On the path to zero emissionsSeptember 16, 2021
Roberto Daniele, managing director of Eni Nigeria, talks to The Energy Year about the company’s role in the energy transition and its plans for increasing hydrocarbons production and gas supply in Nigeria. Integrated energy company Eni has a broad presence in Nigeria spanning upstream, LNG and power generation activities.
How quickly will the energy transition materialise and how is Eni adapting to this energy shift?
The energy transition is a reality today and it’s incredible how fast it’s now materialising. Everyone is moving in the same direction and it’s happening all over the world. When major IOCs such as ExxonMobil, Eni, Shell and TotalEnergies move in this direction, there is no way back. Yet, for it to truly happen, the political component is essential. The energy transition cannot happen without a strong political commitment.
Nevertheless, the importance of oil and gas will remain because the transition won’t happen overnight. It will be happening for the next couple of decades, so now it’s a matter of enhancing efficiencies, reducing costs and being more selective in our projects.
Likewise, this transition will happen at different speeds depending on the stage of development and resources each and every country has. Nigeria has huge resources in oil and gas which are fundamental for its economic development. For this reason, investment will continue to pour into hydrocarbons, especially into the gas arena, which is the transitional journey the country is now taking. Following the recent declaration of the Decade of Gas, monetising and utilising Nigeria’s gas resources will be fundamental to address energy poverty and subsequently drive economic development.
As a company, we have focused on the energy transition for a few years, being one of the first to start moving in this direction. First and foremost, there has to be a change of mentality. This requires the effort from young minds that will pick up the baton and drive the future of the energy spectrum.
As a global company, we’re shifting along these lines, changing the business mentality and culture and adapting it to current times. A few years back, HSE was something novel but now everyone operates with these standards. The energy transition will be the same. Lastly, technology and investment are also fundamental to drive this transition in practice.
What prospects do you see onshore and offshore for IOCs such as Eni in Nigeria?
Depending on the location, IOCs encounter different challenges in Nigeria. Onshore is extremely tough due to security issues. Unfortunately, security is still a severe burden for operators. For this reason, new onshore investment will be extremely selective for IOCs. There is still plenty of potential onshore, and as a result we see indigenous companies taking up the market gaps IOCs have left behind.
In regard to onshore, we are moving forward with NLNG Train 7, which will require a lot of gas for the next 20 years. Here, we are planning some onshore developments. The most important fields are Samabri-Biseni and the Tuomo and Manuso fields.
Offshore is quite a different animal because there’s potential and it’s a safer arena to operate in. There are many assets that still need to be discovered, appraised and developed. In the coming years, it’s probable that IOCs will move offshore, where they can deploy their technology and avoid security issues.
A milestone for us is the recent extension of the offshore OML 118 licence, which holds the Bonga field, in which we are partners.
In what ways are you increasing your gas feed into the domestic market?
Gas is the means for Nigeria’s energy revolution, and a major contributor to development in the country. We are aligned with this narrative, trying to channel our gas to the domestic market. For example, we developed our Okpai CCGT power plant in 2005 with two phases. The first phase was 470 MW and a few months ago we commissioned the second phase, which upgraded the plant to nearly 1 GW of capacity. This last expansion will double the requirements from 70 mcf to 140 mcf [1.98 mcm to 3.96 mcm] per day to fire the plant. We are now waiting for the PPA to be in place, and for the upgrade of the electrical network in order to be ready to distribute the available power to the country.
Now, we are talking to our stakeholders about increasing the volume of gas for industrial uses such as petrochemicals and fertiliser. The demand for gas is increasing on all fronts, and we are seeing diverse opportunities arising in the areas of gas-to-power and gas-to-industry. Both dynamics will push Nigeria’s economy forwards.
Nevertheless, to improve the gas development for local use there should be an open market, not a regulated one. More incentives are needed. This will take time but it would support further developments for the local use of gas.
How is Eni trying to ramp up its production and what issues are you facing?
In 2020, we had very low levels of activity. A lot of our ageing brownfields suffer from depletion, which, added to the low rate of activities, gave way to a substantial reduction in production. We are now picking up our activities, to recover and hit pre-pandemic production rates as fast as possible .
Although the resources are there, so are major challenges such as insecurity and depletion. For example, we have about 25-30 wells that are not producing due to security concerns. We need to be able to re-establish our potential by keeping previous production levels based on our past activities, while also adding new activities to enhance our production efforts. Investment is therefore very important, but there must be an active support from government and all stakeholder in order to grant appropriate security conditions in operating areas. When it comes to fighting depletion, technology and optimising our drilling techniques through EOR are essential.
How can the cost per barrel and cost of operating be reduced in the current environment?
Cost reduction has always been a target and it’s now a government goal, as seen in the recent implementation of NUCOP [Nigerian Upstream Cost Optimisation Programme], under which NNPC, the government and IOCs are working to decrease the cost per barrel. The cost of producing in Nigeria is 60-70% higher than in other countries. Consequently, all of the IOCs are working to find synergies to reduce these high costs and come up with solutions, especially in the areas of logistics and security.
Another aspect in terms of costs is the tendering process. Tenders in Nigeria are too long and complex. We have done an analysis and on average, these take about 36 months, which is impossible to work with. By the time a tender is concluded, the needs have changed. This is not to mention litigation and court procedures that might crop up, costing more time and money.
When it comes to reducing costs, we have already reduced capex by about 25% in the last year and a half. Covid restrictions have taught us to prioritise and optimise our activities by doing things differently. We have been forced to be leaner and more efficient, adapting to the times we are living in.
What steps is Eni taking to achieve zero carbon emissions in its activities in Nigeria by 2024?
In alignment with the Paris Agreement, we are committed to reducing carbon emissions in Nigeria to zero by the year 2024. This is ambitious but achievable. In 15 years, we have cut flaring by 95%; we currently have 11 different locations, each with a single negligible value, but if the volumes are combined, it is quite significant. For this reason, we are investing in not only eradicating flaring but also commercialising gas instead of flaring it. We have signed agreements with local companies to build mini-LNG plants. One has to look for ways and think outside of the box and be proactive to achieve zero-emissions goals.
What key milestones are you aiming to achieve in the coming years?
We are working on all the developments for Train 7, which will come on line sometime around the end of 2025. This commitment is very important for Eni. In the offshore, we aim to enhance our commitment and ensure the developments of OML 118 and our other assets advance. We are also putting our efforts towards enlarging our commitment to gas utilisation and gas-to-power in Nigeria in the coming years. At a corporate level, we are making our organisation much slimmer and adapting it to the times we are in. We have to keep embracing change and the new industry trends to stay relevant.
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