Bidders criticise Nigeria’s gas sales plan, as DPR moves to halt flares  

All is not well with Nigeria’s ambitious plan to commercialise over 700 MMscf/d of gas at 89 flare sites in the Niger Delta region as investors have raised questions over the accuracy and reliability of data about the quantity of gas available in some flare sites.

At the bidder’s conference organised by the Department of Petroleum Resources (DPR) on Monday in Lagos to provide clarifications and address bidders’ questions, potential investors criticised the programme for substituting concerns for the environment with a drive to raise revenue.

On different occasions the moderator had to assure the audience that the project was not a scam. During a particularly heated exchange, the officials requested that the cameras in the room be turned off.
Some investors who have submitted proposals and have accessed data on potential flare sites said there was no gas in some of the flare sites the government was inviting bids for and some had only a quarter of the gas advertised.

Nigeria is targeting investments of about $5 billion which could potentially add $1 billion to the country’s GDP from commercialising gas flares in 89 locations around the country through the Nigerian Gas Flare Commercialisation Programme (NGFCP), an initiative of the Federal Ministry of Petroleum Resources.
Under the NGFCP, licences are granted to third parties to access and collect such gas on behalf of the government from the flare points of oil producing companies.

Bidders submitted questions during the course of the programme but those who felt the responses they were getting from Sarki Auwalu, director, DPR, and Musa Zagi, head, gas monitoring and regulation at the agency, were inadequate began to freely express their misgivings.

For example, representatives from Pioneer Technology and Green Energy who were acting on behalf of their principals queried the process, indicating their checks show the data from the government are unreliable.

“Please bring all these questions to the portal, the legal and technical team will review the observations you have made to this agreement then we will share with you what we have inputted into it,” the DPR officials said.

Bidders were also uncomfortable with the terms of the Gas Sales Agreement which they are supposed to sign with the Nigerian Gas Marketing Company (NGMC). They said they found it too broad and requested for a sovereign guarantee from the government. The DPR officials said the government would not be party to the agreement, only the NGMC would, hence it could not grant a sovereign guarantee.

The NGFCP seeks to attract investments and develop a transparent market mechanism through a competitive procurement process for allocating gas flares, under clear and transparent criteria, to competent third-party investors using proven technologies in commercial application globally.

The licensees will then be required to use necessary technology to set up the facilities for the delivery and collection of gas at the flare points. Under the NGFCP, all identified gas flare points are part of the programme and compliance with the programme will be a licence condition for the award and renewal of all oil mining leases and marginal fields.

Investors are also concerned about whether the projects are bankable enough to cover the cost of infrastructure to extract and process the gas from the areas they are produced to market they are needed.
“All we want is to end gas flaring due to its impact on the environment and the monetisation aspect is to encourage investments,” said the DPR.

The DPR assured that the investments already made by producers means bidders would not be required to extract the gas; they would only make investments in gas gathering and potentially converting to CNG and move to locations they are needed.

Nigeria currently flares 700 MMscf/d of gas at 178 flare sites which is equivalent of the total volume of gas used in power production. This results in 20 million tons of CO2 emissions per year.
In 2016, Nigeria lost $800 million to gas flaring. The DPR is offering about 290m MMscf/d of gas in 45 flare sites at this bid round.