Nigeria and the new energy transition
The world is fast racing towards an energy mix that combines both fossil fuel and renewables. From policy formulation to the direction of oil and gas investments, the readiness to reduce fossil fuel consumption as well as protect the earth is gaining more momentum. Expectedly, several think-tank organisations have made projections into what the future of energy composition and consumption will be like. The scenarios they considered are from the best to the worst cases, giving policymakers enough options to make adequate preparation and sensitisation.
Nigeria as a country has not made many gains from the energy boom of the past. In the early 1970s when the prices of crude oil skyrocketed, the proceeds of that energy boom were not utilised to change the developmental trajectory of the country. Even Nigeria’s oil and gas sector cannot boast of any meaningful achievements it gained in that area. In the upstream sub-sector, the biggest players are still the multinational oil and gas companies. No indigenous oil and gas players are there to give the IOCs a run for their money, in a country where commercial oil discovery was made over 60 years ago.
The downstream sector was initially dominated by multinationals until recently when divestment ushered in local players. In the refinery segment of the industry, Nigeria as a country failed woefully in that the domestic refineries swim in inefficiency till the present moment. On many occasions, billions of dollars were sunk into them in the name of turnaround maintenance (TAM). Yet, the status quo remains with most of them not producing anything while gulping billions of naira through administrative and personnel expenses.
It took protests of industry stakeholders before recently the National Assembly had to pass the Petroleum Industry Act (PIA). Until few weeks ago, Nigeria lacked a modern industry regulatory framework to govern the nation’s oil and gas sector. This explains while acknowledging the effect of the absence of PIA on the Nigerian economy, President Buhari admitted the lack of regulatory framework made Nigeria’s energy sector lose billions of dollars’ worth of investments.
For about five years, Asia and Europe have remained the destinations of Nigerian crude oil cargoes. These are the countries that have intensified efforts in expanding their energy mix to have more of renewables
Just as the oil and gas industry did not benefit from the oil boom, other sectors of the Nigerian economy also failed to get meaningful results out of the oil and gas sector. Consider Nigerian roads, education sector, health care services, and security provision, among others, if they are rated today would put the country in the bottom of the scale even among African countries.
The above speaks to what the Nigerian government needs to focus on now, so as not to lose out in the next frontier of economic and technological advancement. According to Visual Capitalist, theglobal energy mix by 2040 will comprise oil(28 percent), natural gas(25 percent), coal(21 percent), other renewables and modern bioenergy (7 percent each); nuclear(5 percent), solid biomass and hydro(3 percent each).
That was not the composition of the energy mix in 2018. Three years ago, oil accounted for 31 percent of the global energy mix; then, the share of natural gas was 24 percent while coal was responsible for 26 percent. In effect, oil and coal were projected to lose more market share by 2040 while during the same period natural gas and other renewables were forecast to gain more market share.
In view of the preparations being made by different countries of the world, the market share of oil might be smaller than initially anticipated. According to Bloomberg, inflows into renewable energy technologies in 2019 amounted to $282 billion about the time coal and gas attracted $100 billion worth of investments. Innovations are driving the costs of solar and wind power lower. Compared to a decade ago, the costs of constructing solar projects now have dropped by 85 percent while wind power has been reduced by 49 percent.
If the above facts do not interest the Nigerian government much, the assessment of the global renewable energy market by the PV Magazine should spur the Nigerian government’s officials to action immediately. Some countries out of the top ten most attractive markets for renewable energy investments are countries that traditionally buy Nigerian crude oil. The most attractive markets are the United States (1st), Germany (2nd), China (3rd), France (4th), Spain (5th), India (6th), Australia (7th), Japan (8th), Netherlands (9th) and Brazil (10th). The magazine considered factors such as the current policy framework, market fundamentals, investor friendliness, infrastructure readiness, revenue risks, return expectations, and overall opportunity.
For about five years, Asia and Europe have remained the destinations of Nigerian crude oil cargoes. These are the countries that have intensified efforts in expanding their energy mix to have more of renewables instead of fossil fuel. With the Nigerian economy still relying on the sale of crude oil for survival, then, there is an urgent need for this country to take the bull by the horns. Without doing that, the survival of Nigeria is not guaranteed. The country may end up not having enough resources to meet its debt obligations to local and international creditors. Also, Nigeria may not have enough resources to execute its basic activities of governance.