September 28, (THEWILL) – All protocols observed…
Salute to Dr Chief Don Ettiebet @ 80 and thanks to the Petroleum Club for having me!
Your excellencies, distinguished Ladies and gentlemen, let me start by craving your indulgence to allow me to make a slight adjustment to the topic. I have taken the liberty to high grade the topic to be “The Future of Gas, Nigerian Economy and the Global Energy Transition”, as this would allow me a bit more flexibility to do justice to the subject.
Energy has always been in transition from the very early days when the predominant sources of energy were mainly Manpower, Animal fats, Paraffin, Coal and more recently Oil and Gas. Over time, we continue to witness energy transition in action, as we alter our preferences for different sources of energy, on account of economic, environmental, social, and geopolitical considerations. We seem to have taken the evolution of energy for granted until the recent awakening realities of new science, and the greater awareness of the impact of continuing to burn hydrocarbons at the ongoing scale, especially on the back of huge, forecasted growth in energy levels. We suddenly realize that we are endangering our planet and treading a very thin line between survival and our personal comfort. The effect of climate change is driving the acceleration of renewed focus on energy transition and consequently, this is fast changing the global energy mix and energy systems from fossil fuels to other cleaner sources.
Against the backdrop of the energy transition, the global population is forecast to grow by 25% from the current 8bln to over 10bln people by 2050! Africa alone will grow from its current 1.5bln to about 2.5 billion, being about 67% population growth compared to the global average of 25%. This means;
That about half of the world’s expected population growth will come from Africa. The forecast is even more exciting when you focus on Nigeria. Nigeria is forecast to grow from the current 200 million people to about 400 million, which is 100% population growth within the same time frame.
(Where dem go stay?)
Let us now overlay this population growth accompanied by the predicted prosperity of more people in society, with the advent of technological improvements. More people will have access to phones and electronics that will require charging, more people will require air conditioning – heating or cooling, depending on where you are in the world. Mobility and travel will increase, more households will transit to the next level in economic advancement as part of the overall growth. On balance, the global energy demand is projected to grow by about 40% in the same time frame. I would like you to cast your mind on the correlation between the global average population growth of 25% against the global average energy demand growth of 40%. Global energy demand is obviously going to outpace global population growth, but a closer look at Africa and Nigeria with population growth of 67 and 100% respectively, would suggest that the global energy demand projection may not be in tandem with what Africa and indeed Nigeria will need. Whether you see this as an opportunity or as a risk for Nigeria will depend on which side of the divide you stand. Bottom line, the world will need more energy, Nigeria and the rest of Africa will need it even more. About 50% of Africa, approximately 600mln people, do not have direct access to reticulated electricity and for Nigeria, we will not just talk about access to electricity but the juxtaposition of reliability, availability and more importantly affordability.
While it is true that the world will continue to need more energy, the world no longer needs it at all costs. The world now needs it Clean, Affordable and Available in abundance. This is the basic philosophy of the Energy Trilemma in the ongoing Energy Transition. The Energy Trilemma, is about Energy Security, Energy Affordability and Energy Sustainability which speaks to decarbonisation, focusing on the environment and indeed climate change. By implication of the Energy Trilemma, energy sources and energy systems have become quite topical, and fossil fuels have come under very sharp criticism to become the subject of many environmental and geopolitical policy debates. Despite the global outcry, recent events have proven that the global energy system is very fragile and delicate as evident in the fallout of the unfortunate war between Russia and Ukraine. It was projected that fossil fuels would take backstage, while renewables would take centre stage. However, the recent disruptions in the energy systems have kept Fossil fuels squarely back in the game and I believe this has also given Nigeria a new vista of hope and perhaps another opportunity to take advantage of our God-given natural resources. To satisfy the level of energy demand growth, it is expected that fossil fuels will continue to be dominant in the total energy consumed globally, with the balance in the energy mix coming from Renewables and Nuclear fission. This situation would speak to the Energy Trilemma with respect to needing more energy to meet the growing demand, as well as balancing the sustainability priority of ensuring that whatever we do today, in terms of our energy choices, we do not jeopardise the future existence of the next generation yet unborn. The energy transition and changes to energy mix would be largely regional, as there is no “one-cap-fits-all” solution. It is believed that the transition.
