If You are in Oil and Gas, You Should Be Worried

The world of fossil fuel is about to change. It is changing uniquely. The world will demand far more energy than it is currently doing, while the energy mix changes.

There are people who don’t believe that the transition is happening.Concerns have risen around prospects of global warming. The Paris Climate Agreement aims to keep global average temperatures from rising by two degrees Celsius.

Flooding, melting ice….the ecosystem is changing and clean air that we take for granted in many places is now coming under very severe challenges in some areas.

I did ( the one year obligatory National ) Youth Service in Maiduguri in Nigeria’s north-east, many years ago and I remember that we used to go to the Nigerian side of Lake Chad and it used to be a big fishing ground. But today I hear it is a driving race course because the water is gone, it has dried up.

What is happening?

In reality, one of the biggest challenges that we have today as a country, the so-called Fulani Herdsmen, is an unfortunate fallout of global warming because the grazing areas are drying up and if you are a nomad or a herdsman, you’ll keep moving in the path where you will find pasture to graze your cattle. This unfortunately, is bringing people closer together in a manner that they are not used to and we are beginning to see tension.

This particularly is the reason which I believe the world has come together in many of the conferences to reach an agreement to say “Yes we want more energy but we want it clean” which is where the dilemma starts because as we know today, we have enough energy from fossil fuel to last more than a hundred years. But the big challenge to our industry is that will we be allowed to carry on? As I was putting this together, I was reminded that there is still a lot of coal in Enugu, in eastern Nigeria. But the coal is not wanted today. The question really is this: Will your oil be wanted tomorrow? Will your gas still be wanted tomorrow? If we go back to the transition we talked about earlier, you’ll see that the biggest disruption is not the demand for electric cars but the demand for de-carbonization.

Three weeks ago I was travelling to Abuja and I called my daughter to say I was flying and she said to me daddy, what is your carbon footprint? You are travelling too much and you are always on the plane. It is people like you who are contributing to some of the pictures we saw. I must say I was shocked but I am nearing the point where I have concluded that she’ll run an NGO. So I absorbed it in good faith but she has a point.
I don’t know if there is any one in this room today who actually has a feel for what their carbon footprint is? What are you contributing? What will the world accept?

The question for Nigeria will be: are we ready?

We are aware that countries are making moves and preparation in this direction. Just last year, the UK and France put a stick in the ground and said by 2040, we don’t want to have fossil fuel cars. That’s a big statement to make. If you are an oil and gas person you should be worried! No more fossil fuel fired cars in the UK and France by 2040. Sweden has also taken a position and the only one country that needs to follow for Europe to tip over is Germany. You probably would say they are predominantly a strong automotive industry but are they likely to follow, the truth is yes they will. They are biding their time and if you look at the occurrence, you will see that even BMW has started producing electric cars. So it’s not only Tesla that is producing electric cars now but BMW too is.

Sweden has committed to 100% renewable energy by 2040 and nothing else. I don’t know who you sell your oil to but if it is Sweden, France or the UK, you should start thinking because 2040 is not far off. We are talking of just under 22 years from now.

Elon Musk, Tesla Factory (Fremont, California)

Norway has already taken a big step; there are quite a few Norwegian ports that when you are approaching these ports, you are not allowed in with your engines on unless you are powered by gas. You will be towed in and towed out to a safe zone before you start to contribute your CO2 again. Today we know of some EU countries that have set targets that they have met and they are beating them as well. I’m talking about two very crucial ones that I experienced last year but I think it is important to look at some of the drivers here which is where I was a couple of years ago and you can’t blame me. I am of the industry and my survival is tied to my industry. But that industry is threatened and the first reaction is denial. I personally didn’t believe and I was very quick to say, at the time, 7 billion people that is projected to increase to 9 billion by 2050, what source of energy will manage that additional 2 billion people with growing fortunes? More and more people are breaking free form economic shackles of poverty and are getting rich, they all need energy.

Where will it come from? People are damning the consequence and saying we don’t care. We will look at efficiency if we can’t find more; we will be more efficient if we don’t have another source. But one thing that we cannot accept is the same CO2 levels that our predominant product today portends. Global GDP is growing but what will power that growing GDP into the future is the challenge here.

The world will grow by an additional 2 Billion people by 2050. The world will need more energy. People’s fortunes will improve to the point that they will need more things. A man who used to live in one room apartment will live in two, he will need more light, air conditioning and will buy a car that needs fuel to move around. But what kind of fuel will they be needing?

