Funding The Nigerian Energy Mix For Sustainable Economic Growth

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By Ndubuisi Micheal Obineme

Nigerian energy, oil, and gas industry is transforming following the recent policy enactment by the government to reposition the industry for growth opportunities and attract more capital investment to the country’s energy sector. The Federal Government is making tremendous efforts and creating global opportunities under the Petroleum Industry Act (PIA) and the ‘Decade of Gas’ initiative as part of it’s energy evolution pathway. As of 2019, Nigeria was contributing about 2.2 percent of global oil reserves, based on our findings. The country’s crude oil reserves have grown steadily from about 22 billion barrels in 1999 to over 37 billion barrels presently. Between 2015 and 2019, the country generated roughly 2 million barrels per day. In 2021, Nigeria was the world’s most significant oil producer, accounting for an average of 1.27 million barrels per day. Nigeria is the second country with the largest oil reserve in Africa after Libya and the 11th worldwide. Although security concerns and other commercial risks have slowed oil exploration operations in the country which has also led to a production decline.

However, the NOG Conference & Exhibition which has been rebranded as NOG Energy Week, organized by dmg Nigeria events, has therefore partnered with the Nigerian government, industry stakeholders, and players to showcase Nigeria’s oil and gas potential to the world.

This magazine is a Special Edition for NOG Conference & Exhibition 2022 with the theme: ‘Funding The Nigerian Energy Mix For Sustainable Economic Growth’.

For over 20 years, NOG has been serving and unlocking new opportunities for the Nigerian oil and gas industry.

Since its inception in the year 2000, NOG has played a key role in shaping policies in the Nigerian oil and gas industry. The yearly outcomes of the conference have contributed positively to influencing policies in areas such as marginal field bid rounds, local content, and gas prices.

The NOG Conference and Exhibition is Nigeria’s most important oil, gas, LNG, and energy event, where energy professionals convene to exchange ideas and dialogue on issues affecting the oil and gas industry in Nigeria. It also provides the opportunity for industry leaders, innovators, and experts to showcase technological advancements, identify innovative solutions and forge business partnerships.

In 2021, H.E President Muhammadu Buhari declared 2021-2030 as the Decade of Gas in Nigeria. The Decade of Gas initiative of the government is aimed at making the country a gas-powered economy by 2030. The key objectives of the initiative include increasing access to electricity, building a stronger economy, addressing poverty, and reduction in carbon emissions by deepening domestic utilization of gas.

In August 2021, President Buhari signed the Petroleum Industry Bill (PIB) 2021 into law. The PIB is now referred to as the Petroleum Industry Act (PIA). The PIA, which was recently passed by the two houses of the National Assembly, has been in the works since the early 2000s.

The enactment of PIA is Nigeria’s boldest attempt at revamping the fortune of the Nigerian Petroleum sector. The PIA either repeals or amends at least ten different legislations applicable to the Petroleum Industry. This legislation is expected to bolster the government’s revenue and create significant investment opportunities for local and international investors.

Speaking at the NOG Conference & Exhibition 2021 edition, the Minister of State for Petroleum Resources, Chief Timipre Silva commented, “The NOG conference comes at a time when Nigeria has succeeded as a nation in passing the Petroleum Industry Act (PIA) which has been in contention
for over 16 years.

“The PIA comes at a better time when the entire industry still grapples in crisis due to the Covid-19 Pandemic which created uncertainties in the industry.

“The credit goes to our dear President Muhammadu Buhari for his steadfastness and support towards ensuring that the Nigerian oil and gas industry moves in tandem with the current global realities.

“Congratulations will also go to the 9th National Assembly for their patriotism to pass the Bill. They have written their names in the book.

“We are now on the right direction to witness enormous investment in our oil and gas industry. This administration aims to drive infrastructural development in the country to make life more meaningful for all.

“Natural gas ticks all the boxes to help the government achieve its aspiration. That is why we declared 2021 – 2030 as the Decade of Gas.

“We are indeed committed to our vision. The Decade of Gas has become an integral part of the Federal Government oil and gas roadmap.”

“The ministry of petroleum resources is on track regarding the National Gas Expansion Programme. We will launch the various module of the programme very soon including but not limited to Autogas-powered vehicles, and virtual pipelines, among others.

