What is gas flaring costing Nigeria?
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.
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.
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.