In an interview with journalists recently, a Director in Houston-based National Oilwell Varco, Dr. Babajide Agunbiade, talks about developments in oil and gas industry, projects in emerging energy markets, and the need for Africa countries to have improved energy sources. Excerpts.
Oil consumption may never return to levels seen before the coronavirus crisis took hold that was a damning statement made by the oil major BP earlier this week even its most bullish scenarios see demand no better than 40 flat for the next two decades as the energy transition shift the world away from fossil fuels. Do you think this is a fair statement?
Well, the way that such outcome may occur has shifted from peak supply to peak demand. What we are seeing now is that demand is dropping as alternate forms of energy that do not require fossil fuels such as electric cars, wind and other renewable energy options and integrated gasification in combined cycle from coal have come into play. The demand has peaked and it fair to say renewable energy will become the largest source of global power generation while oil demand will continue to decline. But predicting how this energy transition will evolve is a vast, complex challenge. So it is a fair statement.
You know oil is a dirty business and the big giants are looking for ways to clean up some of the mess they have made. But it doesn’t appear as if this discussion is taking place on the continent or is it?
It is not taking place as much as it should be taking place in sub-Saharan Africa. If you look at sub-Saharan Africa along with China and India, these are the places where oil demand is rising. In the developed world, a lot of new technologies are in use; as I said before, such as electric cars, windmill, clean energy, clean coal and are dropping supply.
However, in Africa, it is still the only commodity that can satisfy the demands of an increasing population, an expanding middle class, and in some cases, the main source of government earning.
We still have a lot of need for oil. As a result, operators and service companies are doing what they can do to optimize oil production process and reduce the cost to continuous production. As stated, a lot of these African countries depend mainly on oil revenue for survival.
Oil still plays a large role in the economies of sub-Saharan countries, accounting for up to 40% of Gross Domestic Product (GDP) and 80% – 90% of government earnings. 90% of our external reserves and 80% of government earning for Nigeria are coming from oil; it is a similar situation in Angola, Gabon, and other oil producing countries in sub-Saharan Africa. So the initiative has not been taken into sub-Saharan Africa. There is no push for anything different; they are still aggressively trying to source foreign exchange, which for the most part, they can only do that through oil.
Nigeria’s crude oil output is rising despite the reduction in global demand. You spoke about the dependency. Does that worry you or are you happy that Africa seems to be plowing ahead, even if the world is shifting its focus?
Well. You know the restriction that has been placed by Organisation of Petroleum Exporting Countries (OPEC) and other issues facing Nigeria with regards to production, even though the way you put it, Nigeria has the potential to produce 2.1 to 2.2 million barrels of oil. However, you know with the production cuts in placed by OPEC just to shore up oil prices shows that we now produce between 1.5 to 1.4 million barrels per day, so we have excess capacity. However, this historic cut is expected to see crude oil prices rebound by at least $15 per barrel in the short term. But with Nigeria’s long-term ability to produce more oil once the OPEC embargo is lifted, there’s no doubt that they would ramp-up production as they need the foreign exchange. I mean people are coming in, investors, International Oil Companies (IOCs) playing their little part to drive down drilling and exploration cost so that these countries can make a little bit more money and then be able to satisfy their economic needs. So it is a catch 22 for African countries. They need the foreign exchange and they don’t have a lot of options to earn money and so do I prefer that we look into other sources of energy because you know we may already have peaked as a result of the pandemic, stricter government policies and changes in consumer behaviour. But I mean, given the current scenario at least between now and the next 10 years, that’s the situation that we face and that’s what it’s going to keep happening then I can say that, I am happy Africa is plowing ahead.