Flared Gas: An Untapped Reserve of Wealth and Power in Nigeria

Wisdom .P. Enang (Author), Joshua .O. Ighalo, Emmanuel .U. Mboho

SPEAKER
Dr. Wisdom Patrick Enang (AMIMechE)
MEng, MPhil, PhD Mechanical Engineering
+2348173555667, wisdom_Enang@yahoo.co.uk

IQPC – Digital Refineries Africa Summit 23 -24 July 2019, Lagos Nigeria
 NIGERIAN OIL AND GAS INDUSTY AT A GLANCE

• Nigeria is the 10th largest oil producer in the world and the third largest in Africa,
with a total of 159 oil field and 1481 wells in operation.

• Nigeria is the largest producer of low-sulphur sweet oil in OPEC.

• The Nigerian government has an average of 60 percent ownership interest in JVs

with IOCs.

• About 52% of the Nigerian total proven gas reserve is associated (natural gas
obtained during the production of crude oil).
 CURRENT NIGERIAN NATURAL GAS PATHWAY
* CNG in
Flare Gas Pipeline Gas Flare Nigeria has
relatively
Domestic Gas Consumption CNG lower
Natural Gas End User investments
Gas Exportation LNG compared to
LNG
Resource Utility Viable transportation

Why is Gas currently flared?

• Lack of infrastructure at some oil fields to

harness the produced associated gas.

• A limited number of reservoirs suitable for

gas re-injection and storage.

• The expensive nature of developing and

installing a pipeline network for natural gas.

• A limited local, regional and international

natural gas market.

• The difficult terrain of the Niger delta which

is a hindrance to the gas gathering process.
FLARING STATISTICS

178 Flare sites

Knowledge Bank:

❖ In 2016, gas flared

constituted 14.33% the total
gas produced in Nigeria
 THE HEALTH AND ENVIRONMENTAL COST OF FLARING

Knowledge Bank:

❖ As of 2012, Nigeria emitted the

equivalent of 301,010 kt of CO2 in
greenhouse gas (CO2 & CH4).

Pollution
Toxic green-house gases

CO2, CO,
SO2, NOx,
VOCs, PM

Rusted roof due to Acid Rain

THE OPPORTUNITY COST OF FLARING
 THE NIGERIAN ROAD TO BEING FLARE FREE

Regulatory Approach

• 1969 - Petroleum Drilling and Production Regulations:

❖ Provides regulations for protecting sacred lands, water and the environment.
❖ Mandates accurate record keeping by licensees
❖ Provides process of abandonment of oil wells.

• 1979 - Associated Gas Re-Injection Act:

❖ Compels every company producing oil and gas in Nigeria to submit
preliminary programmes and detailed plans for gas re-injection.
❖ Regulates gas flaring by oil and gas companies in Nigeria

• 1992 - The Environmental Impact Assessment Act:

❖ Sets out the general principles, procedure and methods to enable consideration
of environmental impact assessments on certain public or private projects.

• 2018 – Flare Gas (Prevention of Waste and Pollution) Regulations 2018:

❖ Introduces the “polluter pays” principle to gas flaring (similar to carbon tax).
❖ Imposes significant obligations regarding reporting gas flaring activities.
❖ Mandates government access to all flare gas free of cost and without royalties.
❖ Imposes significant penalties for breach of regulation.
 THE NIGERIAN ROAD TO BEING FLARE FREE

Commercial Approach 1

Nigerian Gas Master Plan

❖ The Nigerian gas master plan was put in place on the 13th of February 2008, to stimulate
the county’s economic growth through the development of the natural gas sub-sector.
❖ The key components of the Gas Master Plan are: The Domestic Gas Supply Obligation,
the Gas Pricing Framework and the all-important Gas Infrastructure Blueprint.

Objectives of the Nigerian Gas Master Plan

❖ To maximise the multiplier effect of natural gas in the economy via its use for electric
power generation.
❖ Up-scaling of domestic LPG and public transportation based on compressed natural gas,
and stimulation of wide-ranging industrial development using natural gas products.
❖ To optimize Nigeria’s share and competitiveness in high value export markets
❖ To apply ecological principles of gas resource management to ensure a sustainable
development approach.
 THE NIGERIAN ROAD TO BEING FLARE FREE

Opportunities for Improvement of the Nigerian Gas Master Plan

❖ Availability: The Nigerian gas sub-sector has been optimized from inception (with
cheaper supply channels) for the export of gas, rather than domestic utilization.
❖ Sustainable supply: The unstable and insufficient supply of natural gas to the power
plants in the country have discouraged the major players in the power sector from
putting into motion the plans for expansion of power production capacity.
❖ Other challenges include: Affordability and commerciality of supply, deliverability and
cost-effectiveness, legal and regulatory framework, and funding.
❖ The Operator’s Dilemma: Cost / benefits of owning an onsite gas compression facility,
which is needed to supply compressed natural gas.
 THE NIGERIAN ROAD TO BEING FLARE FREE

Commercial Approach 2

Nigeria Gas Flare Commercialization Program (NGFCP)

❖ Designed to eliminate routine and non-routine gas flaring through technically and
commercially viable gas utilization projects developed by competent 3rd party investors.

