Africa Oil Week 2017 featuring ministers from South Africa, Nigeria, Ghana, Mali, Côte d’Ivoire, Namibia, Equatorial Guinea and U.S. Secretary of Energy Rick Perry, along with independent oil companies including, Tullow Oil, ExxonMobil, Shell, Total, Eni Spa and Sasol.
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NEITI’s independence is critical to transparency, economic growth and poverty reduction – keagwuonu Ugochinyere
- Reps will ensure its actualization;
- Unremitted revenue hits $9.85bn;
- 80% of the financial liabilities are owed by the NNPC;
- Nigerian federation earned $23.04Billion in 2021;
- $13.2billion or 57.27 went to the federating units, after deductions;
- 13% derivation must be computed based on Section 162 (2) of the country’s constitution
According to NEITI’s latest industry report, total unremitted revenues to the Federation by some affected government agencies as well as companies in the oil and gas sector in 2021 rose to over $9.85bn.
Executive Secretary of NEITI, Dr. Orji Ogbonnaya Orji while presenting the highlights of the report drew the attention of the audience to the importance of the report whose recommendations and proper application according to him would not only help government at all levels to mobilize and increase revenue, but also strengthen support and drive for national development and poverty alleviation.
On the outstanding financial liabilities due to the Federation as indicated in the report, a total of $13.591mn revenues was payable to the Federal Inland Revenue Service (FIRS), July 31, 2023, while the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) had outstanding tax collectible revenues of $8.251bn as at December 31, 2022., with over 80% of these outstanding financial liabilities still hanging around the NNPCL
Senator George Akume, secretary to government, and represented by the Perm Sec, Political and Economic Affairs Mrs. Esuabana Nko while unveiling the report pointed out the need for stakeholders’ commitment in supporting and deepening EITI activities in Nigeria.
Eteng Williams, Chairman Senate Committee on Petroleum Upstream, while commending the vital role NEITI had played over the years, and urging them not to relent said mobilization of revenue for the country may have a clearer direction now that the petroleum subsidy regime is believed to have gone.
Ikeagwuonu Ugochinyere, Chairman, House Committee on Petroleum Resources, (Downstream), had in his contribution pledged the support of his Committee to ensure that the report was laid on the floor of the Lower Chambers for extensive debate aimed at ensuring quick implementation of recommendations as enshrined in Sections 3 and 4 of the NEITI’s Act.
“Working together, we will ensure the realization of government’s desire to diversify the economy for the attainment of alternative source(s) of revenue and clean energy, that will bring about the realization of the projected one trillion-dollar revenue for Nigeria in the next 8 years.”
The Minister of Budget and National Economic Planning Abubakar Atiku Bagudu and represented by the Permanent Secretary, Nebeolisa Anako, stated that the data NEITI has generated would help the ministry in its planning activities for the country.
“The budget outlay for the country for the current national development plan for five years is N348trillion. Majority of this inflow is going to be from the private sector and the oil and gas sector is key to the realization of this goal”, he said.
Breaking it down, the report showed that Nigeria earned a total revenue of $23.046bn from the sector in 2021, a sum which is about 13 percent higher than the corresponding total of $20.43bn realized in 2020.
Further breakdown of the earnings showed that about $8.67bn, or 37.6 percent of the revenue was realized from the sale of crude oil and gas; $13.37bn, or 58.02 percent came from taxes and other specific revenue flows, while $1.01bn, or 4.38 percent went into payments to sub-national entities.
Furthermore, the report showed unremitted revenues and quasi-fiscal expenditure by the NNPCL of $1.95bn (8.47%) and $6.93bn (30.08%) respectively. Transfers to the Federation amounted to $13.2bn (57.27%), while Sub-national payments totaled $963.63mn or 4.18%. The report also showed the available revenue shared amongst the federating units – after all the deductions – and in accordance with the revenue allocation formula, at US$13.2billion, which also represented 57.27% of the total revenue collected, lower however than the 71.7% shared in 2020.
The quasi-fiscal expenditure of $6.931billion (equivalent of N2.651trillion) was equally deducted from what was presented as Federal government’s total revenue, remittance which was carried out without appropriation by the National Assembly. A breakdown of the $6.93bn deductions showed payments of $3.52bn or 15% for Joint Venture Cost Recovery and $3.031bn (about N1.16 trillion) or 13.15 percent for products subsidy/value loss. Other deductions were $258.43mn for government priority projects; $75.51mn for pipeline maintenance and holding cost and $42.40mn for crude oil and products losses.
The report also showed that none of the refineries was operational in 2021 despite spending of about N200billion, done between 2020 and 2021 and captured as TAM.
Findings also reveals about $1.95bn, or 8.47% of the total revenue as transfers to the Federation Account NNPCL was under obligation to do it never did, during the year under review, as breakdown of this did not exclude, $722.6million for NLNG dividend; $871.15mn from domestic crude sales, $859,583 miscellaneous revenue, and $286.42mn from export crude sales. $24.332million and $45.76million were withheld from transportation revenue and domestic gas proceeds.
A ten-year trend analysis of financial flows from the oil and gas sector from 2012 to 2021 showed earnings of $348.63Billion.
On crude oil production and exports, report indicated that total metered crude oil production was 634.60 million barrels, out of which the nation lost 68.47 million barrels to production adjustment, measurement error, theft and sabotage. The figure showed a 13% reduction from the production volumes of 2020.
It was also pointed out that a total 29 companies suffered crude losses arising from theft and sabotage, amounting to 37.57 million barrels. Decline in crude volumes due to theft and sabotage was recorded as 39.08million barrels in 2020 to 37.57million barrels in 2021.
On gas production and utilization, report showed that a total of 2.74million standard cubic feet of gas was produced during the year, about 8.96 percent lower than the 3,013,634mmscf produced in 2020. Total gas utilized in 2021 stood at 98%, while 2% could not be accounted for by the companies based on the templates submitted.
With the nation’s gross domestic products put at about $434.17bn, the report indicates that the oil and gas sector contributed about 7.24% to the GDP and $ 36.55 billion (N14.40 trillion Naira) to total exports of $ 47.31 Billion (N18.91 trillion). This represented 76.22 % of the total exports in 2021, 0.8% higher than what obtained in 2020. The number of employees in the sector in 2021 were captured as 19,171.
