FG tasks oil, gas producers on $270bn voluntary carbon credit markets

The Federal Government has charged oil and gas producers operating in Nigeria to get involved in the $270 billion-worth voluntary carbon markets in order to attract private capital for climate action and support the transition to a low-carbon global economy.

Given the threat of no investments in fossil fuel, the government said such involvement will boost the petroleum industry’s decarbonisation efforts and fast-track the country’s Energy Transition Plan, targeted at achieving net-zero emissions by 2060.

Vice President Yemi Osinbajo gave the charge yesterday, at a dinner to mark the 60th Anniversary of the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI), which was held at the Eko Hotel and Suites in Lagos.

The Vice President, who spoke on the topic: “Nigeria Transitioning to Green Energy,” urged the oil producers to take the threat of no finance for hydrocarbons seriously, and participate fully in the global carbon market.

He said: “So we think the voluntary carbon markets can play a significant role in directing private capital into climate action,” adding that “some Nigerian companies have already been doing lucrative carbon avoidance or removal projects that have yielded carbon credits.”

Already, the global carbon markets have grown to a market value of $270 billion, placing it on the radar of institutional investors as an investable asset class.

According to Carbon Credits, which captures daily trading in carbon, “Mandatory (compliance) markets are governed by national, regional, or provincial law and compel emission sources to meet greenhouse gas (GHG) emission reduction targets.

“Because compliance program offset credits are generated and traded for regulatory compliance, they typically act like other commodity pricing.”

It also noted that “Voluntary Carbon Markets enable carbon emitters to offset their unavoidable emissions by acquiring carbon credits generated by initiatives aimed at removing or decreasing GHG emissions from the environment.

“Companies can engage in the voluntary carbon market on their own or as part of an industry-wide program.”

The World Bank’s latest State and Trends of Carbon Pricing report, global average carbon credit prices per tonne on the voluntary market moved from $2.49/tCO2e in 2020 to $3.82/tCO2e in 2021, and the volume of credits transacted in the voluntary market exceeded 362 million credits last year, 92% more than in 2020.

So we think the voluntary carbon markets can play a significant role in directing private capital into climate action… some Nigerian companies have already been doing lucrative carbon avoidance or removal projects that have yielded carbon credits.

Transition process

Osinbajo, who highlighted “some problematic issues in the transition process,” noted that “from the so many adverse climate occurrences, floods, desertification, rising water levels, and record high temperatures there is a global climate crisis.”

He however added that “the obvious, if difficult solution to the crisis is to stop carbon emissions and use green energy. The staple wisdom is that coal and fossil fuels are major pollutants.”

He also noted that developing countries, including Nigeria, are faced with two. “One is climate change and the other is extreme poverty, the cause and consequence of which is energy poverty.” 

Consequently, he encouraged the OPTS “to take the lead in solar to help drive improvements in our energy mix and also accelerate the transition to having ‘energy’ companies not just oil and gas companies.”      

He equally commended the members for their “outstanding role in the growth and development of the oil and gas sector in Nigeria, and for the numerous social development projects undertaken through the years.”

Achieving net-zero

Also speaking, the Minister of State for Petroleum Resources, Timipre Sylva, argued that achieving net-zero emissions by 2060 requires urgent need to monetize reserves, and championing the use of carbon capture to decarbonize existing and new oil fields.  

Sylva, who was represented by the Acting Permanent Secretary of the Ministry, Kamaru Musa, decried the high rate of production shut-in on account of pipeline vandalism and facilities sabotage.

As a result, he said Nigeria’s production nose-dived from over two million barrels per day in 20 16 to below one million barrels currently and unable to meet its OPEC quota.

He informed that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) had identified over 300 shut-in oil wells in the country, and is making concerted efforts to reactivate them by establishing a one-stop oil and gas investment office.

We seek deeper partnership with OPTS to develop and deploy ingenious solutions towards sustainable financing and development of hydrocarbon resources.

Sustainable financing

The Group Chief Executive Officer (GCEO), NNPC Limited, Mele Kyari, in his keynote address, said the 60 years of OPTS existence in Nigeria speaks to the progress and fortune the industry has brought to the nation.

Kyari, who spoke on: “NNPC Limited, our perspective on the way forward and growing investors’ confidence,” sought “deeper partnership with OPTS to develop and deploy ingenious solutions towards sustainable financing and development of hydrocarbon resources.”

The GCEO, represented by the Group General Manager (GGM) Treasury, NNPC, Dapo Segun, said the Company’s new corporate identity “aligns with the value proposition with reference to the global energy mix and our growing interest in the low-carbon energy portfolio.”

Besides, he said the new Governance framework provides NNPC the autonomy and opportunity for self-accounting, adding that henceforth, cash call settlement including arrears, which has hitherto remained a knotty issue in its joint venture (JV) operations “would be settled and handled promptly going forward.”

Kyari equally assured that the Company is tackling the menace of insecurity, which is affecting production accretion, and frustrating Nigeria’s economic wellbeing.

“We have deployed creative solutions to tackle security challenges in the operational areas. Technological intervention for both monitoring and prompt intervention would also be set up,” he said.

Responsibility and commitment

In his welcome remarks, the OPTS Chairman, Rick Kennedy, who is also the Chairman/Managing Director, Chevron Nigeria Limited (CNL), noted that despite the challenges confronting the industry, there are opportunities for improvement and growth.  

“Working with the government at all levels, we have the responsibility and commitment as a group to get the right policies for our people and for the country,” he said.

Kenny, represented by his Vice Chairman, Osagie Okunbor, who is also the Country Chair of Shell Companies in Nigeria, asserted that the OPTS is guided by four principles: observance of laws and regulations; integrity in business; health, safety and environment, and social accountability.  

He added that the 29-member OPTS, comprising 21 indigenous companies, “have demonstrated resilience and commitment in the face of economic, security, environmental, and funding challenges.”

He reminded that “Over the last decade, the OPTS member companies accounted for 40-60% of the government revenue and 85-90% of export earnings,” while also paying tens of billions of dollars in taxes, levies, royalties, rents, and licence fees.

By Clara Nwachukwu

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