Chief Timipre Sylva, Minister of State for Petroleum Resources
…Pandemic pushes a transforming industry into a state of major crisis
…Crisis will spur support for energy transition and diversification
…Nigeria strategises to strengthens country’s oil industry in a post Covid-19 world to transform its national oil company
-By Olufunke Afolami
Delivering his keynote address at the 13th Nigerian Association for Energy Economics (NAEE), 2020 international conference with the theme Energy and Petroleum in a post Covid world, the Minister of State for Petroleum Resources (MSPR), Chief Timipre Sylva, asserted that it is no longer news that the Covid-19 pandemic presented an alarming health crisis and upset the dynamics of global energy industry.
Covid-19 has exacerbated and weakened demand supply of primary energy commodities while negatively impacting global economy businesses.
The MSPR said the petroleum industry is already locked in the cycle of over supply induced by squabbles for market share by producers. The advent of Covid-19 brought about the fundamental economic consequence evident in reduced national revenue which in turn led to fewer growth and development throughout the world.
“Indeed, the theme for the conference is critical and quite apt as the global lockdown triggered by Covid-19 pandemic has pushed a transforming industry into a state of major crisis because critical assessment of perspective for Nigeria’s preparedness for energy transition dynamics in this trying period cannot be over emphasised.”
Chief Sylva was of the view that the declaration of cooperation between OPEC and non-OPEC counterparts commenced effectively in May 2020 and led to the curtailment of crude oil production to rebalance and stabilize the global oil market. This has been the major rescue of the precarious situation in the oil and gas industry to date coupled with the discoveries of Covid-19 vaccine in Europe, Russia, North America, China and various parts of the world recently were poised for game changers.
In the foregoing, there is a clear evidence that the global economy will eventually be recovered. It is unlikely that it will return to normal soon instead, the oil and gas industry is likely to be faced with prolonged substantially reduced demand mainly due to the growing pressures using greener energy sources.
Speaking further, he made it known that the industry is grappling with over supply issues whether due to burgeoning oil volumes from USA or the struggle for market share between producers. Either way, the Covid-19 crisis which is currently in the second wave continues to dampen the structure and dynamics of the energy industry.
However, the impact of value across the oil and gas industry segment, national oil companies with large low cut reserve positions will push to accelerate production. Those with higher cost structure will struggle due to reduced oil and gas revenue, lower national budget will intensify the debate about prioritization between oil reinvestment and social needs.
Chief Sylva added that some governments will use the crisis to spur support for energy transition and diversification.
Consequently, the post Covid-19 world will see the oil and gas industry accelerate its transition towards cleaner energy sources, product and service delivery with clear paradigm shift from the traditional business model.
The pandemic has created a perfect storm along with an ongoing bid to reduce carbon emissions that will transform the industry. The future survival and success of many players in the industry depended only on their achieving greater focus on cleaner energy source but upon an ability to deliver lower cost emissions.
STRATEGY FOR POST COVID-19
Despite the sordid situation posed by Covid-19, Nigeria strategy is to strengthen the country’s oil and gas industry in a post covid-19 world by transforming its national oil company into a diversified energy building company to enable it respond swiftly to the activities of future crash in crude oil prices and moving rapidly to become an energy building company with more diverse interest.
Notwithstanding, the country is strategically focusing on its vast natural gas resources as a critical transition field to help battle global warming and function as a bridge between the dominant fossil fuel of renewable energy.
The MSPR said that natural gas has the intrinsic ability to meet increasingly global requirement for cleaner primary energy use while at the same time enabling much needed domestic industralisation for rapid economy growth in few endowed countries such as Nigeria.
He revealed that early this year, Nigeria declared 2020, as the year of gas and has commenced the national Gas Expansion Programming culminating into the presidential roll out of auto Compressed Natural Gas (CNG) and Liquefied Natural Gas (LNG) initiative to spare ahead the adoption and use of natural gas LPG to fuel its transportation system across the length and breadth of the country. This is an alternative to carbon healthy fossil fuel like PMS and AGO.
“We expect that substituting traditional product with gas will cushion the effect of deregulation for the downstream sector, stimulate economic growth further improve Nigeria’s energy mix, drive investment and create enourmous job opportunities for Nigeria.”
In spite the global covid-19 challenges, Chief Sylva submitted that Nigeria has embarked on aggressively implementation of nationwide gas infrastructure blueprint constructive critically integrated gas pipeline system across the nation.
The government has also commenced construction of the major 614 kilometre Ajaokuta-Kaduna-Kano gas pipeline and completion of Escarvos-Lagos pipeline system phase 2 to boost industrial activities across the country.
After making laudable achievements and successes in 2020, the federal government declared 2021-2030 the beacon of gas in Nigeria in order to effectively develop the gas sector. The government has also proposed fiscal incentive that will attract investment in the Petroleum Industry Bill.
The Minister assured stakeholders that the fiscal provisions will be one of the most attractive in Africa.
Covid-19 pandemic and progressive decline in crude oil prices in 2020 has made it imperative for Nigeria to aggressively pursue the diversification of its portfolio to non-oil aspect so as to cushion the effect of the future crash crude oil prices and position the oil and gas industry for growth in a post covid world.
He said domestic gas is a platform to drive a truly sustainable in-country economic diversification.
The MSPR said the conference was timely and urged NAEE and participants in the conference to advance feasible innovative ideas for business sustainability and growth in a post covid world.