By Yange Ikyaa
The removal of government subsidy on premium motor spirit (PMS) in Nigeria has attracted public outcry, as the price of the commodity has moved up threefold, causing transport fares to move up and other items also to rise in price.
However, this also comes with a strategic advantage in terms of alternative industrial opportunities in the area of providing low-carbon energy solutions. And since the transportation industry is the largest consumer of PMS, which has now become so expensive and cost-prohibitive, this period may be the best time for electric vehicles or those that are gas-powered to dominate the space and establish themselves in the nation’s transport market for good.
So far, Nigeria has been lagging behind in terms of ramping up its number of eco-friendly vehicles on its roads, which means that the country must do more in order to catch up with its peers elsewhere in the world.
For example, Saudi Arabia has said it will begin producing hydrogen fuel in 2024 for buses and trucks, according to a recent comment by the Chief Executive Officer (CEO) of Neom Green Hydrogen Company, Dave Edmondson.
Earlier in June, the Company which is an equal joint venture by ACWA Power, Air Products, and NEOM said that it had reached the financial close on another part of its hydrogen ambitions, the world’s largest green hydrogen production facility, which will need total investments of up to $8.4 billion.
That larger project is being financed with $6.1 billion in non-recourse financing from 23 local, regional,and international banks and financial institutions. The hydrogen mega-plant will integrate up to 4 gigawatts (GW) of solar and wind energy to produce up to 600 tons per day of carbon-free hydrogen by the end of 2026, in the form of green ammonia, and most of that, Neom said, will be exported.
Neom also has plans to build another green hydrogen plant in Saudi Arabia as well, which is scheduled to start up in 2028 or 2029. And while hydrogen is still a pricey alternative to fossil fuels, Edmondson said efficiencies learned would help to bring down the costs for other facilities, while government and corporate policies help to solidify demand for greener alternatives.
There are a multitude of hydrogen projects being discussed and announced around the globe, but very few of them have managed to secure funding and begin construction. One of the challenges in securing financing for large hydrogen projects is finding commitments from customers.
Yet, the funding and cost dilemma hasn’t stopped everyone from
touting green hydrogen as the next-generation fuel that will help to save the planet.
While hydrogen and other alternatives to fossil fuels are trying to emerge and penetrate the market for a larger share of the energy business, oil production in some areas is going down for different reasons.
Recently, Nigeria, alongside other members of the Organization of Petroleum Exporting Countries (OPEC) and Non-OPEC members, at the Joint Ministerial Management Committee (JMMC) meeting, agreed to a cut in production volumes in order to ensure global oil market stability.
The Nigerian delegation to the meeting in Vienna was led by Gabriel Aduda, who is the Permanent Secretary of the Ministry of Petroleum Resources. After the meeting, the statement also revealed that Nigeria, Congo and Angola have agreed that the highest production volumes of the last six months, covering November 2022 to April 2023, be used as the basis for the determination of their 2024 production quota, subject to a review in November at the 2nd annual meeting of the JMMC.
“However, the current OPEC
quota would be maintained till the end of 2023; This implies that Nigeria can ramp up its production up to its current quota of 1742KBD and subsequently be capped at 10 percent less as its quota for 2024 subject to verification by independent secondary sources,” the statement read in part.
“This will be complemented by a condensate of about 400KBD ultimately upping Nigeria’s crude oil and condensate production to about two million barrels per day in 2024,” it further read.
The country’s expected output quotas for August, September, October, and November were 1.826 million bpd, 1.830 million bpd, 1.826 million bpd and 1.747 million bpd respectively.
Then, in China, despite the country’s oil refining capacity overtaking the United States as the world’s largest in 2022, the country is still investing heavily in low-carbon renewables.
China has 32 refineries, with at least 200,000 bpd capacity each, including the newly-launched facility built by PetroChina in Jieyang, Guangdong Province.
Total refining capacity in China expanded to 920 million tonnes per year, or 18.4 million barrels per day (bpd) in 2022, according to Fu Xiangsheng, the Vice President of the China Petroleum and Chemical Industry Association. That is against the U.S. refining capacity, as of December 2022, of 17.6 million bpd, based on figures from the International Energy Agency’s latest oil market report.
China’s recent wave of refinery expansions has been led by state- run PetroChina and large private firms, such as Zhejiang Rongsheng group and Jiangsu Shenghong Petrochemical, but mainly to fill a supply gap in petrochemicals
rather than transportation fuels.
In spite of all this, the autogas market in China developed largely as a result of local programmes to promote alternative fuels, motivated by the need to tackle the worsening problem of urban air pollution. Autogas schemes, which were initially developed in Hong Kong and Guangzhou City, have now been introduced in more than
25 other cities.
In Guangzhou, virtually all of the
city’s 19 000 taxis and 90% of its 8 000 buses had switched to the fuel by 2010, with most of the remainder running on CNG or LNG, though a recent change in policy is promoting LNG and EVs.
Then, in Hong Kong, all the city’s 20 000 taxis and 30% of the public buses run on Autogas as a result of a conversion programme launched in 1997, which involved grants over the period 2000-2003. Diesel taxis were banned in 2006 because of their high particulate emissions and were phased out.
From Asia down to South America, the Board of Directors of Petro- bras has approved new guidelines in the strategic plan through 2028 to allocate more capital expenditure to low-carbon projects.
The Brazilian state-owned oil firm said in a recent statement that under the new strategic guidelines, it will allocate between 2024 and 2028 between 6% and 15% of its capex to low-carbon energy projects, compared to 6% of capex going to low-emission projects in the 2023-2027 strategic plan.
According to the Brazilian energy giant, the final approval of the new strategic plan and allocation for low-carbon projects will take place in November 2023. It also explained that low-carbon capex will apply to projects in renewable energy and decarbonization of Petro- bras’ operations. The Company
stressed that those investments should be financed by operating cash flow and at levels equivalent to its competitors.
Petrobras says it prefers to make investments in low-carbon projects through partnerships that allow sharing of expertise as well as risks, so that its projects in the making will be aimed at helping it become an integrated energy company and maximize its value, the firm said in a statement.
Earlier this year, it signed a five-year deal with Shell to work together on identifying potential upstream opportunities, sharing experience and best practices on reducing carbon emissions, social and environmental initiatives.
The non-binding agreement will focus not only on potential exploration opportunities in and beyond the presalt layer, offshore Brazil, but also on energy transition efforts, with an emphasis on renewables and Carbon Capture, Utilization and Storage (CCUS). Petrobras and Shell will also work together to set up projects to presserve and restore biodiversity, with the goal of issuing credits to offset carbon emissions.
In the words of Petrobras CEO, Jean Paul Prates, “being able to rely on partners, such as Shell, is vital for Petrobras’s future plans, because partners can add their strength to areas where the company is looking for profitable diversification, such as renewables and hydrogen. We will be looking to learn from the main players as we lead Petrobras towards a fair energy transition.”
With what is happening in these countries in the area of renewable energy development, especially for the automobile industry, there seems to be plenty of good lessons from which Nigeria can learn and also practice.
So far, Nigeria has been lagging behind in terms of ramping up its number of eco-friendly vehicles on its roads, which means that the country must do more in order to catch up with its peers elsewhere in the world.