Wednesday , March 21 2018
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Nigeria’s anti-flaring, spillage laws: How the FG fires water bullets

…millions at risk in the Niger Delta

Benchmarking Nigeria’s major economic sector requires stringent laws that could drive investment in renewables and protect lives from pollution. The Federal Government, however, appears to be romancing the oil companies at the detriment of the populace.

With an estimated 192 trillion cubic feet of natural gas reserves, Nigeria is one of the top ten countries with the largest gas reserves in the world. If well harnessed and monetized, the country could be raking in billions of dollars in addition to oil revenue.

Roughly over 50 per cent of gas deposits are found in the nation’s crude oil around the Niger Delta region. Once lifted with oil, the gas must either be extracted as an alternative source of energy or flared off as a by-product. Oil drillers in the country would rather avoid the cost of producing and refining gas; hence their preference for crude exports.

Globally, about 200 billion cubic metres of gas is flared annually. Nigeria is said to be the 7th largest gas flaring country in the world with over 17 billion cubic metres of flared gas annually with attendant environmental hazards and health problems, according to the revelations of the Senior Technical Adviser to the Minister of State for Petroleum Resources, Gbite Adeniji.

In his presentation titled: ‘Roadmap to end Routine Gas Flaring by 2020’, which he presented at the second West African International Petroleum Exhibition and Conference held recently in Lagos, Nigeria, Gbite mentioned some of the hazards to include emission of greenhouse gases such as methane and carbon dioxide that contribute to climate change, release of particles that cause acidic rain and other acute health problems such as leukaemia , aplastic anaemia, asthma, bronchitis, premature mortality, among others.

Millions of Nigerians are vulnerable to health hazards caused by gas emissions as a result of flaring, but the most vulnerable and endangered region is the Niger Delta, where the largest deposits of gas and oil reserves are found.

The United Nations Environmental Programme (UNEP) reported in 2016 that the region was one of the most polluted areas inhabited by humans on earth. Coupled with oil spillage, the report disclosed that there was high concentration of hydrocarbon and benzene, two carcinogens that exposed the people of Ogoniland and environs to perpetual lack of portable drinking water.


It also found from water samples that hydrocarbon was over 1000 times above the WHO-recommended standard for drinking water. This was said to have permeated over 122 square kilometres, covering more than 220 locations densely or sparsely populated.

Among other recommendations, UNEP highlighted the threat of pollution to lives in that region and called on the Federal Government to initiate measures for cleanup, which would take at least 30 years with an initial capital commitment of $1 billion to be paid by oil companies indicted for causing the enormous damage and the FG.

One of the major oil companies found guilty of pollution was the Royal Dutch Shell, which was the first to discover oil in the region in 1956. Other culpable foreign oil companies include Chevron, ExxonMobil, Shell Petroleum Development Corporation (SPDC), Total, Eniagip, Addax Petroleum, Conoco Phillips, Petrobras, Statoil hydro and many others.

Laws without hands

In attempts to combat the corrosive effects of pollution resulting from gas flaring and oil spillage, there have been several pronouncements and assents to bills that seek to curtail excesses of oil companies in the country. But the flippant attitudes being exhibited by the companies have rather unveiled a lack of seriousness on the part of the government.

For instance, the Petroleum Act of 1969 remains the primary law regulating oil and gas exploration activities in Nigeria. The Petroleum (Drilling and Production) Act 1979, made pursuant to the Petroleum Act, provides that the licensee or lessee of an Oil Mining Licence (OML) shall, not later than five years after the commencement of production, submit to the Minister of Petroleum Resources, a feasibility study, programme or proposals that it may have for the utilisation of any natural gas that has been discovered in the relevant area.

Unfortunately, this provision of the law hasn’t been adhered to by the companies and there hasn’t been any penalty for defaulters. Another grey area in the law is that oil companies have the permission to flare gas for a period of five years before submitting the feasibility report. With these and other shortcomings, a concrete step to regulate gas flaring in Nigeria was reached in 1979 with the enactment of the Associated Gas Re-Injection Act.


