Gas flaring is a critical issue when it comes to the oil and gas industry. Nigeria’s over five decades experience in the oil and gas industry continues to reveal the complex dynamics of balancing global energy security, domestic economic growth, climate and environmental considerations.
Gas flaring statistics
The 2015 statistical report by the Organisation of Petroleum Exporting Countries (OPEC) stated that Nigeria produced 86,325.2 million standard cubic meters of gas and flared 10,736.8 million standard cubic meters in 2014.
Investigations also reveals that Oil firms in Nigeria, especially the international oil companies (IOCs) continue to flare substantial amount of the gas resources in the country. This situation is further compounded by the lack of infrastructure to monetise natural gas that is currently being flared.
Nigeria National Petroleum Corporation in its 2014 Annual Statistical Bulletin (ASB) stated that oil and gas firms in the country flared 289.6 billion standard cubic feet (SCF) of gas, representing 11.47 per cent of the total gas produced in the country.
According to the ASB, the Joint Venture companies comprising the multinational oil companies in terms of quantity flared 211.836 billion SCF of gas, representing 11.2 per cent of their total gas production of 2.11 trillion SCF. Production Sharing Contract (PSC) companies followed as they flared 66.12 billion SCF of gas, representing 19.95 per cent of their total gas production of 397.58 billion SCF.
Financial implication of gas flaring
According to the Department of Petroleum Resources (DPR), the Federal Government is losing an estimated figure of N289.6bn annually to gas flaring as International Oil Companies operating in the country continue to flare 1.4 billion cubic feet of gas across oil fields every day. This figure indicates that the 1.4bcfd flared gas was costing the Federal Government $4.9m daily at $3.50/1,000 standard cubic feet.
When put together, the Federal Government is losing about $1.79bn (N289.60bn) to gas flaring annually, a situation largely attributed to gross under-utilisation of gas in the country.
Industry analysts observed that under-utilisation of gas had continued to be a major problem in the country amid an under-developed domestic market, non-availability of gas-based industries and inadequate gas pipelines, among others.
They opine that gas production in the country is less than one billion cubic feet, adding that associated gas was 5.20bcfd, while non-associated gas was 2.80bcfd.
Industry sources are of the view that gas utilisation remained at only 6.6bcfd in the country, while the country’s gas reserve endowment might be up to 600 trillion cubic feet due to the high proportion of natural gas accumulation concentrated in the Niger Delta as well as substantial discoveries made in the deep offshore area.
Expert views
Energy experts say the issue of gas flaring will continue to impede the nation’s prospect in benefiting optimally from export of gas and pose health and environmental challenge until government who is part owners of all the joint ventures commits huge investments in infrastructure to checkmate this menace.
Government has to contribute to the investment that is required to reduce gas flaring says Wumi Iledare, Professor of Petroleum Economics and Director of Emerald Energy Institute, University of Port Harcourt, Nigeria Iledare said that Government need to do better management of resources that is the only way to bring gas flaring to zero level stressing that Nigeria cannot afford to shut down every plant producing gas in its bid to achieve zero level of gas flaring.
According to him, “the amount of infrastructure required to use in achieving zero gas flaring is very significant. With adequate investment we can move to zero flaring.
He however disclosed that Nigeria have done close to 80 percent effort to checkmate the issue of gas flaring. “Nigeria has done well. We have not come to zero level of gas flaring. I think we are below 20 percent now when it come s to gas flaring because of the so many projects that is in place”, he said.
Ajugwo Anslem, an energy researcher and environmentalist observes the issue of gas flaring is an area that Nigerian government has not enforced environmental regulations effectively because of the overlapping and conflicting jurisdiction of separate governmental agencies governing petroleum and the environment as well.
Anslem pointed out that neither the Federal Environmental Protection Agency (FEPA) nor the Department of Petroleum Resources (DPR) has implemented anti-flaring policies for natural gas waste from oil production, nor have they monitored the emissions to ensure compliance.
He is worried that government continues to pay lip service to the issue of gas flaring without considering how oil exploration and exploitation processes create environmental, health, and social problems in local communities near oil producing fields.
Kareem Jubril Adedayo, an energy expert with Ecobank says tackling gas flaring demands government and private sector collaboration which will focus on policy and incentive for gas producers and pipeline operators. With a solid agreement between the two, we can begin to anticipate the much needed investment in the sector which will in turn achieve the year 2020 zero gas flare aspiration.
The PIB issue
Energy experts continue to clamour for the passage of the Petroleum Industry Bill (PIB) which is closely aligned to the gas reform. They are of the view that when the PIB is successfully passed, it would lead to increased direct utilisation of gas in domestic industrial processes and for power generation.
Analyst maintained that the gas sector reform, which is anchored on the Nigerian Gas Master Plan, would monetise the country’s natural gas reserves and eliminate flaring, while also enhancing greater private sector investment in gas production, transportation and distribution infrastructure.
PIB closely aligned with the country’s domestic gas aspiration; when passed into law, it would create a modern petroleum legal framework, align the Nigerian gas sector to international best practice, enhance transparency and establish good governance practices, while reinforcing linkage between the gas industry and other sectors of the economy” they argued.
Gas experts disclosed that other objectives of the GMP, include the development of a new gas pricing methodology; development of a fair and transparent fiscal regime; and creation of an independent national gas transportation company by unbundling Nigerian Gas Company.
Sources described the tax terms in the current PIB as “so uncompetitive and risk rendering offshore oil and gas projects unviable, and could halt investments.”
They further said the current PIB terms would put potential investments in gas at risk because the fiscal terms were harsher than the current regime than what obtained in the rest of the world.
They insist that most gas projects would not go ahead if the current PIB was passed, adding that the Federal Government would be unable to meet its objective of tripling power generation using gas.
KELECHI EWUZIE
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