A Review of the Nigerian Energy Industry

Nigeria loses $10bn revenue through gas flaring

*Gas flaring in the Niger Delta.

Oscarline Onwuemenyi

07 April 2018, Sweetcrude, Abuja – Nigeria loses approximately $10 billion of revenue through gas flaring, due to its inability to capture and commercialise flared gas in the country.

This was disclosed by the Programme Manager, National Gas Flare Commercialisation Programme (NGFCP), in the Federal Ministry of Petroleum Resources, Mr. Justice Derefaka.

Derefaka stated that if flared gas is properly exploited, it has the potential to create 300,000 jobs, produce 600,000 MT of LPG per year and generate 2.5 GW of power from new and existing Independent Power Producers (IPPs), as approximately 700mmscf/d is flared at 178 flare sites in Nigeria.

Speaking at the Nigerian Norwegian Chamber of Commerce (NNCC) Q1 2018 Business Roundtable Seminar on “The Monetization of Gas: Perspectives and Opportunities in the Nigerian Gas Industry”, Derefaka revealed that Nigeria currently utilises almost 700mmscf/d of gas for power production, which could be doubled by capturing and commercializing flared gas.

He added that about $3.5 billion worth of inward investment is required to achieve the country’s flare gas commercialization targets by 2020.

Derefaka stated that a Flare Gas (Prevention of Waste and Pollution) Regulation 2018 is being finalized and will be issued shortly to underpin the implementation of the NGFCP, as gas flare reduction is a priority in the suite of Federal Government programs for improving the environmental, health, social, economic and security problems in the Niger Delta region.

He stressed that the solution must not only benefit Niger Delta communities and positively contribute to the Nigerian economy, it must also present a bankable market opportunity for investors and lenders alike.

Speaking in a similar vein, the Managing Director, Midstream, Seven Energy, Mr. Ian Brown-Peterside, stressed that the productive utilization of the nation’s gas reserves is critical to Nigeria’s future.

“A robust and viable Gas-to-Power sector in Nigeria is critical to Nigeria’s future economic growth, the constant power supply will lead to growth across all sectors,” he said.

He further stressed that lack of capacity in power generation, compared to other countries, makes it very difficult to attract new investment and retain existing investment in the broader economy, noting that just 25 percent of Nigeria’s circa 12,000 megawatts of installed generation capacity reaches the end user.

He added that current electricity consumption of 144kwh per capita in Nigeria compared to the global average of 3104kwh is alarming, and wholly inadequate to support the economic development goals of the country.

According to Brown-Peterside, gas policy is not always clear and consistent; further sector challenges include commitment to payment terms in the gas to power business, noting that critical factors like co-operation and alignment between stakeholders, proper risk allocation across the chain to preserve investment, as well as clear fiscal incentives to unlock investment are required to enhance the potential and viability of gas to power.

John Chibueze, Partner at Adepetun Caxton- Martins Agbor & Segun (ACAS Law), reviewed the efforts made by the government to date in boosting the exploration, development, production and sale of natural gas, but concluded that there remains a glaring lack of fiscal and regulatory cohesion to support the infrastructure investment required to significantly increase the country’s reserve production ratios.

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