The decision of Royal Dutch Shell to launch a new business operation and Nigeria’s latest pledge to end net zero emission by 2060 could offer a new lease of life and change the narrative to the country’s long walk to energy transition.
Within the space of 24 hours, Anglo-Dutch energy group unveiled its new energy business line called Shell Energy Nigeria while President Muhammadu Buhari also told world leaders in Glasgow the country would work to deliver net-zero by 2060.
These latest developments are crucial for Africa’s biggest economy who experts have told to kiss trillion-dollar oil income goodbye and also forget a repeat of past oil riches as the global ambitious goal to eliminate fossil fuels continues to gain momentum.
For instance, Experts say Shell’s new foray which seeks to build on the success of Shell Nigeria Gas to grow its alternative energy businesses while consolidating on its leading position in natural gas production aligns with the Nigerian government’s commitment to delivering net-zero by 2060.
Other industry players say the company will find a space in Nigeria’s off-grid market, which experts value at over $12 billion. While many of the ongoing projects are small-scale, Shell’s deep pockets could help catalyse mini-grid projects that could produce energy for productive uses in communities and cities.
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“It is a good development because it shows that the Nigerian off-grid market is viable,” says Segun Adaju, president of Renewable Energy Association of Nigeria (REAN) and CEO of Consistent Energy Limited.
Adaju says the development could open the floodgates for more investments and participation by other oil companies.
“With the size of Nigeria’s off-grid market, companies with deep-pockets like Shell have a role to play, especially helping to fund big-ticket projects and investing in growth-stage businesses,” says Kunle Odebunmi, CEO of AllBase Energy, a Lagos-based energy start-up.
Odebunmi notes that there are vast opportunities in residential solar projects with integration of digital technologies like Internet of Things and Artificial Intelligence technologies to support the weak grid.
Apart from Shell, many financial institutions have come under pressure to reduce their funding for oil and gas businesses because of the large carbon footprint of such projects. These companies have already started to reduce their investments in oil and gas as part of their net zero carbon targets.
The crude oil exports of OPEC member Nigeria have been the mainstay of the country’s economy for the past five decades. With the global shift towards cleaner, lower-carbon energy accelerated by the pandemic, Nigeria is hoping to rely more on developing its untapped gas resources.
“Nigeria has energy challenges for which, we believe, gas can be used to balance a renewable energy-based system, be it wind or sun,” President Muhammadu Buhari said at the UN Climate Change Conference in Glasgow, Scotland.
He added, “This would enable us to launch the long-term renewable energy infrastructure procurements and investments needed to have a sustainable energy supply.”
Buhari said for Nigeria and other African countries, gas should be embraced as “transitional fuel” and not be demonized.
“Gas will be key to addressing the clean cooking challenge, which is also a challenge of deforestation, and for giving our electric grid the stability and flexibility to integrate renewables at scale. Nigeria will need to integrate an unprecedented 7GW additional renewable capacity each year to achieve net-zero,” Buhari said.
This comes as Nigeria has promised new efforts to revolutionize its gas sector to help underpin economic development, as Africa’s biggest oil producer looks to emerge from the pandemic-hit oil market.
With significant oil and gas reserves, Nigeria is expected to see a significant divestment of legacy oil and gas assets, as more energy companies pledge net-zero ambitions. This is already having an adverse impact on the country’s economy, which still depends heavily on fossil fuel for a large chunk of its revenue.
Other industry players believed Nigeria’s renewable energy investments have so far been slow to take off in Africa.
“We are looking for partners in innovation, technology and finance to make cleaner and efficient use of all available resources to make a more sustainable transition in energy markets,” added Buhari.
On May 18, Nigerian Vice President Yemi Osinbajo had also said that the “shutting off of capital in energy infrastructure” will not result in a just transition and the attitude towards natural gas needs to be looked at from an energy access and energy poverty point of view.
Earlier this year, the International Energy Agency said the world needs no more new oil and gas developments if it wants to be on the path to a net-zero emissions energy sector by 2050.
This poses an economic challenge to Nigeria, which is expected to emerge as a major player in gas markets as a producer, consumer and exporter with gas output in the coming decades.
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