Nigeria, Others May Suffer over 70% Oil Revenue Crash by 2035, Ex-NLNG Boss Warns

•Says use of firewood, charcoal, fossil fuel will remain dominant in African energy mix

Peter Uzoho

The immediate-past Managing Director of the Nigeria Liquefied Natural Gas (NLNG) Limited, Mr. Tony Attach has warned that Nigeria and other oil producing African countries might witness over 70 per cent crash in their oil revenues when the current energy transition accelerates by 2035.

Attah also warned that the reduction in oil demand and the shrinkage of funding for oil and gas development projects portends high risks for Nigeria and its sister Africa oil nations, adding however, that fossil fuel, firewood and charcoal would remain dominant in the African energy mix

The former NLNG boss gave the warning yesterday in Lagos, in his presentation at the ongoing Sub-Saharan African International Petroleum Exhibition and Conference (SAIPEC) 2022.

He said the predicted massive fall in Nigeria’s oil revenue was based on the forecast that global oil demand could fall to 30 million barrels per day by 2035, below the current 100 million barrels per day oil demand.

He added that in the accelerated energy transition scenario, about 70 per cent of African oil production could become uncompetitive by 2040.

He maintained that in the accelerated scenario, no new oil field might be developed due to inability of companies to secure funds needed to finance oil field development projects, saying over 40 per cent of new projects might be at risks of not being delivered.

Attah said, “The global shift away from fossil fuel by the Western world will lead to a massive reduction in the availability of fund as some key players have already put a stake in the ground not to fund any oil and gas development projects, as seen in the recent announcement by the World Bank and some major funders around the world.

“In the accelerated transition case, it is forecasted that global oil demand could fall at about 30 million barrels per day compared to the current 100 million barrels per day by 2035.

“And most African producers’ revenue will dwindle by over 70 per cent in the accelerated scenario. Can you imagine Nigeria not earning 70 per cent from oil today?

“In this scenario also, about 70 per cent of African production will become uncompetitive by 2040, with next to no new field development across other countries, over left-behind production decline rates due to inability to finance and develop new oil and gas projects. Over 40 per cent of new projects essentially, will be at risks of not being delivered in the accelerated scenario.”

Attah warned that the reduction in oil demand and the massive shrinkage of funding for oil and gas development projects portended high risks for Nigeria and its sister Africa oil nations

This, he pointed out, would exacerbate the existential challenges for countries like Nigeria, Libya and Angola, whose economies depend largely on hydrocarbon for survival, especially if they are not quick to work out the details of alternative sources of funding.

He expressed delight over efforts being made by the African Petroleum Producers Organisation (APPO) in collaboration with the African Export-Import Bank (AFREXIM-Bank) and other investment houses to assist in making funds available for oil and gas development projects in the continent.

He said the continent was not only faced with the need to guarantee the sources of funding, but the need to guarantee revenues, especially outside of the Western market.

Attah stated that while the demand for energy was forecasted to grow by 10 per cent in 2040, Africa’s energy demand was expected to double by 2050, which could both be an opportunity or a challenge for the continent.

According to him, while about 75 per cent of oil produced in Africa is exported, only 50 per cent of the gas produced is consumed in Africa, adding that gas is available in abundance as established with over 500 trilliin cubic feet (tcf) of gas in the continent.

Based on the high rate of energy poverty in Africa where over 600 million of people still do not have access to electricity, Attah stated that fossil fuel, and biomass, which comprised firewood and charcoal, would remain the dominant sources of fuel in the African energy mix in the short to medium term

He explained that the situation was, “underpinned by increased consumption, painfully, of firewood and charcoal with its attendant implications on deforestation, desertification and other knock-on effects of social issues including crisis due to migration, will rise particularly in Nigeria.”