In a statement on Sunday, October 2, the chief executive officer of the Nigerian Upstream Petroleum Regulatory Commission, Gbenga Komolafe said under an accelerated program, Nigeria will resume action steps to end gas flaring by December 2022.
According to him, Nigeria will award contracts for its flared gas by the end of December to harness gas.
Komolafe said; “The auction is being restarted and would be open to previous applicants and new bidders.
“The auction process has been streamlined to enable an accelerated delivery schedule for this exercise with the announcement of winners planned for December 2022.”
In 2016, the Buhari administration launched the Nigerian Gas Flare Commercialization Programme (NGFCP) to auction rights to capture and sell flared gas. However, the government failed to move forward with the programme after the Covid-19 pandemic.
The optics
Natural gas analyst, Kayode Oluwadare said you do not just end gas flaring, you need to trap and process it.
Oluwadare told Nairametrics that the possibility of the Buhari administration ending gas flaring by December 2022 is slim but possible.
According to him, a lot has been done in terms of curbing gas flaring, as opposed to 25 years ago when gas flaring was 100%.
However, this is not the first time that successive governments have planned to implement this kind of policy. But there have been a few hindrances, like the domestic price of gas, which makes it difficult for local investors to build processing plants, to trap and process gas.
Oluwadare believes that an interplay of factors will determine the success of this revised policy implementation.
Business sense – Oluwadare added; “If I am an investor and I want to trap gas from a production site, what are the terms for selling to the power plants to make profits? We already know how some power generation plants are unable to meet up with their financial obligations for gas supplies.
“Another factor to consider is also the Nigerian Gas Master Plan (NGMP), which gives waivers/subsidies to power generation plants to get gas at the lowest possible price under the national gas pricing policy.
Political will – It is also an issue of political will on the part of the government. Will the government be committed enough to see the whole process through before the 2023 elections? Laying the foundation for an end to gas flaring will enable future government administrations to see the policy through.
Cost – There is also an issue of cost on the part of crude oil producers who would rather flare the gas than trap and process it, and the investors, those who will build gas processing plants, will they think it’s a worthwhile investment due to the fiscal regime that does not really protect the gas producers?
Market factors – A lot of gas producers would rather sell their gas to the international markets, rather than keep it for the domestic market. Even before the global energy crisis, it has always made more business sense for producers to sell gas to international markets (an estimated $55 per metric million British thermal units) and earn in US Dollars, as opposed to local/domestic markets which are priced in Naira (an estimated $3.77 per metric million British thermal units).
What you should know
- Nairametrics had earlier reported that Nigeria plans to end gas flaring by 2025
- The 2022 global gas flaring tracker report from the World Bank shows that while the largest flaring fields have been addressed, there remain many smaller, more disparate fields where flare elimination and gas utilization is more challenging.
- The World Bank report ranks Nigeria 7th on the 2021 flare volume rank.
- According to the report, Nigeria recorded a 31% reduction in gas flaring between 2012 and 2021.
- The report also says that Nigeria shows a 68% reduction in gas flaring since 1996.
