Can Nigeria harness opportunities in commercialising gas flares?
Nigeria is targeting investments of about $5 billion which could potentially add $1 billion to the country’s GDP from commercialising gas flares in 89 locations around the country through the Nigerian Gas Flare Commercialization Programme (NGFCP), an initiative of the Federal Ministry of Petroleum Resources.
The NGFCP seeks to attract investments and develop a transparent market mechanism through a competitive procurement process for allocating gas flares, under clear and transparent criteria, to competent third party investors using proven technologies in commercial application globally.
Justice Derefaka Program Manager NGFCP, at a conference in Lagos said under the NGFCP, the Federal Government shall exercise its ownership rights of all gas flared in Nigeria. Paragraph 35(b)(i) of the 1st Schedule to the Petroleum Act CAP P10, LFN 2004 provides that the Minister of Petroleum may, in the public interest, impose terms and conditions applying to any natural gas discovered, including the right of the FGN to take any associated gas that would have been flared either free of cost at the flare or at an agreed cost,” says.
As a result of this, the Federal Government will, grant licences to third parties (i.e. licensees) to access and collect such gas on behalf of the government from the flare points of oil producing companies. They would have necessary permits and approvals, and also enter into a series of agreements with the government and the Flare Gas Producer. These include the Gas Supply Agreement and the Milestone Development Agreement between the offtaker and the government, the Connection Agreement and Deliver-or-Pay Agreement between the offtaker and the Flare Gas Producer.
The licensees will then be required to use necessary technology to set up the facilities for the delivery and collection of gas at the flare points. Under the NGFCP, all identified gas flare points are part of the programme and compliance with the programme will be a licence condition for the award and renewal of all Oil Mining Leases and Marginal Fields.
Nigeria currently flares 700 MMscf/d of gas at 178 flare sites which is equivalent of the total volume of gas used in power production. This results in 20 million tons of CO2 emissions per year.
In 2016, Nigeria lost $800 million to gas flaring, annually, for many years, the country losses close to $1.15 billion. The challenge it seems, is the presence of political will.
The NGFCP value proposition is that assuming around 65 percent of the flared gas volume meets a minimum monetisation investment threshold, it could lead to overall investment of $3-5 billion.
At an average project size of $40m, the NGFCP could trigger 89 projects. Over a 2 year period, the NGFCP could generate approximately 26,000 direct jobs, with an average labour force of 300 per project and approximately 300,000 direct and indirect jobs.
To give legal teeth to this programme, A Flare Gas (Prevention of Waste and Pollution) Regulations, 2018 is being finalised and will be issued by the Ministry of Petroleum Resources. The regulations is made persuant to relevant sections of the Petroleum Act and Associated Gas Re-Injection Act.
Key provisions in the new regulation is mandatory reporting and access to gas flare data, increased flaring fines, new flaring standards, metering requirements, reporting obligations which include monthly gas flare logs and annual reporting and issuance of a certificate for any gas flaring at all.
However this is not the first programme to end gas flaring and lack of political will continues to dog this proposition but the benefits are clearly numerous including the reduction of carbon emissions and conflict in the Niger Delta.
ISAAC ANYAOGU