P.S – This should not be a trade-off but lack of investments in non-oil revenue has led Nigeria into this prisoner’s dilemma it currently faces.
“The number of countries announcing pledges to achieve net-zero emissions over the coming decades continues to grow. But the pledges by governments to date – even if fully achieved – fall well short of what is required to bring global energy-related carbon dioxide emissions to net zero by 2050 and give the world an even chance of limiting the global temperature rise to 1.5 °C.”
This was the opening paragraph from the extract of the much-debated IEA report that came out last week. The IEA has come out in full force to weigh-in on countries who have not aligned their energy plans to achieve net-zero by 2050.
The International Energy Agency has also called for an end to oil exploration and the development of new fields while outlining a route to net zero emissions by 2050 in which coal demand falls by 90 per cent, gas demand falls by 55 per cent, and oil demand falls by 75 per cent.
Certainly, Nigeria would be affected by a lot of these ‘recommendations’ as the country is heavily reliant on its oil and gas industry. A day after the report was released, Nigeria’s President Muhammadu Buhari tweeted about his meeting with the Chairman and CEO of Total, Patrick Pouyanne, and stressed the fact that Nigeria is more a gas country than a crude oil country. The tweet further collaborated that the Nigerian administration is laying a solid foundation for Nigeria to realise its full gas potential.
In contrast, energy giant, Shell is in talks with the Nigerian government to divest onshore oil stakes as the company has acknowledged its green strategy is complicated by its spill-prone operations in Nigeria, where it has been pumping out oil for half a century.
The question now is how does Nigeria cope with a route that sees coal demand fall by 90 percent, gas demand falls by 55 percent, and oil demand fall by 75 percent by 2050?
We start with coal. According to a report by Energy central, the Nigerian Government plans to add six coal power generating plants to the 23 already existing plants by 2037. The paradox of expecting new coal plants by 2037 when the IEA seeks a 90% fall in coal demand by 2050 has raised the question of if Nigeria will pick National interest over Climate policies.
Nigeria holds large coal reserves, estimated to be at least 2 billion metric tons and the federal government plans to include coal to diversify resources to improve the country’s poor power sector to prospective coal investors, and would, in turn, boost the local coal industry.
Furthermore, how will Nigeria survive with a drop in demand in Oil and Gas? Recently, Bloomberg put out an article highlighting how the smaller countries which rely on outside investment to drive their industries, will suffer the most economic damage if oil companies heed the IEA’s recommendation. However, there has been a backlash by multinational oil companies over the IEA report. The CEO of BP has referred to the report as a “scenario on a piece of paper”, while Shell’s shareholders have voted for a more ambitious target on reducing carbon emission.
In another report by GlobalData, “Africa Oil and Gas Projects Outlook to 2025 – Development Stage, Capacity, Capex and Contractor Details of All New Build and Expansion Projects” – Africa is expected to witness 428 oil and gas projects to commence operations between 2021-2025.
Among the countries involved, Nigeria leads the upcoming projects’ landscape in Africa, accounting for 23 percent of the total projects expected to start operations during the 2021 to 2025 period. Also, according to the Department of Petroleum Resources (DPR), the regulatory agency is conducting ongoing bid rounds for 57 marginal oil fields on behalf of the Federal Government.
With all this coming to the fore, this would present a tough challenge for Nigeria’s government in transiting to the template IEA has set.
The IEA is also seeking a reduction in the supply of oil as seen in the chart below.
OPEC’s response to the report seeks to protect the vested interests of oil producers who might be affected by the recommendations.
Energy security for her citizens and potential revenue will be on the front burner of Nigeria’s energy plans. It would be difficult to virtue-signal net-zero emission by 2050 for a country that does not have resources to provide alternatives in providing energy. The scenarios presented in the report would not favour a country that has been heavily dependent on oil revenue for 90% of its gross earnings.
Nigeria, however, needs to diversify from oil and gas as it would not be sustainable in this ‘ESG-driven’ world we live in. The Nigerian government should take a cue from the United Kingdom and the United States in their plans on going green and creating green jobs to offset the potential losses from the oil and gas world.