How has the AGRIA fared? The act became the first anti-gas flaring regulatory framework in Nigeria with the primary intent and purpose of phasing out gas flaring in Nigeria. It was the statutory response to the environmental impacts of gas flare, fashioned out to compel every company producing oil and gas in Nigeria to submit preliminary programme for gas re-injections and detail plans for implementation of gas re-injection.


Section 1 of the Act states thus; ‘Notwithstanding the provisions of Regulation 42 of the Petroleum (Drilling and Production) Regulations made under the Petroleum Act, every company producing oil and gas in Nigeria shall, not later than 1 April, 1980, submit to the Minister a preliminary programme for(a) schemes for the viable utilisation of all associated gas produced from a field or groups of fields;(b) project or projects to re-inject all gas produced in association with oil but not utilised in an industrial project’.


The Act placed a duty on oil companies to submit detailed programmes and plans for implementation of gas re-injection not later than 1 October, 1980.


Under the same Act, no company engaged in the production of oil or gas shall, after 1 January, 1984, flare gas produced in association with oil without the permission in writing of the Minister. The Minister is vested with the power to issue certificates to an oil company to continue to flare gas if such a company pays the sum prescribed by the Minister. Invariably, the law has always provided for application for permits to be granted by the Minister provided the applicant pays the amount prescribed by the Minister, without providing for strict measures to ensure its effectiveness.

Notably, the bill, which was intended to prohibit gas flaring as a measure for environmental protection, was contradicted by the permission given to oil companies to continue flaring gas on the payment of minimal fees.

The Petroleum Industry Bill

After many years of working, overhauling the legislative framework of the oil and gas industry in Nigeria, the Nigerian government made a significant legislative effort to combat the menace of gas flaring in Nigeria through the Petroleum Industry Bill in 2012.

The Bill seeks to consolidate all existing oil and gas in the country into one piece of legislation by addressing certain fundamental issues as the dichotomy between oil and gas regimes; progressive acreage management, among others.

The PIB is an Act that provides for the establishment of legal, fiscal and regulatory framework for the Petroleum industry in Nigeria and for other related matters. Part 1 of the Act lists a number of objectives which include the creation of conducive business environment for petroleum operations, enhancement of exploration and exploitation of petroleum resources in Nigeria for the benefit of the Nigerian people, creation of an efficient and effective regulatory agency, among many others.

Of particular interest is the provision of Part 1, Section 1, Subsection j, which enumerates another objective of the Act as being to ‘protect health, safety and the environment in the course of petroleum operations; for the benefit of the Nigerian people.

Regrettably, this provision is a contradiction to what is obtainable in the sense that it still offers no protection on the health of citizens in vulnerable locations where gas flaring persists.

A comparison of the PIB and the Associated Gas Re-Injection Act of 1979 reveals a similarity between the two legislations, as the PIB does not out rightly prohibit gas flaring in Nigeria. Rather, the Bill makes provision for the payment of penalties for gas flaring violations, a mere replication of the earlier Acts. Specifically, Section 201of the Bill stipulates that the ‘lessee shall pay such gas flaring penalties as the Minister may determine from time to time’.

There is also an added obligation on the part of the lessee to install all such measurement equipment as ordered by the inspectorate to properly measure the amount of gas being flared.

Although the above regulations have contributed to the drastic reduction of the proportion of natural gas flared which was 90-99% prior to 1980, it is worth mentioning that the provision of Section 201, which arrogates to the Minister the sole responsibility of determining the penalties for violations, is too open-ended and subject to the whims and caprices of the Minister.

In a country where corruption is endemic, the power so granted to the Minister is likely to be abused. Perhaps, this accounts for the too many corruption cases leveled against past ministers of the sector.


NGFCP, the newly-born old baby

After many failed laws, the government appears not to have learnt some lessons. In December, 2016, the Minister of State for Petroleum, Emmanuel Ibe Kachukwu, launched the Nigeria Gas Flare Commercialisation Programme (NGFCP) with a mandate to achieve zero gas flaring in Nigeria by 2020.