Dynamics will be largely influenced by market balance, between demand, and supply, based on resource availability, investments, technology, and geopolitics as key enablers. This is not a paper on climate change, but suffice it to add that climate change has driven more recent policies, governments’ speed of response, behaviours and geopolitics as we experienced in the many COP conferences, especially the last COP 28 in the UAE, where the world, for the first time officially acknowledged fossil fuels as the root cause of climate change and the delegates were short of putting pen on paper to sign that fossil fuels, particularly coal, oil and gas should be eliminated from the global energy mix by the year 2050! That would have created another round of panic in the global energy systems with a massive disruptive impact on energy stability. While I am a keen advocate of a cleaner world, I am also a firm believer that human survival has got to count for something. Our current reality makes the push for 100% elimination of hydrocarbons, especially oil and gas, from the global energy mix by 2050, a very wishful and difficult task; but this debate could fundamentally end up being a battle between “Idealism and Pragmatism”! Suffice it to add that with the Energy Transition question, a lot will continue to change with respect to the global energy mix and global energy systems, hence, little wonder why global energy integration has become intertwined with geopolitical power to the extent of becoming an instrument of economic and political weaponisation, disrupting the balance of the European energy systems and global interdependencies with attendant market volatilities. This has greatly challenged the status quo, and we may be seeing the redefinition and emergence of a new world order.
According to a leading authority on energy, geopolitics and global economy, Dr Daniel Yargin, in his recent work “The New World Energy Map”, opined that “The World order can be linked to global power play and that there are different kinds of power. One type is the power of nations that is shaped by Economics, Military Capabilities and Geography by grand strategy with calculated ambition, depending on who you talk to. The other power is the one that comes from Oil and Gas, Coal, Wind, and Solar against the power that comes from policies that seek to reorder the world energy systems to accelerate towards Net Zero with decarbonisation. Some environmental extremists will continue to unapologetically argue in support of Zero fossil fuel in the name of climate change.” We knew of a world order where almost everything about energy was dependent on specific regions in the world like the “Middle East” and geopolitics responded to this as balance of power and balance of economy. This is what makes the subject of this discourse both exciting and frustrating at the same time. It becomes even more intriguing when taken in the context of the current situation in Nigeria and by implication the Nigerian economy. Nigeria was known as the Giant of Africa not because of the great footballing exploits of our Super Eagles or because we have the largest population in Africa. I dare say we were respected, trusted and even revered because we were on very solid ground with respect to our economy and geopolitical presence, at least in the West African Region, if not across all of Africa. In our heyday, this was largely underpinned by the growth in our Oil and Gas sector by way of not just reserves but more about what we were able to produce.
The subject of what we have been able to do with the oil and gas revenues over time should challenge the true essence of our moral justification to continue to pretend to be the Giant of Africa. Last week, I stumbled on a viral video on social media, where the speaker took a long swipe at Nigeria’s relevance in Africa and why anyone should continue to take us seriously as “The Giant of Africa”. His argument is simply that all the indices based on which nations earn that kind of reputation are fast ceasing to be associated with Nigeria and we are becoming largely inconsequential to our neighbours. He argues that there is no need for countries like Niger, Senegal or Ghana to care about us, as in his critique, we have very minimal impact on them both socially and economically. The main point he made which resonated with me is the fact that he still believes that Africa’s development is mainly held down by Nigeria’s lack of agility and ability to grow economically, noting that for Africa to get it right, Nigeria must first get it right! Your thoughts would be absolutely in order if you are currently thinking where did we get it wrong or as some people would brutally say in this era of social media – who did this to us? Distinguished ladies and gentlemen, I will not join issues with the aforementioned panellist on why, when and who did what to Nigeria, but I would like to posit that with the disruption in the European Energy systems, the overall pace of the energy transition is slowing down in deference to survival first, as the world comes to terms with the reality that Net Zero is not necessarily Zero Fossil Fuels. That said, we need to deploy more advanced technologies to achieve a balance in the pursuit of cleaner sources of energy which is what has given Gas, by far more prominence and the bragging right to be labelled as both a Transition and Destination fuel. Gas is cleaner, gas is available, and gas is a ready response to the Energy Trilemma.
