• Thursday, July 25, 2024
businessday logo


Energy trends of the future: The Nigerian direction

fossil fuel

More significant awareness of the role of fossil fuel in global energy trends started since the ratification and effective rollout of the Kyoto Protocol, which subsequently drew attention to impact of greenhouse gases and emission on climatic issues.

With exacerbation of this impact on the environment by the commencement of the shale oil boom in 2006, there has been greater attention on how to reduce, but more importantly reverse the trend in the environmental and climatic effect caused by human activities. While COP25 was generally disappointing, in setting the trend for future climatic responsibilities, it shows a direction that will dictate the energy trends of the future.

With this global initiative, it has led fossil- based energy resource countries, centred mostly around OPEC to tinker around how to maintain the prominent role of the last centuries, and for the proactive ones, how to retain a delicate balance of energy significance by encouraging their corporate entities within the member countries to explore non- fossil energy resource. Increasingly, there is an activism around corporates that are funded via public- funds to pay significant attention to their energy portfolios.

In Africa, particularly the Sub- Saharan part, Nigeria plays a very significant role in fossil- based natural resource, followed by Angola and Algeria. Nigeria as a country is heavily blessed with fossil- based natural resources. In reality, most geologists believe most of Africa is blessed with one form of natural resource or the other but Nigeria has led the way due to early exploration and production during the “Anglo- Saxon -European” precedence of the region.

READ ALSO: How Nigeria can finance a sustainable road fund

In reviewing international energy trend and demand, the global landscape is awash with statements along the lines of “carbon neutrality by the year 2050”, “focal drive to eliminate global methane emission”, “reduce carbon emission production” and similar visions. These drives around the fossil- resource companies revolve around more effective exploration and production activities to reduce associated emissions or investing in alternative energy sources to balance their emission portfolios.

Most are actually taking a long- term view of understanding that while the fossil natural resource is still significantly under- explored, it’s not replenishable on the long term (so at some point, the world will run out of it), while alternative energy sources, are generally renewable in nature and thus more sustainable.

A delicate balance of portfolio of fossil natural resource and alternative sources helps to minimize the need for extreme exploration that could lead to frontiers, which will challenge human boundaries. There are already avenues where strategic focus has been on other planets for energy sources.

While some have mostly considered it fiction, the classic book Chasing new Horizons by Alan Stern and David Greenspoon provide a detailed commentary of NASA search for energy in Pluto. While still at what some might call “fictional phase”, the search for energy in new frontiers will make this a reality sooner, rather than later.

Coming back to earth and more recent reality, we have seen some of the most industrialized and dare say, developed countries increase their focus and investment in alternative and renewable energy sources. The drive to increase solar- based, hydro -based and other sources of energy is rising to unprecedented levels in the last decades.

This development has to be welcomed to bridge the energy gap. More recently, there is a race to increase the prominence of Hydrogen Energy. There is a significant race to outspend in research and developing hydrogen energy either as green, blue or grey hydrogen.

Africa and its rich resource base

To answer this, we have to think holistically about where we all started from as a planet and Africa as a continent. In understanding this, it’s easier to divide the planet into energy-rich and energy-deficient countries. It’s no coincidence that most of the energy-rich countries exhibit characteristics of advanced industrialization and high unit of energy utilization per person. Parallel, the energy-deficient countries who exhibit a low to nonexistent level of industrialization and have a very low unit of energy utilization per person. Coincidentally, most of the energy deficient countries are based in Africa and Latin America.

Historically, and if we went in a time machine where the race for industrialization of all continents would start at the same time, to achieve industrialization and self-sustainability none of the countries would be able to build their initial modernization on alternative energy. Most of the countries in Europe or North America built their industrialization on coal energy, forest destruction and fossil fuel predominantly.

However, with industrialization, these countries are now able to reflect on the impact their aspirations had on climatic issues and are leading a drive to replenish or reverse the trend. In achieving this goal, a delicate energy balance made up of “environmentally-responsible” exploration and production of fossil resource; and alternative energy mix is being promoted as an ideal energy picture. In demonstrating environmental-responsible exploration and production of fossil resource, the current gold standard is based on low carbon emission exploration and low methane emission production activities.

These are indications as to how energy generation and utilization in the future will be. A symbiotic development of fossil resource and alternative energy sources. Interestingly a lot of the technology and capability to produce the alternative energies are not based in Africa so the technology and resource would have to be transferred or “acquired” by the energy-deficient countries.

A set back to this agenda is the trend by international finance organizations to shy away from funding development of fossil resource due to stigmatization. An increasing trend, occasionally driven by shareholders of the financial institutions or interestingly, shareholders of the companies itself. This trend which may appear beneficial in the short stead will be long term detrimental to development and create a wider energy gap which may further the trend of economic migration and long-term socio-political setbacks.

Rather, a trend to encourage more environmentally responsible exploration and production should be encouraged paralleling the growth of alternative energy sources.

The African solution

The African solution has to be primarily driven by African countries. Africa as a continent is energy poor, and even with significant investments, it will take at least 2 generations to make a significant impact. Organizations like the African Hydrogen Partnership (AHP) are already ahead in the Hydrogen space in East and Southern Africa, but no organized structure is in place in West Africa.

Africa development in the energy space needs a commitment from Afro-centric exploration and Production companies, who focus on deploying their extracted resource in Africa: and increasing participation by Afro- centric and African banks. The contextual collaboration of this two, operating in an enabling and financially- independent environment is the major ingredient towards encouraging the right mix of energy growth for the future of Africa and Nigeria in particular. This means exploration and production of fossil fuel must be primarily driven by African opportunities and African-centric financing.

Along this drive, it’s important to note that alternative and renewable energies are the newest source of energy and there is significant room for co-existence between them and fossil- resource energy. In fact, renewable energy should contribute significantly towards meeting the energy needs of the continent, especially in off-grid locations to start with.

However, the fossil resource that exists in Africa should not be labelled as bad energy but rather exploited responsibly. This means as we explore, we need to be more aware about carbon emission and methane production.

Sensitivities on this help to reduce the environmental impact of these activities. This is however only one piece of the pie that has to significantly improve. Funding of industrialization and modernization isn’t cheap, but energy and technology, when well-funded, takes a country there quickest.

There is a great chance we will experience less participation by non-Afro-centric banks in funding development of fossil resource exploration. How do we solve this issue? Afro-centric banks must be made stronger by investing more in them and legislations must exist for these banks to be able to be trusted and reliable by their investors and depositors’ funds.

One of the most important quality in a successful bank is trust followed by ability to operate with best practice corporate governance but independent of extreme state intervention. The interference level of most governments in African banks makes this challenging, and thus a hurdle to be crossed to complete the picture.

In fact, people would say that the only competence that non-African based banks have over African- based banks is the lack of interruption in their operations by their regulating governments. If the regulating authorities stick to regulating and not policing, we would start to establish strong African banks. The likes of Merrill Lynch and Goldman Sacs will never have existed if they were operating primarily in some of these states.

Meeting the energy needs of Africa, and Nigeria in particular, in line with these trends is not impossible but it has to be driven by an aggregation of positive drives and long term environmental – responsible activities balanced by the growth of alternative energies.

Dr. Ogundare is CEO of Newcross Petroleum