Nigeria is suitably positioned to become a superpower in the unfolding energy transition regime given its over 200 million population and abundant energy sources, to achieve the right energy mix for sustainability of energy supply.
This was the position of the Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Engr, Gbenga Komolafe, in a keynote address presented at the Nigerian International Energy Summit (NIES) in Abuja, on Thursday, April 20, 2023. The presentation was on Pivoting Upstream Petroleum Regulations and Investments.
The NIES has, over the years, been consistent in delivering internationally recognized high-quality resources; attracting delegates from a broad spectrum of global oil and gas communities including industry professionals and academics involved in Research and Developmental (R&D) activities.
Engr Komolafe said as a country, Nigeria boasts of 37.064 billion barrels of oil with a daily production of over 1.5 million barrels of oil. In terms of reserves, Nigeria ranks 2nd in Africa, 8th in OPEC and 11th in the World. On the other hand, she ranks 1st in Africa, 6th in OPEC and 15th in the World in terms of crude oil production. The GDP per capita for Nigeria stands at $1,998 which ranks her at 12th position amongst the OPEC member states and 22nd in Africa. Although crude oil contributes over 85% to Nigeria’s foreign exchange earnings, its contribution to GDP is about 6.33%, while Algeria’s is 10.2%, Angola is 30% and Libya at over 50%. The Commission Chief Executive (CCE), stated that Nigeria is a nation where needs meet opportunity.
Parts of the presentation indicate: Aside the catalogued hydrocarbon potentials, Nigeria is blessed with potentials for blue energy, solar, wind, biomass as well as other sources of renewable energy to leverage for right energy mix in the energy transition regime.
Unfortunately, in the years preceding the enactment of the Petroleum Industry Act (2021), investments in the Nigerian oil and gas industry declined due to regulatory uncertainty in addition to de-funding of fossil fuel development occasioned by energy transition and COVID-19. Most of the IOCs deprioritized Nigeria in their portfolios leading to the redirection of CAPEX to other countries and the attendant dwindling investment in Nigeria’s upstream sector. For instance, Nigeria’s total annual upstream capital expenditure decreased by 74% from $27 billion in the year 2014 to less than $6 billion in 2022. More so, increasing competition from regional peers has led to decrease in the proportion of the overall upstream investment attracted by Nigeria.
This under-investment is also reflected in the country rig count. On average, Nigeria had 17 active oil rigs in 2019 representing one of the highest counts on the African continent as at then. Nigeria’s average rig count declined to 11 in 2020, 7 in 2021, 10 in 2022, but recently grew to 24 in April 2023, a positive signal of new investments trickling into the country. This is also a reflection of investors’ acceptance of effective implementation of the PIA by the regulator.
In contrast, other OPEC member countries such as Iran, Iraq, Algeria, Libya, Angola had 117, 62, 31, 12 and 9 active rigs respectively as of February 2023 as against Nigeria’s rig count which stood at 13. However, following two years of high energy prices, the global oil and gas industry is experiencing a boom that could be directed to capital investment in upstream. The projected outlook over the next few years is positive, and as an industry we need to leverage on this opportunity by doing all that is necessary to attract more investments and revive the Nigerian upstream sector.
As opposed to the defunding of fossil fuel projects, global investments in energy R&D and innovations in renewables and clean energy technologies are increasing, even at the peak of Covid-19 pandemic as governments race to stay on track with Net Zero Emissions by 2050. From 2021 to 2022, the annual global investments in clean energy sources and technology specifically relevant to the energy transition increased by 31 percent representing the largest annual investment increase since 2010.
Governments are supporting major R&D and demonstration projects in key areas such as low emission hydrogen-based energy, lithium-ion and lithium-free batteries for electric vehicles, CCUS and other critical energy technologies. For instance, Egypt plans to invest more than US$7 billion in hydrogen projects.
This funding situation was reconfirmed by the US Special Presidential Envoy for Climate, John Kerry, while addressing the G7 Ministers of Climate, Energy and Environment in a summit held in Japan on 15th and 16th, April 2023, alluded to special funds earmarked for clean energy, confirming that funding is now skewed against fossil fuels. According to him, such funds “… will not be invested in new coal-fired power plants (or any other fossil fuel projects), because there’s no such thing as clean coal”. He cited the ongoing aggressive moves, in the US by the Joe Biden administration, enticing companies to invest in electric vehicles and other cleaner energy technologies positing that consumer preferences have evolved in response to global net-zero commitments.
The need for Oil and Gas producers in Africa to embrace the reality of green transition and take strategic position to leverage on the opportunities presented by the unfolding era has indeed become more pressing. On the other hand, energy transition plans have also been derailed by the unprecedented global energy crisis provoked by the Russia-Ukraine war as reiterated by the G7 Ministers of Climate, Energy and the Environment.
It is therefore incumbent on us as industry stakeholders to embrace climate action initiatives targeted at emissions reduction while ensuring that opportunities arising from increasing demand for credit in the Voluntary Carbon Markets do not elude us.
In response to the dynamics of the energy transition and the global footprint, the NUPRC has embarked on development of a regulatory framework for carbon-pricing system to make businesses pay for their emissions and incentivize emission reductions through carbon credits. Accordingly, the Commission has risen to the occasion by establishing a new Department, “Energy Transition & Carbon Monetization”, saddled with the regulation of the oil and gas carbon market and we will soon revert to the industry on proposed actions and measures in this regard.