A 2019 study by the International Energy Agency on “The Role of Gas in Today’s Energy Transitions” concluded that switching to natural gas has already helped to limit the rise in global emissions since 2010. It also identified the power sector as offering an immediate opportunity for major additional emissions reduction, if the economic and policy conditions were to be right. The report, however, conceded that the contribution of gas to energy transition will vary widely across regions and sectors over time. As Nigerians, we have yet another golden opportunity to get it right once and for all! Nigeria is so blessed with natural resources – over 37 billion barrels of Oil and 210 TCF of Gas reserves, that puts us as Nos. 10 and 8 in the world respectively based on proven reserves. This was our place of pride, but we now know that the custodianship of reserves alone does not amount to anything beyond just potential, and Nigeria’s current situation is classic proof that, “potential” alone means nothing if you cannot harness the value from it. With the emergence of other resource-rich African countries like Angola, Mozambique, and more recently Senegal and Mauritania, we are no longer the darling bride of the market, against the backdrop of these emerging energy hubs offering better fiscals and simpler business environments to attract more investors. As they say, the dollar will always go where it will find the best value! As long as our oil and gas reserves remain in the ground, they will continue to face the fast-paced risk and threat, occasioned by the clarion call to move away from fossil fuels and by implication no added value to our economy.
Distinguished ladies and gentlemen, we need to use what we have to get what we want, and we can borrow a leaf from a country like Qatar, which was a predominantly fishing economy but has been able to transform into a global world player, boasting of one of the highest GDP per capita in the world, on the back of its gas reserves. The true value of our Oil and Gas is only about what we can produce and put to use locally or for export to earn the much-needed revenue, including foreign exchange, to rescue our economy. Gas is a game changer, and we must seek to be more deliberate and ambitious in a manner akin to what Qatar has done with its gas to be No.1 in the world of LNG at 77MTPA capacity; even though Australia with 89MTPA and the more recently United States of America with 100MTPA have both overtaken Qatar on the global LNG league table, albeit for the time being. It is important to put it on record that we have never deliberately explored for gas in Nigeria and that all the gas reserves we have today were accidentally discovered while actively exploring for oil. With our 210 TCF of gas reserves and scope to prove an additional 600Tcf, we have the potential to leapfrog to 800TCF and become No. 4 just behind Qatar, based on reserves. The reality is that we started our “Gas to LNG” journey as a means of arresting gas flares and creating a revenue stream for the economy, just two years behind Qatar. We grew our ambition to build NLNG Trains 1-3 and went on to add Trains 4, 5 and 6 between 2000 and 2006. During this period in which the 6 Trains were built, we were deemed the fastest growing LNG country in the world by adding a new LNG Train every 18 months, until 2006 after taking the Train 6 FID and then everything came to a halt – trapped by the politics of expansion, lack of political will and dilemma between the brownfield NLNG Train7 development and growing new capacity through green fields like OK and Brass LNG, which have recently gained some mention in the news.
We built a world-class facility in Bonny which has stood the test of time delivering world-class value to the shareholders and for Nigeria, to the extent that NLNG dividend has found its way into the Nigerian National budget as one of the most reliable sources of foreign exchange earnings. This yawning opportunity should have been obvious to us that we needed to focus and grow more of this reliable cash machine. It eventually took over 13 years between 2006 and 2019 before we took the FID for Train7. I was personally very excited and grateful to be part of that history following which we went ahead to sponsor the “Decade of Gas” agenda, working with the Ministry of Petroleum Resources and NNPC as the much-needed catalyst to jump-start our gas revolution, looking to create a conveyor belt of upstream gas developments and midstream LNG investments in Train 8, 9 and perhaps Train 10. While the Train 7 project will add about 35% capacity to move NLNG from the current 22MTPA to about 30MTPA, Qatar has also taken a very deliberate investment decision to add a whopping 30MTPA to its current 77MTPA to ensure it returns to No.1 when completed. Essentially, our whole NLNG capacity at 30MTPA by the end of 2025 when we commission Train 7, will be equal to Qatar’s incremental capacity project despite our massive gas reserves. Essentially Train 7 alone is no longer ambitious and we should now pull up our sleeves to actively pursue the development of our gas reserves as a matter of urgency and to borrow from the inspirational submissions of the IPPG chairman and the GCEO of NNPC during the 2024 NOG conference where they both posited that, Nigeria needs to declare a state of emergency in the oil and gas sector to be able to attract the much-needed focus and drive, to unleash our upstream oil and gas resource base, which will enable more midstream development projects including the now famous Floating LNG projects. We have to take advantage of the slim window of opportunity, occasioned by the growth in energy demand and the disruption of the energy systems in Europe.
