Omowumi Iledare, a Professor of Petroleum Economics, has tasked Ghana and other producers in Africa to encourage and support upstream investment or run the risk of accelerated production decline.
Iledare who is the Ghana National Petroleum Corporation, GNPC, Petroleum Commerce Chair, University of Cape Coast, UCC, Oil and Gas Studies, Ghana, and also Professor Emeritus in Petroleum Economics, LSU Center for Energy Studies, USA, gave this task while speaking with the theme, “Global Transition to Renewable Energy: Africa Must Walk The Energy Transition Path Tactically”, at the Inaugural Academic Symposium organised recently by the GNPC Centre of Excellence in Petroleum Commerce at the UCC Institute for Oil and Gas Studies , Ghana.
“First, petroleum producers in Africa can benefit from early adoption of the energy transition by using the oil and gas revenues to accelerate green investments especially deepening renewable energy penetration”, he said.
“Secondly, Africa oil and gas producers must develop advantageous barrels. Meaning only the best projects that deliver on overall economics are likely to attract capital. Ghana and other producers in Africa must encourage and support upstream investment or run the risk of accelerated production decline”, he added.
“Third, there is a global acceptance of natural gas as the global transition fuel, thus, gas to power push represents a promising way to decarbonize Africa’s upstream oil and gas sector. This calls for good incentives to monetize the abundant natural gas and create new demand centers-for both internal power and non-power use as well as regional exports”, Maintained Iledare.
Finally, regional cooperation according to him is pivotal to facilitating cross-border trade and investment flows to the petroleum and wider energy sector. Protectionism is always exposed by market fundamentals with consumers having to pay higher prices for goods and services. It is noteworthy, however, that energy transition is not static but dynamics. It takes about 50 to 60 years to transit from one energy source to the other, using the key example of the transition from coal to crude oil.
“The displacement of a dominant energy source does not automatically eliminate that energy source from the energy supply mix with the displacement happening only through a smooth demand decline. For instance, the smooth decline of oil demand, will mean the shrinking of the oil market. The consequences of market shrinking may further affect price and high-cost producers will be squeezed out of the market first, while low-cost producers will then be driven out last”, he stressed.
“The silver lining of the pandemic was a glimpse of the future, which showed the timing of when the oil market may begin to shrink is stochastic. The energy transition is going to bring many changes and opportunities, hence if high-cost producers can manage a reduction in their cost of production then, they can benefit from the transition and extend the oil market era, as oil will not disappear overnight rather it will take many decades. Let me conclude by reechoing the assertion that energy transition is here but it is dynamic and not static”, he stated further.
The displacement of a dominant energy source according to him does not automatically eliminate that energy source from the energy supply mix. Empirical evidence suggests the world is not running out of crude oil and it seems also that it is less likely than not that the world will run crude oil out of the global energy supply mix without dare macroeconomic consequences and energy affordability complexities in Africa.
“Africa needs a strategic thinking approach to the transition dynamics beyond the traditional reactive or ad hoc approach. Unquestionably, according to the Arena International Renewable Energy Agency, energy transition is a pathway toward transformation of the global energy sector from fossil-fuel dominated energy mix to zero carbon emission sources and the train has left the station. Besides, according to Sheikh Zaki Yamani, Saudi Arabian Minister of Oil and Mineral Resources (1962-1986) stating that “the Stone Age did not end for lack of stone, and the oil age will end long before the world runs out of Oil. Change is the only constant and Africa emerging economies with oil endowment, will really have to embrace it”.
He however, stated that African leaders in the private and public sectors in these economies must, embrace the zero-carbon emissions talk, but walk the talk less rapidly than the developed economies who rode the back of crude oil for economic stardom. “Sustainable optimization of an economy for national development requires energy accessibility, affordability and sustainability, and no energy source should be left out of the energy supply mix”, he maintained.
“Nevertheless, Africa must learn the lesson from the no smoking campaign for many years before it took traction. The campaign for zero carbon emission fuels is on course. Using petroleum revenue management tools to drive the linkage necessary for the oil sector to drive emerging economies is critical to absorb the unintended consequences on African economies in case the developed economies decide to walk the loud energy transition talk precipitously”, he opined.