NRGI urges NNPC to reassess oil investment strategy
The Nigerian National Petroleum Company Limited has been warned that continuing with a business-as-usual approach to oil and gas investments could expose Nigeria to growing fiscal, economic and social risks as the global energy transition gathers pace.
The Natural Resource Governance Institute gave the warning at a policy forum in Abuja on Thursday, where government officials, NNPC representatives, civil society organisations and energy policy experts examined the role of the national oil company in Nigeria’s transition to a lower-carbon energy system.
The forum, titled “The Role of NNPC in Nigeria’s Energy Transition”, was organised by NRGI, the Centre for Energy, Finance and Development, the Inclusive and Sustainable Development Research Centre and the Centre for Petroleum, Energy Economics and Law at the University of Ibadan.
The discussion focused on how NNPC could continue to support government revenue, energy security and industrial development while responding to changing global demand for hydrocarbons and Nigeria’s commitment to achieve net-zero emissions by 2060.
Presenting NRGI’s research on the role of national oil companies in the energy transition, the institute’s Nigeria Country Manager, Tengi George-Ikoli, said NOCs could not be excluded from the transition debate because they control a significant proportion of global oil and gas reserves.
“NNPC is a voice, partner and agent of the energy sector generally, but what we find is that NOCs are not largely part of the conversations when we discuss energy transition. It’s not always seen as a positive in some conversations or discussions. Negotiations sometimes omit the NOCs in discussions, but we find that it’s a very important conversation that needs to be had,” she said.
George-Ikoli said NOCs globally controlled about 60 to 90 per cent of oil and gas reserves, making their investment decisions critical to the pace and direction of the energy transition.
She said Nigeria had chosen to use natural gas as a transition fuel while expanding other areas of its energy system, including power and clean cooking, adding that NNPC had a central role because of its interests across the oil, gas and power sectors.
“Failure to adapt to this changing context and the realities and the risks that energy transition poses would leave Nigeria and Nigerians behind, and so there’s a need to explore and assess how far Nigeria is exposed to the fiscal, economic and social risks presented by the transition, and NNPC plays a very pivotal role in that consideration,” she said.
According to the research presented at the event, about $400bn of planned upstream spending by national oil companies between 2023 and 2032 could fail to break even under a demand scenario aligned with countries’ existing climate pledges.
For Nigeria, NRGI said its analysis indicated that about 38 per cent of projects were at risk of failing to break even, highlighting the need to carefully assess new investments before committing scarce capital.
George-Ikoli said, “We need to right-size and recalibrate our ambitions to make sure that Nigeria is putting in place projects that will not lead to stranded assets, again to ensure that Nigeria is spending its revenues and its investments in a way that can deliver Nigeria’s national priorities.”
She said NNPC needed a clearly defined and publicly available strategy that assessed fiscal and social risks, identified new business opportunities and determined how its role should evolve over time.
She outlined five stages for a credible transformation pathway: setting national policy goals, assessing transition risks and new business opportunities, defining strategic direction and business focus, strengthening institutional arrangements and governance, and ensuring a just transition and responsible exits.
The institute also presented its analysis of more than 17,000 media publications to assess how NNPC’s public positioning aligned with Nigeria’s definition of the energy transition.
George-Ikoli said the study found only seven per cent alignment with Nigeria’s stated transition pathway, while 45 per cent were classified as misaligned, five per cent as contradictory and 42 per cent had no clear position.
She stressed that the findings were not an indictment of NNPC but reflected the complexity of Nigeria’s approach, which involves simultaneously expanding oil, gas and renewable energy.
“Business as usual is not a neutral option,” she said. “Inaction or business as usual is not a position that will benefit countries like ours that are fossil fuel producing.”
The Centre for Energy, Finance and Development’s Founder and Executive Director, Nicolas Lippolis, said Nigeria’s size, population growth, oil and gas reserves and economic importance made its transition decisions significant beyond its borders.
“Nigeria is a true bellwether country for what happens with the future of oil and gas production in the face of energy transition,” he said.
Lippolis said the research was not intended to impose foreign solutions on Nigeria.
“At CEFD, we don’t believe in imposing idealised approaches to countries, governments, and companies. We try to engage with our subject matter in its own terms, and so we don’t come to Nigeria with the expectation that we’re going to impose cookie-cutter solutions,” he said.
He said NNPC’s transformation should take account of the company’s commercial orientation under the Petroleum Industry Act while ensuring that investment decisions consider changing global and domestic demand for hydrocarbons.
Also speaking, a representative of the Nigerian Upstream Petroleum Regulatory Commission, Bamedele Dada, said Nigeria would continue to use its oil and gas resources to meet growing energy demand while paying attention to environmental sustainability.
He said the Federal Government wanted to raise crude oil production to three million barrels per day by 2030 and natural gas production to 12 billion standard cubic feet per day.
“Germany believes that we have God-given resources in crude oil and natural gas. And the government aspiration as we speak today is to make use of this natural gas as our transition fuel,” Dada said.
He said increased production was necessary to support Nigeria’s growing population, attract investment and position the country as a major energy hub in Africa.
The forum also examined how much of NNPC’s oil and gas revenue should be reinvested and how much should accrue to government, as well as the company’s potential role in power, clean energy and other low-carbon industries.
NRGI’s George-Ikoli said the transition strategy must also address environmental and health impacts on communities and liabilities arising from the divestment of oil assets by international oil companies.
She said the transition should not be left to NNPC alone, stressing that ministries, financial institutions, regulators and other public agencies needed to establish a coordinated national framework.
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