Sylva calls for economic diversification to tackle oil fluctuation impact

By Obas Esiedesa

The Minister of State for Petroleum Resources, Chief Timipre Sylva says diversifying Nigeria’s economy to non oil businesses would help cushion the impact of oil price fluctuations in the future.

Sylva who stated this in a keynote address at the 13th Annual International Conference of the National Association of Energy Economics (NAEE) in Abuja on Thursday, said the impact of the Covid-19 pandemic on the oil industry globally, has shown that Nigeria must aggressively diversify away from oil.

The Conference had the theme “Energy and Petroleum in post COVID-19 world’’.

He pointed out that it was unlikely normalcy would return to the sector anytime soon, noting that the second wave of the pandemic already in many countries of the world, was still dampening the structure and dynamics of the energy industry.

He maintained that the future and survival of many industry players hinges on focusing on cleaner energy sources, their ability to deliver clear cost solutions, adding that the national oil companies with large low cost reserve positions will push to accelerate production but those with higher cost structures will struggle.

According to him, “Our strategy to strengthen the Nigerian oil and gas industry in a post-Covid-19 world is to transform our national oil company into a diversified energy holding company.

“This will enable us respond swiftly to the twin challenges of a future crash in crude oil prices and decarbonization, by moving rapidly to becoming an energy holding company with more diverse interests.

“Consequently, we have strategically focused on our vast natural gas resources, as a critical transition fuel to help battle global warming and function as bridge between the dominant fossil fuel of today and the renewable energy of tomorrow.

“Natural gas has the intrinsic ability to meet the increasing global requirement for cleaner primary energy use, while at the same time, enabling much needed domestic industrialisation for rapid economic growth in very few endowed countries, such as Nigeria”, he said.

He noted that substituting traditional white products with gas would cushion the effect of the deregulation of the downstream petroleum sector and stimulate economic growth.

He added that it would further improve Nigeria’s energy mix; drive investments and create enormous job opportunities for Nigeria.

“Recently we declare 2021 to 2030, the decades of gas in Nigeria, after making laudable achievements and successes in 2020.

“In order to effectively develop our gas sector, we have proposed fiscal incentives that would attract investments in the Petroleum Industry Bill, PIB. We can assure you that the fiscal provisions would be one of the most attractive in Africa.

“Covid-19 pandemic and progressive decline in crude oil prices in 2020, has made it imperative for Nigeria to aggressively pursue the diversification of its portfolio to non-oil businesses so as to cushion the effect of a future crash in crude oil prices and position the oil and gas industry for growth in a post-Covid world”, he added.

Chief Sylva said that the post Covid-19 world would see the oil and gas industry accelerate its transition towards cleaner energy sources, products and service delivery and clear paradigm shift from traditional business models.

“The pandemic has created a perfect storm that along with ongoing needs to reduce carbon emissions will transform the industry. The future survival and success of many in the industry depend not only in achieving cleaner energy source but also the ability to deliver lower cost solutions,’’ he said.

Earlier, President of NAEE, Prof. Yinka Omorogbe, also warned that the Nigerian petroleum industry might be negatively impacted by the COVID-19 pandemic, especially as the industry currently lacks the capacity to change and adapt to global trends.

“Is this not the time to promote diversification aggressively, and to put sectional and group interests aside on favour of the interests of Nigeria and to finally promote and push for the emergence of a reformed and virile petroleum industry either before competition renders our production unattractive or crude oil is no longer the primary source for motor fuels?

“What is the discernable policy on renewables and what extent has the government put in place mechanisms or incentives to promote the inevitability of renewable use as a means of greatly shoring up access to modern energy services, bearing in mind the 100 million plus people who are presently energy deprived?

“There are too many questions that need to be answered and there is so much to strategize on”, she said.

She added:“What is worrying is that the Nigerian petroleum industry has so far exhibited a worrying incapacity to change and adapt, as evidenced by about 20 years of petroleum reform that has refused to even take the first step of enacting badly needed legislation.

“This is tragic, because even before the COVID-19 pandemic, Nigeria had ceased to be a beautiful bride, several new producers were springing up in Africa, and all over the world and the green movement is becoming a reality,” she said

Also, Executive Secretary of the Petroleum Technology Development Fund, (PTDF), Dr Bello Gusau, noted that the COVID-19 pandemic had significantly impacted on its programmes, especially as most of its human capital development programmes were conducted overseas and through physical meetings.

Gusau, who was represented by General Manager, Strategic Planning of the PTDF, Mr Jide Adebulehin, explained that in the second quarter of 2020, many of these programmes were severely disrupted due to physical distancing protocols and closure of airports among others.

“The prospect of declining revenue from oil, high inflation, high cost of materials and the advent of a recession, have impacted the development of new infrastructural projects and completion of ongoing projects is now at a very high cost”.

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