Oil and gas companies should be the ones driving the energy transition that is redefining activities in the sector. If they don’t do that, other actors such as banks will take over the driver’s seat on the journey, an oil and gas company executive has said.
“Oil companies should be the ones driving the energy transition because if they allow others to do it, they will be out of business. So, the energy transition has to be driven by the oil and gas companies,” Henry Menkiti, a Sahara Upstream Company, said over the weekend.
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He spoke at the first edition of Sahara Group Media Thought Leadership Series, held at the group’s corporate head office in Lagos.
Achieving this will however require the active participation of the private sector, with the government providing the enabling environment through regulation and incentives.
The energy transition is the global energy sector’s shift from fossil-based systems of energy production and consumption to renewable sources. The process is driven by the search for energy sources devoid of carbon emissions from fossils, such as coal, crude oil, and gas.
The process is already redefining the way the sector is being viewed by the business and academic communities, from project funding to the types of degree progammes being offered by some universities, according to Menkiki.
“Banks are now saying ‘We will not fund what you are doing unless you show us what you are doing about emissions,” he said. In academia, he cited the example of Imperial College in the UK, which has decided to suspend its MSc in Petroleum Engineering course at the end of the 2021-22 academic year. The school had previously suspended its Petroleum Geoscience MSc course at the end of the academic year 2020-21.
Africa and energy transition
While Africa has oil now, it must begin to prepare for the transition now because the current customers are already in the transition period, Menkiit said. “If we do not begin to change now, we will be out of business. In 30 years, we will not sell oil. We need to monetize what we have to produce oil now but if we do not hurry, we will be in trouble. We have to move to gas because although our current customers are in the transition, they still need gas,” counselled.
For Nigeria, the transition will be less disruptive given the country’s rich endowment of gas, which should serve as the transition fuel as Africa’s leading oil producer marches to the desired destination.
The challenge of gas includes the need to ensure it does not leak in the process of exploration and production; the need to remove its foul and toxic odour through the use of special deodorant to make it serve as transition energy, and the required volume of investment to provide the relevant infrastructure for its harnessing. “So, any company exploring for gas will have to invest heavily,” said Menkiti.
The response by oil and gas companies operating in Nigeria to the ongoing transition should be determined by the pace of change in the dictates of energy consumers in the developed countries. Projecting that in 50 years, the current consumers of the country’s oil will not need it, he posed the question as to what the response of the oil producers should be now.
Transition to renewables does not mean the end of fossil fuels, said Menkiti, but that it represents the demand for it will reduce.
But the terminal date in the transition process is becoming a movable point, partly because of the Russia-Ukraine war, which Menkiti said has another five years to the transition period. If another war should break out, that could add yet another five years, ultimately pushing the terminal date to about 50 years, he said.
Energy policy needed
“The future of Nigeria’s energy industry will be a lot of individuals and companies; change will not come from the government. It will be from private individuals. The government can only come in via regulation,” said Menkiti.
While Nigeria today has oil that can provide everything the country needs, the Sahara COO noted that the process of making that happen will need the role of the Legislature in driving it. Part of the policy actions is the privatisation of “a lot of things for private enterprises to run these things”.
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