“Nigeria is on track to grow its economy with the energy sources in the country. Currently, Gas
will play a major role in achieving that.

“In his words, the OPEC Secretary-General said, “The Nigeria Oil and Gas Conference and Exhibition have risen to become one of Nigeria’s and indeed Africa’s largest and most prominent industry events.

“Its creation was the brainchild of two icons of our industry. I am referring, of course, to the late Dr. Rilwanu Lukman of Nigeria and the late Dr. Alirio Parra of Venezuela.

“Over the last five decades, OPEC and Nigeria have sown the seeds of friendship to build a highly fruitful and mutually beneficial relationship, forging strong ties that will last forever.

In underscoring Nigeria’s contribution to the Organization, he noted that over its 50 years of Membership, the country has provided OPEC with 23 Heads of Delegation, six of whom served as President of the Conference. Nigeria has also proffered the Organization with four Secretaries General”.

He lauded Nigeria’s contributions to promoting sustainable stability in the global oil market and its influential role in the OPEC and non-OPEC Declaration of Cooperation (DoC).

“OPEC is deeply indebted to HE Muhammadu Buhari, President of Nigeria, for the leading role he has played and continues to play in support of the Declaration of Cooperation process. This historic achievement has ushered in a new era in global energy cooperation,” Barkindo stated.

On the gas side, the country has the 9th largest gas reserves in the world with about 209 trillion cubic feet (tcf) and upside potential of about 600tcf. In terms of gas production and utilization, Nigeria averages about 8.4bscfd. While only 18 percent of the production is consumed in the domestic market (Power, Industries, and WAGP), 43 percent is exported as LNG, 32 percent is re-injected for enhanced oil recovery and other operational uses like fuel gas while 7 percent of total gas production is currently being flared.

The Federal Government has said that the value of Nigeria’s proven gas reserves was over $803.4 trillion, adding that the country had the most extensive gas resource in Africa.

Industry experts say that these resources or reserve numbers mean nothing, except the country drives investment sustainably

and collaboratively through investment-driven policies, governance, and legal and regulatory framework. This has been the thrust and focal point of the NOG Conference & Exhibition since its inception.

Also worthy of note is the conference’s role as an advocacy platform for legal reforms in the oil and gas industry, which birthed the 2021 Petroleum Industry Act (PIA).

The PIA provides a legal, governance, regulatory and fiscal framework for the Nigerian petroleum industry, the development of host communities, and related matters. It aims to open up the Nigeria oil and gas industry to invest and strengthen industry governance and regulation to expand, grow and maximize value capture for Nigeria and its citizens.

Among other incentives that the PIA provides for investors in gas pricing. It pegs the domestic base price for gas at $3.2 per Million British Thermal Units (MMBtu) for power plants. But the price at which the gas-based industry, comprising companies that produce methanol, fertilizer (urea, ammonia), polypropylene, etc will purchase natural gas, can be as low as $1.5 per MMBtu.

In-depth discussions
The NOG Conference & Exhibition, for years, has been playing a critical role in Nigeria’s energy transformation. It is a platform where key policymakers, industry leaders, operators, innovators, and investors gather to discuss in-depth issues affecting the Nigerian oil and gas industry.

Speakers at the 2021 edition of the conference identified measures to be taken to attract and sustain investments, which are: mitigating country risk; funding; available opportunities; right legislation; overhauling infrastructural deficit; security; and attractive fiscal regimes. They called for continued collaboration between the government and the private sector. They observed that government working by itself is often slow, but they are an enabler; while members of the private sector are change agents with all the ideas. However, they run out of steam eventually without the government’s help. The Train 7 project was identified as proof of a profitable collaboration.

The Chairman, of Shell Companies in Nigeria, Osagie Okunbor while speaking on a panel session at the conference said that the company is committed to the 2050 net-zero emissions target set by the United Nations, adding that Shell is aggressively investing in renewables, alternative sources of energy, and gas as the transition energy.

“We are committed to the net-zero emissions by 2050. We are doing that aggressively in terms of renewables and alternative sources of energy.

“We are a firm believer in gas as the transition energy, which explains our investments in Nigeria LNG.

