The persistent gas flaring in Nigeria, despite the regulations, is indeed a pressing issue that requires urgent attention. One significant aspect that worsens this problem is the country’s continued loss of revenue from gas, alongside dwindling revenue from oil, due to massive theft. Despite these challenges, there are key strategies to address the menace as well as beat other constraints in the sector to accelerate progress towards energy security and economic robustness, writes EKAETE BASSEY.
Despite efforts to combat gas flaring, companies in the petroleum industry flared a staggering 241.1 million standard cubic feet (MSCF) of gas in the first 11 months of last year, according to the National Oil Spill Detection and Response Agency (NOSDRA).
This highlights the urgent need for measures to address gas flaring and its detrimental impacts. While there are regulations to curb flaring, the challenge lies in their effective enforcement.
In analysing Nigeria’s progress towards its Decade of Gas Initiative, it is clear that the government is committed to promoting domestic gas utilisation and offshore gas exploration judging from the passing of the Petroleum Industry Bill and the signing of the Petroleum Industry Act (PIA), aimed at removing bottlenecks in investments and host community management.
With a gas reserve of 209 TCF and unproven reserve of 600 TCF, there is a lot to accomplish with a yearly gas consumption of less than one trillion cubic feet yearly.
Chairman, Liquefied Petroleum Gas (LPG) Sectoral Group, Lagos Chamber of Commerce and Industry (LCCI), Godwin Okoduwa, says the construction of the Ajaokuta-Kaduna-Kano gas pipeline stands as a pivotal point, aiming to enhance gas accessibility.
True, the cost of the commodity has been rising. Okoduwa explains that the escalation stems mainly from the exchange rate.
The price of natural gas and LPG, he says, is benchmarked on the US dollar.
“We expect some corrections as we have witnessed recently with the naira gain against the dollar. The main reason for benchmarking pricing in USD is because that is the way funding is sourced; you have to be able to hedge your project against the USD when sourcing funds from international lenders.
“By embracing indigenous production and aligning policies with the needs of producers and consumers, Nigeria can navigate challenges and progress towards energy security and economic resilience.”
In striving for low-cost gas pricing, he suggests that Nigeria needs to address several key areas, including investing in infrastructure, like pipelines and distribution networks, which, he says, are crucial to reducing transportation costs, implementing transparent regulations to foster competition and fair pricing in the gas value chain
“Because you need to use the gas and pay for it to pay back the lenders, after that prices can be locally benchmarked,” he said.
According to the LPG spokesperson, providing incentives for private investment in gas exploration and production could boost supply as well as drive down prices. Ensuring currency stability and promoting local content development, he argues, can further contribute to cost reduction.
On low gas penetration, Okoduwa states that it could be attributed to funding, ignorance of use and high cost of LPG which he says has forced many low-income earners to revert to traditional fuels.
“Capital is required for major investments in Natural Gas. For LPG, there is an issue with lack of awareness of the benefits and support from the government. There is a prevalent ignorance regarding LPG usage, particularly in rural areas. Secondly, the high cost of LPG in the country has forced many low-income earners to revert to traditional fuels,’’ he added.
However, he believes, addressing this issue and improving gas penetration can be achieved through infrastructure development, which stands out as a crucial step. Extending Natural gas infrastructure, including pipelines and distribution networks, to underserved areas and ensuring their reliability and accessibility can significantly enhance gas penetration across the country.
Okoduwa, who is the Head of LPG, Sales and Marketing, Falcon Corporation Limited, says awareness and affordability measures are crucial to dispelling misconceptions about LPG. He emphasised that its cost-effectiveness, efficiency, and environmental benefits. Regulatory reforms such as targeted subsidies and tax incentives, are also essential for attracting investment and promoting competition.
He stresses that incentivising flare reduction efforts through tax incentives, subsidies, and financial rewards can encourage proactive measures. Innovative technologies like flare gas recovery systems and carbon capture and storage can capture and use flared gas effectively. Collaboration with stakeholders like oil and gas companies, regulatory agencies, and local communities can effectively address gas flaring.
