Economy: Fear grips Nigeria, others as oil goes out of fashion

Fossil fuels are fast going out of fashion. No fewer than 10 countries, including India, France and United Kingdom (UK), have set dates to end the use of petrol and diesel-powered cars, an indication that hydrocarbon fuels are losing grip as leaders in the energy mix. EMEKA UGWUANYI examines what the trend portends for Nigeria and other countries that have oil as the livewire of their economies.

OIL, the mainstay of Nigeria’s economy, is under threat. The product that accounts for over 90 per cent of the country’s Foreign Exchange (forex) earnings is fast going out fashion. Many countries have announced plans and dates to exit use of petrol and diesel powered cars.

Such countries include: India, France, Britain, Norway, Austria, China, Denmark, Germany, Ireland, Japan, The Netherlands, Portugal, Korea and Spain. No fewer than eight states in the United States (U.S.) have also set targets on electric cars.

The growing support to ditch gas and diesel cars for electric and hybrid vehicles or cars that run on cleaner fuels, especially in developed and heavily populated countries, is raising concerns about the future of hydrocarbon as a key energy source.

Most of the countries itching to switch to electric-powered cars and auto fuels with minimal environmental threat are committed to saving the global environment from hazardous emissions.

Some stakeholders in the oil and gas industry see the threat as real. Others believe that hydrocarbon fuels will continue to play major roles in the global energy mix in the foreseeable future. There is, however, a consensus that countries that survive on oil and gas revenues should start looking for alternatives as fossil fuels’ future has begun to dim.

Despite the optimism about the prospects of oil and gas as essential energy sources, revenue earners and the belief that the prospects will linger for long, managers of the economy have been advised to think out of the box.

Those who offer such advice said that finding other means of sustaining the economy outside earnings from oil and gas has become imperative.

According to them, the domineering place of hydrocarbon in the energy mix is beginning to wane and may not be reclaimed again. The world is calling for drastic reduction in emission of pollutants into the environment.

The clamour is to save the world from devastation by greenhouse gases. In response to these calls, the identified countries plan to ban cars that use petrol and diesel.

Describing the development as unfortunate, Mr. Dolapo Oni, Head of Energy Research Desk at Ecobank Plc, said the planned shift from fossil fuels is coming at a time Nigeria has not optimally tapped its hydrocarbon resources.

To him, a reasonable number of oil-producing nations including Nigeria, have harvested much resource and saved enough from oil incomes to build infrastructure and expand other sectors. They also have huge cash in their Sovereign Wealth Fund (SWF). Therefore, Nigeria has to aggressively extract as much of its oil and gas as possible before the world leaves these resources behind.

According to him, Nigeria missed a lot of opportunities it could have tapped from oil and gas production. He said the nation ought to have been producing more than its current output.

Besides, the low production, he noted that Nigeria has been producing oil without investing in exploration for new fields and reserves.

He said: “Even if it entails Nigeria exiting its membership of the Organisation of Petroleum Exporting Countries (OPEC) to produce as much oil as possible, make more money and lift the economy, let it do that now.

“We need to explore and get more reserves but the major thing we need at the moment is to invest to produce more. A country like Nigeria needs to produce a minimum of four million barrels of oil per day (bopd) because if you look at the amount of infrastructure investment we need to make, the amount of investments that have to go to others sectors, which have to be funded by oil, we are not producing enough to achieve that.

“What we need to do at the moment is to encourage investors to come and invest in oil fields’ development.  The bulk of the reserves we have at the moment as a country are in the hands of the International Oil Companies (IOCs). They are the ones we need to make the market more meaningful for to be able to produce more.

“But as a member of the OPEC, we have a problem because we cannot push our production beyond 2.5 million bopd. That is what our quota is. But, where that is a less issue is that what other OPEC members do is invest in refineries in other countries so that whatever quantity of crude taken to these refineries in other countries where they have investment is not counted in their OPEC quota. So, there are ways to get around it and in the worst case scenario, we leave OPEC, try and push out more barrels.

“We need to ramp up production so that we can make all the money we need to make from oil before the world moves from oil. Other major oil producing countries such as Saudi Arabia is trying to move away from oil in 10 years. It doesn’t mean they will not be producing oil but oil is not going to be a major source of foreign exchange (forex) for their economy but in Nigeria it is still about 90 per cent.”

Amidst the diminishing value of hydrocarbon fuels as key energy sources, Oni faulted ongoing efforts by the National Assembly to amend the Act Establishing the Nigeria Liquefied Natural Gas Limited (NLNG).

