Gas flaring: How Nigeria burnt $4.9bn in 5 years

Between 2012 and 2016, Nigeria flared a total of 1.698 trillion cubic feet (Tcf) of gas according to figures published by the Nigerian Bureau of Statistics (NBS).

Let’s put the data in a way, Nigerians can relate to. The current international price of natural gas is around $2.90 per 1,000 standard cubic feet (scf). This brings the cost of the 1.698 Tcf of gas flared in Nigeria in the last five years, to $4.9 billion. If you convert this figure to naira at the current exchange rate of N305.75/dollar, it comes up to N1.5 trillion.

So what does it really mean?

N1.5 trillion is 20% of 2017 budget

Nigeria’s 2017 budget is N7.4 trillion so the value of gas flared in the country for the past five years is almost 20% of the national budget.

Nigeria’s most successful company, the Nigeria LNG since inception, has processed about 5.58 Tcf of Associated Gas for exports as LNG and Natural Gas Liquids (NGLs), so it means Nigeria has flared 30% of what NLNG has produced in just five years.

How serious is Nigeria about ending gas flaring?

Not very.

In June this year, Maikanti Baru, group managing director of the NNPC said, “NNPC supports the legislative intervention to prohibit gas flaring in line with global best practices, considering its negative impacts on the environment and the communities where the gas is flared.”

However, NNPC subsidiary, the Nigerian Petroleum Development Company still flares gas.

The lawmakers are not much serious about it either.

Senator Albert Bassey

Senator Albert Bassey, chairman, Senate Committee on Gas, sponsored a bill for an Act to Prohibit Flaring of Natural Gas in Nigeria and Other Matters, 2017 in January this year. It has passed second reading since March but the senators have not found time to pass the bill.

The House of Representatives is yet to even consider it. Rather, they smuggled in a provision to end gas flaring in a controversial amendment to the NLNG Act in July.

Previous attempts have failed

This is not Nigeria’s first attempt at introducing legislation to abolish the practice. In 2009, the Senate passed the Gas Flaring (Prohibition and Punishment) Bill after its third reading. It was sponsored by Senator Osita Izunaso, and sought to eradicate gas flare-out in Nigeria by 31 December 2010. Not much came out it.

Experts say Nigeria has not demonstrated a keen resolve to stop the practice. “Gas flaring is a preferred option for the oil companies as it is cheaper to pay fines than invest in the technology required to gather and process gas found drilling for oil,” said Toyese Adenipekun, Principal Partner at McCoy Barristers & Solicitors in an earlier comment on the issue.

Appeals have not moved the oil companies or the government to take action, despite the health challenges to the people and environment degradation that it causes. Some communities in the Niger Delta do not see night time, even as the flora and fauna are at risk.

The Nigerian Extractive Industries Transparency Initiative, (NEITI), in its 2014 audit report, disclosed that in 2008, the Federal Government in its fiscal regime for the petroleum sector, had set a penalty of $3.5 per 1,000 SCF of gas flared by the oil companies, but the companies have refused to comply with the directive without any repercussions. Nigeria has since lost over $14.298 billion due to non-payment of these fines.

Nigerian cannot compel them to pay because the government who also owns stakes in these oil companies, is not ready to end the practice.

Kicking the can down the road

Between 1983 and 2016 Nigeria has set seven deadlines for oil companies to end gas flaring but has continued to kick the can further down the road when the deadline is in sight.

The first deadline for oil and gas companies to stop gas flaring was set for January 1, 1984 and the military regime of Muhammadu Buhari shifted the date one year further, when the deadline approached.

The present democratically elected Buhari government, last year, further pushed the deadline earlier agreed for year 2020 to 2030.

According to a gas flaring study in the Niger Delta by Eferiekose Ukala, published in the Washington and Lee Journal of energy, climate and the environment, in 1979 Nigeria set a January 1, 1984 deadline for stopping gas flaring.

The government also promulgated the Associated Gas Reinjection Act №99. to specifically address the issue of gas flaring. Through this Act, the government mandated that oil companies “re-inject gas into the earth‘s crust and/or submit detailed plans for gas utilization.”

Oil companies in Nigeria cited lack of resources to construct a gas-injection plant within the stipulated time to push for an extension of the deadline. The government retraced its step and set another deadline for January 1, 1985.

Another deadline was issued for April 2007 and was later pushed to December 2007. Few months later, the deadline was extended to January 1, 2008, and then again to January 6, 2008 but none of the deadlines were met by the oil and gas companies and the Nigerian government enforced fines for none compliance. Ditto for deadlines set in 2011 and 2012.

Penalties were increased from N10 to $3.50 per 1000 standard cubic feet (scf) and the legislature hurried legislation a few months later proposing to end gas flaring by December 2012. The current date to end gas flaring in Nigeria is now 2030.

Policy shortcomings

Nigeria’s Production Sharing Contracts, (PSCs), for deep offshore wells do not make any provision for how the parties should treat gas available for commercial exploitation.

Nigeria requires that oil companies sign a separate agreement for it. No such agreements have been concluded, so the oil companies flare the gas found while drilling for oil or reinject it as fuel for their operations.

NEITI says that the absence of an agreement results in loss of income to the Federation. Africa’s largest oil producer now produces more gas from deep water wells than onshore wells where joint venture agreements are in place, and a vast amount of gas is flared.