Flare-Gas-
to-market-
products

Modus Operandi
❖ FGN takes associated gas at the flare site free of charge, and without payment of royalty.
❖ Bids it out to third parties in a series of auctions.
❖ The third parties will propose projects and are selected on the basis of their technical
and financial qualifications, soundness of project proposals, and several other criteria.
Investor’s Incentive
❖ Bidders have flexibility of flare sites to bid for, the gas price, the end market or gas
products (FG-2-MP), as well as the technology to be used (FA-2-MT).
 THE NIGERIAN ROAD TO BEING FLARE FREE
Objectives of the NGFCP

❖ Benefit Niger Delta communities ❖ Positively impact the Nigerian economy

❖ Present a market-driven solution for flares ❖ Be bankable for investors and lenders
❖ Ensure the safety of producers’
❖ Reduce routine gas flaring by 2020
Exploration and Production operations.

Investment Value and Returns

Estimated Annual Revenue
: ~ $1 billion

Knowledge Bank:
❖ The NGFCP is the
first global market
driven program of
this size.

Host Community Benefits

❖ Products at concessional prices.
❖ Procurement of goods and services from the host communities.
❖ Setup of social infrastructure for the host communities.
External drivers for change
❖ Nigerian membership of the Global Gas Flare Reduction Partnership (GGFR)
and the World Bank’s Zero Routine Flaring (ZRF) initiative by 2030 (2016).

❖ Federal Executive Council approval of the Nigerian Gas Flare

Commercialization Program (NGFCP) (2016).

❖ Signatory to the United Nations Framework Agreement for Climate Change

(UNFCCC) to reduce greenhouse gas emissions (GHGs) (2016).

Knowledge Bank

❖ The NGFCP would reduce Nigeria’s CO2 emissions by ~13 million tons per
year which is to be monetised under the emissions credit programme.

❖ Selected investors will be handed their preferred flare sites by May, 2020.

❖ The NGFP estimates that harnessing 50 top flare sites in Nigeria, could
reduce the volume currently flared by 80%.

❖ Although investors have control over the flare gas price to offer the FGN,
the NGFCP has a floor price of $0.25 per 1000 m 3 ft of gas.
A Road Map to the Development of Sustainable National Gas Initiatives

Initiatives Challenges Potential Solutions

❖ Development of central gas gathering and processing
The Nigerian facilities in Delta, Rivers and Akwa Ibom State, for
Gas Master treating wet gas, extracting Liquefied Petroleum
Plan Gas/Natural Gas Liquids, and exporting lean gas into
transmission systems.
& Gas ❖ Development of gas pipeline transmission systems and
availability, gas compressor stations to efficiently distribute gas to
The Nigerian supply and areas of need in-country.
Gas Flare storage
Commercializ ❖ The use of scalable containerised, skid mounted, barge
ation type “plug and play” technologies, virtual pipeline as
Program well as compressed natural gas (CNG) trucks.
❖ Functional Gas Aggregators with storage facilities where
oil and gas companies can send their gas directly to.

Solving the

Of an onsite gas
Operator’s Dilemma compression facility
 GAS VALUE CHAIN OPTIONS FOR POTENTIAL INVESTORS
CNG Value Chain

LNG Value Chain

Average cost breakdown*

11% 42% 20% 27%

CNG and LNG Process CNG LNG
Physical state Gas Liquid
Temperature in tank Ambient -162oC
Typical pressures in 200 - 250 5–8
tank (bar)
Density 175 kg/m3 435kg/m3
at 200 bar
Capacity (million m3) 1.4 - 22 100 – 250
Reach (km) 2000 – 6000 – 12,000
5500
Upstream Low Very large
infrastructure cost
Downstream Low Very large
infrastructure cost

Cost Components Number of potential Large Low

export sites
LNG CNG
 FUTURE NIGERIAN NATURAL GAS PATHWAY (ZERO FLARE)

Domestic Gas Consumption Pipeline

CNG
Natural Gas End User
Gas Exportation LNG

Resource Utility Viable transportation

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