Similarly, the total government revenue generated in 2021 was 10.75 trillion Naira with the oil and gas sector contributing 4.358 trillion Naira, which also represents about 40.55% of the total revenue, compared to 51% in 2020. The higher export value in 2021 compared to 2020 was due to the increase in crude oil price in 2021 from $41.65 per barrel to $66.97 per barrel, report disclosed.
On marginal oil fields for 2020/21, NEITI report quotes NUPRC as notifying all successful applicants on the “Preferred Bidder Status” to make payments for signature bonus prior to award. More puzzling also was that findings revealed names of companies whose signature bonuses had not been paid, and this was alongside four companies whose names were not originally on the award list but who were seen to have paid their signature bonuses.
NEITI in the 2021 report also observed that majority of the oil and gas companies in Nigeria exhibit complex structures that shield the real identities of their owners, thereby limiting the impacts of efforts at beneficial ownership disclosures. NEITI also had to this effect called on the NUPRC to implement fully the relevant sections of the PIA on Beneficial Ownership reporting.
Other recommendations include that which mandates NNPC to transparently disclose details of the subsidy and the beneficiaries of the payments, render accounts on project eagle loans transaction and review and investigate all pre-export financing arrangements plus other loan arrangements done in exchange for the nation’s crude oil and gas.
NEITI also recommended that Government should commission a comprehensive audit of the PMS subsidy-related financial transactions between NNPC and the Federation, determine all liabilities and ensure accurate and verified data.
Furthermore, the Agency noted the discrepancies in records by some relevant government agencies on transactions in the sector which also raises concerns on integrity and accuracy of the data and pieces of information disclosed by these agencies. It therefore called on the concerned agency to improve its data management processes and establish controls that would prevent future discrepancies and maintain data integrity.
NEITI also drew attention to the practice of computing 13% derivation on the balance of revenue after deductions from the total collections which it advised should be discontinued. Rather, the 13% derivation should be based on total collections for the relevant period in accordance with Section 162(2) of the constitution of the Federal Republic of Nigeria.
It finally stressed the urgent need to strengthen the remediation mechanisms and involve independent third parties to conduct detailed investigations where necessary, especially with the PIA now in place for effective monitoring of the implementation process.
Global temperatures to hit 2.5C if no quick remedial actions – Analysts warn
- US$2.7 trillion a year investment needed to achieve net zero by 2050
The world is currently on a 2.5-degree Celsius warming trajectory, says Wood Mackenzie’s latest report on energy transition, referred to as “Energy Transition Outlook, made available to Energy Window International, one of world’s most authoritative energy industry report channels. Wood’s Energy Transition Outlook, described as a “milestone assessment” of the global journey towards a lower carbon future, has attempted to weigh the level of transformative action taken so far, aimed at ascertaining the reality or otherwise of limiting the average temperature increase to below 1.5-degrees Celsius, within the time allotted.
The report had outlined key findings to include, the optimism that achieving 1.5C was still possible but with limited temperature overshoot, which also will be contingent on the level of actions to be taken within the decade. Also critical is the need for low carbon power supply and infrastructure needs to be scaled up at least twice the pace at which it was built in the last decade – made more difficult though by the current delays faced by renewables assets due to limited grid interconnections.
It also means, from this standpoint, that a minimum of US$1.4 trillion a year (base case) must be invested in renewables, infrastructure and energy transition technologies, as annual spend into the sectors is expected to rise to US$2.4 trillion for net zero target to be met. Of particular mention was the critical role the oil and gas sector has to play to manage this transition because, as natural depletion as low carbon supply begins to develop, the oil and gas supply would have to be replenished, to help move the world closer to net zero. Spending will hover around US$0.5 trillion a year, Woodmac’s base case, and US$0.2 trillion a year for net zero.
Electricity is expected to become the major energy market, with renewables as the main driver of power supply. Power demand will double every 10 years to support road transport electrification and green hydrogen production, which also means that energy will have to be used much more efficiently in a net zero scenario, with demand-side management a major component, while softening the impact or rising electrification in other sectors.
Carbon Capture, Utilization and Storage (CCUS) and DAC (Direct Air Capture) must get the best attention so as to abate industries and help restore the carbon cycle longer term. This will be besides the rapid development of copper, nickel and lithium supplies, all of which are essential to support renewables, electric vehicles (EVs) and transmission infrastructure, with lithium demand projected to double by 2030.
“The pathway to net zero was always going to be challenging, but Russia’s invasion of Ukraine has made it more difficult especially in the near term. The conflict quickly curtailed the global supply of energy and metals, amplifying the impact of underinvestment in the resources sector over the last decade. Supply security fears increased around the world, and higher prices across energy and mining commodities have fueled inflation”, says Simon Flowers, chairman and chief analyst at Woods.
“The supply of low carbon energy has grown by a third since 2015, but the world’s energy demand has grown much faster with rising incomes and populations. The good news is that sustainability is alive and kicking, spurred on by policy including the introduction of the US Inflation Reduction Act and Europe’s REPowerEU. Achieving 1.5C is going to be extremely challenging, but it is possible and greatly depends on actions taken this decade”, Flowers added.
In Woodmac’s base case, energy related emissions will peak in 2027 and fall roughly 25% by 2050 from 2019 levels, with low carbon energy’s share of final consumption growing to 14% by 2030 and 28% by 2050.
“Net zero pledges now cover 88% of annual global emissions. But no major country is on track to meet their 2030 emissions reduction goals, let alone net zero. Policy landscape is shifting to direct incentives and targeted support to accelerate the development of new technologies, but countries need to urgently address obstacles including permitting restrictions and constraints in the electricity supply chain,” Flowers added.
To limit global warming to 1.5 degrees, VP Scenarios and Technologies Research Prakash Sharma, said urgent action towards building low carbon power supply and infrastructure at a very fast pace was not negotiable. Adding that low carbon supply today accounts for 42% of power generation, and this is expected to rise to 78% by 2050.
“The share of wind and solar increases from 13% today to over 53%, undoubtedly double of today’s total power demand in the same time period, this is also with the hope that the supply chain and inflationary pressures currently faced by renewables developers are expected to ease in a few years.”
Power transmission infrastructure according to the report, also needs to expand alongside renewables, with growth which will require grid connectivity expected in the next phase.
