Against Gas Flaring in Nigeria! Environmental Hazard and Shameful loses

Against the backdrop of futility of existing regulations that comes against gas flaring in Nigeria, stakeholders are taking the campaign to higher levels hoping that the incoming administration of the All progressive Congress (APC) headed by Muhammadu Buhari will be tactful enough to make possible their campaign promises of ensuring that they plug leakages associated in managing Nigeria resources which obviously eluded past administrations.

against gas flaring in Nigeria

Writes Mr. Olaseni Durojaiye in Thisdaylive Nigerians themselves should be concerned on how we can not easily solve this problem of gas flaring distorting our environment, all Nigerians should come against gas flaring in Nigeria, the attendant loses cannot and should never be ignored, the attitude of our legislators, the past leaders and stakeholders never cease to amaze even the most dumb, why do we treat ourselves to such brazen foolishness and we complain of lack of power (electricity) and attendant poverty in the land?

Nigeria was absent at the last summit of zero gas flaring where chief executives from major oil companies joined senior government officials from several oil-producing countries in Washington to commit, for the first time, to ending the practice of routine gas flaring at oil production sites by 2030 at the latest, Nigeria’s absence is still another matter to discuss another day, remember Nigeria Oil companies flares 40% of the total gas flared across Africa, leading to a significant lose of almost $7billion apart from this financial loss there are associated health implications to Nigerians.

According to Olaseni Durojaiye, the renewed interest on implications of gas flaring was coming on the heels of the recently held World Bank/International Monetary Fund (IMF) Spring meetings which held in Washington DC, United States of America, where a global initiative on how to combine forces to end routine gas flaring was launched. The initiative was hailed as a welcome development and attendees of Nigerian extract at the event have again advanced reasons why Nigeria should endorse and embrace the new initiative.

According to Coordinator of the Publish What You Pay (PWYP) Nigeria Coalition, Faith Nwadishi, who was one of the guest speakers at the Summit, Nigeria can generate $2 billion annually from flared gas. While she lamented past failed attempts to outlaw gas flaring in the country, Nwadishi noted that ‘it is unfortunate that Nigeria has not signed into the Zero Gas Flaring Initiative’ adding that ‘I think Nigeria should lead herself and other African countries into it. There is no amount of money or fine that could augment the level of destruction being visited on the Niger Delta region,’ she insisted.

Gas Flaring as Economic Wastage
An analysis of data from Nigerian National Petroleum Corporation (NNPC) revealed that Nigeria lost about $1 billion between January and September 2014 as oil companies operating in Nigeria flared a chunk of the gas that they produced during the period. According to the data, about 296 billion standard cubic feet (scf) of natural gas was flared in the nine-month period. The flared gas, experts insisted, was capable of improving Nigeria’s poor power generation when channeled into the sector.

With natural gas price put at about $3.30 per 1,000 scf, at the time, 296 billion scf of gas amounts to about $1billion. Nigeria is one of Africa’s top oil producer and largest holder of natural gas reserves on the continent, with about 187 trillion cubic feet of proven gas reserves and 600 scf of unproven gas reserves.

This figure explains why Nigeria is ranked second to Russia on the global gas flaring index according to an online portal, Nigeria Gas Flare Tracker. Gas flared by both international oil companies and indigenous players in the industry accounts for 40 per cent of gas flaring in Africa according to the online portal. Besides, Nigeria is reputed to flare the largest gas in Africa.

Last January, Total announced the completion of gas flare out of its Ofon field on Oil Mining Lease (OML) 102 offshore of Nigeria. The associated gas of the Ofon field,it announced was being compressed, evacuated to shore and monetised via Nigeria LNG.

The statement reads in part: “The flare-out of the Ofon field illustrates our commitment to developing oil and gas resources around our existing hubs in Nigeria. This important milestone of the Phase 2 of the Ofon project was achieved in a context of high levels of local content,” commented Guy Maurice, Senior Vice President Africa at Total Exploration & Production. “The flare-out on Ofon is also significant for Total’s environmental targets, representing a 10 per cent reduction in the Group’s E&P flaring. This achievement is a clear demonstration of Total’s commitment to the Global Gas Flaring Reduction Partnership promoted by the World Bank.”

Knowing the Numbers
For a long time, industry stakeholders have clamoured for a tracking system that was capable of monitoring the amount of flared gas to among other reasons put a cost to the revenue loss arising from flared gas and estimate fines due to be paid by operators. Many of them argued that better data could allow Nigeria to force oil companies to pay for the gas they release. By law, oil companies are supposed to pay $3.50 per million standard cubic feet of gas burned.

The Federal Government responded to the agitation and in November 2014 launched a gas flaring tracker system to assist industry regulators monitor the volume of gas flared by oil companies operating in the country. At the launch of the satellite based tracker, Minister of Environment, Laurentia Mallam, disclosed that the gas tracker was able to display the volume of gas flared and also has the ability to calculate the amount of unpaid fines by facility owners, estimated at $1.1 billion per annum.

