Is electricity next big shift for energy firms?

The energy landscape in Nigeria is undergoing a significant transformation as more listed Nigerian energy firms are shifting their focus towards the power sector and renewable energy space. This strategic move is aimed at tapping into value chains that mark the next phase of their business operations. In parallel developments, Nigeria's Minister of State for Petroleum Resources has announced the government's plans to take over all idle oil wells from operators. The Minister highlighted that out of the 60 marginal oil licenses issued in 2021, only five are currently in use. These recent developments are indicative of the evolving energy dynamics in Nigeria. Ayodele Oni, Partner at Bloomfield Law Practice, offered insights and analysis on these crucial developments during a recent CNBC Africa interview. Oni discussed the implications of these trends and shed light on the potential paths forward for the energy sector in Nigeria. During the interview, Oni addressed key issues such as the challenges faced by operators with idle oil well licenses and the increasing focus on renewable energy sources. Oni emphasized the importance of access to power and how it impacts businesses in Nigeria. He highlighted the significant cost implications for companies that resort to self-generation due to unreliable power supply. Oni pointed out that companies can spend up to 40 percent of their income on power generation when they do not have access to a reliable grid power source. He emphasized the economics of scale in the power sector, noting that power becomes cheaper when more people use the same source. Oni debunked the notion that grid power would be more expensive, arguing that self-generation costs are considerably higher than grid power. He underscored the need for accurate data and analysis to inform energy policies and decision-making in Nigeria. On the issue of idle oil well licenses, Oni raised critical questions about the bid process and the qualification of operators who acquired these assets. He highlighted the challenges faced by operators in raising financing and adapting to the changing energy landscape, particularly with the growing focus on renewable energy sources. Oni reflected on the implications of having 'strained bedfellows' in the energy sector and emphasized the importance of ensuring that the right stakeholders with adequate financial resources are involved in energy projects. The interview with Ayodele Oni provided valuable insights into the evolving energy sector in Nigeria and the implications of government policies on energy firms. The transition towards renewable energy sources and the need for efficient power distribution are key themes that are shaping the future of the energy industry in Nigeria. As energy firms navigate these changes, strategic planning and partnerships will be crucial in ensuring sustainable growth and development in the sector.