Godswill Ihetu argues for an orderly transition away from fossil fuels
Today, the global consensus is that the world is in a climate crisis. Consequently, the world needs to transition from fossil fuels to renewable energy sources. Burning of fossil fuels has been confirmed to have largely contributed to global warming and climate change. The world agreed and pledged that emission from fossil fuels had to be reduced and that renewable and clean energy resources shall be promoted as replacement.
As a result of the campaigns against the burning of fossil fuel, some financial institutions decided not to finance new oil and gas projects. Last year for instance, HSBC, Europe’s largest bank, announced it will stop financing new oil and gas projects. HSBC said it made the decision following consultation with leading scientific and international bodies who had estimated that current oil and gas fields would meet global demand in 2050. However, it went on to say that it will continue to keep its investments which are already in oil gas fields as it “recognizes that fossil fuels, especially natural gas, have a role to play in the transition, even though that role will continue to diminish.”
But, recent developments in Europe and the US are sending mixed messages to the world. It appears that major oil and gas companies, and even countries in these jurisdictions, are reneging on their carbon emission pledges, in which they had the target of 2050 to achieve net zero carbon emissions.
Following the Russian invasion of Ukraine, a visible shift emerged from the horizon. The war triggered a global energy crisis and appeared to have shifted the world’s attention from emphasis on renewable energy sources again towards fossil fuels in the name of energy security. The Russian war has thrown up new challenges leading to green energy policies and plans reversals, albeit temporarily.
The UK and parts of Europe began to open up coal mines, which had been closed years ago. These mines were closed in the quest to reduce the emissions of carbon dioxide and other greenhouse gases. Oil and gas companies also started sending mixed messages. ExxonMobil is currently increasing oil and gas production in Guyana. Norway’s Equinor, an oil and gas company, has announced its first commercial discovery offshore Norway this year. The US has sold more LNG to Europe in 2022 than most traditional suppliers, including Nigeria. The UK has granted new exploration licenses to oil and gas industry players.
Interestingly, the mixed messages cannot be more pronounced than in the UK itself, going by a recent BBC report. The Scottish government has decided that there will be no new oil and gas exploration, thereby reversing their former position; and Scotland’s draft energy strategy supports the fastest possible just transition away from oil and gas. Meanwhile, the UK government’s position is different. The published strategy has in its plans, a fresh round of oil and gas licensing in which 100 new licenses are to be issued this year. The BBC report points out the contradiction, thus: “These are two different responses to an energy crisis from two different governments in the same jurisdiction, with one leaning into oil and gas and the other leaning away.”
British Petroleum’s (BP) new direction is another case in point. Its Energy Outlook 2023 just published, warned that both governments and industries are behind their targets to reach net zero, and without continued investment in the oil and gas sector over the next three decades, the world faces increased risks of energy price swings and shortages. They emphasize that recent events leading to social and economic disruptions, have highlighted the need for the transition away from fossil fuels to be orderly. Yet, they forecast that fossil fuels will likely account for about 20% of primary energy even in 2050, the year most countries and companies in the world pledge to achieve net zero emissions.
Considering the depth of the conundrum which seems to tie the hands of the oil giants, the question is whether the major oil companies are hooked on oil and gas development and profits in responding to some shareholders who push for increased returns and payouts as dividends. Ironically, some shareholders seem to speak from both sides of the mouth, as they also demand that their companies exit from fossil fuel developments. This is why, in my opinion, the world needs to face the harsh realities, and then consciously move towards net zero with eyes wide open and hands ready to work in harmonizing strange bed fellows.
According to the Wall Street Journal, the 4th quarter 2022 financial report of BP, indicated a shift away from renewable energy and a return to its primary focus in oil and gas production. BP was disappointed with returns on its renewable energy investments and has declared that renewables profit shareholders less than fossil fuels. It now looks to trim future investments in solar and offshore wind, suggesting that the need to sustain shareholder value might slowdown the rate of adoption of renewable and climate change actions.
There is more bad news. The Global Wind Energy Council has repeatedly warned that wind development is falling far short of what is needed to reach net zero in transition from fossil fuels to green energy sources. A UK Sunday Mail recent news report revealed the case of dozens of giant wind turbines at some Scottish Power wind farm, being powered by diesel generators after a fault developed with their power supply. The firm said it was forced to act in order to keep the turbines warm during very cold weather. This is a contradiction. This is a glitch in wind turbine performance where a fossil fuel product came to the rescue. Both the above incident and the Global Wind Energy Council report suggest that energy transition should be orderly, as predictions based on present and future renewable technologies remain uncertain.
I hold the view that we in Nigeria must continue to develop our oil resources because we need the revenues just as the IOCs cited above are doing. We need to utilize our long standing skills and existing infrastructure which include multi-billion dollar investments in flow stations, compressor stations, pipelines and crude oil export terminals, yet we must grow renewable energy sources in sufficient scale to face the realities of the long-term danger of climate change. As I learned more about climate change, I have come to this position. We must pay more attention to climate change issues than we have done so far. We have to invest more on renewable energy sources like solar and wind, which are already the fastest growing renewable sources worldwide.
Meanwhile, some cheering news broke in the last week. The Nigerian Gas Flare Commercialization Programme, which aims to reduce gas flaring, announced two or three years ago is slowly taking off. If successfully implemented, this will certainly reduce our carbon emissions. The federal government has also announced the award of the multi billion Naira Oloibiri Museum and Research Centre. One hopes that the museum will not only focus on our oil and gas history, but also be a research centre for the development of renewable energy resources and for decarbonisation of our oil and gas operations.
Nigeria cannot afford to create agencies duplicating actions on renewable and climate change. Perhaps the Energy Commission of Nigeria should vigourously coordinate the national effort in energy transition projects. The Energy Commission of Nigeria is the apex government organ empowered to carry out overall energy sector planning and policy implementation, promote the diversification of the energy resources through the development and optimal utilization of all, including the introduction of new and alternative energy resources like solar, wind, biomass and nuclear energy. Its moment has arrived.
In concluding, according to a UK Daily Express report, a BP shareholder was quoted as saying that “as we run up the new system of renewables, we do not run down the old system too aggressively. It is a transition, not a step change.” I agree entirely with this view. The world needs an orderly transition away from fossil fuels, because social and economic disruptions, such as wars and supply chain uncertainties, including demand and supply of rare metals required for renewables, remain unpredictable. For all these reasons, projections on energy transition remain difficult. We in Nigeria must survive and exist while at the same time dealing with issues of energy transition and climate change.
Dr. Ihetu, is a former Managing Director/Chief Executive Officer of Nigeria LNG Limited
