… Local operators, Lee Engineering, Oilserv, Seplat, advocate natural gas, technology devt. as key enabler
Investment in production of crude oil in the past five years have witness about 50 percent drop due to global clamor for reduction in carbon dioxide emissions as well as the negative impact of COVID-19 pandemic on the oil and gas industry.
The President, Society of Petroleum Engineers, Kamel Ben-Naceur, stated this while presenting his keynote address at the on-going Offshore Technology Conference (OTC) in Houston, Texas, USA.
He cited the year 2015 as the beginning of the decline investment in the upstream sector of the industry, but added that the situation saw a turnaround before the global pandemic in 2020.
According to him, upstream investment saw steep declines by 26 percent between 2015 and 2016.
“However, investment went back up through 2019 before experiencing a 30 percent drop in 2020. If we look at the relative decrease in investment in the upstream sector overall, in less than five years, we have reduced the upstream investment by 50 percent which is almost unheard of. You have to go back to the mid-80s to see that kind of a trend.”
This came as Nigeria’s operators calls for more investment in the sector to drive the needed development in the sector and impact the countrys’ economy.
Ben-Naceur noted that the COVID-19 pandemic had a unique impact on the energy industry and will pave the path of the energy transition on its way to net zero emissions.
“The Covid-19 pandemic brought the biggest one-year drop in oil demand at 10.4 percent, while natural gas demand dropped by about 2 percent, and coal and nuclear demand dropped by about 4 percent. Demand for hydroelectric and renewable energy increased, though by smaller margins.”
He, however, express optimism as demand for crude oil is back to pre-pandemic levels this year, adding that he expects trend of increasing demand to continue in 2023 but noted that natural gas have done better.
His words: “The ‘most spectacular’ increase is in the price of natural gas. Between April 2020 and the end of 2021, natural gas went from about $3 or $4 per MMbtu to about $40 per MMbtu, a ten-fold increase. We have never seen that kind of increase in gas prices within a period of one year.
He avail fears stressing that there are indication that situation has changed, saying, “there has been a significant increase in upstream investment in 2022.”
Energy transition reality and future perspectives
Reviewing the recent development in the industry, Ben-Nacuer, noted that the energy transition is looking more like a reality, as electric car sales jumped from 1 million to 2 million before 2018 to almost 7 million, or 9 percent of new cars sold in 2021.
“Renewable power capacity continues to be added, and the industry is always learning about incentives of decarbonization.
“There are a few different energy transition scenarios predicted by the International Energy Agency, and each one would bring different costs and results. For the first time, today’s pledges – if implemented on time and in full – would keep the rise in global average temperatures in 2100 to below 2 degrees celsius.”
“Decarbonization will require many combined factors to be successful, including avoided demand, CO2 capture and storage, hydrogen, bioenergy, technology performance, electrification, other renewables and other fuel shifts. But no matter the combination or policies, reaching the net zero emissions goal still requires more oil and gas investment.
“We still need to invest more than what we invest today. Investment in the oil and gas industry will be crucial. And we are not investing enough in clean energy and that’s the big problem that the world faces.
“Some of that investment will be in carbon capture and storage, which is predicted to expand significantly by 2030. The world continues its need to access energy securely, in an affordable way, and in a clean way. Reduction of greenhouse gas emissions and flaring is critical. Accelerating the energy transition will still require a large share of oil and gas.”
Harnessing natural gas as transformation tool in Nigeria
Meanwhile, stakeholders in the oil and gas industry in Nigeria are striving to take advantage of the Federal Government’s declaration of the year 2021 to 2030 as a decade of gas.
Speaking in Houston, some Nigeria operators participating in the OTC, such as Lee Engineering and Construction Company Limited, Oilserv and Seplat Energy plc, emphasized the need for local companies to invest in the natural gas sector of the industry. They also called for more investment, insisting that enormous opportunities is available for investors in the sector.
Speaking on its contribution to the sector’s development, Chairman, Lee Engineering and Construction Company Limited, Dr. Leemon Ikpea, emphasize the importance of improving the country’s infrastructure development.
He stated that his company is committed to creation of the much needed infrastructure hence the firm has committed over $100 million into the construction of a fabrication yard in Warri, Delta State, its operational base.
“The project, which is due for commissioning this year, will guarantee the fabrication of any equipment required in the oil and gas industry locally and the African spectrum. The firm will focus on the manufacturing and fabrication of any equipment required in the oil and gas industry.”
On Nigerians man power capacity, he noted that “When I was a manager I did not just sit down in my office. I took time to understand how the company operated. I noticed that many Nigerians were performing various tasks as electricians, welders and so on. The foreigners were mostly there as supervisors. There are many skilled Nigerian workers around.
“The idea of transiting from seeking contracts to the manufacturing of necessary equipment and spare parts for the oil and gas industry comes with a lot of benefits for the sector. First, it engenders technology transfer, saves foreign exchange, builds capacity alongside many other multiplier effects.”
Ikpea identified commitment and timely delivery of quality jobs as some qualities that distinguished company’s who desire to stand out in the sector’s development.
On his part, chairman, Oilserv Limited, Mr Emeka Okwuosa, said his company’s participation in construction of the Ajaokuta-Kaduna-Kano (AKK) gas pipeline project is an indication of Nigeria’s commitment to energy transition.
According to him, harvesting natural gas which is abundant in country is key to Nigeria’s energy and economic development.
“The AKK project will stimulate gas infrastructural development and industrialisation in Nigeria. The AKK gas project, when completed would boost the agricultural and manufacturing sectors, carbon footprint as part of measures to cut down on global warming and provide gas for generation of power and gas-based industries.”
He said that the project is aimed at transporting natural gas (raw form), which would enable production of Compressed Natural Gas (CNG), Liquefied Natural Gas (LNG) among others.
“The project is important to Nigeria because gas is what will help Nigeria to develop. Development cannot happen without energy and our greatest form of energy in terms of availability is gas.”
For Seplat Energy Plc, there are vast opportunities in the gas business that when harvested would transform Nigeria and Africa, making it a potential hub in the future.
On expectations for sector’s growth, the company’s CEO, Roger Brown, reitereted gas development, technology as key in ensuring a roburst transitioning.
He said “as sector grows and evolves and fight betweeen transitioning, we must be super efficient in what we do particularly in the upstream and technology is very critical in delivering that.
“We believe that IT, cyber- help are more efficient technologies needed in the infrastructure development. We are bringing more technologies on our project like the use of Solar, gas. We believe in the gas business as we would develop LPG.
“We will finish the Assa North-Ohaji South (ANOH) gas plant by next year and its a game changer for us. Also we are upgrading the Sapele gas plant at the moment and puting on LPG and broden that second pillar of our business which is gas processing going into electricity.
“We are really looking at what renewable technologies would be adopted into our business that would be the best for Nigeria going forward. Our view from our business model is that solar would be the win game changer.
“For us at Seplat, investment never stops as we would make more investment in the coming months to year as we broading the transitioning scope.”
