Of gas flaring, global reduction and monetisation

Pitted against current report in which Nigeria is expected to reap N22 billion from fines on oil companies that have failed to stop gas flaring, the news that the nation is instrumental to global reduction in gas flaring offers little cheer. For one, the country remains one of the highest gas flaring entities worldwide; and for another, the practice will prove difficult to eliminate as long as Nigeria keeps monetising her loss by receiving fines from culprit companies.

Gas flaring is the burning of natural gas associated with oil extraction in oil producing countries. Over the years, this has been one of the top environmental challenges facing the world by way of global warming and environmental degradation. The issues surrounding gas flaring need to be addressed frontally to improve sustainability measures in the petroleum industry as well as to have a clean environment globally.

The recent report about global reduction of gas flaring by the World Bank’s Global Gas Flaring Reduction Partnership (GGFR), is itself heartwarming. The GGFR was launched at the world summit on Sustainable Development since 2002 with representatives of governments of oil-producing countries, major international oil companies among others to overcome the worldwide barriers of reducing associated gas flaring by sharing global best practices and implementing country specific programmes.

While the GGFR have encouraged oil producing countries to seize the opportunity to end pollution and wasteful practice, global warming effect arises from the billions of cubic meters of gas being flared globally and this annual practice is also wasteful as valuable energy resources that can be used for economic benefit are lost. Therefore the need for strategies to mitigate wastage to valuable energy resources through various flaring management should be evaluated.

Yet, reports indicate that the Federal Government will impose $49m (N22b) fine on oil and gas firms operating onshore for flaring 24b Standard Cubic Feet of gas valued at about N40b ($86m) between January and February 2023. According to latest gas flare data by the National Oil Spill Detection and Response Agency, the companies operating onshore will pay the penalties for violating the gas flaring rule. “Companies operating onshore flared 24.5 billion SCF of gas valued at $85.8 million, with $49 million penalties payable,” the agency wrote. The development suggests that the Federal Government had in recent times led campaigns for gas monetisation as against flaring.

The report said companies flared 19.14 billion SCF of gas in January and 14.04 billion SCF of gas in February 2023, contributing 1.3 million tonnes of carbon dioxide emission, with power generation potential of 2,500 gigawatts hours. On the other hand, companies operating offshore flared 25.8 billion SCF of gas valued at $90m; capable of generating 2,600 gigawatts hours of electricity and had an equivalent of 1.4 million tonnes of carbon dioxide emission.

According to the World Bank Vice President for Infrastructure, Guangzhe Chen, “After a decade of stalled progress, global gas flaring volumes fell in 2022 by around three per cent, which is a welcome drop, especially during a time of concern about energy security for many countries.” Also, the amount of flaring per barrel of oil produced subsequently fell to its lowest level since the inception of satellite data. This exciting drop saw Nigeria, Mexico and the United States of America accounted for most of the decline in global gas flaring in the year on focus, 2022. While Kazakhstan and Columbia stand out for their being consistent in reducing gas flare in the last seven years.

Notwithstanding, the progress remains a bit worrisome and skeptical as nine countries, Russia, Iraq, Iran, Algeria, Venezuela, USA, Mexico, Libya, and Nigeria are still on the watch list for being responsible for the vast majority of gas flaring countries globally. Indeed, the continued gas flaring amid the various perspectives regarding gas flaring utilisation technologies advancement with further improvements in utilisation of flared gas to efficient energy fuel shows that the relevant authorities have been unable to arrest the situation. For instance, Nigeria’s Federal Government on several occasions have issued deadlines to stop gas flaring, but conveniently shift the deadlines to instead collect gas flaring penalty fines from the oil companies. This is not good enough.

It is disheartening that successive Nigerian governments are in the habit of shifting the ‘goal post’ to end gas flaring. As far back as 1969, the Federal Government directed all oil companies to end gas flaring within five years of business by taking steps to utilise the gas or re-inject it. That this has not happened points to notion that gas flaring penalty payment is more important to Nigeria’s government than protecting the environment and its citizenry. In the light of continued gas flaring, the devastating effects poses a potential catastrophe and ultimately harmful to the nation.

In addressing gas flaring reduction issues, it is important to note that Russia’s invasion of Ukraine has had a dramatic impact on reduction of gas flaring as well as the global energy system. Before the invasion of Ukraine, Russia was the world’s largest oil and natural gas exporter in 2021. The World Bank satellite data reveals that Russia’s decreased gas exports to the European Union (EU) drastically reduced gas flaring in Russia as well as throwing energy markets in turmoil with major energy security and supply risks worldwide. This is because, throughout 2022, the European Union significantly increased its liquefied natural gas (LNG) imports from the United States, Angola, Norway, Qatar and Egypt and through pipeline from Azerbajan and Norway. However, there remain a number of options available to boost gas supplies.

As a trust fund and partnership of governments, oil companies and multilateral organisations should work to end routine gas flaring at oil production sites globally. The World Bank GGFR has a duty not only to help identify solutions to the challenges of technical, economic and regulatory barriers to flaring reduction, it should make sure it is achieved. Above all, Nigeria must exhibit the right political will and mental attitude to preserve the country’s gas, enrich the nation through international gas sale particularly at this time of global conflict; and importantly, join the league of nations to be counted positively for climate change and environment preservation.