Although, in Nigeria, it is common knowledge that the economy is substantially dependent and more dedicated to exploration of oil than it is to gas, several deposits of gas have been discovered around oil wells in Nigeria but because of the past failure of the government to focus and explore the many other natural resources which the country possesses, the gas industry has been practically frustrated and nearly abandoned over the years. Thus, leading to a loss of revenue in a sector where there is a likelihood of otherwise generating more revenue. It is however worthy to note that whilst statistics may not be accurate, the quantity of gas flared in Nigeria exceeds over 40% of the gas flared annually across Africa, which amounts to about $7billion in waste. Apart from economic waste being a consequence of gas flaring, flared gas is also known to contain toxic substances which cause respiratory diseases and air pollution, leading to depletion of the ozone layer, ultimately having an adverse effect on weather and climate.
Whilst many countries across the world have taken advantage of the economic benefits which flared gas may present, through its re-injection into the fields or conversion into liquefied natural gas, domestic cooking gas, plastic production and other uses, the problem of gas flaring has remained unresolved in Nigeria for many decades.
The first regulatory framework aimed at promoting antigas flaring policies in Nigeria was the Associated Gas Reinjection Act, 1979. The Act required every oil and gas producing company in Nigeria to submit to the minister for petroleum, detailed programmes in relation to the re-injection of produced associated gas or programmes for the use of produced associated gas. The Act further provided for the deadline for gas flaring in Nigeria as stipulated by the Federal Government to be 31 December 1974. This deadline has however been extended a number of times between 1974 through a succession of bills and amendments of laws and the final deadline remains uncertain as of date. Through the applicable laws over the years, the law has always provided for application for permits to be granted by the Minister provided the applicant pays the amount prescribed by the Minister, without providing for strict measures to ensure its effectiveness.
If indeed, it is correct that the country losses so much in revenue as a result of gas flaring, the question that comes to mind is why gas flaring has not been eradicated? Some argue it is as a result of lack of political will on the part of the government. Others believe it is as a result of the unavailability of the infrastructure required to control gas flaring. There are some who may also suggest there is no available market for domestic gas products and the low price of gas is discouraging. Whatever the case may be, the focal point is that an end to gas flaring is achievable as evidenced in countries like Netherlands and Norway which have gas-flaring policies that are worthy of emulation. In Norway for example, the Norwegian Petroleum Directorate which is a department within the petroleum ministry, is dedicated to supervising petroleum activities, gas flaring and air emissions. Furthermore, every company applying for a gas flaring permit in Norway is required to identify the measures it has put in place to ensure that the effect of gas flaring on environmental pollution is minimal.
The current Petroleum Industry Bill (2012), which has been in the pipeline for a number of years, just like several other attempts in the past, seeks to address the issue of gas flaring. In particular, a development in the Bill are provisions for gas flaring measurement, a specified number of days for which a permit would be issued to an applicant and the requirement for a gas flaring plan to be submitted by all oil and gas operating companies. Whether the Petroleum Industry Bill will be passed into law in the nearest future is however the subject of discussion for another day. In particular, putting in place effective measures to ensure that the laws on gas flaring are properly implemented is essential.
Energy experts project that the economic strength in gas will exceed that of oil by 2015. Therefore, the Federal Government in a bid to boost the gas sector has set up the Gas Master Plan. The Gas Master Plan is a strategic framework towards achieving a wholly competitive market driven domestic gas sector and for the implementation of gas grid infrastructures amongst others. Based on the recent level of commitment expressed by the Federal Government in the sale of power generation and distribution companies to private investors, the implementation of the Gas Master- Plan therefore, becomes critical to the Federal Government's short and medium term strategies for power generation. If this same attitude is shown in respect of the Gas Master Plan, the ripple effect will create enormous potential opportunities for investors in the gas sector.
Nigeria, no doubt, is in the spotlight as an emerging market and it is expected that the sale of the generation companies and distribution firms by the Federal Government to private investors would create room for more investors to participate in the power sector. The continuous divestment of oil and gas assets in the upstream sector by International Oil Companies also contributes to the surge in the investment in the oil and gas industry with both indigenous and foreign participants having a fair share of these opportunities. If for over 40 years, Nigerians were taking energy for granted, that situation no longer exists! The importance of energy and power in Nigeria can no longer be over-emphasised. The quantity of natural gas lost to gas flaring could have been utilised as a potent source of energy in light of the increasing demand for electricity and pressing need for more power generation capacity in Nigeria. To this end, gas fired power plant is a veritable alternative. Investment opportunities also present themselves with respect to transportation of gas from the well or construction of gas pipelines for delivery of gas to power plants. One major investment opportunity created by the Gas Master Plan is the Federal Government's domestic gas obligations placed on oil and gas operators to attain a minimum threshold of gas reserves and production for the domestic market before same is made available for exportation. Investors can leverage on the huge consumer market (driven by an increasing middle class population) opportunities and gas consumption potentials in Nigeria and also the West Africa sub-region.
This is the set time for the government and oil and gas operators to show greater commitment to ensuring that gas flaring is brought to a minimal level. The World Bank proposal urging producers of oil and gas to stop gas flaring by 2030 is achievable and to achieve this, there should be a well-co-ordinated alliance between the government and various energy sub-sectors to ensure compliance with protocols on gas flaring to achieve maximum utilisation of natural gas. Firm commitment from the government is required to encourage gas utilisation and flaring reduction with petroleum companies through introduction of fiscal incentives. Whilst gas flaring reduction requires substantial investments, flared natural gas can be converted into lucrative investments which will ultimately lead to a safer, conducive and healthier environment compared to the current situation which obtains in Nigeria especially in the Niger- Delta region of the country.
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