Post PIB, AI and the Future of DPR

By Caesar Keluro

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Post PIB, AI and the Future of DPR
Caesar Keluro

Globally, oil and gas regulators are stumbling over themselves to address energy transition and the spiraling consequences of climate change. They are concerned their teams may not be prepared to meet the challenges of the next decade – to piloting the energy transition, to improve the ‘governance’ in ESG- Environment Social Governance and thereby delivering on best-in-class on ESG performance. More so, to facilitate innovation and seize opportunities for economic growth in a circular economy.

A Post-PIB era will demand that our energy leaders must develop and maintain a long-term view and strategic mindset. A mindset that should inculcate “ripple intelligence,” which is like visualizing stones thrown into a pond and watching the ripples in the distance, will be critical to the future of Nigeria’s oil and gas industry.

In moving into this new space, DPR-mutants (Petroleum Upstream Regulatory Commission and Petroleum Midstream and Downstream Regulatory Authority) will need to keep their eyes on the long-range ripples and use them as an early-warning alarm system of what lie ahead-unraveling our oil and gas disruptions. It must be prepared to engage like an ambassador with all stakeholders. It must imbue its team with the skill of agility and contingency planning even more critical in light of the increasingly challenging regulatory operating environment (e.g., JV shortfalls, creating a compelling social license to operate, or exploring new revenue lines such as capturing carbon and sequestration, bitcoin mining via stranded gas, etc.).

Just like it evolved some decades ago, by leading with electronic revenue collection platforms, and geospatial data, it will need a new mindset which must also include skilled entrepreneurial and managerial dispositions in articulating the evolution of Nigeria’s oil and gas future. Revenue collection and e-platform services built by its technology partners have transformed the way it does business. It has deepened transparency, convenience and augmented government revenues.

Nigeria has struggled and remains challenged by the cyclical nature of the oil and gas business for decades. This is the time for DPR-mutants to lead with its history of resilience and pioneering of digitalization in hand. It is worthy of note that oil price volatility, requires not only greater resiliency but the incorporation of innovation programs which DPR has shown competence in over decades. It is time to bring in its transformational skills, by leveraging big data and artificial intelligence (AI) to further enhance regulatory efficiency and industry discipline. This is possible because it (DPR) seats on a massive data pool.

As we witness rapid energy transition, DPR’s achievements as a champion of industry safety for decades must be handed over to new regulatory entities as they must start the process of championing ESG performance. It will have to build its ESG digital tool while charging the industry to subscribe to it and this will provide a real and long-lasting industry competitive advantage.

More so, the oil and gas industry may be a latecomer to the AI age but everything is changing. Lots of digital-savvy industries are profiting from AI. It will behoove new regulators to encourage the industry to digitalize by utilizing advanced digital technologies. As we move into a post-PIB future, we need entrepreneurial leadership and savvy ecosystem management by DPR-mutants. Something new regulators must provide.

With it, techno-infrastructure DPR has helped the oil and gas industry players enjoy improved ease of doing business. A laurel worthy of note. As emerging technologies transform business models and create new outcomes, DPR-mutants will have to balance letting innovation and businesses flourish while ensuring public safety and lately data privacy.

Whatever form DPR evolves into, it must be guided by adaptive regulation, which is a shift from “regulate and forget” to a responsive, iterative approach. It must build regulatory sandboxes through prototypes and test new approaches by creating sandboxes and accelerators. It must take in the handle of outcome-based regulation, which is a focus on results and performance rather than form. It must embrace risk-weighted regulation, which is a move from one-size-fits-all regulation to a data-driven, segmented approach.

However, it must lead collaborative regulation. This is an alignment of regulation nationally and internationally by engaging a broader set of players across the oil and gas ecosystem. Although Nigeria’s heavy reliance on oil and gas exports has proven to be a major Achilles heel, the energy transition and divestment by oil majors holds great potential to accrue revenues of the 70’s era and mostly especially deepen local refining capacity and spread innovation across industries. It will demand of the new regulatory entities to provide leadership to tackle the likely low commodity prices and the possible surge in massive revenues and clear management of the chaos and new oil windfalls, as the global energy industry transits.

In a world going green, Nigeria will need to court investors who are a strategic driver of decarbonization actions while she makes key changes. This is the new market. Globally, investors are growing increasingly adjusting to the demand horizon for hydrocarbons and shifting attention to the environmental impact of oil and gas production through ESG-focused investing.

Incorporating CCUS

Let’s move into carbon capture, use, and storage (CCUS) technologies. This technology is expected to play a smaller role in the oil sector’s general decarbonization. Yet we can demand that industry players adopt it and pursue its development. Industry report said that there are 19 large-scale CCUS facilities in commercial operation; four more are under construction and another 28 in development. There are also several demonstration and pilot projects happening globally.

Mckinsey reported that plants under construction and in operation can capture and store about 40 MtCO2e a year. It puts the total CCUS capacity in strong relief and that could increase by as much as 200 times by 2050. In this market, the oil industry is well placed to lead because it already uses carbon captured via CCUS for use in enhanced oil recovery (EOR). That oil is also less emissions-intensive than the conventionally extracted variety.

