Gas Flare: Building parameters to convert colossal losses to accruable benefits

Oil and gas have remained the honey pot of the Nigerian economy for no less than four decades. The concentration on the resources as the major seat of the Nigerian economy, has however been coloured with some deficiencies in terms of the profile of the working system, of which ordinarily, the sector should have outgrown. The inability to address some of the deficiencies necessarily depict an  imbalance in the growth measures put into the sector to spur evolutionary development, and the sapping of resources from the sector. It is therefore, apparent that the concentration on immediate benefits largely outweighs efforts put into the sector to drive its growth in the long run.

One deficient phenomenon in the clogs of weaknesses in the sector are observable leakages which have lingered over time. Of these categorisation, gas-flaring has been at the top of profile which only do not just accumulate wastages, but also portends hazardous threats to the ecosystem. Recent data from the sector has revealed that gas-flare in Nigeria’s oil fields fell by 0.33 per cent in the first quarter of 2021 to 45.33 billion cubic feet (BCF), compared to the profile of 45.48BCF flared in the fourth quarter of last year. Statistics have also shown that on a year-on-year basis, gas-flare dropped by 21.75 per cent in the first quarter of 2021 from the 57.93BCF recorded in the first quarter of 2020. Statistics from the Nigerian National Petroleum Corporation (NNPC) monthly report for February, 2021, revealed that in 24 months, from March 2019 to February 2021, a total of 430.97BCF of gas have been flared. The leakage has been noted by power experts to be equivalent to 1,720 Gigawatts of power lost in two years.

A summation of the loss recorded by Nigeria from gas-flaring between the period of about 11 months alone, from January to November 2020, was estimated at over N189 billion. According to report, international oil companies and local players flared a total of 178.95 billion standard cubic feet (scf) of natural gas within the period in question. A breakdown of the records from the Nigerian National Petroleum Corporation (NNPC) had shown that the oil companies wasted 19.95 billion scf of gas in January; 18.27 billion scf in February; 19.71 billion scf in March; 17.90 billion scf in April, and 15.07 billion scf in May; 14.19 billion scf was flared in June; 14.15 billion scf in July; 13.62 billion scf in August; 14.79 billion scf in September; 13.98 billion scf in October, and 17.32 billion scf in November. Using the  global price of natural gas and the official exchange rate as at February, 2021, 95 billion scf flared translates to an estimated loss of over N189 billion. According to the NNPC’s monthly financial and operations report for the last quarter of 2020, a total of 222.34 billion scf of natural gas was produced in November, translating to an average daily production of 7.41 billion standard cubic feet per day.  Provisions of the revised payment regime for gas flaring, shows that oil firms producing 10,000 barrels of oil or more per day will pay $2 per 1,000 standard cubic feet of gas, compared to N10 per 1,000 scf in the past. Firms producing less than 10,000 barrels of oil per day will pay a gas flare penalty of $0.5 per 1,000 scf.

The importance of curbing the losses and ravages of gas-flare must have been the ground necessitating the Federal Government in 2016 to launch the Nigerian Gas Flare Commercialisation Programme (NGFCP), with the objective to eliminate gas-flare through technically and commercially sustainable gas utilization projects developed by competent third-party investors who will be invited to participate in a competitive and transparent bid process for flare sites. Latest data on the programme, according to the Department of Petroleum Resources (DPR) which manages the programme, showed that so far, 203 companies have been awarded the right to process flared gas from 178 gas flared sites.

In a statement, the DPR had explained that the commercialisation approach has been considered from legal, technical, economic, commercial and developmental standpoints. “It is a unique and historic opportunity to attract major investment in economically viable gas flare capture projects whilst permanently addressing a 60-year environmental problem in Nigeria. The NGFCP has offered flare gas for sale through a transparent and competitive bidding process,” it stated.

While the recent drop in the profile of gas-glare may be a positive result, it is however insignificant with the enormity of losses still recorded. Flaring about 430.97BCF of gas within 24 months with capacity to produce energy to the tune of about 1-GigaWatts of power,  remains a colossal loss. The need for the Nigerian Government to work around enhancing and modifying existing structures, as well as devising new parameters to develop the working systems to a height of virility where all forms of operational leakages responsible for the deep seated gas flaring to be shrunken to the bearest minimum is significant. This is imperative considering the essentials of the subsisting economic demands, where prevailing realities have come to reflect the necessity of prudence and optimum frugality as the need for capital projects to drive economic growth becomes resounding. The thought of the impacts that gas resources flared would have impacted if channeled into prudent economic use, speaks volume of the necessity why efforts must be galvanised to build-up working systems which productively respond to efficiency and effectiveness, devoid of wastage and leakage which in their reactionary patterns, constitute not only economic losses but hazards to the ecosystem.

Moreover, the need to fortify enforcement of monitoring mechanisms and penalties for defaulters who flare gas through poor inhibition processes of operations is essential, as a deterrent for operators to enhance their system with virile configurations that satisfies best global standards. Working around structures to provide project bankability for Flare Gas Buyers to become more synchronized into the system is essential. Such measures, among other modalities, are key to developing responsive systems to convert colossal losses to accruable benefits from the sector.