NGFCP: The govt intervention that may end routine gas flaring by 2020

There are strong indications Nigeria may achieve its zero routine gas flaring by year 2020. Flaring of gas contributes to climate change and impacts the environment through emission of carbon-monoxide (CO2), black carbon and other pollutants. It also wastes a valuable energy resource that could be used to advance the sustainable development of producing countries. For example, if this amount of gas were used for power generation, it could provide about 750 billion kWh of electricity, or more than the African continent’s current annual electricity consumption.

In 2017, Nigeria flared 324 billion cubic feet of gas; this translates to about 3000MW of power generation or over $350 million carbon credit value which is sufficient to build two to three liquefied natural gas trains.

The “Zero Routine Flaring by 2030” initiative introduced by the World Bank, brings together governments, oil companies, and development institutions who recognize the flaring situation described above is unsustainable from a resource management and environmental perspective, and who agreed to cooperate to eliminate routine flaring no later than 2030.

The initiative pertains to routine flaring and not to flaring for safety reasons or non-routine flaring, which nevertheless should be minimised.

Routine flaring of gas is flaring during normal oil production operations in the absence of sufficient facilities or amenable geology to re-inject the produced gas, utilise it on-site, or dispatch it to a market.

However, the Federal Government formulated its own policy called National Gas Flare Commercial Programme (NGFCP) with the intention to end routine gas flaring in Nigeria by 2020. The Federal Government exercised its powers under Paragraph 35b of the First Schedule of the Petroleum Act 1969 to take gas at flare.

According to NGFCP, elimination of flared gas would be a win for all parties across Nigeria; it will promote collaboration between private and public and social sectors with a commercially viable investment with positive returns and minimise government action to streamline implementation.

The objective of NGFCP is to eliminate routine gas flaring through a market driven transactional and commercial structure that enables flare gas to market.

The policy provides a market driven solution to reduce the amount of routine gas flaring, benefit the Niger Delta communities and the Nigerian economy.

It does not have an adverse impact on the producers’ upstream production or safety; it provides structure that enhances bank ability for investors and lenders.

• 2019: Changing face of Oyo governorship race

How NGFCP will work

During oil production, associated gas is produced from the reservoir together with the oil. Much of this gas is utilised or conserved because governments and oil companies have made substantial investments to capture it; nevertheless, some of it is flared because of technical, regulatory, or economic constraints.

As a result, thousands of gas flares at oil production sites around the globe burn approximately 140 billion cubic meters of natural gas annually, causing more than 300 million tonnes of CO2 to be emitted to the atmosphere.

So, the Nigerian government will take the natural gas produced with crude oil free of cost at the flare header and without payment of royalty. The programme needs to attract third parties that are in the position to take or purchase flare gas from the Federal Government and take it to the market by processing it through the Flare Gas to Market Technology (FG2M-T).

NGFCP is designed to enhance the potential for projects to raise debt and equity by providing limited protection from certain events like political force majeure that are generally outside the control of the projects.

With potential $3-3.5 billion investment, about 300,000 jobs could be created and the 20 million metric tonnes of carbon monoxide emission through routine gas flare could be eliminated thereby contributing to cleaner environment.

The implementation of a recently signed legal framework on flare gas reduction by President Muhammadu Buhari, is expected to lead to a government takeover of fields where flaring is taking place and a bid round of some of such fields before the end of 2018.

The Flare Gas Reduction (Prevention of Waste and Pollution) Regulation 2018, signed in early July 2018, is currently being gazetted. The document seeks the reduction of environmental/social impact caused by the flaring of gas; protection of the environment; prevention of waste of natural resources and creation of social and economic benefits from flare gas capture.

The regulation asserts the right of the government, under Section 9 of the Petroleum Act 1969, to take natural gas produced with crude oil free of cost at the flare site and without payment of royalty. The provision of this regulation is applicable to all petroleum licences, including marginal fields.

Two key aspects of the regulation are the outlines of Bid Processes and the Penalties for supply of inaccurate data by a producer of flared gas.

The minister may, by a permit to access flare gas, authorise a Qualified Applicant selected further to competitive bid processes conducted by the Federal Government, to take flare gas on behalf of the government at any flare site as specified in the permit.

Any producer may apply to the minister to utilise flare gas for commercialisation, provided that such application shall (a) exclude any Flare Gas volume that is being offered in a bid process conducted by the Federal Government or has been assigned to a permit holder, (b) be made by the producer on behalf of a midstream subsidiary corporate entity, either existing or to be incorporated.