Two years down the line, the NGFCP appears more like a toothless bulldog. Outlining its roadmap at WAIPEC, Chairman, Ministerial Steering Committee on NGFCP, Gbite Adeniji, said harnessing gas from the top 50 flare points would drastically reduce volume of flared gas by 80 per cent. The same amount can be utilized in alternative energy sources.

However, the NGFCP requires $3.5 billion worth of investment to achieve its mandate by 2020. But two years after, no serious prospects have been made public; at least not to the knowledge of Business Eye Magazine.

The NGFCP may have been hoodwinked to believe it can actually end a common practice, which has seen the oil companies and the Federal Government in romantic relationship, such that if threatened, might end up in chaos.

Changing trends in energy consumption

Current trends reveal that major oil consumers are already sourcing for alternative energy in renewables, and the multinational oil companies – Shell, Total, Saudi’s Aramco and Stat Oil – are among leading investors.

According to the annual forecast of the International Energy Agency (IEA) made available in November, 2017, energy demand will rise 30 per cent by 2040, driven by higher consumption in India and Africa.

But at the same time, the report indicated that the renewable energy sources will become more important due to emergency of electric cars and the need to fight climate change.

Based on this prediction, although the US oil and gas output is projected to surpass that of any other country in history, due to “a remarkable ability to unlock new resources cost-effectively”, the report said renewable sources such as solar and wind are expected to meet 40 per cent of the new demand.

In the EU, renewable energy will represent 80 per cent of new capacity.

The Chinese government is currently focusing on renewable energy such that the demand for it will increase by an average of 2 per cent annually.

“Norway aims for all new passenger cars and vans sold in 2025 to be zero-emission vehicles. Sweden has committed to 100 per cent renewable energy by 2040. China has surpassed its 2020 solar target. Eleven EU countries have already hit 2020 target in renewables. USA, Germany, France, Canada, etc., have already made headway in renewables,” said Tony Atah, Managing Director, Chief Executive Officer, Nigeria LNG Limited.

It is estimated that by 2040, 31 per cent of world electric consumption would come from hydropower sources. This projection is already dictating policy direction and business plans of multinational oil companies.

IN WHICH COUNTRY? Going by this trend, Total has invested $1.4 billion for 60 per cent controlling stake in Sun Power, American Solar Energy Firm. Besides this, Total has acquired stake in energy storage services firms, Stem and Sunverge and battery cell firms eyeing future of solar energy.

Other findings by the Business Eye Magazine show that the company also has 23 per cent indirect interest in EREN RE by subscribing to a capital increase for an amount of €237.5 million. The agreement also gives Total the possibility to take over control of EREN RE after a period of 5 years.  

EREN RE, established in 2012, has developed a diversified asset base (notably wind, solar and hydro) representing a global installed gross capacity of 650 MW in operation or under construction.

The company aims at achieving a global installed capacity of more than 3 GW within 5 years. The capital increase subscribed by Total will enable EREN RE to cover its financing needs to accelerate its development in the coming years.

“Total integrates climate challenge into its strategy and is pursuing steady growth in low-carbon businesses, in particular in renewable energy. By partnering with EREN RE, we are leveraging a team that has a proven track record in renewable power production, and we are investing in an additional asset to accelerate our profitable growth in this segment, in line with our ambition to become the responsible energy major. So we welcome to Total Eren into the Total Group!” said Patrick Pouyanné, Chairman and CEO of Total.

WHERE? The Royal Dutch Shell has spent over $400 million on a range of acquisitions from solar power to electric car charging points, indicating its drive to expand its investment in renewable energy beyond its oil and gas production.

Reports indicate that the scale of the buying spree pales in comparison to the Anglo-Dutch company’s $25 billion annual spending budget. But its first forays into the solar and retail power sectors for many years shows a growing urgency to develop cleaner energy businesses.