I will like to talk about two gentlemen; Elon Musk and John Goodenough. Musk is the founder of Tesla. Critics like me will say that if you are an investor in Tesla, you will never get a dividend. Yes, they might be in the negative in the meantime but they are approaching a tipping point. Think about that!

I was in The Hague last month and I was walking by some office to my hotel and I saw a whole street with cars parked in tandem with cables coming out to charging point. You have to believe that it is changing and I had that conversation with one of my friends, both of us in denial, but instead of thinking through what that change was, we were busy trying to explain it. “Sir, it’s just a couple of boys trying to show that they are up-to-date”. Otherwise, why would you park your car at a charging point and take a bicycle home? What’s the point?

The biggest denial is the assumption that concepts like Electric cars, etc, are passing fancy. A lot of people assume wrongly that they will not succeed but I must say today that studying it a little deeper, most of the indices that we are looking are not indices that can point to the future, they are indices that support our denial position. At some point, some of us said, well, most of the Tesla vehicles are just small vehicles, ‘The Tesla people can’t build big trucks’! They have started building big trucks. We then said oh, what’s the maximum distance that a Tesla electric car can go before it needs to charge, maybe 400km? It won’t even get to Port Harcourt where I live so come on. But the reality is that even that is changing and that is where this man on the right comes in.

John Goodenough, widely credited for the identification and development of the Lithium-ion rechargeable battery. He is a Professor of Engineering at the University of Texas at Austin.

A much bigger disrupter of things, to my mind, is John Goodenough. He is the biggest disrupter, much more than can be imagined but I don’t know if you know him, John Goodenough. What a name! It is because of this man and his research team that you can actually charge your phones today. He was leading the Lithium Ion Technology which was a major discovery that changed the world of electronics. That you can charge your battery and reuse it was associated with John B. Goodenough early in the 1980s.That is why you have rechargeable batteries. This man is 95 years old and you will be asking me what he is looking for, if you are in the industry and still living in denial like me but he has made one bold statement last year. He said he is moving his battery from liquid electrolytes to solid state. Let me repeat that: the liquid electrolyte battery technology that allows you to charge is now moving to solid state. And if he succeeds, you will only need to charge the battery of your phone once in two weeks. And when you do need to charge, you don’t need the usual one hour but just 5 minutes.

Now make the connection between Musk (Electric cars) and Goodenough (Electricity Storage).

For those of us who criticize Tesla that it can’t go more than 400km and you need to plug it to charge for another eight hours or so, the news is that it doesn’t mean eight hours anymore. With the success of John Goodenough, your car probably needs just 30 minutes to charge. But it also says that the size of the battery will shrink by two-thirds of its size. So the vision that I see of the Tesla cars will be battery racks. Imagine battery racks somewhere in front or at the back of your car or wherever the design allows for it, and all you need to do is drive into a battery point and bring out your five or so number of pallets and they plug in new ones and off you go, just like your gas cylinders. That is the future that I see but just think about all the cars in the UK, France, Norway and Sweden not needing your petrol. What are you going to do with your refineries, who needs your fuel anymore? What does it mean for?? Nigeria if no one wants our oil anymore?

Former US vice president Al Gore, who has for decades pushed for reduction of fossil fuel use, has been trying to influence India and China, two hugely populated, growing economies. India has one of the best radiations in the world for solar powers and they actually have vast desert lands and Al Gore saw an opportunity there. But in the end, it came down to funding and that is where the power of the influence of a man like Al Gore could be able to change the world. So today he has been able to assist India to find very cheap financing to further the technology around solar.
Solar power is the big deal that is coming in India and if you look at the solar panel production in China, the prices are crashing. One of the big IOCs used to have a solar company in Germany but they sold it in the early 90s,thinking it was too expensive and unprofitable. Today, they are bidding for another solar company. You saw what (French oil major) TOTAL did with their acquisition, they are very clear, they can see the future and the future is ahead of us.

Solar shares are growing, wind share is growing and the energy mix is changing. I think Nigeria needs to get to term with that reality. Last year in Germany, they had to pay consumers to take power and this might be very difficult for a Nigerian to understand. Where you are willing to pay but you don’t have power just think about the unimaginable reverse where you are being paid to take power. That is, the negative billing situation that Germany found because they were over producing as a result of successes in their renewables.