It is pertinent to state that Nigeria is already charting a new course in the Upstream Petroleum Sector and is poised to secure a blossoming energy future through effective implementation of the PIA that potently provides legal, governance, fiscal and regulatory frameworks for regulating industry operations. Accordingly, the NUPRC in line with its mandate is developing forward-thinking technical and commercially viable regulations as regulatory instruments to promote transparency, efficiency, and innovation for sustainable development of Nigeria’s hydrocarbon resources.
In the implementation of PIA and as regulatory approach we are also trying to benchmark international standards. Our regulatory focus is targeted at achieving:
- Reduced Unit cost per barrel.
- Transparency in hydrocarbon accounting
- Operational efficiency
- Conducive operating environment
- Increase in oil and gas reserves and
- production
- Reduction in Carbon footprint
In the above regard, as part of its achievement within 20 months of its existence, the Commission successfully gazetted five (5) Regulations, developed thirteen (13) fresh Regulations which are currently under review by the Federal Ministry of Justice and another six (6) which are at consultative stages with industry stakeholders.
In addition, the Commission is currently engaging all lease holders on their natural gas elimination and monetization plan to ensure compliance with Section 108 of the PIA and boost supply to the rapidly growing gas market. We have continuously encouraged investors to leverage on the generous fiscal incentives in the PIA, such as zero hydrocarbon tax, reduced royalty rates based on production and across terrains, tax consolidation provisions amongst others and take final investment decisions on their proposed upstream projects. With a proven gas reserve base of 208.62TCF (as of 1st January 2022), we are on track to increase our reserves volumes to 220TCF in less than 10 years and 250TCF thereafter.
Our drive to increase our Gas Reserves and Production from its current volumes to meet the future energy demand of the country and the international market offers a huge investment opportunity not only for the exploration and development of our vast gas resources, but also for the creation of the much needed infrastructure to utilise the gas within the country as well as earn revenue for further development of our renewable resources.
Permit me to express that the PIA provides for approval of only projects with gas utilization plan in the upstream sector. The Commission is already enforcing this statutory provision in a manner to attract the multiplier economic benefits to the Nigerian economy. We have intensified our efforts towards eliminating flared gas while arresting methane and other fugitive gas emissions. The significance of this is that more gas would be available for domestic utilization as Liquefied Petroleum Gas (LPG), feedstock for power generation plants, fertilizer plants and petrochemicals to mention but a few. Each of these areas provides a unique entry point for willing investors and opportunities to build capacity locally.
Further investments opportunities have been created with the successful completion of the 2020 Marginal Field Bid Round. The Commission is engaging the awardees to ensure early field development. Similarly, the ongoing mini bid round for seven (7) Deep Offshore Petroleum Prospecting Licences (PPLs) is expected to be concluded early Q3, 2023 and will boost the Nation’s Reserves as well as bring about anticipated benefits to the Nation and other stakeholders. Also, the Nigeria Gas Flare Commercialization Programme (NGFCP) 2022 bid process for 49 flare sites with a combined volume of about 300 million standard cubic feet of gas per day is expected to be concluded in April 2023.
The flare commercialisation initiative is aimed at driving Nigeria’s target to end routine gas flaring within this decade, supporting the Nigeria Energy Transition Plan (ETP) and creating value from its gas resources. In this gas flare commercialisation journey, the Commission has partnered with relevant global players to leverage the carbon credit market mechanism that should improve the bankability of some of the flare elimination projects.
With the attractive fiscal, legal and regulatory provisions in the PIA, vast opportunities for investment abound for investors to leverage. Some of these opportunities include the development of deeper hydrocarbon opportunities, conversion of producing marginal fields to Production Mining Leases (PMLs) and clear definitions for domestic supply and delivery of crude oil and gas respectively to create potential for a robust domestic market to mention just a few. In addition, the NUPRC is deliberate in implementing strategic actions and initiatives aimed at increasing national crude oil and gas reserves and production.
In this regard, the Commission will in the weeks ahead organise its Maiden Nigerian Upstream International Investment and Financial Roadshow (NUIIFR) for Petroleum Prospecting Licence (PPL) Awardees, NGFCP Bidders, and potential investors in the upcoming Mini Bid for Deep Water Assets, to explore funding opportunities and leverage capabilities of industry players, prospective Investors (local and offshore) to de-risk the assets and awards.
The event will provide opportunity for participants to network, exchange ideas and chart strategic pathways to enhance investment opportunities.
Empowered by the PIA, the Commission has continued to drive the upstream industry performance to grow reserves through deliberate oil and gas exploration, deep drilling, prospects maturation, appraisal, field studies and improved oil recovery. Our efforts are beginning to manifest in our gas reserves position, and we expect similar manifestation in oil reserves in the very short term.
The National Hydrocarbon Reserves Position as at January 1, 2023 is as follows: Nigeria’s oil and condensate reserves as at January 1, 2023 stands at 31.060 Billion Barrels for Oil and 5.906 Billion Barrels for Condensate, making a total of 36.966 Billion Barrels for oil and condensate while the Associated Gas reserves is 102.32 Trillion Cubic Feet, Non-Associated Gas reserves is 106.51 Trillion Cubic Feet, making the total of 208.83 Trillion Cubic Feet of Natural Gas reserves. The oil and condensate reserves decline of about 0.22% compared to January 01, 2022, figures is attributable to low exploration activities and reserves revision arising from subsurface studies in year 2022. On the other hand, the slight increase of 0.10% in gas reserves over January 1, 2022 reserves position is primarily attributed to the revisions arising from additional information from new wells, and field development studies.
Therefore, Nigeria as a nation state is suitably positioned to become a superpower in the unfolding energy transition regime given its population of over 200 million people and abundant energy sources, to achieve the right energy mix for sustainability of energy supply.
