The-politics-of-gas-development-in-nigeria
September 7, 2020 | News
THE POLITICS OF GAS DEVELOPMENT IN NIGERIA
With a proven reserve of more than 260 trillion cubic feet of natural gas, Nigeria’s gas reserve is said to triple the nation’s crude oil resources as at 2013. But in spite of this, Nigeria is reputed to be one of the largest gas-flaring country in the world, and it appears little or nothing concrete, in terms of right policies and practical futuristic plans have been taken to address this anomaly by past and present government. Rather, all we have seen, as far as we can tell, is nothing but politics that has adversely affected the development of Nigeria’s abundant gas reserve over the years.
And it appears there seems to be little or no hope for the deplorable situation with the nation’s gas development and gas flaring, to change in the near or far future. This was the picture painted recently when experts in the industry have cautioned against undue optimism over the three-point strategy unfolded by the Federal Government to end gas flare by 2020. The experts insisted that elusive strategies and other inherent challenges, would ensure that the desire remains a pipe dream. To further illustrate their pessimism, they say there is no way the strategy would be achieved, considering weak legislative backing and weak regulatory framework, as well as, low incentives.
Like we said, Nigeria is one of the world’s top gas flaring nations and the Federal Government has severally promised to harness and market the nation’s gas resources to reduce the negative impact gas flare has on oil-producing communities over the years without success. But the Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Maikanti Baru, who recently announced the said three-point strategy to contain the menace in 2020. According to experts who queried government’s optimism, even if the challenges were addressed, setting a two-year deadline was a mere political statement and should not have come from a personality who understands how the industry and Nigeria’s political landscape operate. The strategies announced by Baru, include, non-submission of Field Development Plans (FDPs) to the industry regulator, the Department of Petroleum Resources (DPR), without a viable and executable gas utilization plan; steady reduction of existing flares through a combination of targeted policy interventions in the Gas Master-plan, as well as, re-invigoration of the flare penalty through the 2016 Nigeria Gas Flare Commercialization Programme (NGFCP), and through legislation, that is, place ban on gas flaring via the recent Flare Gas (Prevention of Waste and Pollution) Regulations 2018.
Though the NNPC is key to ending gas flare in the country, considering that the gas being flared basically comes from joint venture activities, which the NNPC holds in trust for the state, President of Nigerian Association for Energy Economics (NAEE), Prof. Wumi Iledare, said incentives and legislative backing as well as infrastructure for ending gas flaring are currently unavailable. Indeed, since the country still looks forward to the PIGB coming into effect, and the uncertainties that may emerge as the country prepares for a major election, Iledare said 2030, which was earlier set could be more feasible. Former President, Nigeria Association of Petroleum Explorationists (NAPE), and Chief Executive Officer, Degeconek (Nigeria) Limited, Abiodun Adesanya, corroborated Iledare’s view points, adding that fines attached to gas flaring were not enough deterrent, thereby making it attractive to flare than harness. Flared gas recently rose from 244.84 billion Standard Cubic Feet (SCF) in 2016, to 287.59 billion SCF in 2017, while gas flare penalty stands at N10/Mscf (equivalent to $0.03). Former President, Nigeria Association of Petroleum Explorationists (NAPE), and Chief Executive Officer, Degeconek (Nigeria) Limited, Abiodun Adesanya, corroborated Iledare’s view points, adding that fines attached to gas flaring were not enough deterrent, thereby making it attractive to flare than harness. Flared gas recently rose from 244.84 billion Standard Cubic Feet (SCF) in 2016, to 287.59 billion SCF in 2017, while gas flare penalty stands at N10/Mscf (equivalent to $0.03).
On their part, the National Coalition on Gas Flaring and Oil Spills in the Niger Delta (NACGOND), and Centre for Peace Development and Children Welfare are united in their submission that while the Federal Government continues to dilly-dally over ending gas flare, people of Niger Delta are faced with catastrophic health challenges. NACGOND Coordinator, Eddy Obi, noted that private and corporate greed will thwart government’s initiative, argued that very little has been done in terms of infrastructural development to facilitate the realization of the stoppage. According to him, stakeholders in the Niger Delta want to see government demonstrate commitment to end gas flare beyond mere rhetorics.
“Gas flare has continued because of private interest and corporate greed. Those involved don’t want to put in the kind of money that will be required to get the infrastructure set up to capture the gas and utilize it for other things. It is by far cheaper to flare and even the fines the federal government is supposed to get from flaring gas, evidence shows they are not getting that. Even the fine for gas flaring is negligible and laughable.” he said. Obi added that constant gas flaring and the noise that accompany oil exploration activities are causing wildlife and aquatic species to be on the decline, adding that the reproduction cycles of wildlife and aquatic species have continued to be dented by the fact that they do not have the required hours of darkness and daylight, which is what makes plant and animals produce the way they should.
