THE recent disclosure by the National Oil Spill Detection and Remediation Agency that oil and gas firms have been fined $294 million for gas flaring calls to question the Federal Government’s commitment to performance targets and strategic planning. Many decades after commercial exploitation of crude oil began in the country, a most valuable energy resource has continued to be wasted in flaming flare stacks around production oil wells in the Niger Delta region. Apart from the huge economic costs, it causes incalculable damage to the physical environment and human health. The full might of the state should be applied to stop this practice.
According to NOSDRA, 147 billion standard cubic feet of associated gas was flared by oil exploration and production companies in the country, from both onshore and offshore oil facilities, between January and August 2022. In the corresponding period of 2021, 169 billion scf was combusted.
Based on the fines specified in the Flare Gas (Prevention of Waste and Pollution) Regulation, adopted in 2018 by the Federal Executive Council, $2 is paid for every 1,000scf of gas flared by a company producing over 10,000 barrels per day and $0.5 for those producing less than 10,000bpd. This resulted in total fines amounting to $294 million for the first eight months of the year.
The 147 billion scf of gas combusted was worth $515 million. Juxtaposed with the $294 million fines, the financial loss to Nigeria is immediately evident – a whopping $221 million in eight months. In other words, Nigeria suffered a double tragedy: it was paid paltry sums from fines that grossly undervalue the resource, while also bearing the environmental degradation and health hazards, whose costs have not been quantified.
Gas flaring, the controlled combustion of associated gas during crude oil extraction, ought to have been history by now if the government and its regulatory agencies were focused on the implementation and enforcement of industry-specific development blueprints and regulations. Nigeria is the seventh among the world’s top 10 flaring companies according to the 2022 Global Gas Flaring Tracker. Its efforts to exit the club have floundered.
Among several initiatives the Federal Government and the recently “rebranded” Nigerian National Petroleum Company Limited had launched the Nigerian Gas Master Plan in 2008, for which a road show was organised. The ‘Policy Direction for Gas,’ was two-old: “Fully exploit the potential in gas for accelerated development, in pursuit of the 10 per cent GDP growth aspiration,” and “Competitively position Nigerian gas in terms of cost competitiveness and scalability of capacity.” Under the latter, the government planned an integrated infrastructure strategy to support domestic, regional and LNG export markets.
Before that master plan, successive administrations had sought to curb gas flaring and the associated environmental pollution through legal enactments. There were the Petroleum Act (Amendment) of 1969 and the amended Associated Gas Re-injection Act 1979. In policy statements backed up with provisions of the earlier law, the military government then had directed that oil firms must stop gas flaring not later than five years after start-up.
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The first deadline for flare-outs was December 31, 1974. The law set another deadline of December 31, 1984. Yet another target date was set for December 31, 2004, then December 31, 2008, followed by 2020 as envisaged under the Nigerian Gas Flare Commercialisation Programme of 2016. None has been met. Worse, in the manner of a failing state, the government has been unable to enforce its writ.
The Minister of State for Petroleum Resources, Timipre Sylva, told a parliamentary joint committee in 2021 that the government had set 2025 as new deadline. He claimed that Nigeria had “actually reduced gas flaring significantly to a very minimal level of eight per cent.” This is too low. A clause in the Flare Gas (Prevention of Waste and Pollution) Regulation permits flaring with express authorisation by the minister. The Associated Gas Re-Injection Act (Amendment), 2004 similarly gives the minister discretionary powers. These clauses should be struck off.
Fines for gas flaring harm Nigeria; so do the discretionary powers granted to the minister. They must be jettisoned. Exploration and production companies are comfortable with such penalties because they cost a lot less than infrastructure for gas re-injection. The AGR-I Act has two strategic objectives: gas re-injected into oil reservoirs boosts pressure and oil recovery; also, poisonous emissions are kept out of the atmosphere. Furthermore, Nigeria, with its 209.5 trillion scf in reserves – the world’s ninth largest, according to Worldometer – is regarded more as a “gas-rich” country than a crude oil-rich one. Maximising the benefits quickly should be the government’s priority.
The literature on hydrocarbon-related combustion and the emission of carbon, methane, and other deadly elements into the atmosphere is alarming enough to compel decisive action by Nigeria’s distracted leaders. Humanity is faced with rising temperature levels and a depleting ozone layer. These necessitated the 1992 United Nations Convention on Climate Change, the 1997 Kyoto Protocol, and the Paris Agreement (COP 21), among other global initiatives.
The unspeakable horrors suffered by residents of the oil producing communities are well-documented, provoking protests and militancy. These call for decisive action by the government and industry regulators. It is surprising that politicians from the affected communities, particularly those in the National Assembly and state Houses of Assembly, are not pressuring the government to stop the flaring. Inexcusably, the governors and community leaders of the oil-bearing states appear unperturbed.
Nigeria needs to reconnect with the vision of the Gas Master Plan and take appropriate corrective measures. The Gas Infrastructural Blueprint, conceived to launch Nigeria into the international gas market, could have positioned Nigeria to maximise the value of its resource endowment, particularly now that Europe is desperately seeking sources of gas supply outside of Russia.
The plan’s Domestic Gas Supply Obligation and Pricing Framework could have boosted accessibility of the resource to domestic users and in industry where it is a major feedstock. Nigeria’s political leadership should act responsibly by taking immediate, concrete steps to stop gas flaring.
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