Global energy transition presents Nigeria with mixed fortunes

…as oil majors bet big on renewables

Depending on how Nigeria deliberately positions amid the global effort to reach a low-carbon future the country could take advantage and expand its economy or miss the train as big oil companies bet on renewables.

Ten states, including Massachusetts, New York and California, have set a goal of a zero-carbon economy by 2050. The European Union has adopted a decarbonisation strategy to achieve a net-zero economy by mid-2020 too. Leading private firms and organisations such as oil majors are committing to net zero operations by 2050.

With Joe Biden in the White House and should Democrats hold sway in the U.S. senate major initiatives calling for the US economy to be net zero by mid century will be proposed major initiatives calling for the U.S. economy to be net zero by mid-century will be proposed, speeding up the energy transition.

What this means is that demand for oil will fall, with oil prices collapsing and staying low in the medium to long term.

Since oil is Nigeria’s biggest foreign exchange earner (at over 80%) and accounts for at least half of government revenues, low oil prices imply that Africa’s largest crude oil producers and exporters will struggle to meet developmental objectives.

“We need to position ourselves in the renewable energy space. This requires being deliberate and planning. The Nigerian National Petroleum Corporations should start seeing itself as an energy not oil and gas company,” Adeola Adenikinju, professor of petroleum economics, director, Centre for Petroleum Energy Economics and Law, University of Ibadan, Ibadan told Businessday.

Adenikinju said the best deal for Nigeria now is to deliberately link the oil and gas sector to the rest of the economy. This is because Nigeria is in reality a crude oil-exporting country and not an oil and gas economy. It is time to look beyond the rent oil offers to seeing oil and gas as developmental tools.

When oil and gas become developmental tools, they will spin-off multiple industries that would use these resources as feedstock, addvalue and create hundreds of thousands of jobs if not millions of jobs for Nigeria’s teeming youth. At the moment, both energy resources are treated largely as export, commodities with limited domestic applications. This is a sure way for Nigeria to put these energy resources to developmental use as the world moves away from fossil fuels.

Already, both national and international oil companies are betting on renewables. The Norwegian stateowned multinational energy company, Equinor has one of the most ambitious green strategies of them all.

Of the $18 billion that the super-majors plan to invest in clean energy over the next five years, more than half will come from Equinor.

In fact, when one removes Equinor from the equation, Big Oil’s renewable investments will actually decline over the next three years before even factoring in the industry-wide deep capital expenditure (capex) cuts due to the Covid-19 pandemic.

Similarly, Spain’s oil major Repsol plans to reduce its oil business operations and increase five times its renewable energy portfolio by 2030 as part of its latest strategic plan unveiled on Thursday.

In the current year alone, Total plans to double its gross global renewable energy capacity to 6 gigawatts (GW) from just a year ago, with the company playing the lead role as the developer and owner of the renewable energy assets over the longterm.

For instance, Total has lined up an 800 megawatt (MW) solar project in Qatar where it will own a 49 percent stake in the project when it is completed in 2021.