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Waste not, want not in Nigeria

Niger Delta oil projects used to be among the world's worst offenders, but things are improving

Nigeria's target of eliminating routine gas flaring from oil projects by the end of the decade, while laudable, looks like a tough task, even allowing for significant progress in recent years. But new legislation aimed at tackling the issue could make it more likely.

Over the past decade, the country has dropped from being the world's second largest gas flarer to seventh. Between 2013 and 2015, it reduced flaring from 9.3bn cubic metres of gas to 7.7bn cm at a time when flaring in other leading offender nations, such as Russia, Iran and the US, was on the rise, according to the World Bank-led Global Gas Flaring Reduction Partnership initiative. While many of the world's biggest flaring nations were expanding oil production at a time when Nigeria wasn't—the country still accounts for around 5% of the world's total flaring emissions—this still represents a success for a nation whose oil industry has a poor environmental record stretching back over decades, especially in the Niger Delta.

Nigeria's oil minister Emmanuel Kachikwu is keen to crack on with eliminating the remaining 7bn cm or so, taking a World Bank target of ousting routine flaring from oil projects by 2030 and saying Nigeria can do it by 2020. There are good reasons to have a go: removing flaring would be a chunky contribution to meeting climate-change goals laid out in the UN-backed Paris agreement to which Nigeria is an eager signatory, while flaring is also a potential health hazard in Nigeria, given much of the oil industry is based onshore in the Niger Delta, where poor communities live close to oil installations.

Less flaring also means more of the country's estimated 5.3 trillion cm of gas reserves can be used to meet growing domestic energy needs, if the distribution infrastructure can be put in place. Around 75m Nigerians still lack access to electricity, according to the World Bank, and industrial development is stunted by blackouts and erratic gas supply. Gas flaring, in short, is akin to burning money.

Bassey Akpan, the head of the Senate committee charged with pushing through the Gas Flaring (Prohibition & Punishment) Bill 2017, which has yet to become law, has suggested flaring costs the Nigerian economy $2.5bn a year. That may be an arbitrary figure, given the variables involved, but the economic benefits of selling rather than flaring the gas are clear.

The new legislation, still making its way through the National Assembly, aims to toughen up the framework for charging firms that fail to cut flaring fast enough. There are existing laws in place, but they have been regularly ignored, while fines seldom enforced. A fine of $3.5 per 1,000 cubic feet (28.32 cm) of gas flared was introduced in 2008, but where fines have been enforced by the government, they have frequently been at the much lower previous rate of 10 naira ($0.03) per 1,000 cf, according to the Nigerian Extractive Industries Transparency Initiative.

One problem with sanctioning offenders has been that state-owned Nigerian National Petroleum Corporation has a majority stake in large oil production projects—while not being the operator—and so would take a chunky financial hit from any fines. Similarly, the domestic firms that have acquired oil assets in the Delta, as Shell has pruned its portfolio over recent years, would also be hit hard at a time of economic hardship in the country.

Policy incentives

The new bill, which aims to eliminate flaring by the World Bank's 2030 target, would make the penalty regime tougher and ensure it is compulsory for operators to submit a gas-utilisation plan within 90 days of the act being implemented. Bassey has said that creating infrastructure for gas utilisation should be a condition for project licences to be granted.

The legislation also requires gas-flare meters providing real-time data to be installed that can be monitored by the industry regulator.

NNPC's managing director Maikanti Baru told a National Assembly hearing in June that his organisation backed the new legislation and that its exploration and production arm, the National Petroleum Development Company, would "see that the monetisation of flared gas is realised despite the challenges of the past".

Nigeria has also been seeking to bolster support for gas-flaring reduction and domestic gas commercialisation from the World Bank, while agencies such as Agence Française de Développement and Environment Canada could also become involved.

Areas of interest include assessing the potential to use small-scale technologies for flare reduction through pilot projects, supporting technical baseline work needed to implement the new commercialisation program, including accurate flare measurement and establishing a technical database for access by credible investors in flare-out projects, according to the World Bank.

At present, the main destination for flared gas is the Nigeria LNG plant on Bonny Island. Increasing the domestic market through the country's Gas Master Plan, unveiled almost a decade ago with the intention of using gas to drive economic renewal, has been slow and tortuous. Poor links between producers, distributors and power generators have meant gas hasn't always got to where it was needed and bills have not always been paid. But the government says it is committed to getting the network better. NNPC says it wants to more than triple gas supply for domestic consumption within three years to 142m cm a day, up from 37m cm/d by 2020.

Akpan told the hearing that only 12% of flared gas is re-injected for enhanced oil recovery, so there is scope to develop that side of the equation too.

If the infrastructure to do all this is put in place, then all of Nigeria's flared gas could be channelled into more worthwhile places than the earth's delicate atmosphere.

This article is part of a report series on Nigeria. Next article is: Nigeria looking up

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