It was reported that in the month of August 2014, oil and gas companies in Nigeria flared 39.07 billion Standard Cubic Feet (SCF) of gas. With the current gas flaring penalty at $3.50 per 1000 SCF, this potentially provides a revenue of over $1 billion annually. However, the damaging effects incurred with this arrangement are not quantifiable. Not only does gas flaring create health hazards, the amount of gas flared, if recovered, can produce up to 28,000 Giga Watts of power; provided that there are Gas turbine power stations to generate the power. As of the time of this post, Nigeria’s total generation is less than 5 Giga Watts. However, one must acknowledge that gas flaring is a global issue, as it is not peculiar to Nigeria alone.
Problem: Inadequate Government policies, Lack of infrastructure to transport excess gas and low economic incentive for gas usage.
Beneficiary: Nigeria, Oil producing states.
Proposed by: Tomi Orunmuyi
Idea Status: Pitch
HOW DOES IT WORK?
There are a number of health and environmental hazards associated with gas flaring, and it is the government’s duty to protect its citizens. The introduction of the gas flaring policy was a good initiative but not substantial in curbing the issue. There is an urgent need for a new draft of the Petroleum Industry Bill (PIB), which needs to apply stricter rules such as:
– Strip any Exploration and Production (E&P) company of its license if a substantial level of Gas flaring is detected (say 1,000,000 SCF), in addition to a higher fine.
However, the government may choose to provide offload points close to the E&P sites in good faith, providing a means for the E&P companies to offload their accumulated gas at intervals. Service companies with technology & logistics systems can take advantage of this opportunity by conveying this gas from the E&P sites to offload points.
Natural gas in itself, is a preferred source of power generation as it is used for low carbon power generation; and according to U.S Energy Information Administration, costs between $2.5 and $3 per million BTU [1 SCF=1,202 BTU]. Hence, the accumulated gas can be exported if it cannot be put to use in Nigeria.
This would also be a good time to follow through with the Gas Master Plan proposed by NNPC as far back as 2009, which was meant to act as a guide for the commercial exploitation and management of Nigeria’s gas sector.
It had the following key strategies:
1. Stimulate the multiplier effect of gas in the domestic economy
2. Position Nigeria competitively in high value export markets
3. Guarantee the long term energy security of Nigeria
It was promised that by the years 2015 and 2016, consolidation and expansion of infrastructure would be carried out so that gas flows across all the regions in the country. It is quite unfortunate that this is not the case (as of the time of this write-up). The low performances of the various gas power stations in Nigeria have often been attributed to the lack of substantial gas supply due to pipeline vandalism. It is imperative that the government provides adequate security counter-measures to subdue such situations; however that is a discussion for another day!
Full impact potential: Increased power generation capacity and revenue generation
Funding: Nigerian Government
Marketplace: Oil and Gas
Other interesting facts:
Nigeria has the 2nd largest gas flaring record in the world after Russia.
There is a website called Gas Flare Tracker that shows you live data of gas flaring activities in southern Nigeria. Check it out!
Written by: Tomi Orunmuyi