$5trn net-zero funding raises concerns energy security

. OPEC, DPR, NNPC, others worry over Africa future

Victor Uzoho

The aggressive push from fossil fuels to cleaner energy may create further loopholes in the global energy security, as stakeholders in the sector raised concerns over the 2050 net-zero plan boosted by an ambitious $5trillion yearly funding.

Inherent challenges, especially scale and timing, supply chains and prevailing situations in developing countries, may, according to experts, worsen energy issues and undermine projections set by the United Nations’ Sustainable Development Goals (SDGs), and blow Africa’s debt profile out of proportion.

Indeed, the Organization of the Petroleum Exporting Countries (OPEC), Department of Petroleum Resource (DPR), Nigerian National Petroleum Corporation (NNPC), and other experts at the recently-concluded Nigerian Oil and Gas (NOG) Conference, in Abuja, insisted that climate change activists could create demand and supply challenges, which may exponentially increase oil prices beyond a manageable benchmark.

Coming ahead of the COP26 in November, the stakeholders condemned the call to end investment for fossil fuel, with Mohammad Sanusi Barkindo, Secretary-General of OPEC saying the move “is a dangerous and unrealistic scenario.”

To achieve the Paris Agreement, about $100billion would be needed yearly, to which the Berlin Dialogue, held under the United Nations Climate Change, provides a leading international forum for key stakeholders from the energy sector to share their experiences and ideas on a safe, affordable and environmentally responsible transition to clean energy.

The Forum believes such a transition is key to tackling the climate crisis, as the energy sector is the biggest contributor to climate change, accounting for 73% of human-caused greenhouse gas emissions.

One target for all

But Barkindo noted that oil and gas have an important role to play in the energy transition, and while OPEC supports the need to reduce emissions, bolster efficiency and embrace innovation, inadequate investment in the future of the industry, currently experiencing a 30 per cent investment decline due to the harsh impact of the COVID-19 pandemic could worsen energy poverty.

“Let’s face it; there is simply not a ‘one size fits all’ solution to addressing climate change. Different countries around the world have varying capabilities and diverse needs. Thus, reducing emissions has many paths as set out by the Intergovernmental Panel on Climate Change (IPCC), and we must consider all of them as viable options.

 “Additionally, when considering the scale of the energy transition, we must harness all available energies. The oil and gas industry has much to offer in this regard, including some of the world’s most cutting-edge technologies and advanced innovations, which can all be leveraged to promote a lower carbon future,” he said.

He argued that technologies such as carbon capture, utilisation and storage (CCUS), hydrogen and other technologies are viable options for reducing carbon footprint, adding that energy efficiency programmes will also be key, as will the Circular Carbon Economy, which was endorsed by the G20.

Barkindo argued further that while achieving net zero emissions by 2050 is already a great challenge for advanced economies, it remains daunting for developing nations, where ensuring basic needs are a challenge.

 “Net-zero scenario assumes that both developed and developing countries will achieve the proposed targets by 2050, with developed countries reaching their targets earlier. However, let me remind you that a staggering 790 million people worldwide did not have access to electricity in 2020, most of them located in sub-Saharan Africa and developing Asia. Moreover, there were roughly 2.6 billion people who did not have access to clean cooking fuels, 35 per cent of whom were in sub-Saharan Africa, 25 per cent in India, and 15 per cent in China. And, let us not forget that these are the very regions that are expected to see the most rapid population growth by 2050,” Barkindo stated.

Hydrocarbon discoveries in Africa

While Nigeria has been exploring crude oil and gas for over 50 years and has been an industry leader, most Africa countries are endowed with hydrocarbon resources, which export are a major revenue source to the content.

However, despite the huge hydrocarbon deposit, Africa is faced with serious energy challenges limiting other sectors of the economy that depend on the resources to thrive. With projected population explosion, one of every two people in the world could be from the continent by 2050 making the issue of energy security critical.

Most stakeholders believe that continuous exploration of hydrocarbons to mitigate the energy crisis on the continent may be the only way contrary to the global push from fossil fuels.

Director of DPR, Sarki Auwalu, noted that the overall industry financial position must necessarily improve for sustainability. As much as $10billion additional investments would be required for developments in deep offshore, inland and frontier basins, marginal field development as well as for gas infrastructure and gas-based industrial development.

 “Be that as it may, a stable political, legal, and fiscal environment is critical to improving the investment attractiveness index of Nigeria. We are confident that with the legislative certainty that comes with passage of the PIB into law, existing operators would have the reasons to consolidate their portfolios in the Nigeria petroleum industry whilst we witness the influx of new investments from second generation International Oil Companies (IOCs) and the likes,” he noted.

Outlining ways to edge prevailing hurdles, Auwalu stressed the need for in-sector diversification for economic sustainability and growth. “In-Sector diversification is central to grow the industry from an oil-export based industry to an integrated oil & gas industrial economy where the raw materials mentality is replaced by in-country value addition to guarantee job creation, youth empowerment, poverty eradication & infrastructural development,” he said.

The Group Managing Director, NNPC, Mele Kyari, observed that the reality of the 30 per cent reduction in investment into the oil and gas sector has started to hurt the country.

He warned of possible inability of the sector to meet demand given reduction in investment, adding that energy transition must not be about moving from fossil fuel to renewable but creating the right balance.

Kyari said as a developing country, Nigeria still needs to develop existing resources to meet energy needs, especially power and infrastructure, as such the proposition of net-zero is “very questionable”.

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