative with regards to global transition away from fossil fuels towards cleaner and renewable energies, advocating a Just Transition, which is to be conducted at an appropriate pace.

“That was why, the Board under Dr. Orjiako decided to re-brand the Company as Seplat Energy, which is a signal of our intent and how we see our future

We want to lead this transition to gas and, beyond it, begin to develop a strong renewables business. So, we will evolve from being a company that simply extracts oil and gas to one that can create and capture value right along the energy chain, whatever the source of that energy may be.

“All I have said so far summarizes Dr. Orjiako’s passion and vision; and even as he retires from the Company, we will continue to consolidate on this ethos,” Brown noted.