Also, the number of countries are looking to accelerate CCUS development is growing with the US Congress has passed a provision (45Q) to increase the tax credit that power plants and industries can take for either storing or using captured carbon. Policy tools and a bill is in Congress to support the construction of CCUS facilities and CO2 pipelines and to finance research on direct-air capture. For us, we can start with some kind of regulatory framework to support the industry in its decarbonization efforts with tax relief or the imposition of a carbon price. With CCUS, we can create value for the industry’s overall progress along this line. We can support oil and gas companies in building gas infrastructure with full CCUS capacity backed by tax incentives.

Legacy asset regulation

Without mincing words, Nigeria’s energy transition to a new energy age will be very difficult. But we could point the regulatory touch towards actively reducing the emissions of Nigeria’s oil and gas legacy assets which undeniably will remain crucial in the global energy mix.

I think that the regulatory shift should be ensuring that Health, safety, and the environment become the epicenter of the collective response of the whole oil industry going smart. DPR-mutants should focus regulation on greenhouse-gas mitigation, pushing out the narrative of the age-long philosophy from making more oil and gas into nudging the sector to reduce GHG emissions through smart technologies. The arrival of IoT in the oil and gas space will certainly give the regulator access to shared data, real-time, across the petroleum ecosystem. This will more than improve reserves or boost production but also offer DPR-mutants embedded data schemes to drive mitigation smartly.

More so, as the present government pushes to harness the huge potential of gas through building gas infrastructure across Nigeria, it will be important to mention the role of edge computing as it can assist in addressing the reduction of GHG emissions. Edge computing means bringing massive computing power closer to the devices/infrastructure, a reduced latency miracle. It happens near the source of the data compared to cloud-based data centers that take on all the workload. The most important derivable benefit of this is that it reduces system latency because data is processed at source, a less of a time lag between event occurrence and response to it. This will be very helpful to us as we lay our gas infrastructure across Nigeria. As in the case of gas leakage, DPR-mutants’ monitoring team will be aware of the release almost instantly and would be able to respond right away rather than waiting for long hours of calculations to happen in remote computing surrounding before the system alerts them about this incident.

It is time for the regulator to nudge the industry into a global data standard known as Open Footprint Forum, https://www.opengroup.org/openfootprint-forum This is a broad coalition of members who subscribe to a shared data architecture for emission reduction across the entire value chain, enabling extreme transparency and collaboration by our industry stakeholders to work together in reducing GHG emissions.

An industry guide to the efficiency of digital infrastructure can help in nudging the industry towards employing a procurement process that highlights deploying computing technologies that are more efficient and vendors that are committed to carbon footprint reduction. This will nudge us closer to a zero-carbon energy future.

Forging partnership in the emerging hydrogen energy world

In February 2021, Saudi Aramco announced that its hydrogen business will be world-scale by 2030 and that Japan and South Korea will likely be where the first hydrogen trading markets happen, beginning at the end of the 2020s or early 2030s. Its strategic partner in Japan. Japan is already a leading player in the space of hydrogen technology. Its Fukushima Hydrogen Energy Research Field—the world’s largest facility for producing hydrogen derived from renewable energy, supported by the Ministry of Economy, Trade, and Industry (Meti) and the New Energy and Industrial Technology Development Organization (Nedo).

This leading project is situated on a 180,000m2 site and uses 20MW of solar power generation facilities and power from the grid to conduct electrolysis of water in a renewable energy-powered 10MW-class hydrogen production unit. It can produce and store up to 1,200 normal m3/h of hydrogen (rated power operation). Production and storage are based on demand and supply forecasting, and hydrogen is then transported to users mainly in the Fukushima Prefecture and the Tokyo Metropolitan Area in hydrogen tube trailers and hydrogen bundles to be used to power stationary hydrogen fuel-cell systems and to provide for fuel-cell cars and buses. A technology miracle.

Saudi Arabia, a consortium of Acwa Power, Air Products, and Neom they all intend to build the world’s largest green hydrogen-based ammonia production plant to be powered by wind and solar power, which should produce 650t of green hydrogen daily for export to global markets. Nigeria must join other O & G countries like the UAE to become a major global hydrogen supplier, taking advantage of its abundant hydrocarbon and renewable energy resources.

In all, we will have to be wary of stranded asset risk which is a significant concern for oil and gas shareholders as the future energy mix becomes nuanced. Employing regulatory technologies will enable us benefits from health, safety, security, and environmental (HSSE) performance. With abundant data at DPR and its mutants’ disposal, the time is ripe for us to harness them to drive market efficiency and better monitoring of HSSE performance and compliance. With this massive data pool, if well utilized through AI-driven data analytics tool(s), it will help our new regulators create more effective regulation and market monitoring. Most inspiringly, we could lead energy transition innovations.

Written by Caesar Keluro, Co-Founder/CEO, Nanocentric Technologies Limited. He leads ‘Make In West Africa’, a regional Think-tank. He tweets at  https://twitter.com/KCaesar,  https://www.linkedin.com/in/caesarkeluro/    

 

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