End gas flaring or stop oil production

Photo credit: newsrescue.com

By The Editorial Board of The Guardian Newspaper

During the opening of the Sixth Congress and Exhibition of the African Petroleum Producers Association (APPA) held in Abuja the other day, President Muhammadu Buhari said that his administration with the support of the legislature would sign the United Nations Agreement of ‘Zero Routine Gas Flaring by 2030’. He urged “all APPA member countries to set realistic targets for gas flare-out in the region.” By implication, what he termed the national target of 2020 was unrealistic. That is unacceptable.

Routine gas flaring is illegal in most countries and Nigeria’s score card in this regard should be examined separately from other member countries of APPA. Gas flaring refers to the burning of natural gas associated with pumping crude oil out of oil wells. By the early 1970s, crude oil production level had reached over two million barrels per day, that is more or less today’s production level. Nigeria is the seventh largest OPEC crude oil producer, very far behind the leading producer, Saudi Arabia, that can pump out 10 million barrels per day. However, by flaring 40 per cent of her natural gas output (it is largely associated gas), Nigeria by 2008 had become the world’s biggest gas flarer: she flared four times the volume of natural gas burnt by Saudi Arabia and, according to the World Bank, accounts for 12.5 per cent of total flared natural gas in the world. The fact that Nigeria’s oil fields have rich deposits of gas does not excuse the disproportionately high flaring rate.

The international oil companies (IOCs) operating in the country do not indulge in routine gas flaring in their home countries. With a little additional investment, the associated gas can be reinjected into the ground or the requisite infrastructure for utilising the associated gas can be put in place. As far back as 1969, the Federal Government directed oil companies to end gas flaring within five years of business by taking steps to utilise the gas. But continued gas flaring led to the enactment of the Associated Gas Reinjection Act (1979). Despite fixing year-end 1984 as the gas flare-out deadline, government betrayed readiness to look the other way by adding the option of a fine for non-compliance. The IOCs chose to pay fines. Nonetheless, by creating the NNPC in the second half of the 1970s and by vesting some 60 per cent equity stake of the joint-venture operators in the corporation, the latter bears the ultimate responsibility for the former’s compliance with any oil and gas mining regulations, including ending gas flaring.

In that light should be viewed the following pertinent issues. Firstly, a Federal High Court ruled in 2005 that gas flaring is a great violation of the human rights of residents in the neighbouring communities. What action has NNPC, nay, the Federal Government taken since then? What course of action is open to residents in oil producing communities, who have been abandoned to their fate and whose human rights continue to be violated. Secondly, in 2009, the Shell Petroleum Development Company reported that “More than $3 billion of additional investment is needed to reduce flaring as low as is reasonably possible.” Suppose Shell gave a credible cost estimate. Meanwhile, gas flaring has continued unabated. Also, the NNPC has, over the years, chalked up arrears in joint venture cash call payments. Is NNPC’s indebtedness the cause of the continued gas flaring since 2009? Thirdly, the Petroleum Industry Bill, which was first presented to the Sixth National Assembly, fixed December 2012 as the deadline for an end to gas flaring. We have the Eighth National Assembly, but the PIB has yet to be enacted into law. Some legislators from non-oil producing states objected to the provision requiring host communities to own 10 per cent stake in relevant operations in the petroleum sector. Is the 10 per cent stake really enough to address the problems that crude oil production has brought about?

The devastating effects of gas flaring and oil spills have been fully documented for the Federal Government through commissioned studies, and by experts. Oil producing communities suffer severe environmental degradation with high carbon emissions, which endanger man, animals and plants, as well as, wreak colossal economic losses. The harvest of afflictions include contaminated water sources, poisoned fishing ponds, reduced soil fertility resulting in dropping crop yields, acid rain, chronic health problems leading to premature deaths, biodiversity loss and building decay within short periods. These afflictions may be easily reversed by investing a small fraction of revenue realised from the recovered crude oil for the conversion of the gas being flared to liquefied petroleum gas for cooking and industrial use, generation of electricity and for export. The country’s power plants contend with crippling inadequate supply of natural gas, which the govt should stop blaming, self-indicting, on pipeline vandalisation.

Curiously, in his statement read to APPA, Buhari canvassed gas utilisation partnerships to help meet future energy needs of African countries. A convincing message for the occasion should have been to relate steps being taken on the home front to install the infrastructure for utilising the natural gas being flared in the Niger Delta. But as if to consign the oil host communities to perpetual damnation, the Minister of State for Petroleum Resources cited funding as the major challenge to utilising the gas. That is completely baseless. The Minister of State is an advocate of contracting foreign loans to finance joint-venture operations. It is an option that will perpetuate foreign control of the oil and gas sector and continued trampling of host communities underfoot, contrary to the intendment of the Nigerian Content Act. Since he took office, Buhari has been amply shown the wrongful fiscal and monetary policies which his predecessors dictated and which have kept the economy in limbo. Additionally, the President has been apprised of Nigeria’s capability of independently financing the petroleum and other sectors of the economy. The prospects are such that Nigeria could decide at will to scale down the stake of IOCs in the country’s oil operations simply by properly managing the available resources. For example, the financial sector currently has some N70 trillion idle lending capacity which could be accessed for public-private partnership undertakings in the various sectors of the economy. The Federal Government should, therefore, stop carrying on in the oil producing areas like a plundering colonial outfit. In a true fiscal federalism, the oil producing states would respect the human rights of the residents therein and guarantee them a good standard of living.

In the light of the foregoing and considering that the Federal Government’s mismanagement of the oil resources over the past half a century has despoiled the oil producing communities in the Niger Delta area, Buhari should publicly declare a firm national natural gas flare-out target within his current term. It is technically feasible. In order to free and garner funds for the actualisation of the plan, Buhari should direct the adoption of proper fiscal and monetary policy measures forthwith. A delay or lack of earnestness in executing the plan, could exacerbate the restiveness in the area, should residents in oil producing communities exercise their human rights to self-preservation by taking steps to have oil operators shut in all further crude oil recoveries. The non-escape of natural gas from the shut oil wells will knock out the poisonous flares. It will also bring to an end the death sentence by installment imposed on residents of oil-producing communities by uncontrolled associated gas flaring.