Efremfon Eduo is an experienced Oil & Gas Production and Operations Planning Specialist with a career history of working in world’s leading energy firms including Shell in Nigeria and ADNOC Group in Abu Dhabi. He speaks to Engineers’ Forum on the global energy focus and on issues in the energy sector in Nigeria proffering solutions to some of socio-political economic challenges facing the nation.
You have been an active player in the energy sector for more than two decades now especially in the Oil and Gas sector both in Nigeria and outside the shore of Nigeria, what has been your experience?
Focus on energy resource in particular and natural resource in general as revenue centers for funding consumption instead of catalysts for sustainable development is the bane of Sub-Saharan economies compared to other emerging market economies.
Market volatility in the long-term keeps average earnings below short-term budget expectations. This implies a vicious cycle of deficit financing and debt overhang leading to deepening cycles of negative economic growth and poverty in the population.
Covid-19 pandemic brought the sector to its knees at some point in time, would you say the sector has fully recovered and what were the lessons learned
The energy sector, especially commodities-dependent sub-sector is used to shocks. However looking at it from the long-term, it cannot be said it was an outlier to the rest of the economy. The Oil and Gas markets and investors in particular were adversely hit by geopolitical risks and market share competition amongst the powerful players in the sector in the midst of the pandemic.
As the rest of the economy picks up on its recovery path, it is expected that the sector will be synchronous to the trajectory. However, no experienced analyst of the sector would bet on linear upward growth path without bumps in the medium-term.
Hence, we deal with long-term historical averages, standard deviations and regressions in forecasting and budgeting.
You mentioned market volatility in the long-term keeping average earnings below short-term budget expectations, will you allude this to the mono-economy most of the nations in this category are running?
Yes in part; the danger with forecasting based on assumptions taken solely from prevailing and recent historical data of single dominant denominator at the time of budgeting is to fall into the adverse impact of unforeseen depths in low pricing. This is why we have more than one revisions of budget in one fiscal year.
For example, a 20 to 30-year average of Brent Crude price hovers within the $30-$40/bbl average. At any time Nigeria or other Oil-dependent economies base their budget on $50-$60 price per barrel means every little shock renders your budget and capital projects ineffective.
This is not typical of Nigeria but even oil-rich nations like Russia, Saudi Arabia, Oman, Kuwait and UAE.
The world is gradually moving away from fossil fuels to renewable energy and in recent times there is a spike in the deployment green energy utilities. Can you forecast in terms of global energy needs?
The energy sector is vast. Empirical forecast on a global level can only be undertaken by large institutions and corporations with resources to gather requisite data and technology to analyze and report same. On that premise, taking a look at the latest reports by these giants such as BP’s latest report on Global Energy Outlook is insightful.
In BP’s 2020 report, the world GDP is set to double by 2040 and energy demand is set to increase by 30%. Despite increasing rate of energy transition to renewables in the same timeframe driven by growth in China, India and other Asian emerging economies, and increasing electrification of the economies across the developed world, the energy mix will continue to see increasing need for fossil fuel in the first half of the forecast horizon and a plateau later.
There is a sustained discussion on carbon emissions reduction and decarbonization in the developed world. What is your opinion on this and how does it affect the developing world?
Harnessing and utilizing energy resources in a way that achieves the so-called balance in triple bottom line of people, planet and profit is not a “100-m dash” economics, science or social engineering. It is going to be a trickle-down effect of cumulative positive actions by all stakeholders believing that business-as-usual has not been fair to the planet but that it is better to err in the side of caution by doing something differently.
The big challenge is in increasing economic and social development disparity amongst nations. Secondly, the emergence of leaders with opposing extreme political positions against a unified world order is a threat to a consensus on the way forward. Thirdly, and not the last/least, is the relative ease by non-renewable resource-dependent economies in the developing world to exploit/export non-value-added commodities for revenues that are later misappropriated.
Do you see the New Normal “Work from Home” as causing significant effect on energy need of the world?
I would say, NO, in relative terms of time frame expectations for vaccines to be developed. Rather, it is prolong closure of industrial sites and economic activities that can negatively reduce energy demand and in turn economic growth.
Longer than expected closures of the economic and supply chains would however impact energy needs negatively.
