Can new gas price help to curb gas flaring?

There is insufficient gas and inadequate infrastructure to meet the requirement of the existing power plants. The demand for gas in the domestic market far outstrips the currently available supply.

As part of measures to ensure availability of gas supply to the power plants, the government increased the domestic gas price to $2.50/1,000 Mcf, from $1.50/1,000 Mcf, beginning August 2014. Diezani Alison-Madueke, minister of petroleum resources, who announced the new gas price, said the government also approved $0.80/Mcf as transportation costs for new pipeline capacity, adding that the new prices reflect the current market value, which would now be benchmarked against US inflation annually.

No structure legal or regulatory framework exists currently for gas pricing. The Minister has wide discretionary powers to demand, secure and fix the price at which gas is sold in the domestic market.

Domestic gas suppliers are owed well in excess of N10 billion for gas already supplied making domestic gas business uneconomic and unsustainable.

Flare-out progress

Nigeria loses not less than two billion dollars to gas flaring annually, Nnimmo Bassey, a delegate at the ongoing National Conference and member of the Committee on Environment said. The World Bank had listed Nigeria as Africa’s biggest in terms of gas flaring, while an Organization of Petroleum Exporting Countries (OPEC) reported ranked Nigeria as the second highest gas flaring nation in the world.

The Federal Government has, meanwhile, been setting and shifting deadlines to end gas flaring for years, but despite the expiration of several deadlines, the most recent being the December 31, 2013 deadline, gas flaring still continued in Nigeria.

Andrew Yakubu, former NNPC Group Managing Director, at a conference organized by the Senate Committee on Gas in Abuja earlier this year said that some progress has been made in reducing gas flaring in the country as we have seen a reduction from 25 percent to 11 percent, as many international oil companies are fast approaching full flare out in the country.

Analysts believe that with the new gas price regime, Nigeria Gas Company (NGC) will be engage in aggressive implementation of a nationwide gas infrastructure on the back of the approved $0.80/Mcf. There is the likelihood that the private sector will push for a piece of the action once private pipelines are licensed. This is bound to generate a change in the direction of gas in Nigeria. However, how much impact this will have on gas flaring depends on how long it will take to link the various oil fields to gas pipelines.

Frank Uzuegbunam