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How flared gas commercialisation can work

Efforts by the Federal Government to curb gas flaring have been on for decades without any appreciable results. The outcome has been loss of billions of naira and negative impact on the environment and health hazards in the oil producing communities. However, the plan to handover gas flare sites to firms that will gather, commercialise and monetise the flared gas under the Nigerian Gas Flare Commercialisation Programme (NGFCP), if vigorously pursued, may be the solution long-sought after, writes EMEKA UGWUANYI.

BARRING changes, the preferred bidders for the Nigerian Gas Flare Commercialisation Programme (NGFCP) would emerge before the end of this month.

The Nigerian Gas Flare Commercialisation Programme was initiated by the Federal Government to harness the flared gas and put it into productive use.

Under the NGFCP, the Federal Government will seek qualified investors with financial, technical and technological expertise to harness the flared gas.

The Department of Petroleum Resources (DPR) has evaluated the Statement of Qualification (SOQ) of over 254 firms

The DPR Deputy Director, Gas Monitoring and Regulation, Olusanya Bajomo, who spoke to reporters during the evaluation in Lagos, said the 850 firms that earlier showed interest dropped to 254 when a fee of $1,000 (about N360,000) was attached to the application form.

He said the fee was introduced to enable DPR identify the firms that were serious, adding that after the evaluation, the successful companies would move to the next stage.

Bajomo said: “The NGFCP is government’s flagship programme that will create opportunity to take flared gas under the provision of the Petroleum Act, and also authorised gas commercialisation through third party companies in order to promote investment and get people who are qualified technically and have the capability and experience to work in the Niger Delta to harness the flared gas.’’

The DPR Deputy Manager, Gas Production and Monitoring Unit, Olawole Ogunsola, said the  Federal Government, through the DPR and other stakeholders, is interested in credible companies with technical capacity and financial capability to take flared gas to market, assuring that “there is no constraint to the number of firms that should undertake the programme. But, ultimately, you will find out that as you go along, some will drop by the side, it’s like a funnel, it would go narrower until we get to the key companies that will be able to take the flared gas to market, so, government is not constraining it so that we will get the best out of the process.”

He said the law “in paragraph 35b of the first Schedule of the Petroleum Act” stipulates that the government has the right to the flared gas, so it has invoked that right by means of deregulation of the flared gas (Prevention of Waste and Pollution) Regulation of 2018, already signed into la w by Mr President.

“By that regulation, the government owns the flared gas and the producer has no title to the flared gas. It can allocate it to competent companies that can take it to the market place;so, it’s government’s right.

Ogunsola said to make the programme work, there are mechanisms in place to encourage the operators of such fields “ such that it guarantees certain volume to the third party off-taker and they (the operators) can get some fees in terms of connection agreement and be saved from the penalty of flaring.

“We are designing a programme that will intensify the scheme. First, the regulation has increased the flared gas payments. If you are producing 10,000 barrels of oil and below you pay two dollars,” saying  that is already “an incentive to them to make it happen”.

Harnessing and commercialising flared gas has become imperative in view of its financial benefit to the country and protection of the environment and health of the oil producing communities. For example,  according to a DPR’s report, “National Gas Flare Commercialisation Programme (NGFCP) is key to Nigeria’s flare-out agenda with a target for zero routine gas flaring in Nigeria by 2020.”

The report said flared gas in Nigeria can attract $3.5 billion investments and enough to generate 2.5 gigawatts (Gw) of power or produce 50 million barrels of oil equivalent (boe). It also noted that the flared gas can produce 600,000 metric tonnes of liquefied petroleum gas (LPG) per year, produce 22 million tonnes of carbon dioxide (CO2), feed two-three liquefied natural gas (LNG) trains and generate 300,000 jobs, among others.

It further noted that though Nigeria’s gas flaring level is dropping, the quantity of gas flared last year was as high as 324 billion standard cubic feet (bscf), which is a worrisome volume. The report said about 888 million standard cubic feet of gas was flared daily in 2017. This is despite Nigeria’s efforts at increasing utilisation and commercialisation of flared gas over the years. It stated that Nigeria still ranks the world’s seventh highest gas flaring country, adding that the DPR has identified about 178 flare gas sites or points spread across the Niger Delta in onshore and offshore oil fields; therefore, the agenda is to achieve zero gas flare in Nigeria by 2020. Flared gas constitutes about 11 per cent of the total gas produced in the country, it added.

Ogunsola continued: “Bidders will have flexibility of choosing which flare site (s) to bid for, determine the gas price, and their end-use market or gas product, as well as the technology to be deployed. Interested parties will need to demonstrate project development experience and proposed proven technology, which we expect to be in commercial application.”

Also, oil and gas firms last year, according to the Nigerian National Petroleum Corporation (NNPC) flared a total of 282.08 billion standard cubic feet of natural gas, which was put at a loss of N234 billion.

 

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