Carbon pricing is required to close the gap in cost of low carbon supply, in order to drive adoption in difficult sectors such as steel, cement and chemicals. Wood Mackenzie expects that a carbon price of US$150 to US$200 per tonne is required by 2050 from the current global average of US$25 per tonne, the report reveals
“Electricity will become the largest energy market, overtaking oil and gas as a fast-response, low cost, and efficient energy source,” Sharma adds.
In its base case, the team maintain that electricity’s share in final energy demand will rise from 20% to 22% by 2030, and to 30% in 2050.
For EVs, global stock is expected to rise from 43 million cars currently to 1.02 billion cars by 2050, in the base case. An additional 20% growth in stock is projected in the country pledges scenario and 60% in net zero.
As a core material for EVs, lithium demand is projected to increase two-fold by 2030 in the base case and three-fold in a net zero scenario. Copper and nickel supplies will also need to be developed quickly to support renewables, EVs and transmission infrastructure. The urgency of investment is further underlined by seven to 10 years build time for new mines.
On emerging technologies: hydrogen and CCUS, low carbon hydrogen and CCUS projects are moving out of the pilot phase and becoming mainstream. Wood’s net zero scenario requires 515 million tonnes (Mt) of low-carbon hydrogen by 2050, as the technology will see 11% share in final energy demand by 2050, 4% in the base case, phasing out fossil fuels in chemicals, steel, cement and heavy-duty mobility.
CCUS and DAC abate fossil fuels use while low and zero carbon energy supply is developed. In Wood’s base case, CCUS and DAC capacity is projected to rise from 100 Mt in 2023 to 2 billion tonnes (Bt) by 2050. The deployment needs to reach around 7 Bt by 2050 in a net zero scenario, which also requires substantial expansion in developing transport, shipping and storage infrastructure.
About oil and gas, Sharma said: “Oil and gas still have a role to play as part of a managed transition. There will be a natural depletion to be low, as zero carbon options develop, but supply still needs to be replenished as we move towards net zero.”
According to Wood’s base case, fossil fuels will account for 69% of end-use energy demand in 2023, falling to 53% by 2050, triggered by greater end-use efficiency and electrification.
Oil peaks over the next decade in all scenarios are expected, primarily driven by the significant uptake of EVs. In Wood Mackenzie’s base case therefore, peak comes at 108 million barrels per day (mb/d) in 2032 and falls to 90 mb/d in 2050, with expectation that it will fall to approximately 50 mb/d, and to 30 mb/d in the country pledges and net zero scenarios, respectively, by 2050.
Growth in LNG markets will see natural gas increase its share of primary energy supply to 25% in 2023, whereas coal and oil stagnates or declines. Gas demand is projected to grow for 10 years in all scenarios due to its wide range of application. Demand weakness in buildings and industry is offset by increased coal-to-gas switching in power and feedstock for blue hydrogen production.
Woodmac’s base case on investment sets the total investment needed to decarbonize the energy sector at US$1.9 trillion a year, and needs to increase by 150% – or US$2.7 trillion a year – “if we are to meet the 1.5-degree target.” More than 75% of this investment is needed in the power and infrastructure sectors.
“Sustained investment is critical for both the existing and new supply of zero and low carbon energy sources. Global cooperation and an institutional framework are essential in driving innovation and technology development. COP28 can build the consensus for commitment amongst member states to meet the 1.5-degree climate target and ultimately shape the outcome of the global energy transition,” Flowers concluded.
Hear stakeholders discuss practical steps to achieving Nigeria’s energy transition at NAEC 2023 conference
The world is undergoing the most critical moments in its history, triggered by a number of factors, encapsulated in the current geopolitical shifts and uncertainties in the global energy market, concerns for energy security and market stability, rising inflation and supply chain challenges, investor pressure for returns, balancing poverty alleviation and economic growth concerns with climate change objectives, governments’ inability to prioritize (with reference to Nigeria) its energy and economic policy actions, a combination which has also given rise to more critical economic challenges and sociopolitical bottlenecks.
Since the beginning of 2022, a couple of oil and gas events have been held in Nigeria with focus on the country’s Petroleum Industry Act, PIA whose passage was trailed with mixed feelings, the declaration of 2020 to 2030 as a decade of gas in Nigeria (even as the price of cooking gas in the country seems far from the ordinary Nigerian), the place of Nigeria, and indeed the Sub-Saharan Africa in the ongoing worldwide campaign aimed at charting the right course toward achieving the global energy transition agenda. This conversation is thus continuing at the Association of Energy Correspondents of Nigeria, NAEC annual international energy feast taking place at Eko Hotels Lagos on the 5th of October 2023.
Consistent with NAEC’s tradition, and in line with the global struggle for net-zero gas emission reduction anticipated by 2050 through the ongoing energy transition programmes, NAEC’s Conference Committee was able to articulate contents for discussion to fall within the purview of the ongoing global discourse, toward finding a common ground to achieving the global emissions reduction target while emphasizing the critical role crude oil exploration and production will play in the actualization of the entire transition agenda particularly in Africa.
Group Chief Executive Officer of the Nigeria National Petroleum Company Limited, Mele Kyari will deliver the keynote address, while the Managing Dirrector & Chief Executive Officer Falcon Corporation, Audrey Ezeigbo is the conference Chairman.
Others include, the Nigeria Upstream Regulatory Commission, Nigeria’s Midstream and Downstream Regulatory Authority, Nigerian Content Development and Monitoring Board, NCDMB, International Oil Companies’ Chief Executives, Local Independents, MOMAN, Nigeria’s power sector officials – all have already been confirmed to participate at the all exhaustive hydrocarbon and energy transition event with the theme, “Nigeria’s Energy Transition: Enhancing Investment Opportunities and Addressing Challenges in the Oil and Gas Sector.”
Olu Philips, NAEC’s Chairman speaks of the event as one industry assembly that has always reflected presence and participation of a cross section of industry stakeholders, policy makers, analysts and the academia, providing platforms for exhaustive discussions, and most often, providing prophylactics for a number of long-standing industry issues.
“Nigeria has pledged to reach net-zero by 2060, ten years behind that of the United Nations. However, as the clock keeps ticking, not much is being done towards achieving this transition, in terms of investments. This is the time stakeholders should begin to talk seriously, make plans and policies and execute them”, Olu said.
