Bidders in Nigeria’s gas flare commercialisation programme, will have the flexibility of choosing which flare site to bid for, how much they wish to buy the flared gas from a floor price of $0.25c/1000scf, the end market or gas product, as well as the technology to be used, Justice Derefaka, program manager of Nigeria Gas Flare Commercialisation Programme has said.
There have been concerns over how to evacuate gas from flare sites in remote Niger Delta locations to industries outside the region and the practicality of building gas gathering infrastructure in a volatile, often dangerous Niger Delta terrain, which could derail expectations of bidders to recoup their investments.
In response to these concerns, Derefaka, told BusinessDay that prior to the launch of the programme, his team has conducted a research on ways bidders can transport and use the gas captured from flare sites for economic activity.
“And we found out that although pipelines present the most viable option for transporting gas, there are scalable, containerized, skid mounted/barge type ‘plug & play’ technologies, virtual pipeline & compressed natural gas (CNG) trucks would be preferred for security and other reasons.
“So these take care of the issue of remoteness of gas flare site and locations. Additionally, under the NGFCP, any preferred bidder and/or a would-be gas flare site “Permit Holder” is free to latch onto existing NNPC pipeline infrastructure.”
Derefaka also said that the Federal Government is offering flexible terms including a floor price of gas at $0.25c/1000scf. Natural gas currently sells for $2.78/1000scf in the international market allowing for higher returns.
He also said the programme is strictly market driven and the World Bank and the International Finance Corporation are funding a market study to assist investors.
“The primary focus of the Market Study is on the Off-Takers (Market) inputs and the total value chain economics and each of its corresponding links. Study will also determine whether and under what conditions Flare Gas can be taken to Market based on sound economic/market criteria. Focus on current Market conditions and potential (adverse) change in Market conditions within the next 5 – 10 year period,” Derefaka said.
The study will determine the feasibility, attractiveness and sustainability of Flare Gas to Market projects which includes the transformation of Flare Gas to “end products” and the delivery and sale of these “end products” to the Off-Taker and provide market intelligence on LPG, CNG/LNG, Power, Methanol, Pipeline gas, GTL.
Analysts are also concerned about the ability of government to realise its desired objectives given the claim by some producers that a significant amount of gas currently being flared is due to safety reasons which the law allow.
“There is also the claim that some of the flare out projects is already part of a Field Development Program that the National Petroleum Investment Management Services (NAPIMS) has approved,” says Wole Obayomi, partner and head, tax, regulatory and people services at KPMG Nigeria in an article for the company’s blog.
Obayomi further said, “It is, therefore, important that both NAPIMS and NNPC are fully committed to the NGFCP. Most importantly, the success of the NGFCP will highly depend on its bankability and ability to attract quality investors. For investors to be able to successfully raise finance for the project, they would need the assurance of protection from political risks. Otherwise, investment in NGFCP will be less attractive.”
Derefaka assured that the programme is market driven, a core principle of the NGFCP. “The gas flare commercialisation programme is strictly a market driven programme,” he said and assured that it supports government’s plan to achieve zero gas flares and reduce Nigeria’s carbon emission.
Since the Federal Government announced the Nigerian Gas Flare Commercialization Programme, an ambitious plan to sell over 700 million standard cubic feet of gas a day flared at 178 different sites across the Niger Delta, over 700 bidders have expressed interest.
ISAAC ANYAOGU
