The future of Nigeria’s oil and gas industry in an emerging world of renewable energy

The increasing global energy demand is constantly encouraging a shift towards renewables as an energy source. Nigerians, like many all over the world, are therefore wary of the future role of the oil and gas industry, an industry that accounts for 65% of government revenue. Particularly as many countries are putting in their best efforts to reduce carbon dioxide pollution and promote clean energy by utilizing non-fossil sources of energy.

China, France, Germany, Italy, the Netherlands, Spain, and South Korea are some of the countries working towards mitigating the use of fossil fuels in the coming decades. This begs the question: is the move away from petroleum and natural gas a threat to Nigeria’s oil and gas industry?

Fuel consumption remains high in all regions as the contribution of renewables in the energy sector stands relatively low. Given the huge disparity in figures, it should be evident that renewables are not likely to replace fossil fuels in the immediate future. Fossil fuels may have been used for centuries for power generation, but they are non-renewable, hardly sustainable, and dangerous to the environment.

Table 1: Energy Consumption by Region

**Source**: BP Statistical Review of World Energy 2019

In Nigeria, Africa’s largest oil-producing country, carbon pollution is a significant challenge facing the oil and gas sector. Also, for a country whose budget depends heavily on the revenue from the oil and gas industry, fraud and revenue misappropriation have increased calls for alternative energy sources from governments, investors, and end-users.

However, such pressure does not necessarily imply that there is no future for the oil industry. Rather, continued expected growth in global energy demand presents a challenge for the future of Nigeria’s oil and gas industry.

Presently, 85% of the world’s energy demand is supplied by hydrocarbons (oil, coal, and natural gas). Despite the rising global demand for renewable energy, it is unlikely that the goal of shifting to renewables will be met soon. This is because, compared to petroleum derivatives, renewable energy is yet to attain for sustained large-scale utilization. This suggests that the likelihood that the world will soon begin to depend solely on alternative energy products is slim.

Is renewable energy a realistic alternative for Nigeria?

Amidst a global energy transition, Nigeria’s oil and gas industry faces opposition from a citizenry mostly unperturbed with the environmental impact of fossil fuels, skeptical investors, and delays from policymakers in meeting decarbonization goals. The demand, economic, and social future of the country’s oil and gas industry is, therefore, increasingly in question. How can Nigeria’s oil and gas industry manage a strategic energy landscape while providing returns to investors—and also play a leading role in Africa’s energy story?

The Nigerian Government has always declared its commitment to diversifying the nation’s economy; from dependence on oil revenue to non-oil revenues. However, oil and gas have remained an integral part of the energy mix in a developing country like Nigeria. Oil and gas dominate Nigeria’s extractive sector as the country holds 29% of Africa’s proven oil reserves. The challenge for the industry remains how to evolve in ways that discourage the use of fossil fuels and contribute to global efforts to decarbonize the energy system.

Table 2: Summary of Renewable Energy Potentials in Nigeria

**Source**: ECN (2014), Energy Implications of Vision 20: 2020 and Beyond, Report no.: ECN/EPA/2014/01

Despite the comparative advantages of renewable energy, it is mostly untapped and inclined to face challenges in energy storage and intermittency of supply. Barriers to the development of renewables include the large production of oil and gas, fuel subsidies, and the knowledge gap/lack of economic support available for private-sector opportunities. In principle, the challenges that renewables face in Nigeria suggest that the country’s dependence on fossil fuels is not likely to shift dramatically soon.

However important the transition from fossil fuels to renewable energy may be, energy experts in Nigeria argue that it would not be easy or immediate. For a country that is largely unprepared, scaling up alternative sources of energy to compete with the scale of the country’s oil and gas industry will be no small undertaking. These experts also made it clear that shifts to global-scale alternative energy in Nigeria will require a huge mobilization of monetary resources as well as political willpower.

Nigeria’s Renewable Energy Ambition: The Way Forward

Against the backdrop of the country’s enormous renewable energy potential, experts believe Nigeria should begin a rethink of business models in a decarbonizing world. With energy demand always on the rise, the country needs to invest in energy sources that meet end-user demand.

According to a report by Robert J. Johnston, CEO of Eurasia Group, for the oil and gas industry to survive the ongoing global low carbon energy transition, it needs to:

Develop and implement mechanisms for low-carbon business models that reduce carbon use while remaining profitable.
Encourage the development of transparent, objective, and investor-friendly Environmental, Social, and (Corporate) Governance (ESG) metrics.
Invest in the reliable concepts of net-zero emissions and the circular economy.
Support the growth of international carbon markets and stimulate joint cross-border collaborations for the reduction of emissions.

In conclusion, the future of renewables is considered promising, as it will contribute to energy production and virtually many aspects of daily life. Compared to petroleum derivatives, low-carbon energy products are yet to attain large-scale utilization all around the world. However, Nigeria, like many other countries, must manage a range of policy, investment, and political bottlenecks affecting the shift to renewables if it must meet expected energy demand in the long term.