1 January 2009

Nigeria: FG, Oil Majors May Clash Over Gas Flaring Deadline

Major oil companies in Nigeria could clash with the government on the December 31, 2008 deadline to end the flaring of about 20 billion cubic metres of gas yearly.

The government has threatened to sanction anyone that flares gas beyond the date, but the companies, under the aegis of the Oil Producers Trade Section (OPTS), have also declared the date as unrealistic.

The OPTS told reporters in Lagos last year that 2010 could be more realistic, given the technicalities and logistics involved.

Oil firms have flared gas in Nigeria for years.

Lacking facilities to harness gas or a market to sell it, flaring made good business sense, even if it pollutes the atmosphere and gas wasted could earn Nigeria more than $500 million a year.

Aside from this, electricity generation has plunged by about 2,000 megawatts (mw) because of insufficient gas supply to the substations of the Power Holding Company of Nigeria (PHCN).

It was learnt that this, among others, has spurred President Umaru Yar'Adua into action to ensure the final stoppage of gas flaring.

But, to date, no accord has been reached between the government and the oil majors, and this may lead to a clash of interest.

Nigeria flares gas more than any country after Russia: 20 billion cubic metres a year out of a global total of 150 billion.

Manager of the World Bank's Global Gas Flaring Reduction Partnership, Bent Svensson, disclosed that the volume of gas flared in Nigeria has been stable for a decade, though oil production has risen.

Nigeria outlawed gas flaring in 1979, to be phased out five years later.

But since companies pay a little fee for flaring and are allowed to carry on under government-granted exceptions, there is little incentive to stop.

No legislation regulates the gas industry; penalties and procedures are irregularly enforced.

The government approved a Gas Master Plan in February last year to provide for building new facilities, inject gas into domestic supply, and encourage producers to stop flaring once and for all.

Although regulators have threatened heavier penalties for flaring, the fact that oil accounts for about 76 per cent of government revenue and 90 per cent of exports makes the government wary of imposing penalties so tough they may persuade oil companies to shut down production instead.

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