Though, Nigeria is said to be the second largest producer of Liquefied Petroleum Gas (LPG) in Africa, and supposedly the sixth largest producer in the world with over 3million metric tones annually. However, recent per capita consumption of the gas in Nigeria is about 0.8kg/annum. This is the lowest in Sub-Saharan Africa; lower than those of Nigeria’s West Africa neighbours who do not produce the product. Annual LPG consumption in Nigeria for 2010, was put at 120,000MT, whereas, in Lagos alone, there is a potential market for 1,000,000MT annually. Yet, stakeholders in the industry are daily crying shortage of gas supply for domestic, industrial and power generation usage. How can we be crying shortage of what the country has abundantly in reserve? The problem squarely lies with the country not giving gas development and utilization the rightful attention it needs.
The International Energy Agency predicts that the demand for natural gas will grow by approximately 44 percent through 2035. Perhaps, this explains why International Oil Companies (IOCs) like Shell are investing more in natural gas as they are divesting from their crude oil assets in Nigeria and other countries. This also explains Shell’s huge gas investments in Russia, for example the Shell Sakhalin Natural Gas Plant in Russia is one of the world leading gas projects. Shell also has the largest Gas-To-Liquids Plant in the world in Ras Laffan Industrial City, 80km North of Doha, Qatar. Apart from producing diesel, petrol, and kerosene, the Plant produces base oils for top-tier lubricants, which is a chemical feedstock called naphtha used in making plastics and normal paraffin; also used in making detergents.
Just recently, there was a report that over $9.9bn in capital expenditure, will be spent by Qatar-focused operators on gas projects between 2018 and 2021 to ensure that country’s production will remain around 18.1 billion cubic feet per day (bcfd) in 2021, according to GlobalData, a leading data and analytics company. Qatar Petroleum will drive Qatar’s gas production with 62.1 percent share of all the production in 2021. Exxon Mobil Corporation and Total SA follow with 23.8 and 3.5 percent, respectively. Qatar has two key upcoming gas projects, Barzan, which will be producing by 2021 and North Field Expansion. Qatar Petroleum will lead in greenfield gas projects, with participation in both the projects. We can see efforts being made other governments across the world in the area of gas development.
We have reiterated severally. On the need for the Nigerian Federal Government to replicate all of this and even more in the country by paying great attention to strategic natural gas development projects in the country.
Though, there were some major efforts by IOCs like Shell (SPDC) to reduce gas flaring in the country to the barest minimum, as you cannot really eliminate gas flaring completely, but not much effort is being made by the Federal Government’s NNPC, which has the lion share in the industry’s Joint Venture (JV) Operations. Some of these options for Associated Gas utilization projects as planned by Shell (SPDC) for instance, include the Re-Injection into reservoirs, fuel for industries, fuel for power generation, Compressed Natural Gas (CNG) for vehicular and other uses, Extraction and bottling of LPG constituents for commercial consumption, Feedstock for Industry, Liquefied Natural Gas for export, etc. In fact, part of the concrete efforts made by Shell (SPDC) in this regard was to initiate the present Utorogu Gas Plant Phase 2 (aka Utorogu NAG 2) Project in OML 34, Delta State, which is meant to gather Associated Gas (AG) from the surrounding oil fields to address the gas being flared around the said areas. But that gas Project is suffering today, after the Shell (SPDC) Divestment; due to the ‘interplay of politics/interests’ (which we are not going to bother ourselves to explain further). One would have thought that such a sensitive gas project like the Utorogu NAG 2 and 3 Projects, as well as other Gas Gathering projects in the Utorogu areas, would have been made a priority by the relevant stakeholders as part of efforts to address this gas flaring problem and gas development in the country. But that remains to be seen.
We recently read in the media that the Government is partnering with some investors to build new Gas turbine Power Stations across the nation. We cannot help but wonder what gas are they planning to use to power these Stations? Where will the gas come from that will be used for these Power Stations, especially when we consider the above stated prevailing circumstances with gas development? Building Gas turbine Power Stations without availability of gas supply or commensurate efforts to develop the gas that will be used by these Power Stations, is absolutely useless.
The importance of Gas development cannot be overemphasized. As environmentally friendly and efficient energy source, natural gas is lighter than air, colorless, odorless and tasteless. For this reason, odorant is added to the gas to make it noticeable and objectionable for safety reasons. Natural gas can be compressed and, therefore, transmitted in large quantities through relatively small pipe diameters when under high pressure. And there are over 6,000 products that can be gotten from natural gas and crude oil when properly developed. Nigeria cannot afford to continue flaring gas and complain about inadequate gas supply; whereas the country is blessed with abundant gas reserve/deposits that are begging to be developed and utilized, hence, the need for the Federal Government and industry investors to adequately fund the operations in the industry that will see to gas development activities.
