Natural gas flaring such as this at a Royal Dutch Shell facility in Nigeria is costing it thousands of lives due to pollution-related health issues and billions in lost income, but the country is hard-pressed to pay for the cost of liquefied natural gas technology that could eliminate the problem.
Photo: NPR
Nigeria loses billions of dollars each year because it lacks the capacity to turn natural gas, which like oil is found with oil in reservoirs deep beneath the earth,
from hundreds of producing oil wells into anything other than huge flaming torches that light up its landscape night and day in the Niger Delta.
Politically, gas flaring has been a hot political issue since gas prices began to rise sharply last year. But it has been a health issue for the villages and cities in proximity to the flaring for much longer. Nigeria's problem has been that it cannot afford the huge cost of the technology that would allow it to exploit the high gas prices on global markets.
In fact, Mahtani reports, it is not paying its way now in a technical joint venture with Shell Petroleum Development Co., the Nigerian operatingentity of the multinational giant that is headquartered in the Netherlands.
Shell has said progress toward reducing flaring levels further has been slowed by shortfalls in funding from the government, which as a silent partner in onshore joint ventures is required to contribute to a yearly "cash call" that would partly be used to speed the construction of gas-gathering networks. The shortfall this year was estimated at $1 billion, multinationals say.
In the meantime, environmentalists who say multinationals and the Federal Government are not doing enough press the issue harder day by day, and amid the superheated cauldron of Nigerian politics, the issue can be expected to occupy headlines for some time to come.
Here's the Financial Times piece, published New Year's Eve in the Los Angeles Times:
January 2, 2006 latimes.com
GLOBAL REPORT
Nigeria Burns an Opportunity
The nation would like to process its gas reserves into the liquefied form. Instead, the 'flaring' of excess fuel -- and health fears - have risen.
By Dino Mahtani,
Financial Times
Plans to end the environmentally damaging practice of burning off unused natural gas by oil companies in Nigeria are being stymied by funding problems amid pressure to increase oil production, industry officials and environmentalists say.
Nigeria is committed to ending "gas flaring" by 2008 as part of its attempt to find commercial solutions for gas produced with oil pumped from the Niger Delta region. But levels of so-called associated gas flaring have been rising again in recent years.
Flaring levels in Nigeria are widely recognized as being higher than anywhere else in the world. Friends of the Earth, an environmental group, estimates that Nigerian flaring causes more greenhouse gases than all of sub-Saharan Africa combined. The giant orange flares that burn across the delta region, where most of Nigeria's oil is produced, cause respiratory diseases and premature deaths, and pollute croplands close to village homes in the delta's vast network of swamps and creeks.
Environmental groups estimate that Nigeria burns off almost half its 5 billion cubic feet of daily production because of a lack of gas-gathering networks. Edmund Daukoru, Nigeria's minister to the Organization of the Petroleum Exporting Countries, said that associated gas flaring in Nigeria had risen in absolute levels over the last two years. Royal Dutch Shell, Nigeria's largest oil producer, says it saw its absolute levels of associated gas flaring increase to 728 million cubic feet daily in 2004 from 570 million in 2002.
The increase in flaring was prompted by higher oil production, and represents a huge lost opportunity for Nigeria, which would like to process its gas reserves into liquefied natural gas that could be shipped internationally. Nigeria is already one of the world's biggest exporters of natural gas.
Billions of dollars of investment by multinationals in gas-gathering networks have at least pulled back flaring from growing as quickly as oil production. Billions more dollars earmarked for liquefied natural gas export plants, a regional gas pipeline, gas-powered electricity plants and gas re-injection projects should in theory help bring flaring down to insignificant levels over the next few years.
Shell's latest flaring figures already show a fall from 2004 to an average of 614 million cubic feet of associated gas flared daily for 2005, but environmentalists say the figure is still too high.
Shell has said progress toward reducing flaring levels further has been slowed by shortfalls in funding from the government, which as a silent partner in onshore joint ventures is required to contribute to a yearly "cash call" that would partly be used to speed the construction of gas-gathering networks. The shortfall this year was estimated at $1 billion, multinationals say.
Citing funding problems, Shell has pushed back its flaring elimination date to 2009. But last month, a Nigerian judge ruled in favor of a delta community that challenged the company's right to flare gas nearby. Government officials have said that if all flaring were ordered to stop, crude oil output would grind to a halt. Shell has challenged the judgment and continues to flare.
The case has further hit the hopes of environmental groups that flaring will stop on time. Shell says that oilfields for which it cannot find a solution will shut during 2008, though fields where flaring works are continuing will go on pumping.
With Nigeria, Africa's biggest oil producer, keen to increase its oil production from its existing joint ventures with Shell, Exxon Mobil Corp., Chevron Corp., Total unit Elf and Agip, pressure for more flaring is likely to persist.
Confusion over gas allocations for projects has troubled officials in Nigeria's oil ministry, who say some schemes have overstated gas requirements, which could cause supply problems and affect flaring.
"The contradictions in the statements and positions taken on gas worry me," Daukoru said.
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