Oil and gas exploration spending to recover from historic lows, average $22B per annum through 2027
- Deepwater areas of Africa and Eastern Mediterranean to provide most growth opportunities
Exploration spend, with the exclusion of everything appraisal, according to Wood Mackenzie’s latest industry report, will recover from historic lows to average US$22 billion per annum in real terms over the next five years.
Tailwinds from attractive exploration economics, the need for energy security and the emergence of new frontiers will incentivize oil and gas companies, led by NOCs and Majors, to increase exploration spending through 2027, Woods “Exploration quietly recovering” report had shown.
“Explorers will become bolder in the coming years,” says Julie Wilson, Director of global exploration research at Woods. “While this rebound might surprise some, it must be seen in context. Exploration went through a boom during 2006-2014 and spend peaked at US$79 billion (in 2023 terms). But in the prior six years, the average was US$27 billion per year in 2023 terms. While spending will increase, it won’t return to anywhere close to past highs and there will likely be a ceiling on the increase. There is a lack of high-quality prospects that would satisfy today’s economic and ESG metrics and a continued focus on capital discipline will keep a lid on overspending.”
The growth according to Julie will begin in 2023, with spending projected to increase 6.8% over 2022 totals (in real terms), with fingers at the robust business case as the major driver for the accelerated and increased activity. For Wood’s analysts, full-cycle returns from exploration have maintained a consistency of above 10% since 2018, exceeding 20% in 2022.
“These positive results have increased confidence in exploration,” says Wilson. “Improved results are down to many factors. Portfolio high-grading coupled with greater discipline in spending and prospect choice mean only the best prospects are drilled and waste is minimized. Efficiency gains also serve to enhance the returns from both development and exploration.”
In the virgin regions, in the long term, deepwater and ultra-deepwater are expected to provide the most growth opportunities for exploration. The Atlantic Margin of Africa and the Eastern Mediterranean regions for instance, all things being equal, will experience the greatest growth, with spends of various sizes taking place in some unspecified new frontiers.
“There are areas where leads and prospects are being worked up with recent seismic data, for example Uruguay, southern Argentina and deepwater Malaysia,” Wilson added. “Future spend in ‘success case’ areas is additional exploration following success, whether that’s in a frontier like Namibia or Greece, or a more established province like Egypt’s Nile Delta.”
Asia Pacific will serve as a critical cynosure for EV sales, while playing significant and evolutionary role in energy storage.
And as regulations change and consumers’ preferences shift, the electric vehicle (EV) and energy storage system (ESS) industries are set to experience substantial growth, with the Asia Pacific region playing a vital role, Wood’s report indicated.
Wood’s analysis also notes that passenger plug-in electric vehicle sales are set to soar, reaching an estimated 39 million units by 2030, partially fuelled by recent US regulations. This is as the global sales will continue to rise through 2050, with the Asia Pacific region coming as the primary growth driver, accounting for a substantial portion of the market.
Meanwhile, regulations demanding a higher share of EVs in car manufacturers’ portfolios will have an impact on the industry. Max Reid, senior research analyst – Electric Vehicles & Battery Supply Chain Service, for Wood’s analytical team says, “car manufacturers are adapting to stricter regulations and evolving consumer preferences by focusing on the C/SUV-C and D/SUV-D model segments and providing high-performance and energy-efficient battery packs for electric vehicles. This collective effort is shaping the future of the automotive sector towards sustainable mobility and a more sustainable future.”
Global battery demand is projected to skyrocket at a compound annual growth rate of 26% until the end of the decade, reaching 3.4 terawatt hours (TWh) by 2030, primarily driven by EVs and ESS, motive products, portable electronics, and power devices will also contribute to the overall market. However, demand growth is expected to slow to 3% in the 2040s, with a forecasted demand of approximately 7.3 TWh by 2050.
Again, the type of cathode technologies used in batteries can significantly affect the demand for raw materials required. “According to our analysis, the use of iron-based chemistries will lead to a drop in the average cost of battery packs to below US$100 per kilowatt hour by 2029. Lithium-ion battery technology is expected to grow with a projected capacity of 3.4 TWh by 2030 and 7.35 TWh by 2050, matching demand. On the other hand, the rise of sodium-ion technology is also anticipated, with an additional capacity of 158-gigawatt hours (GWh) expected to be added. While lithium iron phosphate currently comprise almost 70% of production and installation in China, this technology shift is unlikely to occur elsewhere. It is expected to level off in China by the end of the decade,” Reid added.
Only China, South Korea, and Japan produce significant quantities of nickel-based cathode active materials. But by the end of the decade, more countries like Germany, Canada, the United States, Poland, Indonesia, and Finland are also expected to start producing them. However, most of the production will still be in the Asia Pacific region.
On Lithium and Nickel in high demand. The global demand for lithium-ion battery technology will drive a fivefold increase in the lithium market by 2050. Currently, the majority of mined lithium comes from Australia and China, but by 2030, Africa and North America will contribute 30% of the mined supply.
The demand for nickel in the market is expected to increase significantly as lithium-ion batteries rely heavily on it to enhance their energy density. However, compared to lithium, the supply of nickel for batteries will mostly come from Asia. This could pose a significant risk to battery pack prices, especially for those that use nickel-based chemistries that demand high nickel content.
Recycling: circularity will increase as EVs reach end-of-life
Regarding recycling, the report highlights that by 2030, there will be two million tonnes of black mass from shredded and processed battery waste available for processing each year. This amount will increase significantly in the 2030s as early-decade electric vehicles reach end-of-life. However, only 157,000 tonnes of lithium carbonate equivalent will come from the recycling sector in 2030, meeting just 7% of the overall demand. By 2050, nearly two million tonnes of battery materials will be recycled annually, contributing to sustainability efforts.
“As the demand for electric vehicles (EVs) and energy storage systems (ESS) increases, planning carefully and investing further to maintain a stable supply chain is essential. Neglecting to do so could result in higher costs for raw materials and refined chemicals later in the decade,” Reid concluded.
US$ 27bn investment required to mobilize global offshore wind supply chain
- Investment required by 2026 if sector is to meet forecasted 5-fold growth in annual installations by 2030, with greater sum of US$100 billion needed to hit global government targets by the end of the decade.
The global offshore wind supply chain will require US$ 27 billion of secured investment by 2026 if it is to meet a fivefold growth in annual installations (excluding China) by 2030. This was according to latest Horizons report by Wood Mackenzie, a global insight business for renewables, energy and natural resources.
