Market News

By OpeOluwani Akintayo

Although Nigeria’s gas flare rate has been decreasing over the years, the country still has a long way to go to attain net zero by 2060. OPEOLUWANI AKINTAYO writes on what gas flaring has cost the country in the last 11 years

Nigeria is currently cash-strapped as it continues to struggle to meet its financial obligations. The country plans to borrow N11 trillion to fund the N21.83 trillion budget for this year. This is over half of the entire 2023 budget. Despite battling a cash crunch, the country has wasted N9tn revenue through gas flaring in the last 10 years.

Between 2012 and 2022, Nigeria flared an estimated 80 billion standard cubic metres of gas worth about N9tn as part of its oil production process.

A breakdown showed that in 2012, about 9.6 billion standard cubic metres worth N460m ($1,100m) of gas was wasted.

In 2013, 9.3 billion standard cubic feet of gas were flared into the environment, 2014, 8.4 billion, 2016, 7.3 billion, 2017, 7.7 billion, 2018, 7.5 billion, 2019, 7.9 billion, 2020, 7.2 billion, and in 2021, 6.6 billion cubic metres of gas was flared, according to World Bank.

Gas flared in 2012 could have earned Nigeria the sum of $1,100m, $1,075m in 2013, $970, 000 in 2014, $980,000 in 2015, $810,000 in 2016, $880,000 in 2017, $860,000 in 2018, $890,000 in 2019, $825,000 in 2020, and about $761,000 in 2021, according to World Bank.

Data from the National Oil Spill Detection and Response Agency showed that from January to November 2022, Nigeria flared an estimated 5.6 billion standard cubic metres of gas valued at $685m.

Meanwhile, an analysis of the data showed that the country has successfully cut the volume of gas it flared in last three years.

Nigeria has a lot of natural gas reserves yet to be fully harnessed and utilised.

In 2021, 7,177.53 million standard cubic feet of natural gas were produced on average per day, with the majority exported as liquefied natural gas. In 2020, the total production volume of natural gas in Nigeria was around 52 billion cubic meters. This was an increase compared to the previous year.

The country joined the league of oil and gas-producing countries in 1956 after oil was discovered in commercial quantities in Oloibiri, Bayelsa State. As of today, the country ranks 12th largest producer of natural gas in the world and second in Africa with 3.01 billion standard cubic feet yearly, a sharp decline from its proven gas reserve of about 209.5 trillion cubic feet.

Although Nigeria’s natural gas is low in Hydrogen Sulphide and Carbon Dioxide impurities, gas flaring is still estimated at nearly $2m/day.  Nigeria has more associated gas reserves than non-associated gas, yet, non-associated gas makes up more than half of the country’s annual gas production.

Nigeria generated 22 million tonnes of LNG yearly as of 2020.

In 2021, 7,177.53 million standard cubic feet of natural gas were produced per day, the majority of which was exported as liquefied natural gas.

Apart from 2022 and 2020 when the country had the highest national budgets of N17.1tn and N10tn respectively, other years’ budgets from 2012 were in the range of between N4tn, N7tn, N8tn, and N9tn.

If the N9tn worth of flared gas had been commercialised, the federal would have conveniently funded some of the budgets without resorting to borrowing.

With its current N44.06tn total debt stock as of September 2022, Nigeria has spent N3.04tn to service external and domestic debts in nine months of 2022, representing an increase of 23.4 per cent Year-on-Year from N2.46tn reported in nine months of 2021, according to the Debt Management Office.

The PUNCH published a report last August on how the country lost N891bn to gas flaring in 18 months.

According to the NOSDRA report, oil and gas companies operating in the country flared a total of 126 billion standard cubic feet of gas in the first half of 2022, leading to a loss of $441.2 million, (about N183.54bn) in the six-month period.

Estimation puts the equivalent of the volume of gas flared in the first half of 2022 to carbon dioxide, CO2 emission of 6.7 million tonnes in the oil-producing areas, 4.56 per cent higher than the 120.5 billion SCF of gas flared in the second half of 2021, and capable of generating 12,600 gigawatts hours of electricity.

On the other hand, the quantity of gas flared in the first six months of 2021 was capable of generating 14,000 gigawatt-hour of electricity, and an equivalent of 7.4 million tonnes of CO2 emission.

Giving a breakdown of the gas flared in the country in the first six months of 2022, the agency disclosed that while companies operating in the offshore oilfields flared 62.2 billion SCF of gas, companies operating onshore flared 63.9 billion SCF of gas, valued at $223.6 million.

However, the Federal Government had in recent years led campaigns for gas monetisation as against flaring.

NOSDRA lamented that Nigeria has been flaring gas since the 1950s, releasing carbon dioxide and other gaseous substances into the atmosphere, and which has continuously led to environmental and health challenges in oil-producing areas.

Chairman, Society of Petroleum Engineers, SPE Nigeria Council, Prof. Olalekan Olafuyi, told The PUNCH in an interview that the Federal Government would increase gas flaring penalties as Nigeria raced towards achieving its commitment to the United Nations net zero goal by 2060.

Although he did not state the amount the flare rates would attract, he stated that the council was working closely with the Nigerian Upstream Petroleum Regulatory Commission.

“We are working closely with the Nigerian Upstream Petroleum Regulatory Commission, and I can categorically say that companies who flare gas will now pay more than those utilising it. So, it will be to their advantage to start thinking of ways to utilise their gas instead of flaring them,” he said.

Currently, companies producing more than 10,000bpd pay a fine of $2 per 1,000 scf of gas flared. Companies producing less than 10,000bpd pay $0.5 per 1,000scf of gas flared.