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Government more concerned with economic benefits, than effects of gas flaring

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Gas Flaring

Dr. Diran Fawibe is the Chairman and Chief Executive Officer, International Energy Services Limited. In this interview with KINGSLEY JEREMIAH, he spoke on the many challenges of gas flaring in the country, and what government must focus on to adequately address the situation.

What is gas flaring and why do we flare gas?

Natural gas is a form of clean fossil fuel or hydrocarbon naturally occurring beneath the earth’s surface, which is made up of mostly methane and other elements such as nitrogen, carbon dioxide etc.

When you produce hydrocarbon it is either you produce oil and gas together, or you produce predominantly gas alone.

Usually, there is no oil production reservoir that contains only oil and without certain amount of gas.

But you can have a predominantly gas reservoir with no oil, and this is labeled as non-associated gas. The one that is produced together with oil is called associated gas.

When you produce natural gas, you have three options in dealing with the gas, it is either you re-inject it into the reservoir, which can enhance your oil production, or recovery.

If an oil reservoir is already losing pressure with water driven method or process, you can boost the reservoir with gas injection process.

The other two options are to either pipe the gas for commercialisation or in the absence of this, flare the gas.
 
Re-injection process or project costs money, and can be expensive depending on the terrain.

The oil producing companies from time to time engage or undertake gas re-injection projects as a way of handling the associated gas when it is feasible or compelled to do so.

Of course, the most viable option is to produce and transmit the gas for commercial utilisation.

The bulk of the gas currently flared today occurs in the onshore and shallow water fields.

However, over the last 15 years, there has been drastic reduction in the amount of efforts to stop gas flaring in the country’s oil fields.

It is not that oil companies are not making some efforts, by way of gas re-injection or commercial utilisation within the framework of gas monetisation programme, but these efforts were not sufficient, and in some cases lackluster.

That’s to say that more than 70 per cent of gas produced in the oil fields was being flared, and the situation was really bad.

The penalty imposed at that time like 50 kobo per standard cubic feet (SCF) was not a deterrent. The oil companies invariably opted to pay the penalty than to embark on gas utilisation projects.

Thereafter, or about 1997/8, government came up with the carrot and stick approach, whereby the penalty was increased to N10 per SCF, with flaring or the companies given incentives to undertake commercial utilisation of the gas.

When the penalty was 50 kobo, it was convenient for them to flare because the penalty was minimal.

They preferred to pay penalty than to incur the cost of re-injection or commercial utilisation. But when the penalty became stiffer, they started looking for ways of gas disposal without paying penalty.

The factor really was not about the penalty, but rather the incentives given to them that helped them to expense the cost of gas development and utilisation projects.

There was also the issue of ownership of associated gas at the well head, which discouraged companies from incurring high costs to deal with their associated gas, as there was no compensation, or reasonable financial benefits to them.

Even the gas processed and supplied to NEPA or PHCN in those days was hardly paid for after a long period.

The current financial regime has made it financially rewarding for the companies to utilise the gas or do injection.   
 
When you have small fields, the cost of infrastructure to harness gas or re-inject has also been a major issue. That is high cost of re-injection or building pipeline to harness the gas.

The good news is that the companies are now making conscious efforts to eliminate or reduce flaring to the barest minimum, albeit under severe government pressure.

The technology has been improving to set up small-scale plants to utilise gas at the gas fields without having to undertake very costly pipeline projects.

How would you rate government’s responses to gas flaring in oil producing communities?
 

No government will deliberately harm its citizens. It can happen that people are victims of circumstances. Government could have done much more over the years in putting an end to gas flaring.

We are more concerned about economic benefits than the effects of that action. Nigeria is rated as the second largest gas flaring nations in the world. How did the other countries achieve minimum to zero flaring.

We may not completely eliminate gas flaring, but the issue is that the current level of gas flaring is certainly unacceptable.

The health of the people is in danger, which denies or betrays the saying that ‘health is wealth.’