“Governments have made clear their commitment to offshore wind as an important pillar of decarbonisation and energy security. However, the supply chain is struggling to scale up and will be an impediment to achieving decarbonisation targets if change does not happen”, says Chris Seiple, Vice Chair, Power and Renewables at Wood Mackenzie, and co-author of the report.
Seiple added: “Nearly 80 GW of annual installations to meet all government targets is not realistic, even achieving our forecasted 30 GW in additions will prove unrealistic if there isn’t immediate investment in the supply chain. Adjustments and new policies by governments and developers will be required to transform the supply chain to deliver offshore wind projects at industrial scale.”
With low offshore margins which have made investment case more challenging and extremely difficult, Seiple also believes that the oversupply that resulted from the 2015 supply chain buildout has huge and tremendously negative impact on profitability.
He said: “The oversupply that resulted from the 2015 supply chain buildout is one of the factors depressing profitability, which saw the industry boost its capacity to supply around 800 turbines, compared to the yearly average of 500 since then. Suppliers are now also having to cope with the inflation of the past two years and higher commodity input costs.”
He added: “Burned once, current suppliers are cautious in their investment plans and the lack of profitability is hampering their ability to fund manufacturing capacity expansion – ultimately stalling innovation in the sector.”
On the uncertainty of project timing which could also result in very different supply-chain needs, the report showed that about 24 GW of projects which are scheduled to come online between 2025 and 2027 have already secured a route to market, through either some form of subsidy or power purchase agreement (PPA), even though a financial investment decision (FID) has not been made. And according to the report, the very critical stage is now, when developers look to firm up project orders with the suppliers, however with multiple global projects delayed, prompting renegotiations on offtake contracts, given increased supply costs and inflation.
With the shift in the anticipated equipment demand from 2025-27 toually2028-30, which also and naturally will result in less need for manufacturing expansion in the shorter term, there would be an even greater need for investment to expand to meet the demand from 2028-30.
Finlay Clark, Senior Research Analyst at Woods, and co-author, said: “In reality, if this occurs, certain projects might not get built at all in 2028-30, meaning governments will risk falling further behind their targets. The uncertainty surrounding project timing is a large reason why supply chain participants hesitate to expand further.”
This figure is based on Wood’s base case outlook which forecasts annual capacity additions to hit 30 gigawatts (GW) by 2030, to be dwarfed however by policymakers’ offshore wind targets, which would require nearly 80 GW per year. To hit this goal set by governments across the world says Woods, the supply chain is estimated to require more than US$100 billion in investment, findings which came from its “Cross currents: Charting a sustainable course for offshore wind.”
According to the report, many investors would be concerned that if the supply chain were built out to satisfy peak installation demand in 2030, in order to meet government wind targets, there could be insufficient demand for equipment to support it after 2030.
“This seems eerily similar to the post-2015 drop in margins across the supply chain. This is an important consideration for suppliers, in particular, as they need to be confident in the demand 10-plus years ahead to earn a return on their investment,” Clark added.
Wood’s believe in scaling up therefore, the offshore wind supply chain will require a number of adjustments by governments and developers. It includes, first and foremost, target setting and plans for power market infrastructure to support offshore wind need extending beyond 2030, especially in places where they do not already do so. Policymakers to consider the impact on the supply chain when deciding whether or not to renegotiate existing contracts and pausing the turbine size arms race with a size cap.
Finally, Soeren Lassen, Head of Offshore Wind and co-author as well also noted: “It’s not all up to governments. Developers also need to consider innovative partnerships with suppliers to provide the demand stability that suppliers need to increase capacity.”
Seiple concluded: “The sector – most notably the policymakers – must take this opportunity to chart a more sustainable path for offshore wind. This will not just influence the projects being installed today or in 2030, but also the 1.4 terawatt (TW) offshore wind capacity that Wood Mackenzie expects to be connected by 2050.”
NLNG plant was shut down as reported was mere fabrication – Andy Odeh
The General Manager External Relations and Sustainable Development of the Nigeria Liquefied Natural Gas Limited, Andy Odeh has debunked as mere speculations that the company’s production plant on the Bonny Island in the south-south Niger Delta region was shut down and so was not producing. His reaction was coming on the heels of the report by one of Nigeria’s daily newspapers of August 17 2023 with the caption, “NLNG Prolonged Shutdown Threatens Gas Production.”
While condemning the publication as false, misleading and obliterative of the company’s corporate image, Andy said the NLNG plant has been in operation and producing optimally notwithstanding a declaration of Force Majeure on it.
He said: “NLNG reiterates that operation at its plant on Bonny Island is still active despite a Force Majeure which still subsists due to the unavailability of upstream gas suppliers’ major liquids evacuation pipelines occasioned by sabotage and vandalism.
“The plant continues to produce LNG and LPG commensurate to the feed gas it receives from its upstream gas suppliers. Its cargo loading operation also continues without interruption.
“The latest cargo from the Bonny plant sailed on the 17th Aug 2023 to the St Croix, US, Virgin Islands, carrying 140, 000 M3 of LNG.
“NLNG remains committed to collaborating with key stakeholders to minimize the impact of the consequent gas supply shortage”, Andy Odeh said.
Mike Sangster is Senior Vice-President Africa E&P at TotalEnergies
Mike Sangster of TotalEnergies who will deliver a keynote address at the African Energy Week conference, taking place this October in Cape Town settles down as the Senior VP Africa E&P at TotalEnergies, moving from his current position as Head of E&P for Nigeria at the firm.
“TotalEnergies represents one of the longest-operating E&P companies in Africa, having been present on the continent for over 90 years. The energy major is currently active in 43 countries and boasts over 13,000 employees. Leveraging its experience and technological expertise, TotalEnergies is active across the entire energy value chain, and has a diverse portfolio with projects spanning the oil and gas industry, renewables sector and broader power and infrastructure markets.
“With sustainability at its core, TotalEnergies works collaboratively with African governments, National Oil Companies and service firms to unlock high returns on investment while yielding tangible opportunities for local communities. TotalEnergies has committed to achieving Net Zero by 2050. Through technological innovations, low-carbon investments and priority placed on capacity building, skills and technology transfer, the company continues to serve as a strong and steadfast partner for African countries. TotalEnergies is also the official Sustainable Energy Partner for AEW 2023, and Sangster is expected to further elaborate on how the company is leading the next wave of sustainable energy operations in Africa.
