SYNOPSIS OF THE PRESENTATION BY OMOWUMI ILEDARE, PROFESSOR EMERITUS IN PETROLEUM ECONOMICS, LSU CENTER FOR ENERGY STUDIES AT THE SECOND EDITION OF THE DR DRAN FAWIBE ANNUAL LECTURE SERIES, UNIVERSITY OF IBADAN, NIGERIA, JULY 9, 2024.
The global energy system is more likely than not to undergo a fundamental restructuring through decarbonization. The rapidity of the decarbonization process will create challenges as well as opportunities worldwide, including Nigeria. Unfortunately, there exists presumptive empirical evidence to suggest that key and most dependable global primary energy sources, fossil fuels are the primary source of greenhouse gas emissions. Consequently, fossil fuel consumption is the major cause of global warming. It is natural, therefore, to assume that the fight against climate change must begin with the drive to end or reduce as much as possible, the use of fossil fuels, which is a call to disrupt the energy landscape in a typical petroleum-dependent economy, like Nigeria. So, the quest to either stop or drastically reduce the use of fossil fuels as the primary energy source qualifies as a disruption in the dynamics of the evolving global energy landscape and outlook. Nigeria has emphatically set 2060 to attain the net-zero target, but time will tell.
Indeed, the global urgency and determination to shift the global energy supply mix towards renewable energy systems because it has a unique attribute to produce energy with no associated emission of greenhouse is glaring. That renewable energy offers a clear path to net-zero emissions is not conjectural but the transition speed to zero carbon emissions is conjectural and cannot be homogeneous. A historical review of renewable energy contribution to the primary energy mix shows the extent of the daunting task ahead and why proffering a uniform approach to effectively mitigate global warming by mandate is less likely to succeed. Nigeria must learn lessons from the global dissimilarity in the journey to net-zero. The forces shaping the global energy transition trend to 2050 and the key parameters surrounding the transition are not deterministic. Key players in the global energy supply dynamics have diverse interests. Attaining the global transition goals requires a heterogeneous approach rather than a homogenous strategy. The one thing held in common among all energy stakeholders, worldwide, is enhancing the quality of life of human beings, which petroleum has sustained over, at least, my lifetime. Nigeria may not farewell disrupting its Energy landscape for environmental sustainability at the expense of energy equity and security to drive its economy with energy affordability, accessibility, assurance, and applicability.
Interestingly, tackling the global warming phenomenon requires strategic thinking to find the best transition pathway from fossil fuels to non-fossil fuels keeping in perspective the energy trilemma dimensions—energy security, energy equity, and environmental sustainability on one hand. On the other hand, Nigeria must keep in perspective the energy-economy-and-environment nexus. This implies finding the best pathway to disrupt the energy landscape that safeguards energy affordability, availability, acceptability, and accessibility, eventually, is critical. Disrupting the energy landscape in Nigeria, rapidly, without strategic thinking, may more likely than not lead to a high energy poverty index, a diminished economy, and a defaced environment. It is not conjectural that a disruption in the global energy landscape, apart from being a threat to balancing the energy trilemma dimensions may upset the global energy dynamics, the economy, and the environment for best sustainable development.
In fact, disrupting the energy landscape in a petroleum-dependent economy like Nigeria, implies a rapid increase in the use of renewable energy, all things being equal, translating to a decrease in the use and production of fossil fuels in Nigeria. This decrease will be a loss to agents in this petroleum-dependent economy and with a high incidence of economic vulnerability. Also, rapid energy transition, which really is a form of energy landscape disruption may also increase the volatility of petroleum prices and therefore increases the vulnerability to either energy equity, economic security and or environment, respectively in Nigeria. Technology adoption offers a pathway to perfect energy supply mix and natural gas eases the desired reduction of carbon emissions with less unintended consequences in the journey to net-zero carbon emissions target in 2060 for Nigeria.
As mentioned earlier, carbon dioxide emissions are the primary driver of global climate change and to avoid the worst impacts of climate change, the world needs to urgently reduce emissions. But reducing emissions does not necessarily imply reducing oil and gas extraction to quite a lot of regions worldwide. Sharing equitably the responsibility between regions, countries, and individuals has been an endless point of contention in international discussions. The reasons for the contention are obvious and they anchor mostly on energy security, energy sustainability and energy equity aptly described as energy trilemma. Some regions are more energy secure than others, while energy equity in terms of affordability and accessibility leaves much to desire in some regions. Yet the need for environmental sustainability cuts across the globe even though contributions to carbon emissions differ significantly, across the regions. Africa, for example, contributes cumulatively to date, less than 3%, of the aggregate CO2 emissions.
