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Nigeria loses N170bn to gas flaring

By on January 3, 2015

Nigeria lost about $1bn (N170bn) as oil companies operating in the country flared a big chunk of the gas produced from January to September 2014, analysis of data obtained from the Nigerian National Petroleum Corporation has shown.

According to data from the NNPC, about 296 billion standard cubic feet of natural gas was flared in the nine-month period.

With natural gas price now about $3.30 per 1,000 scf, 296 billion scf of gas amounts to about $1bn.

International oil companies and indigenous players burnt a total of 43.7 billion scf in January (19.17 per cent of total production), 50.1 billion scf in February (23.20 per cent of production) and 38.3 billion scf in March (17.77 per cent of output).

In April, 22.3 billion scf of gas was flared; 19.7 billion scf in May and 23 billion scf was wasted in June. In July, 29.1 billion scf was flared; 39.1 billion scf in August; and 29.5 billion in September, the NNPC data showed.

Nigeria is Africa’s top oil producer and largest holder of natural gas reserves on the continent, with about 187 trillion cubic feet of proven gas reserves and 600 Tcf of unproven gas reserves.

But low investment in gas infrastructure over the years has continued to hamper the development of the huge natural gas reserves in the country for domestic consumption, particularly for power generation.

A former Permanent Secretary in the Ministry of Mines and Power, Chief Philip Asiodu, had recently said that there could be no valid excuse for the failure over the past two decades to agree on gas pricing, which would have led to the much-needed development of gas reserves to fuel the power sector and gas-utilising fertiliser and petrochemical industries in the country.

“Many promoters of excellent viable projects based on gas have negotiated with the NNPC and the government for more than 10 years to no avail. This has been disastrous for economic development. It has been bad for the environment as cut-off dates for gas flaring have been postponed continuously,” he said.

The International Energy Agency, in its special report entitled: ‘Africa Energy Outlook’, said a critical uncertainty for Nigeria’s gas supply outlook was its ability to stimulate significant production of non-associated gas.

“Huge resources exist, sufficient to cover both domestic demand and exports. Production of non-associated gas increases in our projection period, but it is gradual. Exploiting this resource requires a change in focus by the upstream sector and, importantly, the government to establish a framework to incentivise the necessary large-scale capital investment,” it stated.

This will require a stable, attractive investment environment generally and the development of a bankable commercial structure in Nigeria’s gas sector, which includes price reforms, improvements in regulatory arrangements, a redefinition of the role of public companies in the gas sector and an alternative to the current NNPC joint venture financing model, the IEA said.

 

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