Financial Times: Giant orange gas flares mean lost opportunities for Nigeria: “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.”: “Citing funding problems, Shell has pushed back its flaring elimination date to 2009. But last month, a Nigerian judge ruled in favour of a local delta community that challenged the company's right to flare gas nearby.”: “Meanwhile, Shell has challenged the judgment and continues to flare.”: Wed 28 Dec 2005

By Dino Mahtani
Published: December 28 2005

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 attempts 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 recognised 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 of its 5bn cubic feet of daily production because of a lack of gas-gathering networks. Edmund Daukoru, Nigeria's minister of state for oil, told the FT in an interview this year that associated gas flaring in Nigeria had risen in absolute levels over the last two years. Shell, Nigeria's largest oil producer, says it saw its absolute levels of associated gas flaring increase to 728m cu ft daily in 2004 from 570m cu ft 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 reinjection 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 614m cu ft of associated gas flared daily for 2005 but environmentalists say the figure is still too high. Shell has said progress towards 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 $1bn (£580m, €845m), multinationals say.

Citing funding problems, Shell has pushed back its flaring elimination date to 2009. But last month, a Nigerian judge ruled in favour of a local 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. Meanwhile, 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, already Africa's biggest oil producer, keen to increase its oil production from its existing joint ventures with Shell, ExxonMobil, Chevron, 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," said Mr Daukoru.

A draft report of a five-year strategic plan for Nigeria's largest liquefied natural gas scheme, NLNG, has also said there could be delays in gas fed to the project because of supply issues at upstream plants, especially in the coming year. Shell, which has a stake in NLNG and feeds into the project, has however said it is confident of meeting its obligations to all clients.
 

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