He described proposal to amend the Act as ill-timed considering the state of the economy and the dwindling value of oil and gas.

According to him, the lawmakers should be concerned about how to grow the economy, create more jobs, and build more Liquefied Natural Gas (LNG) companies, expand the existing plants and not to stifle the existing and functional ones.

He said: “We need to monetise our gas. We need to build more LNG companies, which can only be achieved through attraction of investors in all the value chain of the oil and gas sector.

“The National Assembly has to support inflow of investments to develop more LNG plants and monetise our gas. The lawmakers have to be more concerned with actualising the Olokola LNG (OKLNG) and Brass LNG that have been on the table for about 17 years, support realisation of NLNG’s Trains 7&8, which is expected to create 18, 000 jobs and attract multi-billion dollar investments than pursuing payment of three per cent levy to Niger Delta Development Commission (NDDC).

“We, as a country, are losing our gas export window because right now, LNG plants are being developed around the world, in countries such as Mozambique, Tanzania, Cameroon, Angola, and Equatorial Guinea and eventually the demand for our gas will be less, and normally supply will affect the pricing of the LNG in the future.”

The President, Nigerian Association of Petroleum Explorationists (NAPE), Abiodun Adesanya, echoed Oni’s position. Agreeing that Nigeria has not taken adequate advantage of its hydrocarbon resources, Adesanya expressed concern over the future of oil, adding that the way technology is advancing, it may not be a surprise that hydrocarbon fuels may be outdated or useless with time.

He hinged his prediction on the fact that hydrocarbon is made up of hydrogen and carbon, while water is made up of hydrogen and oxygen. Adesanya identified carbon and oxygen as the difference in the two elements, saying  therefore, it may not be strange that, one day, vehicles may run on water.

Adesanya said: “It is true that in near future, crude oil may not be as attractive as it is today. Research and development never stops. Don’t forget that hydrocarbon is a combination of hydrogen and carbon. And water is hydrogen and oxygen. Now, hydrogen is common to both of them.

“There is a research going on to see how to begin to use water to power generators and cars. If that research hits the market with a breakthrough, that will be the end of reliance on and need for hydrocarbon.

“What we are saying essentially is that Nigeria has infrastructural and developmental deficits.  Let the country generate enough revenue from oil and develop its infrastructure. Let’s become a developed country and let quality of lives increase. Let’s use our money to diversify the economy from over reliance on oil and gas. This is because if oil has become suddenly unattractive, something else should be attractive and Nigeria has enough of all those opportunities. All we need to do is to use what we have right now to get what we need for future development.”

The Chief Executive of Royal Dutch Shell, Ben van Beurden, shared in the views of those that believe oil and gas is losing its major place in the global energy mix.

The oil chief confirmed that world’s oil consumption could peak as early as the end of the next decade as electric vehicles become more popular.

He told Reuters that the planned exit from use of diesel and petrol as fuel for automobiles in United Kingdom (UK) and France is a welcome development, adding that he would opt for an electric car as his next vehicle purchase.

Beurden: “I think they are very welcome and needed announcements. Under the Anglo-Dutch company’s most aggressive scenario of battery-powered vehicles replacing traditional internal combustion engines, consumption of oil will peak in the early 2030s.

“Also with a high use of biofuels in the mix, demand could peak by the late 2020s. However, even if the UK, France and the Western world in general will all go to 100 per cent electric vehicles, that would be great, but that wouldn’t be enough. We still have less advanced economies that cannot do that switch.

“Nonetheless, oil will still be needed for decades to come as it is likely to remain the main fuel for planes, ships and heavy trucks.”

As the second largest oil and gas firm in the world, Beurden was optimistic that the steps being taken to curb use of hydrocarbon fuels by cars will not seriously affect his company.

“With the incubation and changes we are making in the new energies’ business and also in our existing business focusing on the best possible projects in LNG, gas and oil and petrochemicals, we can remain relevant,” van Beurden said.

Shell launched a new energies division last year through which it aims to invest up to $1 billion a year by 2020 in renewable energy, biofuels and hydrogen. The company has been producing oil since 1907.

The President/Director-General & Country Chair, Shell Gabon, Osa Igiehon, corroborated Beurden at the annual conference of the Society of Petroleum Engineers (SPE), Nigeria Council, in Lagos, said renewable energy could triple by 2050, but we will still need large amounts of oil and gas to provide the full range of the energy products we need.

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