WHERE? Sources disclosed that Shell agreed in December, 2017, to acquire independent British power provider First Utility for around $200 million.

Although Shell has declined commenting on the acquisition, the company’s Managing Director in Nigeria, Bayo Ojulari, confirmed at an event recently that “Shell has investments in Solar Frontier, Tier 1 PV Module Supplier of Japan through 100% investment by subsidiary, Showa Shell Sekiyu.”

Other findings reveal that Shell has also created a green energy division to invest in wind energy in the pacific areas, and has committed to invest as much as $1bn a year in “new energy” by 2020 — a fraction of its projected annual capital expenditure of $25bn-$30bn., the company’s Chief Executive Officer, Van Beurden, disclosed during an interaction with reporters in Lagos last year.

Another multinational oil driller, Chevron, acquired its renewable energy arm in 2000, and went on to develop multiple large-scale solar and geothermal projects.

According to a Bloomberg report, the division doubled its projected profit target in 2013. However, according to the report, the company stopped the renewable arm in 2014 as revenue grew thinner in the context of Chevron’s total earnings.

Next to Chevron is BP, which has 14 onshore wind farm assets in the United States. In fact, BP had invested in solar energy through BP Solar with Tata, even though it has exited from the venture on reporting losses.

Saudi’s Aramco has a $5 billion investment in renewables with a view to generating 10GW energy capacity by 2023; while Stat Oil has announced $200 million investment in renewable energy by 2022.

All the investments captured above are outside Africa, not even close to Nigeria. This magazine has gathered that even though the same oil companies (particularly Shell, Total, Chevron, etc.) are operating in Nigeria, they have done little or no investment in Nigeria’s liquefied gas.

When contacted, they declined commenting on any efforts they are making in that regard. Perhaps, gas flaring is their call in Nigeria.

Reports indicate that Shell has only 25.6 per cent shares in Nigeria’s Liquefied Natural Gas (LNG). Total has 15 per cent; Eni 10. 4 per cent; while the largest share of 49 per cent is owned by the Nigerian National Petroleum Corporation (NNPC).

Until these companies commit their investments in the nation’s NGFCP project, Nigeria’s anti flaring laws might just be firing water bullets.

Renewing Nigeria’s energy sector with urgency

Nigeria suffers an acute energy crisis due, largely, to the inability of the gas sector to meet domestic demand for power generation and other gas utilization projects and this has severely constrained the nation’s economic development.

The Africa’s giant with her population estimated over 170 million people is currently distributing little above 5,000 mw of electricity. Her economy is plagued, even with enormous resources, due to poor energy generation to drive investment.

Nigeria signed the Paris Agreement on Sept. 22, 2016 on the sidelines of the 71st UN General Assembly. The country also endorsed the Paris Climate Change agreement “Gas flaring – the “low-hanging fruit” in a global climate action plan, signaling her commitment to international obligations on gas flaring, oil spillage and pollution.

However, poor oil practices, lack of policy thrust and weak regulations paved way for flaring and other unfriendly practices to flourish, especially in the Niger Delta region.

But with the right pegs in round holes, the NGFCP could marshal a change in the right direction as the world heads towards a revolution in renewables.


About Lanre Oyetade

A multiple award winner in Economics and business journalism, Lanre Oyetade has served close to two decades in the media industry, spanning different notable stables, where he is privileged to have risen to the position of a title editor. A masters degree holder in Economics from the University of Lagos and doctoral student at the Babcock University, he is a winner of the prestigious NMMA Capital Market Award for two consecutive years (2004 & 2005), and was also a nominee for the body’s banking and finance and money market awards for two years. In 2013, he also won the Most Outstanding Business-Reporting Title Editor award of the National Institute of Marketing of Nigeria (NIMN). A minister in the LORDS’s vineyard, he has been an inspirational speaker and resource person at many corporate and religious fora since early 2004, and has so far authored three books on the capital market; on personal effectiveness, and on personal finance, in 2008 and 2014, respectively.