“We are looking at solar energy, gas and we are deliberate about reducing our carbon footprint.”
In his address at the conference, the Vice President, Prof. Yemi Osinbajo noted that the Federal Government was aware of the challenges confronting the industry and has been working to address them.

Represented by the Minister of State for Petroleum Resources, Chief Timipre Sylva, Osinbajo said, “We are not unmindful of the peculiar challenges confronting the oil and gas operators in Nigeria from infrastructural deficiencies and insecurity to the high cost of operation, to mention just a few.

“The government is working consciously to tackle all without lagging on our path to meeting the global demand that our signatory to international protocols on cleaner energy has placed on us.”

The theme of the 2021 edition was, “Fortifying the Nigerian Oil and Gas Industry for Economic Stability and Growth”. Some of the speakers and panelists said that the country needs to monetize every resource that is available today, to create the resource that will create the future for the country and the oil industry.

According to the GMD of the NNPC Limited, Mele Kyari, “Oil will help Nigeria create wealth, while there is an opportunity for the country to operate in the gas space, and the focus of the NNPC is to deepen gas monetization for both domestic and export.

He noted that the notion that fossil fuels will fizzle out by 2050 and the world will be dealing with renewables is not true, adding that the forecasts of the Organisation of Petroleum Exporting Countries (OPEC) and other key organizations in the oil industry have shown that even by 2050, there will still be a demand of about 100 million barrels.

While lamenting the lack of investment in the exploration and production of oil, Kyari averred that for Nigeria as an energy resource-dependent country, the oil will remain relevant to the country beyond 2050.

“For us as a developing country, energy resource-dependent country, we know for sure that beyond 2050 that oil will be relevant for us. Today, we are in a deficit of infrastructure, power, and so many other things. There is so much work going on, but the facts remain that there is a deficit here,” he said.

“As we all know investment has gone down 30 percent. So, those outcomes will show up probably in the next 3, 4, and 5 years, when we realize that the lack of investment of today will manifest in that practical sense and in our inability to meet the demand that is required of the oil and gas industry. This will happen and before something happens, there is something we can do as an industry.”

In his presentation at the technical session of the conference on “Driving Operational Profitability Through Digital Transformation”, the General Manager Sub-Saharan Africa for Schneider Electric Process Automation, Ajibola Akindele, said that the current market dynamics have increased pressure across multiple dimensions of the oil and gas companies’ businesses. This is in addition to the aging workforce and the upstream producers seeking to maximize the production of oil and gas from onshore and offshore wells safely and economically, amid increasing demand, environmental pressures, and potential security threats.

With all these challenges, he said that the primary concern of most operating companies is to ensure safe, reliable, and compliant operations – while managing energy costs and minimizing time and installed costs. He noted that producers in the upstream market, pipeline operators in the midstream market, and refineries in the downstream market can make the right technology investments while maintaining global competitiveness through digital transformation.

According to Akindele, “Digital transformation may be viewed as the cultural, organizational, and operational change of an organization, industry or ecosystem through smart integration of digital technologies, processes, and competencies across all levels and functions in a staged and strategic way.”

Represented by the General Manager – External Relations, Mrs. Eyono Fatai-Williams, the former Managing Director of the Nigeria LNG, Engr. Tony Attah noted that Train 7 will further the development of the country’s local capacity and businesses through 100 percent in-country execution of construction works, fabrications, and major procurements.

He encouraged oil and gas service companies in the country to take advantage of the enormous opportunities that the project present, stressing that there will even be more opportunities with Train 8 and beyond.

Attah said, “The Train 7 project will further the development of Nigerian local capacity and businesses through the 100 percent in-country execution of construction works, fabrications, and major procurements. I am convinced that the Train 7 project will set the record in Nigerian local content capacity development for the years to come.

“I, therefore, enjoin all prospective players and service companies to key into the various aspect of this project, because the opportunities are huge and exponential. There will be opportunities in construction, cable, and different areas. Riding on the back of Train 7, the prospects for more growth with Train 8 and beyond seem bright as the company’s cores are focused on gas through the gas agenda.”

The Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Engr. Simbi Wabote said that the Board has recovered about $100 million of undisputed obligations from the Third-Party Forensic Audit of remittances of the Nigerian Content Development Fund (NCDF) between 2010 to 2017.

In line with the legal provisions in the Nigerian oil and gas industry, Wabote noted that priority will continue to be given to Nigerian companies in granting oil and gas licenses, award of oil blocks, and contracts in the industry.

“We will continue to deploy the provisions of the NOGICD Act to fortify the oil and gas industry against these attacks such as Sections 3, 12, and 28 of the NOGICD Act which state that first consideration shall be given to Nigerian operators in the award of blocks and licenses, to Nigerian goods and services in the evaluation of bids, and for the employment and training of Nigerians in any project executed in the Nigerian oil and gas industry.

“Let me emphasize that this is the law of the land and the default mindset for any reputable local or international operator or service provider is to comply”, he said.

In his presentation, the Deputy Managing Director, Deep Water, Total E&P Nig. Limited, Victor Bandele, expressed TotalEnergies’ commitment to continue investing in Nigeria.

“Despite the challenging environment that we operate in as an industry, TotalEnergies remains committed to investing in the country because we strongly believe in the potential of Nigeria and Nigerians,” he said.

“This is why we have been quite active in recent years even in the face of understandable uncertainties. We completed Egina at the end of 2018 and have been progressing well with the development of the Ikike project”.

Furthermore, other projects including UTM Offshore’s recently announced FLNG, the AKK gas pipeline due to be completed by 2023, and Nigeria LNG Limited’s Train 7 FID are all establishing Nigeria as a credible investment hub for gas development.

Indeed, there are huge opportunities in the Nigerian oil and gas industry that haven’t been fully explored. But now that the PIA has been passed coupled with the ‘Decade of Gas’, the question is what other opportunities are available in the Nigerian basins to tap into?

In an exclusive interview with the Managing Director & Chief Executive Officer of ND Western, Mr. Eberechukwu Oji, who spoke with our Correspondent recently in Lagos highlighted some key opportunities in the Nigerian frontier basins.

According to him, “There are lots of opportunities for growth in the E&P business. If you look at the value chain of E&P business, we have Seismic – where you have to go and see if oil is in this place.

“One of the problems we have in Nigeria today is that we aren’t exploring enough. We are producing what we have already explored. There are few companies I know today that are shooting Seismic.

“If we want to grow in the industry, we have to be shooting Seismic. There are huge opportunities
there.

“If anybody is thinking of where to invest in the Nigerian oil and gas industry, Seismic is an area where there are investment opportunities.

“Another opportunity is field development. We have the big marginal field bid rounds that were done last year. So many companies now have access to these acreages. They need to be developed and bring the fields to production. There is drilling, field development, and sub-surface study that needs to be done for all these companies.

“There are very huge opportunities in the marginal field space. We also expect that very soon the country should be going out for another round of bidding for OMLs on bigger acreages. That’s also an opportunity area.

“In terms of existing infrastructure, there is a huge opportunity such as asset integrity. Most plants are inherited from the International Oil Companies (IOCs) in the 70s and most of these plants need an upgrade.

“This is a big opportunity area for companies that can execute and finance the work.

“There are opportunities in the areas of trading, bringing liquidity into the market.

Due to climate change, many institutional investors are running away from fossil fuels. We need to bridge that gap.

“As a country, we need to be serious about establishing additional sources of funds. I would expect that in a very few years that we should have an energy bank where companies in the oil industry can access credit to develop the field.

“I expect we should have a robust bond market for E&P companies to explore opportunities in the capital market. Though enough of that isn’t happening.

“For many of these indigenous companies, I expect the companies to be listed. It will deepen the Nigerian stock market. There is enough for everybody and we should see the oil and gas industry as an engine for shared prosperity for Nigeria”.

The focus of the 2022 edition
The NOG Conference & Exhibition will focus on the strategies that will be adopted by the Nigerian government and private sector leaders to navigate the emerging business environment – helping to set the nation’s energy agenda for the next 12 months and beyond.

“The arrival of the global pandemic led to a disparity in supply and demand of hydrocarbons, a drop in oil price, and an economic crisis of unprecedented magnitudes. This introduced new vulnerabilities to the main contributor to Nigeria’s Government revenues.