According to a press statement from the organizing committee of the African Energy Week, it is now trite knowledge that Africa has already entered into a new era of oil and gas, driven largely by a continental focus on exploration where global energy majors like TotalEnergies “have not only represented long-term partners for African nations but have placed themselves at the forefront of the industry’s transformation. The French major has set its sights on new hydrocarbon plays in Africa, while correspondingly spearheading the sustainable development of existing operations.”
During this year’s edition of the continent’s premier event, scheduled for October 16-20 in Cape Town – TotalEnergies’ Mike Sangster will deliver a keynote address on the future of African exploration, for Sangster is already in line, according to the statement, to assume the role of Senior Vice-President Africa E&P at TotalEnergies, moving from his current position as Head of E&P for Nigeria at the firm. Sangster is expected not only provide insight into TotalEnergies’ ambitious upstream agenda in Africa but lead dialogue around sustainable exploration, the role of local content and why Africa is set to play a central role in future supply chains.
It is no longer in doubt, from the array of its activities, that TotalEnergies has set its eyes on unlocking new hydrocarbon finds in Africa while spearheading several exploratory campaigns in both mature and frontier markets. In Namibia for instance, the oil major is driving a multi-well drilling campaign in the Orange Basin, kickstarted by a sizeable oil and gas discovery made in 2022. Earlier this year, it announced plans to invest nearly 50% of its exploration budget ($300 million) into its Namibian activities. In Angola, it has stakes in several assets in the Lower Congo and Kwanza Basin, and further south, it plans on exploring the South African side of the Orange Basin, and recently, has acquired environmental authorization to explore Block 5/6/7. TotalEnergies was also responsible for two major gas finds in South Africa in 2019 and 2020 – the Brulpadda and Luiperd discoveries.
In Mozambique, its upstream success saw major discoveries off the coast, while making progress yet towards getting its Mozambique Liquefied Natural Gas (LNG) project back on track, the delays notwithstanding. On the continent’s eastern coastline, TotalEnergies Lake Albert Basin developments are set to awaken a new era of energy security for the high-demand region, and also developing the Tilenga and Kingfisher oilfield – scheduled to begin production in 2025 – as well as the East African Crude Oil Pipeline. And in West Africa, it operates two deepwater blocks in Mauritania; the Rufisque and UDO blocks in Senegal; has interests in 30 licenses, five of which as operator, in Nigeria; and has interests in promising acreage in Gabon, Ivory Coast and the Republic of Congo.
“TotalEnergies continues to demonstrate its commitment to Africa’s energy future. The French energy major is not only investing heavily in existing assets but is driving the next wave of upstream campaigns in promising markets such as Namibia, Mozambique and South Africa. TotalEnergies investments in African upstream, local content and sustainability serves as a benchmark for other E&P firms active across the continent,” states NJ Ayuk.
Mike Sangster to deepen discussions on Africa’s future exploration
Mike Sangster of TotalEnergies will deliver a keynote address during this year’s edition of the African Energy Week conference, taking place this October in Cape Town
“TotalEnergies represents one of the longest-operating E&P companies in Africa, having been present on the continent for over 90 years. The energy major is currently active in 43 countries and boasts over 13,000 employees. Leveraging its experience and technological expertise, TotalEnergies is active across the entire energy value chain, and has a diverse portfolio with projects spanning the oil and gas industry, renewables sector and broader power and infrastructure markets.
“With sustainability at its core, TotalEnergies works collaboratively with African governments, National Oil Companies and service firms to unlock high returns on investment while yielding tangible opportunities for local communities. TotalEnergies has committed to achieving Net Zero by 2050. Through technological innovations, low-carbon investments and priority placed on capacity building, skills and technology transfer, the company continues to serve as a strong and steadfast partner for African countries. TotalEnergies is also the official Sustainable Energy Partner for AEW 2023, and Sangster is expected to further elaborate on how the company is leading the next wave of sustainable energy operations in Africa.
According to a press statement from the organizing committee of the African Energy Week, it is now trite knowledge that Africa has already entered into a new era of oil and gas, driven largely by a continental focus on exploration where global energy majors like TotalEnergies “have not only represented long-term partners for African nations but have placed themselves at the forefront of the industry’s transformation. The French major has set its sights on new hydrocarbon plays in Africa, while correspondingly spearheading the sustainable development of existing operations.”
During this year’s edition of the continent’s premier event, scheduled for October 16-20 in Cape Town – TotalEnergies’ Mike Sangster will deliver a keynote address on the future of African exploration, for Sangster is already in line, according to the statement, to assume the role of Senior Vice-President Africa E&P at TotalEnergies, moving from his current position as Head of E&P for Nigeria at the firm. Sangster is expected not only provide insight into TotalEnergies’ ambitious upstream agenda in Africa but lead dialogue around sustainable exploration, the role of local content and why Africa is set to play a central role in future supply chains.
It is no longer in doubt, from the array of its activities, that TotalEnergies has set its eyes on unlocking new hydrocarbon finds in Africa while spearheading several exploratory campaigns in both mature and frontier markets. In Namibia for instance, the oil major is driving a multi-well drilling campaign in the Orange Basin, kickstarted by a sizeable oil and gas discovery made in 2022. Earlier this year, it announced plans to invest nearly 50% of its exploration budget ($300 million) into its Namibian activities. In Angola, it has stakes in several assets in the Lower Congo and Kwanza Basin, and further south, it plans on exploring the South African side of the Orange Basin, and recently, has acquired environmental authorization to explore Block 5/6/7. TotalEnergies was also responsible for two major gas finds in South Africa in 2019 and 2020 – the Brulpadda and Luiperd discoveries.
In Mozambique, its upstream success saw major discoveries off the coast, while making progress yet towards getting its Mozambique Liquefied Natural Gas (LNG) project back on track, the delays notwithstanding. On the continent’s eastern coastline, TotalEnergies Lake Albert Basin developments are set to awaken a new era of energy security for the high-demand region, and also developing the Tilenga and Kingfisher oilfield – scheduled to begin production in 2025 – as well as the East African Crude Oil Pipeline. And in West Africa, it operates two deepwater blocks in Mauritania; the Rufisque and UDO blocks in Senegal; has interests in 30 licenses, five of which as operator, in Nigeria; and has interests in promising acreage in Gabon, Ivory Coast and the Republic of Congo.
