The Nigerian government pegs the price of cooking gas, to keep it down, while seeming helpless in controlling gas flaring, which is harmful. With the hike in the cost of cooking gas, EHIME ALEX writes that government can channel its effort at converting the flared gas to domestic use
The recent spike in the cost of Liquefied Petroleum Gas, which is used for cooking in homes, has continued to draw worries across various quarters. The hike has not only brought untold hardship to Nigerians, but has also exposed the opportunities gas faring cost to household cooking in Nigeria.
A 12.5kg cooking gas, which was sold at N3,000 a few months ago, now sells for about N7,500. The blame has been directed to the gas marketers.
The Marketing Manager of the Nigeria Liquefied Natural Gas Limited, Austin Ogbogbo, had reportedly said that marketers were unable to offtake the full 450,000 metric tonnes of LPG allocated to the Nigerian market due to various factors.
But, Financial Street gathered that the price hike was due to the country’s high dependence on importation of LPG.
The National Chairman, Liquefied Petroleum Gas Retailers Branch of NUPENG, Mr Chika Umudu, said. “As the dollar is appreciating against the naira, the price of LPG is increasing.”
According to PricewaterhouseCoopers, harnessing Nigeria’s proven gas reserves can stimulate an estimated Gross Value Added of $18.3bn yearly to the domestic economy, while optimising domestic utilisation could support 6.5 million Full Time Equivalent jobs for the economy.
However, Financial Street gathered that the Obiafu-Obrikom-Oben gas pipeline, a critical infrastructure expected to boost gas supply to thermal power plants and delivery of natural gas to power sector and industry, was halted due to the outbreak of the Coronavirus Disease.
Meanwhile, gas consumption is to accelerate steadily to 20.1 billion cubic metres till 2027. Fitch Solutions reported that this was due to greater availability of gas, which would support more use of natural gas in the power sector, adding that gas would remain below the government’s desired targets due to lack of accelerated investment in vital infrastructure.
A bright spot
According to the World Bank, gas flaring, which involves the burning of natural gas associated with oil extraction, takes place due to a range of issues, from market and economic constraints to lack of appropriate regulation and political will.
While global gas flaring decreased by five per cent from 150bcm in 2019 to 142bcm in 2020, Nigeria remained among the top seven gas flaring countries for nine years running, the ‘World Bank 2020’s Global Gas Flaring Tracker report’ showed. The report further showed that although Nigeria remains in the top seven largest gas flaring countries in 2020, it has nonetheless steadily reduced its flaring by some 70 per cent over the past 15 years.
“Gas flaring in Nigeria has declined from over 25bcm in 2000 to close to seven bcm in 2020,” the report added.
Global call on gas flaring
Ahead of this important milestone are calls for governments to put gas flaring reduction front and centre in their Nationally Determined Contributions, and for oil-producing countries to position it at the heart of their “net-zero” and energy transition plans.
“Eliminating routine gas flaring is commonsense because any action to reduce flaring profoundly reduces the direct or Scope 1 emissions of the oil and gas sector. In this sense, it is what we call a ‘low-hanging fruit’, alongside other climate actions, like preventing and minimising methane leaks and eliminating routine venting,” World Bank also reported. “While there are certainly barriers and constraints, ending routine gas flaring represents a big ‘win’ for climate action. To minimise COVID-19 impact, reduce emissions and accelerate the energy transition, the commitment of governments and companies to end routine gas flaring is now more important than ever.”
Alternatives to gas flaring
Apart from the attendant environmental and social impact of gas flaring, its economic effect is equally demanding. According to Prof Nnamdi Nwulu, a lecturer at the University of Johannesburg, with other co-researchers in a paper entitled ‘Gas Flaring in Nigeria: Opportunity for Household Cooking Utilisation’, gas flaring in Nigeria is not an accident; but a calculated attempt to cut cost at the expense of the people and the eco-balance of the environment.
Shell, ExxonMobil, Chevron, Texaco and TotalFinaElf are the main oil exploration firms in Nigeria.
Nwulu and his colleagues argued that these firms flare a good proportion of the associated gas lifted with crude oil because of the lack of adequate infrastructure to supply the gas to possible end-users because the recovery cost of associated gas is much higher than the cost for non-associated gas.
Crude oil exploration comes with associated gas that needs to be separated before the oil is refined and there are three options for separating the associated gas, the researchers noted. The first is to re-inject the gas to the ground for future re-use, an option used in developed nations of the world that have the required infrastructure and mechanisms; the second is to use it for domestic and commercial purposes which involves acquiring equipment for liquidification and transportation; and the third, the easiest ground, is to flare the gas.
Prohibition of gas flaring
In most countries, gas flaring is prohibited by law due to its harmful effect on the environment and the people, except in unavoidable circumstances such as accidental breakdown of machinery, pipelines and others.
In Nigeria, the ‘Flare Gas (Prevention of Waste and Pollution) Regulations, 2018’ stipulates, “The Regulations prohibit Producers from flaring gas from any facility operated by such producer, except pursuant to a certificate issued by the minister based on the provisions of the Associated Gas Reinjection Act. This prohibition also applies to routine flaring or venting of natural gas, except flaring for safety reasons, by Permit Holders.”
But Nwulu and his co-researchers traced the issue of gas flaring in Nigeria, largely due to poor technology and infrastructure, weak governmental policies to enforce harvesting the gas for domestic use or the re-injection of the gas into the ground.
“The oil firms have used the gross corruption among the political leaders to mitigate proactive enforcement of standard practices as obtained in developed countries,” they observed.
In their submission, the researchers proposed government’s involvement in converting the gas flared in the Niger Delta region to a useful cooking energy source by improving on the infrastructure that would make the commodity available to every household at a cheap rate. “The gas flared by Nigeria can be converted to LPG and transported to every part of the country. The LPG has not gained wide acceptance in Nigeria due to high price.”
Regulating domestic price of natural gas promotes inefficiency, as price pegged might not be reflective of actual cost of gas despite the position of the National Domestic Gas Supply and Pricing Regulations in 2008, PwC analysts said.
Get real time update about this post categories directly on your device, subscribe now.