Dr. ABC Orjiako, chairman, Seplat Energy Plc,says the global energy transition journey can only be achieved in a collaborative manner leveraging technology and innovation.

 He spoke recently  at the 2021 Milken Institute Global Conference themed “Charting a New Course”.

At the global conference, Orjiako’s panel focused on “Energy and Commodity Markets: Structural Bull or Earthbound?” His words: “We must develop a coordinated and coherent approach to energy transition with the specific needs of several geographies in consideration”.

The panel  provided insights on how few markets have seen more fundamental changes than energy and commodities. The experts at the panel responded to issues such as – How accelerated demand for microchips has led to rising metal prices, decarbonization and how electric vehicles are disrupting the energy market, and top companies supporting initiatives such as the broad deployment of hydrogen.

His panel also looked at what energy and commodity firms and investors can do to stay ahead of the game; and how they are supporting policy or developing effective programmes; as well as what incentives can help accelerate decarbonization and a more sustainable approach in the face of a growing climate crisis.

Responding to Seplat Energy’s timeline for Energy transition and how he sees this happening, Orjiako said: “I think one of the biggest challenges in Energy Transition is the continuous discordant tunes that are being sung across the world. The recent bull market experienced in the commodities market particularly with oil and gas is due in part to the uncoordinated planning of the pace of Energy Transition. The real message is that net zero emissions does not equate to zero fossil fuels.”

According to him, massive withdrawal of funding for fossil fuel projects has led to a market imbalance where with every slight rise in demand comes a sharp increase in commodity prices “as seen in the recent uptick in the price of coal.”

He added:“Energy transition must be done in a collaborative manner where there must be a balance between net-zero /carbon neutrality and energy poverty in Africa and much of the developing world. To put this in context, Nigeria for example with a population of over 200 million people has installed grid capacity of 12,500MW, availability of grid power to the population is only 3,000 – 4,000MW. 25,000MW off-grid power is supplied by diesel generators”, Orjiako noted.

“Over 60percent of the population has no access to electricity and rely heavily on biomass and kerosene for cooking. The challenge remains: how do we prioritize a transition to renewables overnight without addressing the energy poverty that exists with the available fossil fuel. Nigeria cannot afford to not utilize its over 200Tcf of gas reserves in the bid to address the UN SDG7 as it pertains to universal energy access. This gas reserves will leapfrog the transition”, he said.

On whether it is possible for oil price to go towards $100 per barrel (/bbl) given the recent demand surge and the example scenario where coal plants cannot sustain demand in China for instance, he said: “It is a possibility that oil price will go beyond $100/bbl in the near term”.

“The bull market is not isolated and oil prices will experience volatility in the long term. The phenomenon of Energy transition has been around for a while – e.g. the transition from coal to oil and then to gas. Energy transition in the past typically took about 100 years and keeps evolving over time. The current energy transition push is mainly driven by climate change and the urgency of now; however, it will not happen overnight,” Orjiako further said.

According to him, the current energy transition is also driven by politics, climate activism and policies whereas in my view the energy transition should be driven by technology and innovation in a coordinated manner by all players. “The recent call by the UN Secretary General for a complete stop to funding fossil fuel projects I consider as policy activism and contradicts the UN SDG7 aspiration as the current requirements cannot be met by renewable energy sources alone”.

A more pragmatic approach in Orjiako’s opinion will be to invest in the technologies that will drive net zero aspirations as well as engage policies and incentives to encourage carbon capture and sequestration.

“In Seplat Energy for example, we are implementing a flares out programme to be delivered in 2024 (2.8MT of carbon emissions), six years ahead of the Federal Government’s target year of 2030.

“We also see opportunities in Gas monetization as an added benefit of our flares-out programme. We have also launched our Seplat Tree for Life campaign as a way to naturally capture carbon through tree-planting. This campaign will also address the “S” in ESG with social impact, providing jobs and mobilizing youth participation in the programme. This demonstrates and further underscores the need for a sustainable approach to the solving the problem rather than defunding fossil fuel projects,” he noted.

“At Seplat we have changed our name to Seplat Energy to repurpose our organization to lead Nigeria’s Energy Transition. It is a mix; we continue to leverage our upstream business focusing on applying technologies to reduce carbon intensity in our operations. Midstream business where we maximize the opportunities in Gas and the New energy business where we focus on renewables in off-grid and solar”, the chairman told the audience.

Responding to question on whether there should be carbon yax, Orjiako noted that “the right pricing for carbon emissions offset credits as opposed to a carbon tax is actually an incentive that will be quite useful in driving Energy Transition”. To him, there needs to be a universal, standardized acceptable way for measuring emissions, offsets, and credits across board.