When you cannot guarantee the health and life of your people, the money you are making, and spending is immoral money at the expense of the people or the communities. The ecosystem in the oil producing areas has been affected.

If we genuinely believe in protecting the ecosystem there is a lot more that needs to be done.

Today, when you look at the amount allocated to health in the budget, you will discover that what we are doing in Nigeria is deplorable.

The United Nations recommended that about five per cent of our national budget should go to health; we have not achieved two per cent, yet we say health is wealth; we talk about the healthcare of the cities and urban areas, but don’t do enough about the health situation of oil producing communities that require special attention.

There is no gain saying that we have a serious problem in Nigeria when it comes to environmental degradation in the oil producing communities.

Government must continue to address the problem with a combination of factors, including legislations, policies and a carrot and stick approach, as well as, incentives for gas projects that will help to eliminate gas flaring.

What are the implications if we fail to stop gas flaring now?

There are two aspects to this. The major problem is environmental degradation.

The effects of gas flaring are detrimental to the producing communities and that is why we have all kinds of diseases and ailments in the oil-producing region.

It is not just the question of land, water or ecosystem being polluted but the air, which people breathe in. The health of oil producing communities is being seriously affected.

Secondly, we are also depriving ourselves of the economic benefits or revenue that we could derive from utilising the gas.

Ideally, commercial utilisation of gas is the best option and the second option is re-injection.

A number of oil companies are currently undertaking gas re-injection in addition to assisting some investors who are embarking on gas plants, such as mini LNG, gas plants for CNG, petrochemicals, etc.  

 
What economic value would you place on the level of gas we flare daily?
 

Though the only gas we flare is basically associated gas, but when you look at the statistics, you will know that gas flaring has reduced substantially.

About 15 years ago, 70 per cent of gas being produced in Nigeria was flared.

Today, you have about 30 per cent of gas flare. The desirable thing is to eliminate the current level of flare. That is why the NNPC GMD was saying it would be a mixture of policies to tackle the problem.

Do you think we can stop gas flaring in two years?
 
The intention is laudable, but I am not too sure it is a realistic deadline. It is a laudable thing to work towards each deadline and to give a sense of urgency.
I think it is very ambitious, but we may wait for government to roll out this programme to accelerate the process.

There is nothing that is beyond human endeavours if we really work at it.

But on the face of it, two years appear to be too short to achieve the objective, maybe we should wait for the programme that will be put in place, which will guarantee that in two years, otherwise we have to be looking beyond two years.

Gas flaring,
What really needs to change if we must end gas flaring?
 

The NNPC has given a kind of outline of what may likely happen. There is no silver bullet or single measure to tackle the problem. We need a combination of factors.

The appropriate policy instrument has to be in place. We need instruments that would ensure that the penalty for gas flaring is strictly implemented.

Government can look at additional incentives for fields where flaring still occurs.

We can also look into infrastructure development for gathering gas, not strictly the economics of it, because if we compare some critical issues on rational economic consideration, it may be difficult to completely achieve zero flare. We have to pay a price for the desirable objective.
 
In view of the challenges associated with effective monitoring, do you believe in the capacity of the Department of Petroleum Resources to monitor gas flaring?  
 
How do we determine the capacity of organisations? Today, there are a lot of improvements in the activities of DPR, but DPR is not yet there.

The basic reason is that it has not been financially empowered to be able to do all that it is capable of doing.

Today, DPR is basically generating the bulk of revenue to run its operations through licenses and permits; there has to be robust budget allocation to provide facilities for DPR to undertake its supervisory activities.

The people need to be well equipped in terms of staffing training, equipment, and operational fund.

If we double budget and release allocation to DPR, you will see that DPR will be completely transformed. In developed countries, they are able to manage these challenges because of the facilities available to regulators.

DPR does not have enough operational vehicles talkless of helicopters and boats to operate in the fields and riverine terrains.

For a long time, the issue of turning DPR into a petroleum commission has been on the card. It is expected that the Petroleum Industry Governance Bill when finally enacted into law will settle this.


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