“Oil continues to be one of the major sources of power generation. However, increasing global investment into cleaner sources of energy, volatility of oil price, and the awaited clarity on the legislative framework for oil and gas production in Nigeria all highlight the need for a more diverse energy mix.

“The NOG Strategic Conference will review Nigeria’s positioning within the evolving global energy landscape, with a focus on emerging opportunities to transform her energy industry through robust legislation, technology, and innovation, in-country capacity development, and actualize energy sufficiency targets,” says dmg Event, organizers of the conference.

As the world transitions toward cleaner energy sources, there remains a need for energy to drive industrialization sustainably. Taking stock of Nigeria’s energy resources, a clear agenda must be set for meeting domestic energy demand, increasing export market plays, and achieving international environmental standards. According to dmg Event, the 2022 edition of the conference will assess the strategies in place to strengthen Nigeria’s position as a global energy player and increase the use of low carbon.

With the impact of Covid-19 on oil-dependent economies like Nigeria and how it has introduced greater uncertainties and strengthened pre-existing vulnerabilities, stakeholders will look at new approaches to legislation and policy as part of the strategy to sustain and increase oil and gas industry activities in the country.

Also, lower oil prices, ongoing operational costs, and fiercer global competition mean an increased need for oil and gas operators to work smarter, faster, and more efficiently. Stakeholders will discuss how the government and the private sector can collaborate to drive down the cost of production. They will also look at areas digital technology can be applied for rapid value addition and a real return on investment.

Similarly, Nigeria’s oil and gas sector presently accounts for about 70 percent of government revenues and 90 percent of foreign exchange earnings. However, it is projected by the Federal Government that by increasing local content to 70 percent, the country would retain $10 billion annually. The stakeholders will look at the capacity development strategies being developed to create socioeconomic independence for the nation. They will in addition discuss how the proposed Local Content Development and Enforcement Bill and Nigerian Oil and Gas Industry Content Development Act (Amendment) Bill can enhance human capacity development, encourage knowledge and technology transfer and support the domestic manufacturing of goods.

In the last three years, the development of a domestic gas market has been at the top of the Federal Government’s priorities. Stakeholders will look at how the impact of global events on gas prices encourages the domestication of gas as compared to export. They will also discuss the appetite of investors considering the domestic gas market value chain, e.g. storage plants, virtual pipelines, liquefaction plants, and compression stations as well as look at the untapped opportunities that exist in the use of LPG, CNG, and LNG in the domestic market.

The conference will also discuss key issues such as financing opportunities for energy projects in sub-Saharan Africa, bridging the infrastructure gap for the improved domestic gas market, opportunities for indigenous companies in the PIA era, technology innovations for decarbonatization across the value chain, and other critical topics, that will help set the nation’s energy agenda for the next 12 months and beyond.

The conversation at this year’s conference is significant as the industry navigates the growing global demand for renewable energy and climate-friendly sources of energy in the face of Africa’s unique energy mix requirements. Many industry leaders have also dubbed this to be an opportunity to seek a lasting solution to Africa’s energy poverty and bring much-needed socio-economic development.

As part of its commitment to the development of the Nigerian energy industry, NOG will also provide the opportunity to showcase and train industry stakeholders on best-in-class technology innovations across the value chain through its CPD-certified NOG Technical Seminar. The Technical Seminar will host sessions in 5 different streams covering upstream operation, midstream, downstream, digitization, and project management.

The NOG Conference and Exhibition annually hosts over 500 delegates, 300 exhibiting companies, 80 industry expert speakers, and 40 sessions across 2 conference streams.

2022 Sponsors include NNPC, Nigeria LNG Limited, Shell, Chevron, Total Energies, ExxonMobil, NCDMB, Prime Atlantic, DCPL, Coleman Wires And Cables, First E & P, ND Westers, Nivafer, Russell Smith, Vurin Group, MG Vowgas, PE Energy Ltd, WAV, among others.

NOG Energy Week will take place on 2 – 6 July 2023 and expects to host over 5000 attendees, 600 delegates, 350+ exhibiting companies, 85 industry expert speakers and 35 sessions across two conference streams.