Mon. Jan 24th, 2022

As Nigeria Continues to Miss Gas Flaring Deadlines, Huge Revenue Is Lost

5 min read

In 2020 alone, natural gas valued at $1.24 billion was burned by oil companies, one which could generate the annual electricity use of 804 million Nigerian citizens.

Since 1979, Nigeria has missed out on ending gas flaring on at least seven occasions. The country is now targetting 2025 to end the environmentally unfriendly, health-damaging and resource-losing act.

Each time Nigeria misses out on the deadlines set to harness gas belching from its oil fields, it loses revenue and an opportunity to ramp up power generation.

Experts believe the gas Nigeria flares on its oil fields could be a huge revenue trove worth billions of dollars if well harnessed for use as liquefied natural gas or for plastics or fertilizers.

NOSDRA, a government-run satellite tracker, said that 1.8 billion standard cubic feet (scf) per day of gas was flared in the last nine years, one that should ordinarily attract about $3.6 billion in penalty, little of which was paid.

The volume has generated 95.5 million tonnes of CO2 emissions. The flared gas is valued at $6.3 billion and it could generate 179.9 thousand GWh, data from NOSDRA showed.

In 2020 alone, natural gas valued at $1.24 billion was burned by oil companies, one which could generate the annual electricity use of 804 million Nigerian citizens, according to the tracker.

The carbon dioxide, methane and soot released as a result of gas flaring can cause health issues like cancer and lung damage, deformities in children, asthma, bronchitis, pneumonia, neurological and reproductive problems as well as environmental challenges which stall agricultural productivity and aquatic and wildlife lives.

Gas flaring

Gas flaring is the controlled combustion of associated gas, a large volume of which make up Nigeria’s gas reserves, generated during various processes including oil and gas recovery, petrochemical process, and landfill gas extraction, into open-air.

Oil-producing nations almost certainly flare some gas, and Nigeria remains a global hotspot.

According to the World Bank’s 2020 Global Gas Flaring Tracker, a leading global and independent indicator of gas flaring, Nigeria is the seventh-largest gas-flaring country globally. The country is surpassed only by Russia, Iraq, Iran, the United States, Algeria and Venezuela.

All seven countries have continued to light up the global map for nine years running.

While they have together produced some 40 per cent of the world’s annual oil production, they have also accounted for roughly two-thirds of global gas flaring, the report showed.

The extraction of oil from onshore and offshore oil wells come with components of natural gas in them. Nations either use the gas at source or transport it elsewhere.

But when neither of these is possible, the gas is flared as a waste product, a practice that has been condemned by environmental activists in the country, especially because pledges made to end the practice has hardly been fulfilled.

Were the gas harnessed, it could have been to feed the national grid and used to generate power and electricity, which around 80 million Nigerians do not have access to, according to the World Bank.

Yet, without revamped power infrastructure, friendly regulation, gas-to-power investment that could help address Nigeria’s power challenges remains a far reach, experts say.

As an alternative, the government, in 2016, commissioned the Nigerian Gas Flare Commercialization Programme with the mandate to eliminate gas flaring and possibly boost the economic potential of gas by 2020.

The progress on the programme has been largely sluggish and the government has repeatedly shifted the date to end the practice in the country.

Unmet deadlines

Nigeria first targeted to end gas flaring by 1979, and the move decades ago proved potent as the country has been able to more than halve it since 2001.

The move to extinguish all flares by 1979 (under the Associated Gas Re-injection Act of 1979) could not be met though, and 1984, when it became illegal, was set. When the new date failed, 2004 became the next target and then the Nigeria Gas Master plan of 2008.

By 2016, the federal government again extended the deadline to end gas flaring to 2020. Another challenge greeted the country and the world over: novel coronavirus.

Earlier this year, state petroleum minister Timipre Sylva said that the government is now committed to eliminating gas flaring by 2025.

The country, he said, has “actually reduced gas flaring significantly to a very minimal level of eight per cent. If you all recall, last year the ministry of petroleum started what we call the National Gas Expansion Programme and we declared 2020 as the year of gas.

“At the beginning of this year, we declared 2021, the beginning of the gas decade. We believe that with all the programmes we have in place, we are on course to achieve complete elimination of gas flaring by 2025.”

Meanwhile, as a signatory to the World Bank’s Global Gas Flare Reduction Partnership, Nigeria also has the mandate to extinguish all flares by 2030.

Alternative regulation

In 2018, the country adopted the Flare Gas (Prevention of Waste and Pollution) Regulation, which on one hand prohibits gas flaring, and on the other allows it but with a caveat.

To flare gas, oil companies would need a permit to be obtained from the president. Companies producing more than 10,000 bpd pay a fine of $2 per 1000 standard scf of gas flared. Companies producing less than 10,000 bpd pays a fine of $0.5 per 1000 scf of gas flared. This was intended to discourage the companies from flaring gas.

However, rights groups believe that the International Oil Companies (IOCs) are comfortable paying the “meagre fines” imposed on them.

However, Chevron, Shell and Eni told Reuters last year that they have cut flaring by some 90 per cent.

A flagship report by the Petroleum Revenue Special Task Force in 2012 found that the companies often do not pay the fines. Rather, the report noted, they pay the old penalty of N10 per 1000 scf flared, and even at that, authorities lack the bite to accurately track what each operator should pay.

Bans on gas flaring have proved to be ineffective, and experts have said the only ban that can prove effective is to shut flaring fields and cut off the income they provide.

But, the government needs that revenue, so flaring will most likely continue unless there is a viable outlet for the associated gas.

Efforts towards gasification

Since it was launched in 2016, the Nigerian Gas Flare Commercialisation Programme, a gas-to-power initiative of the federal government which has identified over 170 flare sites that collectively flare 330 billion scf annually, has not achieved most of its mandate.

Optimal performance would mean an investment of $3.5 billion that could generate 2.5 gw of power, create 300,000 jobs, provide clean energy to 6 million households and 450,000 mt of liquefied petroleum gas to over 4 million households, and reduce annual CO2 emissions by 20 million tons.

Experts say these huge potentials continue to elude Nigeria due to cheap charges imposed on oil companies, over-dependence on crude oil, insufficient gas infrastructure and high cost of processing and transporting gas from fields.

The Buhari-administration has expressed readiness to change this through the National Gas Expansion Programme which seeks to deepen domestic usage of natural gas through conversion of fuel-powered cars and generators from petrol to gas.

Mr Sylva said in December that the programme is aimed at making gas a cheaper alternative to petrol for powering automobiles, one that the country would need to tap into its gas reserves to achieve this.

By Premium Times

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