Energy Capital & Power

Nigeria Takes Aim Against Gas Flaring in 2020

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The Nigerian authorities are committed to rapidly implementing plans to reduce gas flaring and to fully utilize the nation’s untapped flared gas resources. Nigeria has long been a global hotspot for gas flaring, with successive administrations pledging to clean up the industry. In 2020, the government has mounted a concerted effort to tackle the issue and raise new revenue from wasted natural gas.

Plan to Commercialize

The Nigerian Department of Petroleum Resources (DPR) announced in February 2020 the launch of the first phase of the Nigerian Gas Flare Commercialization Programme (NGFCP), having shortlisted 200 bidding companies following the evaluation of statements of qualification. The DPR subsequently declared that 45 gas flare sites would be put up for auction in the first phase of the NGFCP.

The Department announced in June 2020 that the NGFCP is being delayed by six weeks due to COVID-19 related travel restrictions, thus limiting the involved stakeholder’s ability to access to flare points. The first phase of the program is expected to resume once travel restrictions lighten.

The NGFCP was launched by the Minister of State for Petroleum Resources of Nigeria on December 13, 2016. Subsequently approved by the Federal Executive Council, the program’s goal is to offer flared gas for sale through a transparent and competitive bidding process, with the underlying long-term objective of reaching zero flaring by 2030. Through the program, Nigeria hopes to reduce gas flaring and venting of associated methane while providing an additional revenue stream.

Mounting losses

The Nigerian government and local operators lost approximately 90.9 billion cubic feet of natural gas due to gas flaring in the period from January to May 2020. Authorities estimate the financial loss due to gas flaring close to $230 million during those months.

According to Ben Akabueze, Director-General of Nigeria’s Budget Office, gas flaring penalties promulgated in 2018 will be tightened.

The revised payment regime will result in an increase in collected revenue from $120 million in 2019 to $270 million this year. The gas flaring fine for companies which produce 10,000 barrels of oil per day or more is now set at $2 per 1,000 cubic feet of gas, while the fine for companies producing less than 10,000 barrels a day is $0.5 per 1,000 cubic feet.

Justine Derefaka, NGFCP’s program manager, disclosed that proper channeling of flared gas could impact the country’s gross domestic product by up to $1 billion per year. Furthermore, Derefaka estimates it can “create up to 300,000 jobs, produce 600,000 million tons of liquefied petroleum gas per year, and generate 2,5 gigawatts of power.”

Environment and Society

Environmental goals are also high on the list of Nigeria’s government’s priorities in the fight against flared gas, which is said to contribute to the production of 49 million tons of carbon dioxide annually. Nigeria has ratified the Paris Climate Change Agreement and is a signatory of the Global Gas Flaring Partnership (GGFR) principles, a global initiative aiming to reduce gas flaring worldwide. Globally, Nigeria is ranked among the top ten largest flared gas producers.

Aside from environmental concerns, utilization of flared gas has to potential to reduce poverty and improve quality of life. Nigeria is currently the world’s third-largest producer of bioenergy while 80% of its population still depends on charcoal and wood as household energy. According to Prof. Chukwumerije Okereke who is the Director of the Centre for Climate Change and Development at the Alex Ekwueme Federal University of Ndufu-Alike

93 million women die every year due to pollution from traditional biomass cooking. While reduced gas flaring solves the question of energy poverty in Nigeria, Prof. Okereke also believes it could also help to increase “social and gender equity, poverty alleviation and improve wealth and well-being of some of the poorest population in the country.”

National Plans, International Impact

The NGFCP is one of three national plans related to gas monetization, alongside the Nigerian Gas Transportation Network Code (NGTNC) and the National Gas Expansion Programme (NGEP). This framework of gas programs and plans targets the achievement of the presidential mandate to improve the reach of the gas network, boost gas-based industrialization and to promote economic diversification.

In August 2020, the country’s federal government announced the launch of the long-awaited Nigerian Gas Transportation Network (NGTNC). The lack of a regulatory framework for gas transportation had been highlighted by industry players as a major weakness in Nigeria’s gas market development, seriously hindering the penetration of gas in the domestic market. The NGTNC was announced as one of the key reforms under the Buhari administration in line with governmental goals of expanding gas-to-power, gas-to-industry, and gas-to-manufacturing as well as tackle the challenges related to gas flaring.

Gas flaring is a major global environmental challenge. The World Bank announced that 2019 had been a record year for gas flared worldwide, up 3% from 2018. That represents more than 400 million tons of CO2 equivalent per year. Christopher Sheldon, Practice Manager in the Energy and Extractives Global Practice, World Bank, said: “Our data suggest that gas flaring continues to be a persistent problem, with solutions remaining difficult or uneconomic in certain countries,” while he worries the COVID-19 pandemic could deepen the crisis due to “sustainability and climate concerns [could be] potentially sidelined.”

Taking a strong, cross-sector stance on mitigating gas flaring and using flared gas is a key initiative in what Minister of State Hon. Timipre Sylva has called the ‘Year of Gas’. Flaring has long been a challenge to Nigeria’s federal government and petroleum authorities. It is clear that the government is now committed to meeting global and national gas flaring reduction goals, translating to improved energy efficiency and access, increased revenue, and benefits to the environment and society. Alongside numerous initiatives in the energy sector in 2020 including an important marginal fields licensing round, Nigeria’s gas flaring plans are set to harness the nation’s formidable natural resource potential to enhance economic competitiveness and drive growth.

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