Nigeria: Towards Rendering Associated Gas more Beneficial

Flaring is a common practice in the petroleum industry intended to combust “unwanted” associated gas (AG) generated during oil and gas recovery.[1] This is because oil producers do not derive sufficient economic benefits from the utilisation or production of AG. As shown in this piece, Nigeria, the biggest oil producer in Africa, is not exempted and is even one of the worst gas flaring countries, as it ranks 7^th in the world.[2]

Gas flaring has been an ongoing activity in Nigeria since the start of commercial oil production in 1958. Until 1963, all of Nigeria’s AG was flared. From 1963, flaring declined slightly by almost 5% when gas supplies to industrial users commenced. From there on, the flaring of about 95% of AG continued for about 15 years, but increased in the 1970s as a result of an increase in production due to inflation on crude oil price. In the 1980s, Nigeria witnessed a drop in AG flaring such that by 1987, the AG flaring had dropped to 70%. As of 1999, various gas utilisation schemes and regulatory interventions contributed in reducing gas flaring progressively to the current level of 11.4%. Even at this level, the Federal Government of Nigeria (FGN) is still striving to bring gas flaring further down.

In 2016, the FGN launched the Nigerian Gas Flare Commercialisation Programme (NGFCP) to limit gas flaring drastically and to convert currently flared AG to commercial use. The primary target was to cut down continuous gas flaring by 2020, to ensure that unavoidable gas flaring is limited to only 2% of Nigeria’s total gas production. Therefore, the FGN anticipated that the NGFCP would achieve its target by eliminating “gas flaring through technically and commercially sustainable gas utilisation projects” designed and presented by competent third-party investors to be selected through a competitive and transparent bidding process.

Regarding bidding for the economic exploitation of AG, the Director of the Nigerian Department of Petroleum Resources announced in February 2020 that government had identified 45 gas flaring sites as the first phase of the NGFCP. The sites were to be awarded to successful bidders among 200 drawn from a list of 800 bidders who had initially shown interest in the management of about 178 gas flaring sites. The bid submission due date was subsequently extended to 10 April 2020, and to date, there is no information regarding when the much-awaited management of Nigeria’s gas flaring sites will commence.

The NGFCP is a win-win situation as both the FGN and the eventual investors stand to reap benefits out of the programme. While investors are likely to make economic gains, the FGN is expected to recover most of the income previously lost as a result of AG flaring. The FGN will also score environmental points as the programme will cut down on gas emissions and eliminate or limit the adverse effects on communities and ecosystems.

Economically, Nigeria has lost significant volumes of gas which, if commercialised, could have contributed enormous amounts of money into state coffers during about 70 years of oil production in the country. Between November 2016 and November 2017, 301.69 billion standard cubic feet of gas was flared by oil companies operating in Nigeria. In terms of the Domestic Supply Obligation price of $1.50 per 1,000 Standard Cubic Feet of gas, the volume of gas flared translated to a loss of N162.912 billion (i.e. about $452.54 million). It is estimated that in 2018, the “Nigerian economy lost N233 billion (US$761.6 million) to gas flaring”. This represents 3.8% of the global total cost of gas flaring. This implies that losses were undoubtedly far more higher when about 70% or more AG was flared.

Environmentally, continuous flaring of AG has inflicted severe consequences to human, plant and animal life. It also contributes significantly to climate change. Regarding climate change, carbon dioxide emissions resulting from AG flaring contribute to global warming.[3]

Gas flaring also causes acid rain through emissions of sulphur dioxide and nitrogen oxides which form sulfuric acid and nitric acid, thus culminating into a mixture with atmospheric moisture. Furthermore, the corrosive effect of gas flaring is more visible in affected communities in the coastal southern part of Nigeria where roofing sheets are replaced almost every two years.[4] As well, gas flaring gives rise to atmospheric contaminants such as Nitrogen, Carbon and Sulphur oxides, particulate matter, hydrocarbons and ash, photochemical oxidants, and hydrogen sulphide.[5] The main concern with these contaminants is that they acidify the soil, deplete soil nutrient and negatively affect crops growth.[6] Consequently, plants, including economic trees like palm trees, are stunted or stifled and “water becomes too hot for fish to live in”, thus leading to the depletion of fish stocks in nearby rivers and ocean.[7] Villagers in communities around flare sites have also reported plants and crops withering away due to excessive heat resulting from gas flares in their local areas.[8]

The adverse effects of gas flaring are also experienced by wildlife as the bright lights of gas flares scares them and cause them “to migrate to more friendly territories or locations”.[9] Thus, gas flaring is directly linked to the unintended consequences such as wildlife disruption in immediate vicinities.[10]

Similarly, gas flaring has direct implications on human health in the oil fields of Nigeria. Health impacts of AG flaring, including respiratory tract diseases, central nervous system diseases and cancers have been reported among the populations in the vicinity of the flaring sites.[11] Equally, malformations in children, as well as lung damage and skin conditions, have been reported.[12]

Similarly, temperatures are likely to rise higher with the heat attaining deadly proportions as one approaches the flare sites.[13] It has also been reported that community members struggle to sleep at night either as a result of high temperatures or bright lights from the flaring sites.

The above economic and environmental consequences of AG flaring have persisted, despite the existence of a legal framework designed to minimise and control flaring activities. The Associated Gas Re-injection Act of 1979 (as amended), as the first anti-gas flaring instrument in Nigeria, was designed to cut down on the environmental impacts of gas flaring. Literature suggests that prior to 1984, no oil company complied with the provisions of the Act, and there is no evidence to suggest that any Minister attempted to force an oil company to comply with the Act.[14] This is attributed to various flaws in the Act, including provision permitting gas flaring upon payment of minimal fee and its failure to make explicit provisions regarding the party or parties to cover the costs for gas re-injection.[15] In 1985, the Associated Gas Re-Injection (Continued Flaring of Gas) Regulations were passed with one major flaw which was the reversing of the original intention of the Associated Gas Re-injection Act. The Regulation offered companies more options to flare gas.[16] A critical analysis of the legal framework relating to gas flaring in Nigeria falls beyond the scope of this piece and will be the subject of future research.

While this article commends the initiative of the FGN to reduce gas flaring significantly through the NGFCP, stringent laws are necessary to improve the harmful effects of gas flaring on the environment, human health and the economy. Hopefully, the ratification of the Petroleum Industry Bill, pending since 2012, will bring a plausible solution. Resolving the legal flaws identified above will support the NGFCP, thus, increase the probability for affected communities to have access to a cleaner environment and for the government to boost its coffers.

Written by Bernard Kengni.