NIGERIA HAS ONLY 27 YEARS TO MAXIMISE ITS OIL AND GAS POTENTIAL

 Delegates wrapped up the COP28 conference in Dubai on Wednesday, December 13, with an agreement to shift away from fossil fuels by 2050. 

The concluding document encourages nations to discontinue the use of fossil fuels, stopping short of specifying a phased-out approach.

nairametrics.com  

At the time of the final text presentation, COP28 president Sultan Ahmed Al-Jaber said:

“Together we have confronted realities and we have set the world in the right direction. Many more oil and gas companies are stepping up for the first time on methane and emissions. And we have language on fossil fuels in our final agreement for the first time.”

Within this framework, the term "fossil fuels" includes coal, traditional biomass, oil, and gas. It's noteworthy that at COP28, leaders pledged to intensify actions in alignment with the objectives of the Paris Agreement.

Over 100 countries committed to tripling renewable energy output, launched the Loss and Damage fund, and prominent oil and gas companies vowed to cut direct emissions and tackle methane emissions. Additionally, a declaration was endorsed by over 100 nations to address the influence of food and land-use alterations on carbon emissions.

Now to Nigeria

Currently, Nigeria heavily depends on its oil and gas industry, which is a fundamental aspect of its economy. However, in light of global conversations about emissions, the country is actively exploring a transition to an economy driven by gas. The Decade of Gas Initiative and the Nigeria Gas Expansion Program (NGEP), introduced by the Buhari administration, are crucial steps in this direction, although it's important to highlight that both initiatives are not fully operational at this time.

Moreover, a few months ago, the Tinubu administration approved Compressed Natural Gas (CNG) as a practical substitute for petrol after the removal of subsidies. This approval stemmed from a deal between the Nigerian National Petroleum Company Limited (NNPCL) and Nipco Gas Limited, set to commence operations in 2024.

Given the consensus achieved at COP28, Nigeria has approximately 27 years to completely transform its economy, moving away from its current reliance on oil and gas. Yet, concerns emerge about the ramifications of this agreement. Kayode Oluwadare, the Regional Energy Partner and Director at Energy Compact in the UK, emphasized a norm in the energy sector where investors seek to recoup their investments within five years in feasible energy ventures.

If investors adopt a long-term outlook towards Nigeria's gas industry, how will they adjust their business strategies to conform to the latest COP28 directives? Given the reluctance of foreign investors to engage in oil-based investments, particularly with various global banks discontinuing funding for oil-related projects in sub-Saharan Africa, caution is likely to prevail.

Oluwadare notes that the reluctance to invest in African oil projects is expected to increase following the COP28 final text, except for nations like China, actively engaged in oil and gas initiatives across the continent. Notably, China's PetroChina supports the Niger-Benin pipeline, slated to begin exporting 90,000 barrels of crude oil daily in January 2024 under military governance.

In light of this situation, a crucial question arises: How can Nigeria and other sub-Saharan African countries successfully transition away from fossil fuels by 2050, despite being COP28 signatories? This transition presents a significant challenge, particularly given the region's historical dependence on these resources for economic sustenance.

Nigeria should have a clear understanding of its current situation.

COP28 youth delegate, Seyifunmi Adebote, told Nairametrics that COP28 has been described as successful and like many previous COP, it has produced a final text agreed upon by all parties dubbed the UAE Consensus. He referred to article 28D in the final text stating that parties will transition “away from fossil fuels in energy systems in a just, orderly and equitable manner, to achieve net zero by 2050 in keeping with the science.”

He said:

“Looking at the place of Nigeria, being an oil and gas nation, what is more important is for us to be clear about what ”just” and ”equitable” means for Nigeria, as well as other developing countries. As President Tinubu said in his COP28 speech, Nigeria seeks to shift from oil and commits to reducing emissions by moving to cleaner energy sources, but this is only possible if developed nations finally honor their commitment to providing the needed finance and technology to help promote development.”

“In essence, Nigeria like many other oil-dependent nations may have agreed upon this text but except there is a tangible commitment from developed countries, I maintain that from the political demeanor of the current government, it is clear, maybe sadly, that Nigeria will remain oil-dependent and at best, ensure her development through the improved use of natural gas, in line with the existing ‘decade of gas’ policy.

What Seyi means by a commitment from developed countries

In 2009, at the 15th Conference of Parties (COP15) for the United Nations Framework Convention on Climate Change (UNFCCC) in Copenhagen, Denmark, developed nations committed to mobilizing $100 billion annually by 2020. This financial pledge, designed to aid climate initiatives in developing countries, hinged on substantial mitigation efforts and transparent execution. The objective gained formal recognition at COP16 in Cancun and was reaffirmed and extended until 2025 during COP21 in Paris.

Developed nations have yet to fulfill their commitment, as highlighted in the COP28 final text on December 13 by Sustainable Energy for All. The document underscores a significant gap in addressing financial support for climate action, emphasizing the lack of clearly outlined objectives for assisting developing nations in their energy system transitions. 

According to SEForAll, annual investments of $2.8 trillion in clean energy across emerging economies are crucial to meet the Paris Agreement goals. Despite this urgency, the current Global Stocktake calls for developed countries to contribute $100 billion annually, falling considerably short of the financial support needed for developing nations. 

The Energy Transition 

Energy Law expert George Amos notes that Nigeria's 2060 target for carbon neutrality under the Energy Transition Plan requires expedited implementation, suggesting a focus on diversification through investments in renewable sources like solar, wind, and hydroelectric power.

He said:

“A lesson for this can be taken from Germany which uses its “Energiewende” policy to make substantial investments in wind and solar energy sources. Infrastructure investments and adjustments can also be made to boost reliance on renewable technologies, an example being Norway’s use of electric vehicles which has reduced reliance on fossil fuels in the transportation sector.

“Intellectual collaborations and partnerships with developed countries that already have a clean energy structure will guarantee access to funding, technology, and experienced manpower for success.”

Amos highlighted Nigeria's heavy dependence on fossil fuels, with a daily crude oil production capacity of around 1.2 million barrels per day (excluding condensates). The nation heavily relies on non-renewable energy, particularly for critical sectors like power generation, posing a significant challenge for transitioning to renewables, given Nigeria's predominantly unindustrialized state.

He underscored that the final COP28 agreement places Nigeria in a precarious position due to the proposed departure from fossil fuels by 2050, bringing substantial economic and financial implications. Nigeria faces risks to its human capital, with potential job losses requiring workforce retraining for a shift to the renewable energy sector.

Additionally, he warned that without proper diversification, a distant reality 27 years before the deadline, Nigeria might experience a revenue decline, potentially increasing economic volatility. Amos further noted that oil-producing regions like the Niger Delta could face social disruptions and challenges such as economic uncertainty.

However, he offered an alternative perspective, reasoning that the mandated shift to renewable energy holds promise. Transitioning to cleaner energy sources has the potential to enhance public healthcare by reducing air and water pollution associated with fossil fuel extraction and usage.

source: nairametrics.com 

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