“TotalEnergies continues to demonstrate its commitment to Africa’s energy future. The French energy major is not only investing heavily in existing assets but is driving the next wave of upstream campaigns in promising markets such as Namibia, Mozambique and South Africa. TotalEnergies investments in African upstream, local content and sustainability serves as a benchmark for other E&P firms active across the continent,” states NJ Ayuk.
TotalEnergies to end all flares as 2023 peters out – Engr Victor
- Was from the onset committed to non-routine flaring;
- Takes care of the environment, monetizes gas;
- Egina, Ikike, with several fields’ tieback are flareless;
- FDI is positive or negative depends on the environment and policy, but it can do a lot for Nigeria as an economy;
- How will government attract this FDIs;
- Emphasis on development of NAG, as about 50% of Nigeria’s 200 – 209 (tcf) of gas is Associated Gas;
- Total production in 2022 was only 1.40 (tcf), NLNG has less than 1 trillion cubic feet (tcf) of this total;
- Nigeria needs infrastructure to develop gas, it should be developed not as bye-product of oil;
- TotalEnergies bags an award, identified as “Best Pioneering, first, truly integrated Energy Company in Nigeria”;
- “I am my only limitation”, Prof Yinka Omorogbe (SAN), President, Nigerian Association for Energy Economics, tells women.
“I suppose we know where we are as a country, so the question, for me, should be, how do we move from where we are to where we should be” – Engineer Victor Bandele, Deputy Managing Director (Deepwater), TotalEnergies E&P Limited.
Engineer Victor who said that TotalEnergies was “desperate to remain in Nigeria” because they are “everywhere in the entire energy value chain in Nigeria”, and “optimistic about Nigeria”, was speaking during a panel session with the topic – “Role of FDI (Foreign Direct Investment) in the Efficient Development of National Gas Reserves to meet Africa’s Energy Security Demands”, at the just concluded 46th Edition of NAICE/SPE 2023 in Lagos, with the theme: “Balancing Energy Accessibility, Affordability, and Sustainability, Strategic Option for Africa.”
For Victor and other panelists, comprising Dr. Philip Mshelbila, Managing Director/CEO NLNG, represented by Engr. Joseph Alagoa, Engr. Elohor Aiboni, Managing Director, SNEPCo, Mr. Tony Elumelu, represented by Mr. Samuel Nwanze, with the session’s moderator as Barr Ny Ayuk, also represented by Grace – all were of the opinion that FDIs were critical to unlocking Nigeria’s enormous gas potential, drive technological knowhow, as well as stimulate domestic investment.
Depending on the size of the market space which is also widening considering the Russian-Ukrainian war, and the deplorable energy security challenges in Europe at the moment, triggered by Russia’s gas as weapon of demarcation and war, FDIs are replete with huge benefits for countries like Nigeria who has this gas resource in abundance. For Engr. Victor and his friends on the panel, the returns are immeasurable, including reducing energy poverty, stimulating economic growth, and the creation of jobs. “FDIs can do a lot for us as an economy and continent, considering the volume of the country’s natural gas resource”, he said.
Yes, the panel believes that FDIs are key to unlocking the gas which hitherto seems stranded in the ground, but Victor’s worries which centered around finding the money and showing resilience to develop gas as gas rather than as bye-product of oil were much more plausible and urgent to be treated with a whiff, or wave of hand. “We need the money to develop this gas; we have to be desperate in the development of the country’s Associated Natural Gas (NAG).
“We talk about 200 (tcf) of gas in Nigeria but where is it, where are they locked; we are really not playing the game. I tell you that 50% of this gas is NAG. We must find means – infrastructure, money and market, to enable its development, again, it’s about 50% of the 200-209 (tcf) total gas reserves.
“Let me again ask, what is the physical/fiscal environment to encourage people to come into NAG for development – this is a big issue, so we must find the environment for energy development in Nigeria”, Engr Victor maintained.
However, there are conditions that will necessitate consideration for FDI in Nigeria, or Africa some of which according to the panelists, would include, policy and regulatory environment, stable and transparent legal and fiscal framework, credibility issue – how are funds disbursed or utilized when received, and what are the visible templates for project’s successful completion – which means that every word spoken must be translated into action, and shouldn’t be the usual and prevailing “motions without movement” as it is in Nigeria, the totality of all this which takes us to another critical prerequisite – sanctity of contract, otherwise referred to as the “investor’s attraction.”
Other conditions include, timeline for any projects, availability of infrastructure for prompt delivery, market space – (export opportunities), making gas as key reserve for FDI, for, and as Victor rightly pointed out, “attracting FDI is not science, it is an act.” For the above, according to Victor and his scintillating panel members, should be all that the government of Nigeria requires to attract Foreign Direct Investment (FDI off season and on season.
“It’s not about dialogue, but more about finding the right environment, for gas development.
“We are supposed to have moved from the statistics of 2022 but we are not. There must be strategic action from government. We have infrastructure for oil, and that also must be for gas. We are supposed to find the people to bring money to develop gas but we are not doing that.
“Looking at what TotalEnergies are doing, I think I am proud, for we’ve been able to set a fence. Take the actions; and it’s also about being desperate – this is what my firm is up for; we are desperate to develop NAG. We must create the physical environment that will help for NAG development. In the last 10 years, TotalEnergies had been committed to non-routine flaring. We are desperate about it and it’s working well”, Engineer Victor explained.
For Mele Kyari of NNPC, three keywords pertain to Africa and Nigeria in particular when examining this year’s theme: Energy accessibility means ensuring all citizens can access reliable, modern energy, irrespective of their location or socio-economic status. Energy affordability entails ensuring energy and its infrastructure are priced so they can be obtained without financial strain by Africans, while Energy sustainability implies that our energy use does not harm the local environment or exhaust resources, affecting future generations.
This according to him is indeed a trilemma situation that requires a delicate balance between political will and technological innovation, as well as effective market mechanisms and well-crafted policy interventions.
Noting that Nigeria currently has about 209.5 Trillion Cubic Feet of natural gas reserves with a potential upside of up to 600 TCF, so enormous to drive cleaner and affordable energy vision, while outlining other alternative energy sources such as solar and wind which are also faced with technology limitations. “They are still not affordable and therefore cannot meet the high energy demands of our industries, cities and remote environments”, he said.