We need a vibrant and active oil and gas sector with ambition anchored on commitment and agility to quickly convert our potential reserves to value for our nation. For Nigeria’s economy to grow and recover from the current weak position and revenue crisis, the oil and gas industry must succeed, being the largest contributor to national foreign exchange earnings. For Nigeria to grow and achieve sustainable cross-sectoral diversification and industrial catalysation, the oil and gas sector must grow, and we can confirm the correlation with a simple fact check on the times we have had economic booms being directly linked to when the industry enjoys a boom. It is thus, not out of place to say that the oil and gas industry is the nerve centre, if not the brain box of Nigeria’s economy. The fastest way of resolving the ongoing revenue crisis is to revitalise and galvanise the oil and gas sector by accelerating the implementation of the recently approved executive orders and the ongoing IOC divestments to restore confidence and stability in the industry. It should be said that we cannot achieve the much-needed industrialisation and national development without unleashing the potential of the industry. We need to scale up Domestic gas development alongside gas for export. With the recently launched national program on CNG, we need to be more deliberate to include LPG and grow the national domestic gas capacity by at least doubling the current gross daily production level to about 5bcf/d, in the near term. This will catalyse the power sector, unleash manufacturing by bringing down the cost of manufacturing by over 50%, thus stimulating the economy and creating much-needed jobs and employment through large-scale industries and SMEs.
Distinguished ladies and gentlemen, no nation can develop and grow its economy without electricity! In other words, the growth of a nation will be largely underpinned by the growth and availability of electric power which in our case means the upscaling of Domestic Gas supply to release the available gas-fired power plant capacity. We are currently struggling with grid power supply and universal electrification in Africa where about half of the people are without direct access to electricity and in Nigeria, we also struggle with the entire electricity value chain-misalignment between Power Generation, Transmission and Distribution. The total Spinning reserve or generating Capacity in Nigeria, for over 200mln people, is just about 20,000MW with only about 5,000MW available to the consumers. Whereas countries like South Africa with about 60 million people have over 50,000MW, Egypt has 60,000MW for 100mln people and Algeria has 22,000MW for 45 million people. Overall Egypt, Morocco, Tunisia and Algeria have nearly achieved 100% electricity access for their people through very deliberate and focused policies and investments. We are way below the standard of 1000MW per 1 million people! This simple rule of thumb would of necessity require that Nigeria should have a minimum of 200,000MW power generating capacity, which based on a very rough calculation would amount to needing about $10 billion per year for the next 20 years, to have a fighting chance of moving the needle on the much-needed catalyst for industrialisation and the emancipation of Nigeria’s economy. A lot can be said and debated about what it will take to unleash Nigeria’s economy and the much-needed industrialisation dream, but very little argument can stand the test of the fact that the availability and affordability of electricity are the main catalysts and perhaps the key energy solutions that will nearly fit all our issues including reducing corruption because technology can disrupt conventional models and ways of doing things and systems which are susceptible to corrupt processes and practices.