Zik Gbemre, JP.
With a proven reserve of more than 260 trillion cubic feet of natural gas, Nigeria’s gas reserve is said to triple the nation’s crude oil resources as at 2013. But in spite of this, Nigeria is reputed to be one of the largest gas-flaring country in the world, and it appears little or nothing concrete, in terms of right policies and practical futuristic plans have been taken to address this anomaly by past and present government. Rather, all we have seen, as far as we can tell, is nothing but politics that has adversely affected the development of Nigeria’s abundant gas reserve over the years.
And it appears there seems to be little or no hope for the deplorable situation with the nation’s gas development and gas flaring, to change in the near or far future. This was the picture painted recently when experts in the industry have cautioned against undue optimism over the three-point strategy unfolded by the Federal Government to end gas flare by 2020. The experts insisted that elusive strategies and other inherent challenges, would ensure that the desire remains a pipe dream. To further illustrate their pessimism, they say there is no way the strategy would be achieved, considering weak legislative backing and weak regulatory framework, as well as, low incentives.
Like we said, Nigeria is one of the world’s top gas flaring nations and the Federal Government has severally promised to harness and market the nation’s gas resources to reduce the negative impact gas flare has on oil-producing communities over the years without success. But the Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Maikanti Baru, who recently announced the said three-point strategy to contain the menace in 2020. According to experts who queried government’s optimism, even if the challenges were addressed, setting a two-year deadline was a mere political statement and should not have come from a personality who understands how the industry and Nigeria’s political landscape operate. The strategies announced by Baru, include, non-submission of Field Development Plans (FDPs) to the industry regulator, the Department of Petroleum Resources (DPR), without a viable and executable gas utilization plan; steady reduction of existing flares through a combination of targeted policy interventions in the Gas Master-plan, as well as, re-invigoration of the flare penalty through the 2016 Nigeria Gas Flare Commercialization Programme (NGFCP), and through legislation, that is, place ban on gas flaring via the recent Flare Gas (Prevention of Waste and Pollution) Regulations 2018.
Though the NNPC is key to ending gas flare in the country, considering that the gas being flared basically comes from joint venture activities, which the NNPC holds in trust for the state, President of Nigerian Association for Energy Economics (NAEE), Prof. Wumi Iledare, said incentives and legislative backing as well as infrastructure for ending gas flaring are currently unavailable. Indeed, since the country still looks forward to the PIGB coming into effect, and the uncertainties that may emerge as the country prepares for a major election, Iledare said 2030, which was earlier set could be more feasible. Former President, Nigeria Association of Petroleum Explorationists (NAPE), and Chief Executive Officer, Degeconek (Nigeria) Limited, Abiodun Adesanya, corroborated Iledare’s view points, adding that fines attached to gas flaring were not enough deterrent, thereby making it attractive to flare than harness. Flared gas recently rose from 244.84 billion Standard Cubic Feet (SCF) in 2016, to 287.59 billion SCF in 2017, while gas flare penalty stands at N10/Mscf (equivalent to $0.03). Former President, Nigeria Association of Petroleum Explorationists (NAPE), and Chief Executive Officer, Degeconek (Nigeria) Limited, Abiodun Adesanya, corroborated Iledare’s view points, adding that fines attached to gas flaring were not enough deterrent, thereby making it attractive to flare than harness. Flared gas recently rose from 244.84 billion Standard Cubic Feet (SCF) in 2016, to 287.59 billion SCF in 2017, while gas flare penalty stands at N10/Mscf (equivalent to $0.03).
On their part, the National Coalition on Gas Flaring and Oil Spills in the Niger Delta (NACGOND), and Centre for Peace Development and Children Welfare are united in their submission that while the Federal Government continues to dilly-dally over ending gas flare, people of Niger Delta are faced with catastrophic health challenges. NACGOND Coordinator, Eddy Obi, noted that private and corporate greed will thwart government’s initiative, argued that very little has been done in terms of infrastructural development to facilitate the realization of the stoppage. According to him, stakeholders in the Niger Delta want to see government demonstrate commitment to end gas flare beyond mere rhetorics.
“Gas flare has continued because of private interest and corporate greed. Those involved don’t want to put in the kind of money that will be required to get the infrastructure set up to capture the gas and utilize it for other things. It is by far cheaper to flare and even the fines the federal government is supposed to get from flaring gas, evidence shows they are not getting that. Even the fine for gas flaring is negligible and laughable.” he said. Obi added that constant gas flaring and the noise that accompany oil exploration activities are causing wildlife and aquatic species to be on the decline, adding that the reproduction cycles of wildlife and aquatic species have continued to be dented by the fact that they do not have the required hours of darkness and daylight, which is what makes plant and animals produce the way they should.
