Gas flaring is the burning of natural gas associated with oil extraction processes and it is regrettable from an economic viewpoint because a valuable resource is wasted. It is even more regrettable from an environmental perspective because 140-150 bcm of flared natural gas translates into 270-290 million tons of C02 emissions per year, according to data from the Post Carbon Institute. Despite this, the institute says, Nigeria remains the second largest flaring country in the world and emits around $1.8 billion worth of gas annually. Rachid Benmessaoud, World Bank’s country director in Nigeria said that gas flaring is a 150-year old industry that requires comprehensive solutions and commitment from all stakeholders. There is need to provide a conducive legal and regulatory environment, and also provide infrastructure to take the gas to end users.
True, Nigeria has made considerable progress in its gas flare out programme, having moved from its previous position as the second highest gas flaring country after Russia to its current position of seventh. However, despite the progress, Nigeria still flares about 9 cubic metres of gas per barrel of crude oil minded, which is double the globally acceptable standard of 4.5 cubic metres.
At a gas seminar organized by the World Bank and International Gas Union in December 2016, Ibe Kachikwu, the minister of state for petroleum resources, and Ekaluo Antigha, deputy director, Department of Petroleum Resources (DPR) openly disagreed over the current volume of gas being flared in the country. While Antgha said that only 10 percent of current associated gas production is currently being flared, Kachikwu insisted that the figures are much more than that. “My gut feeling is that those numbers are very deceitful. I believe there is a lot of management of those figures to suit the penalty being charged. We are currently looking at independent tracking to ascertain the real gas flare volume so that we would not rely on the figures from the International Oil Companies (IOCs) or the DPR”, said Kachikwu. “Government is determined to ensure flare-out within the earliest possible time. I know the oil companies have made substantial progress on this, but we are going to be seeking very aggressively for more”.
Part of the gas flaring challenge includes and vandalism of gas infrastructure, poor funding of Joint Venture projects, an underdeveloped national gas market and commercial framework, non-resolution of fiscal terms for gas, as well as aging facilities and integrity issues.
Rightly, as Kachikwu said, conversion of gas flares into cash is not about penalties but developing a sustainable business model that ensures that the entire gas value chain is profitable. Unless this is done, gas flare out is never going to work.
As we seek to exit gas flaring by 2020, Nigeria needs to speed up reforms that will ensure the commercialisation of currently flared gas for supply to the both the domestic and international markets. Current figures from the DPR shows that the 330BCF gas flared in 2015 were capable of generating 3, 500 MW of electricity or an equivalent of three trains of Liquefied Natural Gas (LNG), representing a loss of $850 million in revenue, or 55 million barrels of oil equivalent.
In areas that flare the most gas, the sale value of gas simply would not offset the investment cost of implementing systems that could gather the gas and bring it to market. Also gas is flared usually because the produced gas is too low in pressure, or is too low in quantity or is too long of a distance to the nearest user. The solution to the overall problem therefore, lies in the development and adoption of efficient and, crucially, cost-effective gas capture technologies. The good news is that there are a variety of new technologies available to reduce flare gas at oil wells and the gas prices in Nigeria are improving. More effort should be made to capture the produced gas through clustering strategies and by the application of new technologies. Above all, effective regulation must be developed to ensure that all industry players apply the rules, operate sustainably, which will demonstrate Nigeria’s readiness to attract more investment into the sector.