Interview: Mele Kolo Kyari
What was the impact of the Covid-19 pandemic on oil and gas production in Nigeria?
MELE KOLO KYARI: Before assessing the effects of the pandemic, it is necessary to consider the state of the industry in the years leading up to the health crisis. Even before 2020, the country’s energy sector was going through a transition. There was more of an emphasis on green and sustainable sources of energy, especially in light of conversations on how to reduce the industry’s carbon footprint and become carbon neutral by 2030. The pandemic accelerated this process and laid the groundwork for the a more robust transition.
Similar to what was seen in markets across the world, the pandemic had a significant impact on Nigeria’s oil and gas sector. Demand for hydrocarbons fell sharply, affecting all of our projects, as well as plans for capital expenditure and investment. It also resulted in a lack of liquidity for both future investment and maintenance of basic operations. These pressures made the industry focus on more sustainable and cleaner sources of electricity, such as natural gas. Specific to Nigeria, we also had to manage our production systems in line with OPEC restrictions. Although there was a drop in global oil consumption due to the pandemic, it is expected that this type of energy will continue to play a key role in the energy mix – even as consumption patterns change in response to the energy transition.
Looking to the future, it will be imperative to address the high costs associated with production. In May 2020 the NNPC issued an aggressive target to bring production costs below $10 per barrel by the end of 2021, as our global competitiveness will be determined by our ability to produce oil in a cost-efficient manner. Consumers now have choices, and companies need to be able to deliver in kind. In this sense, the pandemic was an opportunity, as it forced energy companies to be more efficient and improve operational processes. These efforts not only enabled us to come out of the crisis in a stronger position, but also allowed us to leverage the knowledge we gained.
How can the private sector strengthen its role in the downstream segment?
KYARI: As of April 2021 the authorities had issued over 100 licences to private entities permitting them to establish refineries in Nigeria. These will complement the NNPC’s own refining capacity as new facilities come on-line. While this is certainly positive, the regulatory environment has hindered growth. It will be necessary for the public and private sectors to cooperate more fully and share both benefits and risks. The Petroleum Industry Bill passed by Parliament in early July 2021 will help meet this goal, as it will create a clear regulatory framework and competitive fiscal climate in order to facilitate investment. The new legislation will also create partnerships between the various stakeholders with operations in the oil and gas industry.
In what ways can natural gas ease pressure on Nigeria’s electricity grid?
KYARI: In March 2021 President Muhammadu Buhari launched the Decade of Gas initiative aimed at tapping Nigeria’s expansive proven gas reserves – at 90.4trn standard cu feet in 2019 – and supporting industrialisation. It will be necessary to focus on gas as a source of transparency and sustainability. However, we cannot achieve these ends without the required investment and infrastructure, both of which are integral to meeting the country’s full potential in terms of its natural resources. Once we have established the right infrastructure, we will be able to increase gas supply, boost exports and develop industries that rely on natural gas. Increased revenue from these ventures will allow us to fund more projects in renewable energy, further fuelling the transition to a carbon-neutral energy industry.
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