Nigeria Has Loses N300bn to Gas Flaring in 7 Months ~ Matters Arising
The Gas flaring in Nigeria’s oil fields has taken a huge toll on the economy, as the country flared 225.1 billion standard cubic feet of gas, (BSCF) between January and July 2020.
The monetary value of the burnt gas in the international market is $787.7 million (about N299.33 billion). This comes against the backdrop of the huge revenue losses arising from the impact of the outbreak of Coronavirus, COVID-19, pandemic, which crashed both the volume and price of crude oil sales.
According to the National Environmental Economic and Development Study, NEEDS, the environmental cost of gas flaring in Nigeria is $94 million (about N35.7 billion) yearly. The volume of gas flared was an equivalent of 12.0 million tonnes of carbon dioxide emission.
According to the report, last week, from the Federal Government’s Gas Flare Tracker, stated that the 225.1 BSCF of gas flared by the oil and gas firms in the first seven months of 2020 was capable of generating 22,500 gigawatts hour of electricity.
Our Correspondent gathered that the oil companies responsible for the gas flares are expected to pay fines totalling $450.1 million, an equivalent of N171.04 billion, but no information in the report indicating they have paid any fine for the previous gas flares amounting to several billions of U.S. dollars.
When giving a breakdown of the volume of gas flared in the period under review, the report stated that 136.0 BSCF of gas was flared onshore, while 89.1 BSCF of gas was flared offshore.
On a month-on-month basis, the report stated that in January 2020, 40.03 BSCF of gas was flared; 32.15 BSCF in February; 37.61 BSCFf in March, while 38.84 BSCF, 36.98 BSCF, 37.21 BSCF and 2.24 BSCF of gas was flared in April, May, June and July 2020, respectively.
Petroleum Nigeria Limited) flared 8.1 BSCF from OML 56.
Famfa Oil flared 7.6 BSCF of gas from Oil Prospecting Licence, OPL, 216; Shell Petroleum Development Company, SPDC, flared 6.9 BSCF, 6.7 BSCF and 5.4 BSCF of gas from OML 11, OML 29 and OML 18 respectively; while Nigerian National Petroleum Corporation’s, NNPC, upstream subsidiary, Nigerian Petroleum Development Company, NPDC, flared 4.6 BSCF of gas from OPL 091.
In its report ‘‘Nigeria’s Flaring Reduction Target: 2020’’ obtained by Vanguard, the World Bank, stated: “With almost 8 billion cubic meters of gas flared annually according to satellite data, Nigeria is the seventh-largest gas flaring nation in the world. At the same time, approximately 75 million Nigerians lack access to electricity.”
Similarly, an investigation by Vanguard showed that Nigeria continues to flare commercial gas because of many issues and problems, including lack of adequate investments in gas and related sectors, especially power.
Others include much-associated gas, which is produced along with crude oil, over-reliance of oil and delay in the passage of the Petroleum Industry Bill, comprehensive legislation, planned to restructure, encourage investments and bring about more transparency and accountability in the industry.
In an email response to Vanguard on this issue, Lead Promoter, EnergyHub, Dr Felix Amieyeofori, stated: “Nigeria will continue to flare it’s gas resources until it provides the right incentive for investment in the gas business. Another problem is that the federal government is also not relying on revenues from gas. Gas has not become a sustainable economic product for the country as long as they rely on crude oil revenue.
‘‘Also, until the government wake up to this reality and enforce the zero flare programme that started since 1984, it will still be paying lip service. Oil companies will continue to flare associated gas as stopping gas flare would mean shutting in the associated oil wells and reservoirs.”
On the way forward Amieyeofori stated: “The award of the 40-inch x 614 km AKK gas pipeline, which is a part of the Trans African Gas pipeline project initiative between Morocco and Nigeria, is a step in the right direction, especially as it would boost the continent’s energy needs and also offer huge opportunities for Nigeria to export its rich gas resources to Europe.
“But the Federal Government must commit itself to complete this pipeline within record time, as not to suffer the fate of some other gas projects.
‘‘Another major milestone in this direction is the signing of the NLNG Train-7 in May this year that is expected to be on stream in 2025. When completed, the train-7 will increase the existing installed capacity of the 6 trains from 22 million tonnes per annum to 29.6 million tonnes per annum.
‘‘This will be a significant incentive for gas supply to NLNG when it is completed. Technically, we should see less gas flare just as the existing 6 trains helped reduced Nigerian gas flare from 65 per cent to 25 per cent in the past 20 years.
“The current efforts on flare gas commercialization, which started since December 2016 must be pursued vigorously. It should not die like other previous programmes if we are to end gas flaring in the country.
‘‘There are now penalties since July 2018 labelled as “Flare payment”, where companies that produce about 10,000 bopd or more are fined $2 per 1,000 SCF of gas, while those that produce less than 10,000 bopd will be fined $0.5 per 1,000 SCF of gas flare.
‘‘The major challenge here is that, unless the government truly pursue the flare commercialization project that will take out the gas, most oil companies cannot sustain such flare penalties, especially under the current global crude oil market uncertainties.
‘‘I also do not see how the government can sanction the erring companies for gas flare in the face of dwindling oil revenues.
“Finally, the government must also pursue its commitment to review the domestic gas pricing in the country to increase gas penetration in the country.”