“The opportunity cost of gas flaring is the amount of power that could have been generated had the gas been channeled to the power sector. The gas to power potential is enormous and is estimated at 27,612 Gwh. This would effectively double Nigeria’s current electricity target for 2014 and could provide 40 per cent of Nigeria’s total electricity requirements based on a current needs assessment,” she said. The system is located at the National Oil Spill Detection and Response Agency (NOSDRA) and was funded by the UK through its Department for International Development (DFID).

Unfortunately, much of the revenue were reportedly not paid as and when due. Director General of the Nigeria Oil Spill Detection and Response Agency, Peter Idabor, in a media report said companies skirt paying their fair share.

Flared Gas as Source of Power Generation

Nigeria is one of Africa’s top oil producers and largest holder of natural gas reserves on the continent, with about 187 trillion cubic feet of proven gas reserves and 600 trillion cubic feet of unproven gas reserves. But low investment in gas infrastructure over the years has continued to hamper the development of the huge natural gas reserves in the country for domestic consumption, particularly for power generation.

A former Permanent Secretary in the Ministry of Mines and Power, Chief Philip Asiodu, recently said that there could be no valid excuse for the failure over the past two decades to agree on gas pricing, which would have led to the much-needed development of gas reserves to fuel the power sector and gas-utilising fertiliser and petrochemical industries in the country.

“Many promoters of excellent viable projects based on gas have negotiated with the NNPC and the government for more than 10 years to no avail. This has been disastrous for economic development. It has been bad for the environment as cut-off dates for gas flaring have been postponed continuously,” he said.

The International Energy Agency, in its special report entitled: ‘Africa Energy Outlook’, said a critical uncertainty for Nigeria’s gas supply outlook was its ability to stimulate significant production of non-associated gas.

“Huge resources exist, sufficient to cover both domestic demand and exports. Production of non-associated gas increases in our projection period, but it is gradual. Exploiting this resource requires a change in focus by the upstream sector and, importantly, the government to establish a framework to incentivise the necessary large-scale capital investment,” it stated.

This will require a stable, attractive investment environment generally and the development of a bankable commercial structure in Nigeria’s gas sector, which includes price reforms, improvements in regulatory arrangements, a redefinition of the role of public companies in the gas sector and an alternative to the current NNPC joint venture financing model, the IEA said.

Way Forward
According to Nwadishi, ‘the Nigerian government has to take the lead on that. For instance there is a court judgement that declared gas flaring illegal. We need the National Assembly to pass the Petroleum Industry Bill (PIB) because checks on gas flaring are contained in there; we need to be committed to ending gas flaring and not shifting the goal post. From the 1979 law they were supposed to have stopped gas flaring by 2004 but they kept shifting the goal post until 2012 December and until now there is no specific date to end it.

‘Globally, we heard Norway saying that from the very first time they started exploring oil they decided to end gas flaring. But we have Statoil that is from Norway, which has come out to say this is what we are doing in their country, but they are not doing the same thing in Nigeria. Also we have heard companies like Shell and Eni speak about wonderful things that they are doing in the US but nobody talks about what they are doing in Africa,’ she stated.

As the new administration prepares to assume power at the federal level, many Nigerians are expectant and full of high hopes that the issue of gas flaring would be tackled once and for all.

In another news Nigeria’s LNG January to April revenue sinks by 30%, Nigeria LNG is the owner of the six-train Bonny LNG plant in Bonny Rivers State, said its January-April revenue fell 30% year on year due to the slump in global oil prices, local media reported Friday.
Isa Inuwa, deputy managing director, told a shareholders meeting that NLNG’s share of the global LNG supply shrank during the same period to about 5% from 8%, according to online news reports. He said the company is battling new LNG supply sources and dwindling international demand.
“Our prices are indexed to crude, at least a significant portion of our portfolio,” Inuwa was quoted as saying. “The price of gas is indexed to Brent, hence if there is a fall in the prices of Brent, it means we will sell for less.”
Crude plummeted from more than $100/barrel in July. July ICE Brent crude was trading at $66.71/b at 0650 GMT Friday.
The Bonny LNG plant currently produces 22 million mt/year and exported 315 cargoes in 2014, according to company data.
Inuwa was quoted saying that NLNG has started renegotiating contracts with buyers of supply from the first three trains. Contracts with Enel, Gas Natural, Botas and GDF Suez were signed in 1999.
NLNG is owned jointly by state oil firm Nigerian National Petroleum Corp. (49%), Shell (25.6%), Total (15%) and Eni (10.4%).

Nigeria LNG and Corporate social responsibility

Recently the Nigeria LNG Limited said it has signed an agreement guaranteeing funding estimated at N4.5 billion towards the development of a new model secondary school on Bonny Island, Rivers State.

Ms. Pamela Okeke

Epoxy Oilserv Limited




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