Though, Nigeria is said to be the second largest producer of Liquefied Petroleum Gas (LPG) in Africa, and supposedly the sixth largest producer in the world with over 3million metric tones annually. However, recent per capita consumption of the gas in Nigeria is about 0.8kg/annum. This is the lowest in Sub-Saharan Africa; lower than those of Nigeria’s West Africa neighbours who do not produce the product. Annual LPG consumption in Nigeria for 2010, was put at 120,000MT, whereas, in Lagos alone, there is a potential market for 1,000,000MT annually. Yet, stakeholders in the industry are daily crying shortage of gas supply for domestic, industrial and power generation usage. How can we be crying shortage of what the country has abundantly in reserve? The problem squarely lies with the country not giving gas development and utilization the rightful attention it needs.
The International Energy Agency predicts that the demand for natural gas will grow by approximately 44 percent through 2035. Perhaps, this explains why International Oil Companies (IOCs) like Shell are investing more in natural gas as they are divesting from their crude oil assets in Nigeria and other countries. This also explains Shell’s huge gas investments in Russia, for example the Shell Sakhalin Natural Gas Plant in Russia is one of the world leading gas projects. Shell also has the largest Gas-To-Liquids Plant in the world in Ras Laffan Industrial City, 80km North of Doha, Qatar. Apart from producing diesel, petrol, and kerosene, the Plant produces base oils for top-tier lubricants, which is a chemical feedstock called naphtha used in making plastics and normal paraffin; also used in making detergents.
Just recently, there was a report that over $9.9bn in capital expenditure, will be spent by Qatar-focused operators on gas projects between 2018 and 2021 to ensure that country’s production will remain around 18.1 billion cubic feet per day (bcfd) in 2021, according to GlobalData, a leading data and analytics company. Qatar Petroleum will drive Qatar’s gas production with 62.1 percent share of all the production in 2021. Exxon Mobil Corporation and Total SA follow with 23.8 and 3.5 percent, respectively. Qatar has two key upcoming gas projects, Barzan, which will be producing by 2021 and North Field Expansion. Qatar Petroleum will lead in greenfield gas projects, with participation in both the projects. We can see efforts being made other governments across the world in the area of gas development.
We have reiterated severally. On the need for the Nigerian Federal Government to replicate all of this and even more in the country by paying great attention to strategic natural gas development projects in the country.
Though, there were some major efforts by IOCs like Shell (SPDC) to reduce gas flaring in the country to the barest minimum, as you cannot really eliminate gas flaring completely, but not much effort is being made by the Federal Government’s NNPC, which has the lion share in the industry’s Joint Venture (JV) Operations. Some of these options for Associated Gas utilization projects as planned by Shell (SPDC) for instance, include the Re-Injection into reservoirs, fuel for industries, fuel for power generation, Compressed Natural Gas (CNG) for vehicular and other uses, Extraction and bottling of LPG constituents for commercial consumption, Feedstock for Industry, Liquefied Natural Gas for export, etc. In fact, part of the concrete efforts made by Shell (SPDC) in this regard was to initiate the present Utorogu Gas Plant Phase 2 (aka Utorogu NAG 2) Project in OML 34, Delta State, which is meant to gather Associated Gas (AG) from the surrounding oil fields to address the gas being flared around the said areas. But that gas Project is suffering today, after the Shell (SPDC) Divestment; due to the ‘interplay of politics/interests’ (which we are not going to bother ourselves to explain further). One would have thought that such a sensitive gas project like the Utorogu NAG 2 and 3 Projects, as well as other Gas Gathering projects in the Utorogu areas, would have been made a priority by the relevant stakeholders as part of efforts to address this gas flaring problem and gas development in the country. But that remains to be seen.
We recently read in the media that the Government is partnering with some investors to build new Gas turbine Power Stations across the nation. We cannot help but wonder what gas are they planning to use to power these Stations? Where will the gas come from that will be used for these Power Stations, especially when we consider the above stated prevailing circumstances with gas development? Building Gas turbine Power Stations without availability of gas supply or commensurate efforts to develop the gas that will be used by these Power Stations, is absolutely useless.
The importance of Gas development cannot be overemphasized. As environmentally friendly and efficient energy source, natural gas is lighter than air, colorless, odorless and tasteless. For this reason, odorant is added to the gas to make it noticeable and objectionable for safety reasons. Natural gas can be compressed and, therefore, transmitted in large quantities through relatively small pipe diameters when under high pressure. And there are over 6,000 products that can be gotten from natural gas and crude oil when properly developed. Nigeria cannot afford to continue flaring gas and complain about inadequate gas supply; whereas the country is blessed with abundant gas reserve/deposits that are begging to be developed and utilized, hence, the need for the Federal Government and industry investors to adequately fund the operations in the industry that will see to gas development activities.
Zik Gbemre, JP.