NNPC opposes banks’ decision to reduce funding for fossil fuels

Mallam Mele Kyari, the Managing Director of Nigeria National Petroleum Corporation (NNPC) Limited, has expressed his displeasure with financial institutions and banks’ decision to reduce funding for fossil fuels, a situation brought about by the global rush to reduce carbon emissions.

Kyari expressed his dissatisfaction with banks’ and financial institutions’ reluctance to reduce fossil fuel funding at the 2021 Strategic International Annual Conference of the Association of Energy Correspondents of Nigeria (NAEC) in Lagos.

The conference’s theme was “Petroleum Industry Act: Energy Transition and Nigeria’s Oil and Gas Future.”

He insisted that President Muhammadu Buhari has requested energy justice and other plan B measures to cushion the impact of reduced funding for fossil fuels on the Nigerian economy, given that oil is the country’s main source of revenue.

The NNPC boss, who joined the event via Zoom from Scotland, stated that Nigeria is still energy deficient, citing a lack of infrastructure for the energy transition.

“As a country, we are energy deficient, as evidenced by our lack of electricity,” he said. We continue to produce less than what is required.

“At the moment, we do not have the resources in Nigeria to make that switch to cleaner energy.”

“Mr. President is so eager to switch to cleaner alternative energy that he has demanded energy justice for all from us.”

“Backbone infrastructure project OB3 is still ongoing in this regard. The project must be expanded and completed within the specified time frame of 24 months.”

“The banks, the financial sector, have been very reluctant in financing fossil fuel and energy transition for Nigeria for obvious reasons,” Kyari said of the industry’s challenges.

Regardless, we will do everything we can to participate in the energy transition.”

Mele Kyari also assuaged concerns about a disruption in the supply of petroleum products, following reports of resurgence of queues in some parts of the country.

The GMD also explained why Nigeria is seeking energy justice at the United Nations.

In the midst of the global push for energy transition, the United Nations Climate Change Conference (COP26) is currently taking place in Glasgow, Scotland.

The NNPC’s goal, according to Kyari, is to ensure Nigeria’s energy security and the availability of petroleum products.

“As we speak, the media is speculating about fuel scarcity, but we have over 1.7 billion litres of Premium Motor Spirit in the country,” he said.

“We have another 2.3 billion litres on the way, so there is no supply shortage as has been speculated,” he said.

“Of course, some depots have pricing issues, but the government has no plans to change the pricing structure.”

The COP26, according to Kyari, highlights the challenges Nigeria and other African countries face in the global energy transition.

President Muhammadu Buhari, he said, had demanded energy justice for Africa in his address to world leaders, as well as the need to exploit available resources as a means of achieving the net-zero carbon goal by 2050.

Despite accounting for only about 3% of global carbon emissions, the NNPC boss stated that Africa had a responsibility to join the rest of the world in combating climate change.

According to him, Nigeria has identified its abundant gas resources as the fuel for its energy transition, prompting the government to declare the years 2021 to 2030 the Decade of Gas.

“We are making good progress in terms of implementing the PIA, which is clearly laying the groundwork for transition,” Kyari said.

“Without adequate infrastructure to transport the resources to where they will be used, we will not be able to achieve this feat, which is why we are investing heavily in massive gas infrastructure.”

The Obiafu-Obrikon-Oben (OB3) and Ajaokuta-Kaduna-Kano pipelines, he said, are among the projects that will increase gas utilization in the country.

Mr Biodun Adesanya, the Conference Chairman, praised the Nigerian National Petroleum Corporation’s decision to set aside 30% of its profit for exploration activities in the PIA’s frontier basins.

The discovery of oil and gas resources in areas other than the Niger Delta, according to Adesanya, is a welcome development that the country should pursue aggressively.

He did, however, call for the appointment of qualified personnel to oversee the sector, stating that this was the only way Nigerians could benefit from the country’s vast oil and gas reserves.

The passage of the PIA, according to Mr Simbi Wabote, Executive Secretary of the NCDMB, has opened up a vista of opportunities for the industry.

Mr Tunde Adelana, Director, Monitoring and Evaluation, NCDMB, represented Wabote, who stated that the implementation would have a positive impact on local content development and host communities.

He went on to say that it would also help the oil and gas industry attract much-needed investment.

Mr Olu Phillips, Chairman, NAEC, said earlier in his welcome address that statistics show that over 100,000 people die each year in Nigeria as a result of indoor inhalation of waste gases.

According to Phillips, this has informed the global energy transition, and the Nigerian government is responding by focusing on the most efficient use of the country’s gas resources.

Read also: NNPC, NGX Investigate Capital Market Financing Options

Professor of Petroleum Economics Wumi Iledare, President Nigeria Association of Petroleum Explorationists (NAPE), Patricia Ochogbu, and Managing Director, Degeconeck Nigeria Limited, Biodun Adesanya, who also spoke at the NAEC conference, collaborated with Kyari’s statement on banks’ reluctance to fund fossil fuels.

Patricia Ochogbu, the NAPE President, has advocated for the creation of an Energy Bank, a financial institution dedicated to providing funding for the energy sector.

Ochogbu stated that while oil and gas investments are capital intensive, the exposure to these investments has proven to be a burden for Nigerian commercial banks.

“Investing in oil prospecting is capital-intensive and high-risk. NAPE, Nigeria’s association of explorationists, has acknowledged dwindling investment in exploration as a group. As a result, we have called for the establishment of an energy bank, which will be solely responsible for the funding of industry projects,” she said.