In addition, he states that community engagement, policy reforms, and investment in research and development are crucial for reducing gas flaring, empowering local communities, raising awareness, and promoting community-led initiatives fosters ownership and responsibility, regulatory support and financial incentives, which will encourage companies to explore alternative uses for flared gas; as well as supporting R&D initiatives can lead to long-term solutions.
In tackling challenges facing gas production and the gas market that impede their efficiency and contribution to the economy, Okoduwa posits that efforts to curb gas flaring are imperative for environmental sustainability and maximising the economic benefits of gas production.
Besides, he states that infrastructure deficiency presents a significant obstacle. Inadequate pipelines and distribution networks hinder the transportation and distribution of gas across the country. This limitation results in restricted access for domestic and industrial consumers, hampering the sector’s growth and impact.
“Persistent issue of gas flaring exacerbates challenges in the sector. Despite regulations, the challenge continues due to factors such as lax enforcement, infrastructural constraints, and economic considerations. This not only contributes to environmental degradation but also represents a loss of potential revenue from gas utilisation,” he said.
He argues that regulatory uncertainty, security concerns, and fiscal issues in Nigeria’s gas sector are hindering investment and development. Clear regulatory frameworks, he pointed out, are needed to attract investment for infrastructure and technological advancements, addressing security concerns such as vandalism, and theft which causes revenue losses, and deter investment in the sector as much as resolving fiscal issues; are pivotal for promoting gas production and maximising the sector’s contribution to the economy.
Besides, he adds that the gas market faces challenges in pricing, structure, and competition, consumer affordability and inaccessibility.
He maintains that promoting competition and efficiency in the gas market involves fostering transparency, removing barriers, and preventing anti-competitive practices. Facilitating access to financing and investment capital for gas projects. Providing targeted incentives, public-private partnerships, and innovative financing mechanisms can reduce investment risks and attract private sector investment.
And investing in skills development and capacity building initiatives can address the shortage of skilled workforce and technical expertise that hinders project implementation and maintenance.
On the prospect of gas overtaking fossil fuel in the near future and if could, the revenue the government gets from crude oil, he explains that Nigeria is a gas region with oil in it.
He said: “This is to say we have more gas than oil, which is why the administration of President Bola Ahmed Tinubu, offered a 25 per cent gas utilisation investment allowance for equipment and plant for new and ongoing offshore projects.This is important to tap into the very huge gas reserves. This is the time to harness the huge gas opportunity in the country and we see the government’s interest in this direction, which is laudable.”
While some experts are urging Nigeria to transition from LPG to CNG, saying it is cheaper and cleaner fuel, especially in the context of the cost of living crisis, the LPG Sectoral chief, argued that they could co-exist.
“CNG is cheaper but more expensive to deploy its infrastructure, unlike LPG.
“So, for us in the LPG industry, we are asking for support because it’s easier to deploy storage, transportation and distribution infrastructure for LPG, so while its ok to look for funding for CNG, the government should see LPG as a low-hanging fruit for deployment of more affordable and greener fuel when compared to Diesel and petrol,” he said.
Okoduwa, who serves as a liaison between the LPG sector and other stakeholders, including trade associations, professional bodies, and international organisations, demonstrated that LPG’s vast potential, with over 9,000 retail fuel stations qualifying for Autogas dispensing, offers job opportunities and stimulates growth through local manufacturing and its diverse uses.
Seizing the chance, he also provided an overview of how the Lagos State government, through the Ministry of Energy andMineral Resources (MEMR), in collaboration with the LCCI-LPG, established and implemented the Eko Gas project, an initiative focused on promoting the adoption of LPG as an alternative to cooking energy.
According to him, the initiative, aimed at reshaping the energy landscape in Lagos, by advocating the adoption of LPG as a cleaner and more sustainable option for cooking and domestic needs.
He added that the Eko Gas project aims to improve the level of awareness and deepen the use of LPG among households in the state.