Let’s come back home where you started your career. The government over the years has struggled to put the sector right. There have been a long wait for the passing and signing of the PIGB into law. What do you think this delay might have cost the nation?
Immediate cost is in zero or reduced investment in the petroleum sector. The long-term cost is in lack of growing reserves to create the path for future development.
Given your experience in the global stage, how can the nation stem oil theft and possibly pipelines vandalism?
The ‘Ownership” question of natural resource in an ethnically diverse federation if not answered as can be noted even in the original PIB in which the fragmented-passed PIGB in my opinion has not resolved is a challenge that has decimated not only Nigeria’s petroleum sector but the economy and polity as a whole.
I have not seen a clean copy of the PIGB but a copy of the original PIB uses the term “vested” to describe Federal Government of Nigeria’s property and sovereign ownership of natural petroleum resource “for and on behalf of the people of Nigeria”. That is open to divergent interpretations.
My experience in other federated nations shows a different approach to sustainable natural resource ownership and management.
What is the approach if it turns out to be a veritable template that can address the situation?
The approach is simply a return to true federalism and restructuring of the economy to be centred and driven by local ownership and managers using modern approaches. Even the States have to relinquish their strangle-hold of local governments and concentrate on regulatory and policy framing/execution for essential social services. Economic activities have to be locally-managed but global-best practice-minded. The municipalities and local councils have to be given more autonomy and control to direct the economy of their domain best on the resources and innovative mindset of their people.
Beyond the local governments, every other higher level of government should get their fair share of revenues from the resources through tax policies and not direct control and ownership.
UAE has 7 emirates with different natural resources owned, controlled and exploited for economic development primarily of the emirates before the federal government of UAE. What it means is that the giant national oil company is known as Abu Dhabi National Oil Company (ADNOC) and not UAE National Oil Company. The corporation which is one of the best NOCs in the world is owned by the Abu Dhabi people with investment arms of the emirate driving oil and gas investments and contributing to the Federal Government through the Supreme National Council appropriations. Likewise, Dubai, with its meagre oil resources own Dubai Petroleum, a far lesser oil company by size. However, the Dubai economy is largely driven by other resources and returns on investments in Trade, Commerce and Tourism. Yet the two and the other 5 emirates with revenues made from different economic activities and investments contribute their fair quota to the central government which manages and regulates activities and concerns of common interest to the federation e.g. national security, inter-emirates and transnational infrastructural projects, etc.
Our refineries have not been operating and looking at the fact that Dangote Refinery will commence operations soon, what will you advise government to do to these refineries?
The inability to manage downstream Energy/Oil & Gas sector for profitability is indicative of a systemic and fundamental flaw in Nigeria’s polity and economic models.
It goes back to the “Ownership” question which in the assumption that it is not for short-term resolution demands that competitive market economic models and disengagement of government in businesses it has failed in many decades is not asking for too much or what is not seen elsewhere to be working.
The world is closing in on fossil fuel vehicle to EV will you say Nigeria is ready for the change in terms of her energy management and innovation focus?
Nigeria is never ready for the next scalable technology because of lack of evolutionally development in critical national infrastructure. Nigeria was able to leap-frog in mobile telecommunication because of the nature of the technology – mobile, microwave facility-enabled. The inability to evolve to nationwide fibre-optic powered homes, factories and offices is an example of the lack of readiness to upscale even in telecoms. Lawmakers, in the 7th National Assembly could not see the vision to progress a bill sponsored to address the transition to EV technologies and infrastructure probably due to “more pressing needs” of the legislators.
On a final note, what will you then prescribe as the way forward given the many challenges outlined here?
Knowing the complexity of the polity and its long checkered history, prescription of immediate return to the likes of 1963 Constitution is seemingly a tall order but at last it is where I would like us to revisit.
In the interim, reframing the economic models and fiscal policy framework using recommendations of contemporary constitutional amendments, ad-hoc advisory committee whitepapers e.g.the 2014 National Conference, and full implementation of Civil Service reforms including unbundling, privatization and commercialization of business entities currently managed by civil service operatives, are first steps in the gradual process of repositioning the Energy Sector for greater efficiency and effectiveness.
So essentially, it is politics and a culture of graft and impunity due to policy failures and lack of clarity on/answers to the “Ownership” question that are to be reset before meaningful progress can be made in the economy in general and the energy sub-sector in particular.
