In the first nine month of 2018, Africa biggest oil producing country literally threw N275.6 billion into the flames through age long gas flaring menace in spite of its potential for development, particularly in the generation of electricity, and its deleterious effect on the environment.
Analysis by BusinessDay showed from January 2018 till September 2018, Nigeria flared a total of 215.9 billion scf flared translating to a total cost of $755.65 million (N275.6 billion) using the average price of natural gas of $3.5 per 1,000scf as at September last year.
Further analysis revealed if the flared 215.9 billion scf were to be sold today Tuesday, January 8, 2019) at the current price of $3 per 1,000scf it would cost $647.7 million (N236 billion).
“It’s a sad story and a combination of several factors which cut across the value chain; the gas flared away in Nigeria would have been able to address some of the challenges facing our gas- to-power plants,” Luqmon Agboola, head of energy and infrastructure at Sofidam Capital, said.
Agboola explained that there are still major bottlenecks in infrastructural operational capacity which needs to be addressed in order to solve the menace of gas flaring.
Analysis of the NNPC report using September average cost of $3.5 per 1,000scf showed in January Nigeria flared 31.68 billion Scf of gas worth $110 million, in February 27.25 billion scf was flared worth $95.3 million while in march and April, Nigeria flared 26.88 billion scf and 23.06 billion scf worth $94 million and $80.5 million, respectively.
The oil and gas companies, which include international and indigenous operators, also wasted 21.20 billion scf of gas in May worth $74.2million, 21.66 billion scf in June worth $75.81, 21.21 billion scf in July worth $74.2million, 22.42 billion scf in August worth $78.47, and 20.54 billion scf in September worth $71.89million.
Since the 1950s when Nigeria started oil production, gas has been flared indiscriminately by the oil companies operating in the country, despite its many implications. Yet legal efforts to reduce gas flaring and convert the resources into productive use such as generating electricity have never really come through.
The Federal Government increased the gas flare penalty from N10 per thousand standard cubic feet of gas to $2 or N612.8 (at the official exchange rate of N306.4 to one dollar) per thousand standard cubic feet of gas in October last year.
The increase is in the case of any firm that produces 10,000 barrels of oil or more, the government explained, adding that for anyone producing less than 10,000 barrels of oil per day, the penalty was increased to $0.5 or N153.2 per thousand standard cubic square feet of gas. The government also announced a fine of N50, 000 or six months jail term, or both, for anyone who provided inaccurate flare data.
The effectiveness of the policy lies in its implementation, Agboola said. “Who are those who are supposed to implement these laws that were put in place, and why are they not publicly indicting those found culpable?” he asked.
The NNPC data further revealed that out of the 238.91 billion scf of gas supplied in September 2018, a total of 142.09 billion scf of gas was commercialized, comprising 30.36 billion scf and 111.73 billion scf for the domestic and export market respectively.
It said: “This translates to a total supply of 1,011.96 mmscfd of gas to the domestic market and 3,724.26 mmscfd of gas supplied to the export market for the month.
“This implies that 59.47 per cent of the average daily gas produced was commercialized while the balance of 40.53 per cent was re-injected, used as upstream fuel gas or flared. Gas flare rate was 8.60 per cent for the month under review,” NNPC said in the September report.
The NNPC further said that the total gas supply from September 2017 to September 2018 stood at 3.094 trillion scf, out of which 464.48 billion scf and 1.331 trillion scf were commercialized for the domestic and export market respectively.
“For a long time we have always had the problem of gas infrastructure, most especially pipeline installations,” Ayodele Oni energy partner at Bloomfield Law practices, told BusinessDay by phone.
DIPO OLADEHINDE
