‘Shift to renewables an opportunity to address Nigeria’s energy gap’

Debo Fagbami is the Chief Operating Officer at Xenergi Limited and Council Chairman, Society of Petroleum Engineers (Nigeria). In this interview, he talks about the way forward to accelerate access to sustainable energy in Nigeria. FEMI ADEKOYA writes.

Energy poverty remains a serious obstacle to economic and human development in the country. Where lies the gap?
Policy drives socio-economic development and its sustainability is largely dependent on formulation of the right policies to allow for efficient business operations. Citizens of all nations as well as businesses require access to reliable energy at affordable prices on a sustainable basis with minimal risk and supply interruptions. From this standpoint, Nigeria remains in a situation of serious energy deficit and the key to unlocking the power potential of a country blessed with an abundance of the resources required to deliver on its power needs is hinged on policies that would sufficiently drive investments and enforce transparency, accountability and sound management of its resource base.

Africa’s energy landscape is evolving with new entrants. What are the prospects and challenges?
Africa has witnessed a changing energy landscape in recent years which has seen the evolution of a new wave of oil and gas producers entering the stage. Ghana, Kenya, Tanzania, Uganda and even Somalia have recently become not just prospects for new oil discoveries but have taken up position as crude oil exporters. Added to these emerging oil markets is the fact that attention is beginning to shift from fossil fuel as the predominant energy source to renewables with some of the new entrants like Ghana and Senegal already actively pursuing projects in wind, thermal and solar energy to complement their foray into fossil energy.

The traditional power house producers like Nigeria, Angola, Congo, Equatorial Guinea and Gabon have also started looking outside the realms of fossil fuel and are now looking at renewable energy as the next frontier to boost the energy spectrum in sub-Saharan Africa. The requirement for reliable and sustainable energy in sub-Saharan Africa cannot be over emphasized for a region that is often and truly considered to be in a near perpetual state of energy poverty. Industries need power to operate and run machinery, students need electricity to study at home after nightfall, hospitals need steady source of power to store life-saving drugs and medical supplies and the energy deficit leaves the locals resorting to use of unclean energy sources like firewood as cooking fuels leading to health complications and long-term respiratory conditions.

What are your expectations for the development of Nigeria’s energy sector in 2019?
The year 2019 comes on the back of two years of relative stability and progress in the energy sector. This comes against the backdrop of positive reforms in the power sector since the return to civil rule in 1999. There was an increase in daily crude oil production in 2018 from 2017 levels and a corresponding increase in revenue across the same period. The passage into law of the PIGB (a sub-set of the PIB) though awaiting Presidential sign-off, is expected to create a more efficient and effective working environment within the industry with separation of roles to create a more commercially driven and business oriented national oil entity which would in turn promote accountability and transparency across the entire value chain thus creating the right environment for oil and gas operations and investments.

Having said this, the delayed Presidential sign-off of the PIGB into law is raising doubts amongst investors who may begin to look outside Nigeria and into the emerging markets in other parts of the continent. Another developmental driver in Nigeria’s energy sector is the flare gas regulation that was Gazetted into law under the National Flare Gas Commercialization Program (NGFCP).

Under the NGFCP, the federal government is able to take ownership of all flare points free of cost and pull into a basket for interested parties to bid competitively. This regulation would eliminate gas flares and any identified flare points post implementation would be subject to severe tax penalties on the part of successful bidders. Projects that would evolve out of the NGFCP would also further increase the energy resource base of the country with attendant job creation across the entire value chain and lead to acquisition of new skill set and/or skills conversion in certain cases. Overall, the Energy sector in 2019 is geared towards positive growth and development, buoyed by the impending kick off of the PIGB as well as other innovative regulations and reforms to stimulate economic activity.

With consistent shift from traditional sources of power towards renewable sources in recent years. How do you see renewables impacting Africa’s power scenario in the next 10-15 years?
First, the global shift to renewable sources of energy is bound to have a ripple effect on Africa. The cumulative power generation of sub-Saharan Africa currently stands at 40 GW if you exclude South Africa and according to IEA, to meet Africa’s energy needs would require a yearly spend of close to $50b. The implication of this is that African countries, particularly the new kids on the block would need to invest a significant portion of their windfall from oil sales into power generation, transmission and distribution projects. Renewables would have a significant role to play in power generation, although it is important to recognize that though the developmental costs of renewable energy projects have dropped due to advancements in research and technology, the costs remain high in comparative terms to fossil fuels particularly for African countries.
Power projects in Africa are infamous for taking a long time to go from planning to completion.

How do think operators and investors should cope with these issues? What should governments do to mitigate these problems?
The key to ensuring the successful execution of power projects lies in formulating the right policy framework (fiscal and legal) to encourage investments and drive sustainable activity in that sector. The value chain must be set up in such a way as to deliver affordable and sustained power to the last mile consumers while allowing operators to recover their investment thus creating a viable commercial ecosystem for all stakeholders including government. Governments of African countries need to create an enabling environment free of severe risk to investors, so as to stimulate activity and grow the sector exponentially. The Nigerian model of having a bulk electricity purchaser provides a platform for operators to sell and deliver power directly to the grid thus ensuring security of power offtake on a grand scale.

How are environmental awareness and tighter regulations resulting in gas comprising a greater proportion of the energy mix?
If this question is referring to Nigeria, I would posit that regulation and/or legislation has not created the desired impact in developing gas as a key portion of the energy mix. The government’s driver for enforcing the development of gas has always been linked to the negative impact of gas flaring on the environment and from these we have had a succession of gas flare out directives and legislations that have had little or no impact in changing the status quo. I would say that the recent initiative from Nigeria’s Honourable Minister of Petroleum Resources via the National Gas Flare-out and Commercialization Program (NGFCP) has been by far the most encouraging and stimulating program to drive gas development projects on a sustainable economic basis. The NGFCP is linked to an economic driver which allows for the transparent commercial bidding for all unutilized gas flares by interested parties who are able to demonstrate prior experience and capability in developing gas projects either alone, in alliance or consortium basis.

What are your expectations for the SPE #OLEF2019 and how can it foster the growth of Nigeria’s energy economy?
The Objective of SPE’s Oloibiri Lecture and Energy Forum (OLEF) 2019 is to stimulate discussions on how Nigeria’s energy sector can move forward along a path to sustainability. Through OLEF, SPE is providing the platform for government, regulatory agencies, Captains of industry, and practitioners at all levels to sit together to discuss and come up with ways Nigeria can develop energy that has little or no carbon footprint, develop efficient systems that require lesser energy to run and on how we can use Nigeria’s oil and gas resources to support the nation’s economic growth for the benefit of all stakeholders. We believe that when Nigeria’s energy mix is developed and efficiently utilized, we will have energy security, green jobs, greater national wealth for the people and foster sustainable growth and development in Nigeria.