Austin Avuru, former CEO of Seplat Petroleum
Photo Credit: Africa Oil+ Gas Reports
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AUSTIN AVURU: No Panic Button, Oil Will Still Be Relevant In 30 Years  

11 mins read

In the most aggressive transition to sustainable energy away from fossil fuels by 2050, oil and gas will (still) be contributing 35% to the energy mix

 

PRIME Business Africas correspondents VICTOR EZEJA and DONATUS ACHIKWUBE capture Austin Avuru, former CEO of Seplat Petroleums comments during the Episode 24 of the National History Series (NHS) organised by the Centre for Values in Leadership (CVL). He spoke on the issue of energy transition, policy and proper regulatory system to ensure professionalism in the oil and gas sector. To the strong voice in Nigerias Energy solutions discourse, there is no need to press the panic button on the issue of energy transition which appears to have left the country in the abyss of fossil dilemma.

Policy and Regulation In Oil & Gas

Proper regulation will distil the serious investors from the all-comers. If you put a good policy in place, the regulator and the regulatory framework ought to drive that policy to definite milestone achievement clearly outlined. In 2001 to 2003, Engr. Kupolokun came up with the marginal field programme. It’s easy to look at the failure part of it, but out of 24 marginal fields, in 10 years eight of them were produced, three of them have metamorphosed into bigger companies.

It has taken 18 years for a continuation of that policy to try to create other marginal field operators in the process. 18 years later, I  ask: What has the regulator done since 2003? So, we have 24 marginal fields, eight on production, did the regulator ask itself what next? What do we expect of those who have succeeded? Where do we drive them to? When some of us came together and created SEPLAT and Niger Delta created ND Western, those successes were in spite of and not because of the government or the regulator. It ought to be the other way round. Those successes should have been driven by regulation based on what we have done in the marginal field programme. So, what I am saying is that a proper regulatory framework, implementing government policy should continuously be asking where we are today and where we are going. What adjustment do we need to make to get to where we are going? So, if eight out of 24 marginal fields are on production, it is the regulator who should be asking: What do we do at this stage? How do we build further capacity? What is lacking?

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But, on the other hand, when these eight operators who are successful, move to the next level, the regulator or government becomes an obstacle, in terms of getting approval and so on, and indeed the so-called cowboys will get approval long before those who are moving legitimately to the next level. And it is not just in the oil and gas industry. As long as the regulation is not targeted at full implementation of government policy, we will all continue to wander.

Perhaps, the only one that has been properly regulated stage by stage to get them to the point where they are successful is the banking sector, understandably because they are using other people’s money, so you can’t look away. Here, either that regulation becomes a roadblock because approval is needed {and approval means the person giving the approval is powerful and because he is powerful everybody will lobby around him and the process approval might be given to the so-called cowboys instead of those it should be given to or as we are now seeing} the regulator becomes a source of revenue for the government. That is the emphasis, so we are doing marginal fields so that we can collect one billion dollars for the government. We are not doing marginal fields 18 years later so we can grow on the successes of the one that happened in 2003, we are doing it so that we can collect money for the government.

So, where regulation is either not focused or becomes actually the albatross of the industry itself we can talk from now till tomorrow, those good policies that were put in place ultimately will go the way of other policies. All I am saying is that the failure of regulation is the reason all these policies have not taken us anywhere. The few cases where you have seen success, whether it’s in the refinery, whether it’s in the upstream to large extent even in the service sector it is in spite of and not because of any real targeted regulatory attempt to take us to the next level

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Tackling The Transition From Fossil Fuel

This energy transition has become such a panic button; everybody now sounds as if, in the next 10 years, we won’t find a place to send our crude oil.

Let me just give some basic statistics; in the most aggressive transition to sustainable energy away from fossil fuels by 2050, oil and gas will be contributing 35% to the energy mix in the most aggressive which we call the next zero situation.   If by 2050 carbon footprint is zero, that’s the most aggressive and oil and gas will still be accounting for about 35% of the energy mix. In a more likely situation, where carbon footprint will be reduced by 70%, oil and gas will still be in the 50% range. Remember that fossil fuels as we speak today account for 81% of the energy mix in spite of all the noise, and I am bringing this into the global perspective so that we understand that by 2050 oil and gas is not going away.  All of the aggressive investments in renewable energy, most of it are investments away from oil and gas, so even if they reduce demand for oil and gas, the supply rate is going to be very tight because of very low funding into it. So again, by 2050 we will be talking about a basket of energy sources because no matter what you do, in 2050 this growing population today in the world will be 9.2 billion people.

There is a certain quantum of energy that is required to sustain that population and oil and gas will be in that mix as it is today domineering, it may no longer be domineering but it will be in that mix. Now how do we bring it back to where we are, now for sixty years, the multinational companies have taken oil and gas out of here to address their own energy needs, whether it is electricity, whether is combustion name it. So while they were doing this, what oil and gas were doing for us was just revenue collection, so 200 million people who have only 4000 megawatts of electricity, entire Africa has about 600 million that have no electricity so that we don’t join into the bandwagon of solving other peoples problem when we all talking about renewable energy. We should take advantage of the energy transition to then look inwards and solve our problems. This country will need three billion standards cubic feet (BCF) of gas a day to deliver 15 megawatts of electricity. So rather than panic that oil will have no place, let us realize that it is now especially with the indigenous capacity being built that we need our gas more than anything else as our contribution to the energy transition.

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Our own idea of the energy transition as Nigerians should not be focused on nuclear-like we find in some other places, neither should it be focused on wind, it should be focused on how best should we use our gas to solve our energy problems. We are still importing petroleum products from the crude oil that was exported from here. those are the solutions that we should first of all address, that is domestic energy security and we have seen from experience that domestic energy security will not be created for you by multinationals, only indigenous companies can create domestic energy security. Other than the NNPC, nobody had the courage to build a huge refinery until Nigeria decided to venture into it, so it is the same thing.

 

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