My last post was an introduction to the Rio+ 20 conference and
what it means for Nigeria - this was based on the introductory chapter of the
Green Deal Report as compiled by the Heinrich Boell Foundation. This week, I’m
going to be commenting generally on the second chapter – the transformation
from fossil fuel to green energy - of this report which is quite a long read,
so please go on and click on the link at the end of the post for the full
“gist”. Also at the end of the chapter is an
initial plan; transition
steps for Nigeria from fossil fuel to green energy economy.
“…The focus of this chapter is crude oil and natural gas and
its importance for the green deal Nigeria. The Nigerian economy and the oil and
gas sector are in a dialectic state. Nigeria holds large reserves of a
depleting resource that will expire or substantially decline in the next 15-20
years for oil and some 70 years for gas. Energy supply from fossil fuels
results in climate change, which needs to be urgently addressed through
adaptation and mitigating strategies. These strategies will be aligned with the
transition to a green economy. There is a need for a paradigm shift,
diversifying the economic base towards sustainable renewable sources. A green
economy is our overarching goal with improved human well-being and social
equity, reducing environmental risks and ecological scarcities...”
Nigeria is a country blessed with so resources that it has
become our bane. Whilst the developed economies of the world are trying to
depend less and less on crude and find alternative energy sources which include
gas, somehow we still in the frontline of suppliers, as a country with large
reserves. These developed nations carry out their activities with climate
change in mind but, I can’t say the same for us. This leaves us, me with a lot
of questions – one of which is imbedded in the next paragraph.
“…Unfortunately, crude oil and gas make only a small
contribution to GDP, despite generating the majority of export earnings, as it
is a highly technology and capital intensive industry that employs few people.
The materials and equipment used in exploration and production are not produced
in-country. There is minimal domestic manufacturing input to the oil sector,
especially in oil product refining. Local content makes up about 5% in goods
and services, though the Local Content Regulator claims higher rates. According
to the Central Bank of Nigeria (CBN), the oil sector had negative growth in the
period between 2005 and 2007. This minimal sector GDP growth has been largely
fuelled by the increase in global market prices which started around the year
2000 due the quantum growth of other economies, mainly China and India…”
Almost like the devil, when a thing goes wrong or cannot be
explained, the culprit in Nigeria is usually the government, sad but rightfully
so most times. “…It is the role of government to regulate and create a suitable
investment climate in the petroleum sector. At the moment, the government acts
both as regulator and investor, in that it makes cash calls to fund upstream
sector joint ventures (JV) and provides the budget to the NNPC for capital
investments and major operating expenses (“priority projects”). This has
fostered inefficiency, corruption and mismanagement of financial resources, as
a true cash flow of the NNPC and JV upstream cannot be segregated in normal
economic practice...”
The authors of the report went on ahead to discuss on a
variety of issues such as the role of government in upstream licensing and
indigenous capacity development, “…it is safe to say that Nigeria’s oil
licenses (acreage blocks) are in foreign hands, as the production, operations
and management of JV and PSC are held 100% by foreign interests, i.e.
international oil companies (IOCs) who operate about 98% of total country
assets of crude oil and natural gas as well as the outputs in crude oil and
natural gas…Local indigenous assets are extremely low, and even major portions,
due to lack of access to finance are ceded to foreign technical partners, which
reflects in less than 7% of the total national output per day…”
Also, there was strong criticism of gas flaring – of the
penalties (which urgently need to be reviewed as we are still using what was
obtainable in 1998) and parties; the government and foreign companies in JVs,
responsible. After this, the authors
went ahead to tackle the downstream
sector, writing on oil products, the need for deregulation and subsidy reform.
This part makes quite the educative read as it touches on the issues that were
responsible for the Occupy Nigeria protest from professional angles without
bias, focusing on the wider problems of subsidies which are policy choices and the need for deregulation.
In their opinion, as long as the major source of funding to the oil and
gas sector is the Federal Government of Nigeria there will be limited gas
development.
Alleviating the impact of subsidy
removal while sustaining the pricing of oil products, tackling & punishing corruption, are key solutions with lots of minor
recommendations made by the authors. Also proffered for the long term were
actions such as, investment in alternative energy, creation of an integrated energy
planning system for upstream and downstream sector, creation of a strong
statistical data & reporting basis for the entire sector, establishment of a commodity
market at the Nigerian Stock Exchange for crude and petroleum products and
encourage the same in the Western Africa region etc. A very thorough and critical analysis of oil
revenue and its management in Nigeria ensues, with helpful recommendations at
the end.
In
conclusion, the environmental and social impacts of oil exploration and production were looked into – the
story of the Niger Delta is known to the average Nigerian. “…the opening up of
these remote locations brings with it human “invaders” that plunder resources,
impact on the culture and moral ethos. This has led to socio-economic
dislocation of Niger Delta people and has left many impoverished. Women have
been particularly impacted…the problem needs to be urgently addressed at
multiple levels…prevention of oil
spills & an end to gas flaring, introduce accountability for restoration,
if necessary through the courts, mitigate community unrest, contain the rising
cost of militancy, environmental law and implementation…”
Recommendations
as to renewable
energy development included “…review the structure & management of the energy sector, provide for
an effective management structure to transform Nigeria’s energy sector, conduct
long-term sustainable energy planning…” All things being equal, the above
recommendations and more should achieve the following at least, “…accelerate the development of the domestic energy
market, significant scaling-up of
renewable energy for electricity for both grid and off-grid distribution, end gas flaring through a harmonization of gas
management and electricity sector development, structured plans for the
transformation away from oil & gas dependence towards renewable energy
supplies...”
Source/Link: http://www.ng.boell.org/web/index-312.html
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