“Flares out programme may not translate to carbon credits for and oil and gas company however, investments over and above in for example: GHG capture programmes should translate to carbon credits for the company”, he added.

“We are also looking at the area of deforestation and health hazards in homes brought on by domestic use of biomass for cooking in Nigeria. To address this, we have identified LPG penetration. The benefits of this are preservation of the forests and promote health of our people.

“Another way to leapfrog to renewables is through the proliferation of solar energy. The Federal Government of Nigeria instituted the “Solar Naija” Programme to deliver solar power to 5 million homes. This is commendable however when compared to the massive energy gap we will still require support from our enormous fossil fuel resources to achieve our universal energy access aspirations”, Orjiako said.

Speaking further on where the energy for the future will come from amid population growth (about 2 billion people by 2100) which shows that there will be more demand for power, chairman of Seplat Energy said: “The balance is in the mix. As people migrate both geographically and socially to higher income status, the demand for energy will grow rapidly. This demand cannot be met by just one energy source. Ultimately the percentage contribution of fossil fuels will taper off as that of renewables in the mix grows over the coming years. However, the absolute contribution of fossil fuels to the energy mix will remain about the same.”

He noted that the current global demand for oil is about 100million barrels per day and projections show that in 2050 even with natural decline, “oil will still contribute about 40percent to the energy mix as against current contribution of 55percent today, but total demand will still be at about 100million barrels or more because of the increased demand brought on by population growth.”

“We will need to revisit the Paris Climate agreement and provide adequate investments in technology and investment as well as promote the right policy framework to keep temperature rise below pre-industrial levels rather than a focus on defunding fossil fuels,” he added.

Mrs. Zainab Ahmed, Minister of Finance, Budget and National Planning, has said the Federal Government would end fuel subsidy in July 2022.

Ahmed ,who disclosed  this at a media briefing, shortly after the closing ceremony of the 27th Nigerian Economic Summit (NES#27) in Abuja, explained that the provisions of the Petroluem Industry Act( PIA), indicate that

all petroluem products should be deregulated.

She said: “On the issue of fuel subsidy, the PIA has been passed and the provisions on the PIA indicate that all petroluem products should be deregulated.But also, when the PIA was passed, there was a -12 month implementation time-line that was provided.

“So, we are looking at it arleady, three months have passed. So, when we were preparing 2022 budget, we made the assumption that the time of PIA started from July 2021.

“And because of the fuel subsidy, we did not have provision in  2020/ 2021, though we have been incurring the costs anyway, we decided to make provision from January  to June 2022 in the proposed budget,  that is to say that we expect from July 2022, we will not be incurring the cost of fuel subsidy. I hope, that is clear.”

She spoke on the implementation of the Presidential Committee on Restructuring and Rationalisation of Federal Government Parastatals, Commissions and Agencies, under the Chairmanship of Mr. Steve Oronsaye, popularly called, Oronsaye Report, adding  that another Sub-committee has been set up by the present administration to take a holistic review of the Report, with a view to implementing it.

She  said unless and until the Oronsaye Report is implemented, the agencies recommended for scrapping or merging, would continue to receive their budgetary allocations.

She said that the sub-committee has gone far with the Report as the mandate of the committee is very difficult, adding that the Committee is doing a holistic review of Oronsaye Report  and earnings across all MDAs to ensure equity.

On Nigeria’s borrowing, Ahmed said Nigeria has been consistent in paying both the domestic and foreign debts.

She added that because of the Nigeria’s consistency in servicing her debts, that the the lenders continue to oblige her whenever the country wants to borrow.

She noted that Nigeria has debt management strategy that guides how it borrows funds, as the borrowing is carefully planned and calibrated to meet the debt service obligations of the lenders

On the impact of the money so far borrowed, Ahmed said the infrastructure built with funds borrowed has been impactful, as it has improved the quality of life of the citizenry.

Also speaking during the media briefing, Mr. Asue Ighodalo, Chairman of NESG, said the recommendations of the.annual Summit, over the past 26 years, have been incorporated into government policies.

While expressing some reservations on the Implementation of the past Summit recommendations, he said: “we are not as happy as we should be looking at the trajectory of development in the country.”

He said each administration comes to power with its party manifesto, adding that  NESG being a private sector- led think-tank and advocacy group, looks at the manifesto and advises government on what to do to improve the quality of life of the citizenry.

“Over the years, we feel fairly satisfied that most of the recommendations of the Summit which government has adopted, have been very impactful.

“They include pensions reform, telecoms reform, power reform. We suggested them and government looked at them and adopted them as policies.

“We will continue to do this, even where people think that we have not achieved as much as we should.

“But we feel very satisfied that in this partnership with the government, it is working hand in hand with us throughout the year not just at the summit.”