Vice President Yemi Osinbajo’s recent lamentations about gas constraints truncating Nigeria’s power generation is a pungent reminder of how a country’s obsession with one source of income could blind her to the latent potential of others. Over the years, Nigeria has made so much money from crude oil sales that she ignored the huge fortunes inherent in gas, which could easily have been exploited, alongside oil, to ease the economic crisis currently plaguing her.
Nigeria is blessed with an abundance of high quality, sweet natural gas reserve, estimated at over 184 trillion standard cubic feet, according to figures from the Nigerian National Petroleum Corporation. Globally, this places Nigeria in the ninth position, and certainly the leader in Africa. The country’s gas reserve is reputed to be triple that of crude oil. For this reason, the country should be noted more for her natural gas reserve than for oil deposit. This fact was re-echoed recently by Osinbajo at the annual conference of the Nigeria Association of Energy Economics in Abuja, where he said, “… yet, in energy industry circle, Nigeria is described as more (of) a gas territory than an oil territory.”
Rather than exploit this God-given resource to better the lot of her citizens, however, the country fritters it away through sustained flaring that has also taken on the additional notoriety of despoiling the environment. Nigeria’s record of gas flaring is second only to Russia’s. The result has been an incalculable damage done not only to the ecosystem and the health of the people living within the oil-bearing Niger Delta region, but also to the entire world through contributions to the climate change and depletion of the ozone layer.
With the prices of crude oil down to less than $30 per barrel earlier in the year before a rally to $49.01pb on Monday, Nigeria’s gas would have come in handy to ease the pressure currently borne by the naira as a result of foreign exchange scarcity. Despite leading the world in gas flaring, Russia, through its gas export monopoly, Gazprom, still supplies a third of Europe’s gas needs. The state gas giant reportedly made a profit of 1.43 trillion rubles (about $37.6 billion, using that year’s prevalent exchange rate of 38 rubles to one dollar) in 2014, according to Oil and Gas 360, an online publication.
As the world increasingly moves towards the promotion of clean energy, the place of gas as the future source of energy is no longer in question. Gas is becoming the preferred choice for electricity generation, heating, base chemicals and fertiliser production. It is therefore foolhardy of any country to continue to waste such a valuable resource, even when the domestic demands have not been met. It is particularly ironic that Nigeria cannot provide the needed gas to power her troubled energy sector, just as she has failed to refine crude oil to meet local needs.
This, according to the NNPC, has been blamed, in the main, on five key barriers, namely pricing, fiscal terms, institutional and infrastructural arrangements, legal and regulatory framework and financing. The Vice-President was able to contextualise the irony more pointedly when he said the country had an installed electricity generation capacity of over 12,000 megawatts but was hobbled by lack of adequate supply of gas. With the obvious fixation on crude oil, even the very little that has been achieved in gas production has been targeted at exports, leaving the home front to suffer.
This worrisome situation inspired a former Head of State, Yakubu Gowon, to cry out in 2012 about the loss of about $2 billion to the flaring of 460 billion cubic feet of gas the previous year. Citing the strides made by countries like Qatar and Australia in the development of their gas sectors, he sufficiently foregrounded the stagnation in Nigeria, saying, “And worst of all, countries we started out with in the LNG (Liquefied Natural Gas) production have all left us behind.”
If nothing else, the embarrassment of suffering in the midst of plenty should now spur us into action. There should be a return to previously outlined plans by the government to develop the gas industry. For instance, at a lecture at the Baker Institute Energy Forum, Rice University, Houston, USA in 2006, Funsho Kupolokun, then the Group Managing Director, NNPC, spoke about plans for the rapid development of the Nigerian gas sector and achievement of gas flare-out by 2008. He said, “Additionally, the anticipated 25 per cent growth in Nigeria’s gas demand by 2010 (about the highest in the world) is expected to generate about $13 billion annually by 2012.” This is 2016, yet the country is nowhere near all the set targets.
To start with, Nigeria has to summon up the political will to stop gas flaring, having failed woefully in previous attempts. This can be done by formulating enforceable gas policies. Previous efforts, including the very first by the Gowon administration that was supposed to end gas flaring by 1974, failed because of lack of enforcement. Since then, many new timelines have been fixed and the companies have defaulted.
Apart from the obvious lack of facilities, due to insufficient investment, the main reason for the refusal of the oil firms to stick to the gas flare-out deadlines has been the weak penalties for defaulting. The government has to raise the fines and ensure compliance. When it is no longer advantageous for them to pay fine, the oil companies will stop gas flaring. Although the Vice-President said that Nigeria had decided to adopt a new target date of 2020, ahead of the United Nations agreed date of 2030, for cessation of gas flaring, what matters now is action, not platitude.
Besides, the government also has to make sure that the Petroleum Industry Bill is passed into law. Embedded in that document that has been gathering dust at the National Assembly for these past years are clearly spelt-out guidelines that will ensure that Nigeria derives maximum benefit from her oil and gas wealth. And until the bill becomes law, the country will continue to grovel in a rudderless manner as the oil companies take advantage of the legal void to impoverish Nigeria through continuous gas flaring.
