What is gas flar­ing cost­ing Nige­ria?

Business Day (Nigeria) - - NEWS - DIPO OLADEHINDE

Six decades af­ter Africa biggest oil pro­duc­ing coun­try started pro­duc­ing oil in prof­itable quan­tity the haz­ardous and harm­ful prac­tice of flar­ing gas into the at­mos­phere has con­tin­ued un­abated.

What is gas flar­ing?

Gas flar­ing is the burn­ing of nat­u­ral gas that is as­so­ci­ated with crude oil when it is pumped up from the ground. In petroleumpro­duc­ing ar­eas where in­suf­fi­cient in­vest­ment was made in in­fra­struc­ture to uti­lize nat­u­ral gas, flar­ing is em­ployed to dis­pose of this as­so­ci­ated gas.

Eco­nomic flar­ing

Anal­y­sis by Busi­ness­day showed from Jan­uary 2018 till Sep­tem­ber 2018, Nige­ria flared a to­tal of 215.9 bil­lion scf flared trans­lat­ing to a to­tal cost of $755.65 mil­lion (N275.6 bil­lion) us­ing the av­er­age price of nat­u­ral gas of $3.5 per 1,000scf as at Sep­tem­ber last year.

Fur­ther anal­y­sis re­vealed if the flared 215.9 bil­lion scf were to be sold to­day Tues­day, Jan­uary 8, 2019) at the cur­rent price of $3 per 1,000scf it would cost $647.7 mil­lion (N236 bil­lion).

Anal­y­sis of the NNPC re­port us­ing Sep­tem­ber av­er­age cost of $3.5 per 1,000scf showed in Jan­uary Nige­ria flared 31.68 bil­lion Scf of gas worth $110 mil­lion, in Fe­bru­ary 27.25 bil­lion scf was flared worth $95.3 mil­lion while in march and April, Nige­ria flared 26.88 bil­lion scf and 23.06 bil­lion scf worth $94 mil­lion and $80.5 mil­lion, re­spec­tively.

The oil and gas com­pa­nies, which in­clude in­ter­na­tional and indige­nous op­er­a­tors, also wasted 21.20 bil­lion scf of gas in May worth $74.2mil­lion, 21.66 bil­lion scf in June worth $75.81, 21.21 bil­lion scf in July worth $74.2mil­lion, 22.42 bil­lion scf in Au­gust worth $78.47, and 20.54 bil­lion scf in Sep­tem­ber worth $71.89mil­lion.

Im­pact on the en­vi­ron­ment

In Nige­ria, oil com­pa­nies both lo­cal and in­ter­na­tional en­gage in gas flar­ing, as a 24 hour-a-day, 365 day-ayear prac­tice. Some of these flares have burned with­out ces­sa­tion for 40 years. Peo­ple live lit­er­ally next door to the roar­ing, ground-level flares that leap as high as a sev­eral-story build­ing and belch black clouds of toxic smoke in the mid­dle of, or next door to, their vil­lages.

Gas flar­ing harms lo­cal health through emis­sions that have been linked to can­cers, asthma, chronic bron­chi­tis, blood dis­or­ders, and other dis­eases. These hu­man health prob­lems af­fect loss to gas the peo­ple of oil-pro­duc­ing com­mu­ni­ties, such as the Niger Delta, where 30 mil­lion peo­ple live with lit­tle to no health care ac­cess.

Also, Gas flar­ing causes acid rain, which im­pacts soil fer­til­ity and is as­so­ci­ated with re­duced crop yields, caus­ing hunger in the Niger Delta where fish farm­ing have al­ready de­clined due to pol­lu­tion which have also re­duced the means of liveli­hood of many fish farm­ers.

Past ef­forts to stem the tide with­out re­sult

Pre­vi­ous ef­forts by the Fed­eral Gov­ern­ment to curb in­ci­dences of gas flar­ing have yielded lit­tle fruit.

The gas-flar­ing charges im­posed by the As­so­ci­ated Gas Re-in­jec­tion Act (AGRA) on oil pro­duc­ing com­pa­nies are com­pa­ra­bly neg­li­gi­ble.

To com­pound this is­sue, the Tax Ap­peal Tri­bunal has held that levies paid for flar­ing gas un­der the AGRA are tax de­ductible. The im­pli­ca­tion is that oil pro­duc­ing com­pa­nies can flare as much gas as they want to, and deduct the levies they pay for flar­ing this gas from their tax­able in­come.

New Mea­sures

The present gov­ern­ment re­newed its com­mit­ment to end the prac­tice and, in this re­gard, launched a new frame­work – the Nige­rian Gas Flare Com­mer­cial­iza­tion Pro­gramme (NGFCP) – to tackle the long­stand­ing is­sues.

In Oc­to­ber last year, the Fed­eral Gov­ern­ment in­creased the gas flare penalty from N10 per thou­sand stan­dard cu­bic feet of gas to $2 or N612.8 (at the of­fi­cial ex­change rate of N306.4 to one dol­lar) per thou­sand stan­dard cu­bic feet of gas. The gov­ern­ment also an­nounced a fine of N50, 000 or six months jail term, or both, for any­one who pro­vided in­ac­cu­rate flare data.

What are the so­lu­tions?

Luq­mon Ag­boola, head of en­ergy and in­fra­struc­ture at Sofi­dam Cap­i­tal, said gov­ern­ment should be firm and de­ci­sive in the im­ple­men­ta­tions of laws against gas flar­ing and also solve the bot­tle­necks in cap­i­tal in­fra­struc­ture.

Ag­boola said gov­ern­ment should give a firm dead­line and wield the big stick on de­fault­ers.

Em­manuel Afimia an en­ergy an­a­lyst at Afimia con­sult­ing said the gov­ern­ment needs to be more proac­tive in har­ness­ing the op­por­tu­ni­ties nat­u­ral gas can bring on the econ­omy.

When the gas is con­verted to wealth for in­dus­trial use, it will cre­ate jobs and bring bil­lions into the cof­fers of gov­ern­ment, Afimia said.

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