Nigeria, which is energy-poor has anxiety, and rightly so, that abandoning its fossil fuels for renewables, will more likely than not, reduce the ability to supply reliable and affordable energy to households and commercial users. This makes Nigeria very vulnerable in terms of energy equity. Nigeria is among the nations with the lowest average consumption (15 GJ/head) and its people still use some form of wood fuel as their primary source of domestic energy. Physical and economic access to modern energy sources, despite oil and gas production over the years, remain elusive, buttressing home the fact that having resources without being resourceful can be detrimental to energy equity and security eventually. Adopting energy transition requires a lot more strategic thinking and apolitical planning than sentiments or mantras, like the decade of gas mantra, in Nigeria.
Invariably, then, energy landscape disruption demands strategic thinking and planning keeping in perspective the economy, environment, and energy sustainability, each of which cannot exist in isolation. Nigeria cannot because of environmental sustainability abandon cheaper power sources to keep energy affordability. Neither can it adopt more expensive renewable energy, which promotes environmental sustainability. Such choices seem like classical energy sustainability and equity quandary. Additionally, Nigeria with a poor energy infrastructure and low technology, can it afford to import expensive sources of energy and compromise energy affordability? This allows the importation of more affordable sources, which compete with ambitions for more sustainable energy. This is also a classic rapidity versus adaptability quandary in this energy landscape disruption discourse. Nigeria must not take the baits of aids and grants to abandon its abundant resources in the race to reach environmental sustainability at the expense of energy security and equity.
Thus, an energy mixed roadmap with natural gas as the fuel of the future in Nigeria seems to be worthy of exploration. Gas-to-power strategy along with hydroelectricity expansion, and renewable energy policy is a good step that Nigeria has taken. In fact, the design of the Nigeria fiscal framework in the Petroleum Industry Act 2021 lends credence to the decade of gas mantra of the Federal Government in Nigeria. The three classical instruments, taxation, the royalty scheme, and incentives are highly favourable to natural gas development for domestic consumption. The infrastructure fund for midstream natural gas investments supports the shift. Of course, the government in Nigeria still struggles with petroleum subsidy removal, which is antithetical to a smooth energy transition because subsidies crowd out private investment significantly and make ineffectual Forex management and the aggregate money supply. Of course, removing oil subsidies qualifies as a good disruption in the energy landscape in Nigeria.
To balance energy security in terms of current and the future at a reliably affordable price and energy sustainability in terms of high environmental quality in production and use of energy is a laudable strategy. Additionally, energy mix enhances best resource depletion path limiting high price volatility and shocks to the global economies. For Nigeria with a cumulatively low emissions so far estimated at less than 1.2 percent of global emissions in a cumulative sense and abundant natural gas resources, disrupting the energy landscape toward gas is not complicated though it requires a transformational leadership mindset.
Further, energy mix strategy offers Nigeria the opportunity to improve the growing energy poverty even as technological advancements help to mitigate carbon emission from oil and gas production. This is ongoing right away with the emerging carbon capture and use technology. Adding renewables to energy resources at a pace not detrimental to energy equity is good; the comparative advantage of natural gas offers a complementary option. The unsustainable foreign aid or grants mentioned earlier must not limit natural gas development. Additionally, energy mix protects countries from energy supply vulnerability and strengthens energy security. It also protects us from market risks such as fluctuations in supply or pricing. Energy mix reduces the risks posed by political unrest or natural disasters and the development of renewable resources such as solar and wind power diminishes the threat of energy scarcity.
Disrupting the energy landscape towards renewable in Nigeria rests on government because it is policy issue. Government must set the best speed for transition agenda and cooperates with regional allies. Energy institutions with frameworks to attract investment by rewarding entrepreneurship and innovation and constraining inefficiency and waste can help. Public-private partnership adoption in finding and developing energy sources based on comparative advantage is desirable. The type of investment fund required for the energy mix strategy that includes petroleum must come from within. The proposed Africa Energy Bank with headquarters in Nigeria is a noble idea.
Finally, transformational leadership in the energy sector in Nigeria is essential to play in the evolving global energy landscape. This means transactional leadership with Esau’s syndrome must not hinder finding appropriate solutions to energy landscape challenges. The management team must have operational control skillsets and own the capability to be an effective manager of the energy workforce. Professional promotion must be apolitical among the cadre. The energy global landscape calls for a rekindling of engineering education in Nigeria. Further, it is important to rekindle technical education. The relevance of technical education for sustainable national and economic development is not conjectural. Energy is life, its consumption drives prosperity and sustainability. Nigeria must go after a robust energy mix driven purely by economics, technology, public policy, and good governance. The evolving through Strategic thinking, which disavows political expediency, Nigeria needs an energy transition framework that balances energy security, equity, and sustainability with a transparent and accountable mindset.