Gas flaring: Abridging systemic leakages to mitigate economic and environmental hazards

Systemic leakages are phenomena which are known to be common to the working state of various sectors in Nigeria. The lacunae left by these deficiencies have over the years left virtually all sectors largely underdeveloped, and as a result under-performing below the standard of expected output. As the macroeconomy of the Country continue to suffer set-back, the necessity to address systemic problems of critical sectors in the economy becomes essential.  The lingering experiences of systemic dysfunction of different sectors bear stringent conditions with untoward effects on the performance of the economy in whole. It is glare to sight that despite Nigeria’s huge resource potentials, the Country continues to grapple with distasteful conditions of underdevelopment. The records of negative growth across sectors of the economy in recent times are omen of deficiencies which leave every rational being in the Country with worry. It is indisputable that if Nigeria would begin to reap optimum output from the performance of various sectors, the need to return back to addressing systemic leakages becomes sine qua non.

One sector of the Nigerian economy where leakages are on the disturbing side is the oil and gas sector. Leakages of different sorts constitute factors which have over the years left the sector to record outputs below the expected outcomes. Calculated cum deliberate merchandise and otherwise, which have lingered over the years have positioned the sector more in a state of shambles which is a negation of what the expectations from the sector should offer to the economy. While the profile of illicit calculated  mechanisms deployed to exploit corrupt machinations to the detriment of honest and optimum productivity bears its own wings of distress, it is glaring that there are other problems that boil down to infrastructural deficiencies which have been instrumental to recording huge losses in the sector. One of these defects is the subject of gas flaring. The phenomenon which has lingered for too long without development of virile machinations to convert the loss to profit, has cost the Country too much over the years. The wastage of this flaring is one systemic leakages in the oil and gas sector which depreciate its records of output and thus a shortage to the economy at large.

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 a report, international oil companies and local players flared a total of 178.95 billion standard cubic feet (scf) of natural gas. A breakdown of records from the Nigerian National Petroleum Corporation (NNPC) showed 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 recent  global price of natural gas and the official exchange rate, 95 billion scf flared translates to an estimated loss of over N189 billion. According to the NNPC’s latest monthly financial and operations reported, 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. The report read partly: “For the period November 2019 to November 2020, a total of 3,004.06 BCF of gas was produced, representing an average daily production of 7,642.69 mmscfd during the period. Out of this volume, production from Joint Ventures accounted for 67.29 per cent, Production Sharing Contracts accounted for 19.97 per cent, while the Nigerian Petroleum Development Company accounted for 12.74 per cent.”

The report which revealed that a total of 137.41 billion scf of gas was commercialised, consisting of 39.99 billion scf and 97.42 billion scf for the domestic and export market respectively, stated that: “This translates to a total supply of 1.33 billion scfd of gas to the domestic market and 3.25 billion scfd of gas supplied to the export market for the month. This implies that 62.55 per cent of the average daily gas produced was commercialised while the balance of 37.45 per cent was re-injected, used as upstream fuel gas or flared. Gas flare rate was 7.89 per cent for the month under review translating to 577.39 mmscfd.” 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 significance of addressing the defects of gas flaring among other leakages in the Nigerian oil and gas sector is paramount. It is imperative for the Government to work with stakeholders in the sector on the move towards developing the most feasible mechanisms and the corresponding infrastructures required to reasonably address the wastage the defects bears in the sector. Beyond the issues revolving around records of economic output, the environmental impacts of the flaring of gas in large quantities has been observed according to scientific studies, to be pose a serious danger to the environment. The warnings from climate change and the depletion of the ozone layer due to uncontrolled mismanagement of the environment have begun to reflect negative omens. The necessity to address the subject of gas flaring as a threatening phenomenon to the sustenance of human environment is paramount.

As calls for proper management of the environment to forestall human induced catastrophe continue to assume resonating importance, it is imperative that the Nigerian government keys into the global call by reckoning and reconciling with the necessity to abridge existing gaps that constitute threats to the environment. While the necessity to address gas flaring is significant to mitigate economic losses, the necessity to eliminate the threats it constitutes to the sustenance of human environment is another potent reason why the Government must take the lead to rationally address the leakages. However, giving an overarching approach to address systemic leakages in the oil and gas sector is a call the Nigerian government should take as exigent to revitalise the sector to the height of optimum performance. The current performance record, below the reality of reckoning potentials is disheartening, and therefore calls for concerted efforts involving all stakeholders to remodeling the workings of the sector.