I was in Lisbon in December because I sell natural gas and I have a load of customers in Portugal but I also take the opportunity in connection with the vision of my company to help build a better Nigeria and try to attract one power company to really just come and join the energy mix here in helping us generate power and they say, “we have actually been banned from generating power with fossil fuel. The only power that we can get involved with going forward has to be power tied to renewables. If you are asking me to come because you hope to sell gas to me, find another customer”.
And it turns out that the week before in Portugal, they had 72 hours of powering Portugal 100% on renewables. All the fossil fuel plants, gas and whatever, were told to shut down. They’ve proven 72 hours’ steady and you can see it that they will continue to work it until they can absolutely live on it.

It is not Honky Dory in the renewables world especially for wind. Sometimes we have low wind and then we are unable to generate because it is quite cyclical. Sometimes solar radiation also drops but the big difference is that it doesn’t matter anymore with people like Goodenough because I can now store that energy in photovoltaic cells whenever I am able to generate and deplete when I’m low. So that up and down will be evened out and balanced on a day-to-day basis. But you really need to look beyond power because even in the heating industry, transport and soon, things are changing.

NOW LET US LOOK AT AFRICA. We have huge potential and opportunities because we actually do have more than 100GW capacity of wind and even more for solar. If you look at Southern Africa when you fly from Europe into Africa, that vast desert land is really a land of opportunity going into the future. We still have coal and like I said to you, we still have a lot of coal in Enugu and a lot of technology is improving on coal. We have huge reserves of oil in the ground. But will these resources be acceptable to the cleaner world that we desire? This is the harsh reality that we must start to plan for.

We are also richly endowed in gas, Nigeria especially but will gas still be acceptable, is gas an option? I know you will say why not because gas is your mainstay, that is your business so why won’t you support gas? I think we have come to a point where we debate that all the resources will continue to exist, every source of energy will be here just like the coal in Enugu will remain but the real conversation is around which one will be acceptable to a world that needs less carbon and cleaner energy? I think that is where our advocacy for gas starts because we believe that oil will suffer; not complete extinction but the relevance of oil in the energy mix will greatly reduce. We believe that the relevance of solar, wind will greatly go up but if you match that with the growth in demand, given additional 2 billion people that will be joining us by 2050, I personally don’t believe that it will be enough and that is where the conversation around what else will be acceptable begins. I think the next best bet, in my mind, will be gas. It is available in abundance, it is not 100% clean as you would say solar, but it is 3 times cleaner than coal and 3 times cleaner than oil in terms of carbon content. It is affordable and available. So what do we do in Nigeria?

Today, we have 37Billion barrels of proven oil reserve and more than 190Tcf of gas and we have new scope of 600Tcf of gas potentially to move Nigeria to the top five in terms of gas reserves. But the question is are we ready to start to think about that future where oil will not be as relevant? In my mind I will like to posit that Nigeria need to start looking at gas differently. Nigeria needs to start to position itself to develop the 600TCF of gas in readiness of the challenges ahead. I think today’s reality about Nigeria is that most people talk about power and you hear often time they criticize the gas sector saying that we don’t have power because we don’t have gas when what we actually don’t have is a balanced energy mix. If you look at the huge resources in the country, there is absolutely no reason not to have pursued solar power generation going north where the radiations are high and somewhere in the middle belt, we develop hydro and when you come down south, we focus on gas.

Between these three sources of energy, I believe Nigeria can be fully self-sufficient and self-reliant in terms of energy mix irrespective of the transitions that will happen external to us. Some people say gas is not as profitable but we’ll just make a case of Qatar. Qatar today produces 77Million tones per annum of gas and they started LNG production only 24 months ahead of Nigeria. Today, we are still at 22Million tones per annum. But if you just take a look at this picture, from what is a small fishing economy with low GDP and next to no shipment of LNG as at 1997, to this. I am absolutely convinced that we can power our economy just on the strength of gas. Gas alone can lift Nigeria up and that is where we come in as Nigeria NLNG. I did mention that we have produced 22MT of NLG per annum but we are not resting but we are moving to 30MT and working assiduously to take the FID on train 7 by the end of this year but from a national point of view, we believe that for Nigeria to be ready for the energy transition that is ahead, some of which would be quite dangerous if we do not take because we think it is time for gas and it is time to unleash the potential of Nigerian gas.

This in an abridged version of a keynote speech delivered at the West African International Petroleum Exhibition and Conference (WAIPEC), in Lagos, Nigeria, February 6, 2018. Mr. Attah is the Managing Director of the Nigeria Liquefied Natural Gas NLNG Ltd, which runs a 22MMTPA plant out of Bonny Island, in eastern Nigeria.