To underpin and future-proof our economy from the vagaries of the energy transition and the changing energy dynamics we need to attract massive investments for gas development. These massive investments and the ready availability of gas will not only galvanise our economy but will also energise it. This will change the narrative on the availability of power, availability of clean energy sources and availability of feedstock for gas-based industries. For all of these to materialise, we will need to deploy what we have to achieve what we want. I make this statement carefully, noting that no nation can stand alone against the backdrop of the Energy Trilemma and the ongoing energy Transition. Therefore, the key economic growth opportunity must be hinged on massive gas development, specifically on deliberate new Gas Exploration to rebase our gas reserves. Essentially the government needs to do everything including granting additional and far-reaching fiscal incentives and moratoriums over and above the PIA fiscals focused on gas development, infrastructure and cost reflective pricing as the main pillars on which our industrialisation will be anchored. The potential 5bcf/d local market for gas is huge and we must, therefore, domesticate a significant part of the gas development to drive our national economy, consistent with President Bola Ahmed Tinubu’s Renewed Hope and Decade of Gas agenda to underpin the economy with gas by 2030. This focus on gas via the recently approved executive orders on NAG development and the structural improvement of our ministerial portfolios to include the “Minister of State for Gas” is definitely in the right direction, however, we may need to be more bullish to adjust our ministerial portfolios to focus on integrating Oil, Gas and Power but to also consider restructuring or consolidation to have a Minister of Energy to enable the full integration of the Oil, Gas and Power Ministries.
With the fierce urgency of now, developing and producing our oil and gas reserves has got to be the main agenda going forward!! Suffice it to add that, we will need investors, and the investors would need to satisfy themselves that their investments would realise sufficient profitability in the face of mitigable risks, hence, they would require assurances and clarity on fiscal stability, sanctity of agreements and enabling regulatory policies to enjoy competitive returns in a guaranteed market like ours. That said, I am not unaware of the attendant challenges and difficulties in attracting finance to fund the industry against the backdrop of some tough choices already made by key financial institutions in the Western world. This should spur us to develop and seek alternative homegrown solutions including looking to be part of the solution to the energy crisis in Europe, as well as reaching further to the East for new sources of funds even if we have to use the reserves as collateral. We should also look inward, taking advantage of the great work that the Afrexim Bank is doing to keep Africa going by supporting new oil and gas investments. Afrexim Bank is the main leader in African projects financing offering homegrown solutions to enable Africa to take a stand against the international castigation of Oil and Gas. The Africa Energy Bank recently located in Abuja will also be a key enabler and catalyst to accelerate our gas development opportunities. This would ensure the security of supply thereby giving us a fighting chance of being able to take advantage of the growing global energy demand and energy gap before our oil and gas reserves become “trapped in transition” to make the harsh reality of the quote by the former Minister of Petroleum and Mineral Resources of Saudi Arabia, Ahmed Zaki Yamani, who said: “The Stone Age did not end for lack of stones, and the Oil Age will end long before the world runs out of oil”, but let me bring it even closer home with a key reminder that “There is still a lot of Coal in Enugu”.
Distinguished ladies and gentlemen, the moment of truth is upon us as a nation and we cannot sit on our hands and watch while the world moves on, whilst we continue to play the ostrich because we have 37Billion barrels of oil and 210Tcf of gas reserves which as I said earlier remain as just potential and not value adding as long as these reserves remain in the ground. The existential challenge to surmount the trilemma and keep our economy afloat will require a very deliberate focus on gas as Qatar has demonstrated with a clear and replicable template for us to copy. This could well be the golden opportunity for us to leapfrog and unleash our economy, making it more robust, sustainable and resilient to survive the vagaries of the energy transition and the fast-changing energy mix.
Distinguished ladies and gentlemen, we have plenty of gas to make this happen; Plenty of gas to unleash our economy!
• Gas is Power as in Electricity
• Gas is Food as fertiliser for Agriculture
• Gas is Petrochemicals as feed stock
• Gas is Industrialisation as catalyst for SMEs
• Gas is Employment as in LPG for cooking
• Gas is Transportation as in CNG
• Gas is Political and economic Power
Indeed, gas can be everything and anything we set our minds to make it! Please let me finish with an old quote of mine, that says “Nigeria has ridden on the back of oil for over 60 years, it is perhaps now time for Nigeria to fly on the Wings of Gas”!
Distinguished ladies and gentlemen, It is time for gas, It is time for Nigeria! Congratulations, Sir Dr Don Ettiebet – I must say 80 looks good on you sir!!
Thank you for listening.
*** As delivered by Engineer Chief Tony Attah (FNSE)
Independent Energy Consultant