Addressing Delays in the Name of Progress: The State of Play of African Oil and Gas
At a time when African oil and gas holds the key to a secure energy future, the trend of project delays needs to be addressed.
Historically, oil and gas projects are known to experience delays ranging from 5% to 20% of the project duration owing to project complexity, significant capital requirements and the multi-faceted nature of developments. In 2023, oil and gas projects across Africa are experiencing even further delays, a trend which is detailed in the African Energy Chamber’s (AEC) recent market-focused report, The State of African Energy Q1, 2023 Outlook. The report paints a telling picture of the challenges facing the industry and the impacts these delays could have.
Procrastination: The Foe of Progress
According to the report, delays from discovery to final investment decision (FID) to development kick-off have increased, leading to revenue losses due to deferred production, increased costs for contractors, and essentially lack of progress. This trend mimics Parkinson’s Law of Delay, an observation that work will expand to fill the time allocated to it. In this scenario, procrastination is the ultimate foe of progress and productivity, and unless delays are addressed, Africa will not be able to unlock the full potential of its oil and gas.
Despite their significance, a number of large-scale projects are experiencing a lull. These include the Mozambique liquefied natural gas project which has experienced multiple delays due to security concerns. Developed by TotalEnergies, the project was originally scheduled to start production in 2024 (FID was secured in 2019) but the start-up is now delayed to the late-2020s due to the declaration of force majeure by TotalEnergies. Additionally, the East African Crude Oil Pipeline – which will transport crude oil from Uganda to Tanzania for export – has been delayed due to financing challenges and environmental opposition. The project, which is being developed by TotalEnergies and other partners, was initially expected to start operating in 2020 but is now expected to come online in 2025. In Nigeria, several offshore oil projects have experienced delays due to security concerns, regulatory issues, and technical challenges. For example, the TotalEnergies-developed Egina oil field, saw a 12-month halt due to issues related to local content requirements and delays in the delivery of key components. Meanwhile, sizeable natural gas volumes discovered in Ethiopia in the 1970–1980s are yet to see FID, with project delays extending decades.
However, there are several successful stories such as the Jubilee field off the coast of Ghana, which has been in production since 2010 and has had a significant positive impact on the country’s economy. Another example is Egypt’s Zohr gas field, which has been in production since 2017, and Angola’s Kaombo, which has been producing since 2018. These countries have experienced relatively few delays in their projects and are now enjoying the benefits of their successful development. Unless other O&G projects are developed with the same urgency, Africa’s production forecast will see a downturn.
Start-ups Critical for Long-Term Output
According to the AEC’s report, the currently producing fields, both liquids and gas, are in terminal decline due to depleting reservoirs. Infill drilling or redevelopment programs on these fields, which involve brownfield spending, may only temporarily stabilize the decline in production. Liquids output from these fields is expected to decline from 7.66 MMbbls/d in 2023 to 6.85 MMbbls/d in 2025 and 4.7 MMbbls/d in 2030. The average annual production decline rate is 8% through 2025-2030 and a higher 10% through 2031-2040. Any further delays or shelving of future start-ups can be catastrophic to Africa’s hydrocarbon output. Although short-term (2023-2025) start-ups are expected to have little impact on the forecast, the medium-term (2026-2030) and long-term (2030+) start-ups are expected to drive a revival in Africa’s liquids output. The good news is that the overall impact of delayed start-ups is short-lived, and the total liquids output from Africa is expected to ramp up to about 8.4 MMbbls/d in 2036.
Similarly, regarding gas production, the decline in producing fields, though terminal, is not as steep as liquids-producing fields. The short-term start-ups are estimated to account for 10% of the total output by 2025, but the share from the currently producing fields is expected to drop to 50% by 2031 and further to about a quarter of the total output by 2040. The long-term start-ups are estimated to add up to a third of the total output by 2035 and half of the total output by 2037-2038, and this share is only expected to increase going forward.
Capital Flows to Africa’s Deepwaters
Governments are already considering project delays and the issues caused, both economically for the countries dependent on hydrocarbon exports and domestically for countries looking to diversify the energy sector. Efforts have been made to address these issues, such as Nigeria passing the Petroleum Industry Act resulting in new production-sharing contracts signed with supermajors. As such, investment is seeing a gradual surge, and Africa’s deepwater prospects are gaining attention.
Due to the fact that most of the untapped O&G are currently located in deep waters off the coast of Africa, the majority of future investment is expected to be directed towards the deep offshore. By 2025, it is projected that 45% of the estimated $24 billion greenfield spending will be in deepwater projects, and by 2030, it is estimated to increase to over 50%. This trend is expected to continue, with over 55% of the estimated $64.5 billion total spending in 2035 projected to be spent on deepwater projects. Of the estimated $775 billion total greenfield spending between 2023 and 2040, approximately 48% is expected to be spent on deepwater projects.
Some notable deepwater projects in Africa include the Greater Tortue Ahmeyim (GTA), Yakaar–Teranga, Bir Allah, and Orca projects offshore Senegal-Mauritania as well as the Pecan project offshore Ghana; the Brulpadda and Luiperd gas fields offshore South Africa; and the recently discovered Graff, Venus and Jonker finds offshore Namibia. These deepwater projects are significant in terms of reserves and cost, making them major drivers of O&G spending. Given the importance of these projects for Africa’s production forecast, both governments and operators must prioritize securing funding for their development.
The AEC’s State of African Energy Q1, 2023 Outlook provides a comprehensive overview of the state of play of Africa’s O&G projects, highlighting the urgent need to advance collaboration, investment and development. Time is of the essence, and missing this opportunity could result in a significant development gap between Africa and the rest of the world. However, with accelerated projects, it is still possible for Africa to utilize its resources while adhering to global climate targets. In this context, AEC Executive Chairman NJ Ayuk’s slogan, “Drill baby Drill!” holds a palatable meaning. Let us work together to prevent project delays and drive environmentally-sound developments so that Africa benefits from its O&G resources.
This article is receiving this attention because it is a wake-up call to leaders and industry stakeholders in Africa that the days of songs, slogans and motion pictures were over, while emphasizing the critical imperative of actions rather than words – the only one condition to put Africa’s oil and gas on the path of socioeconomic development relevance, says Ejimmaduekwu Chidiebere of Energy Window International, an international media outfit of our time.
By Gawie Kanjemba, International Energy Fellow, African Energy Chamber
