Gas flares continue to burn in Niger Delta

Nov 02, 2009 01:00 AM

The flames have burned for half a century but darkness still prevails in the Niger Delta. At night the orange glow from flares fuelled by the waste natural gas from crude production are the only lights visible across vast stretches of Nigeria's oil region, where many settlements are starved of power.
Logic would suggest a simple solution: harnessing the gas from the flares, along with that from bounteous gas fields to fire the country's power stations, most of which stand idle for lack of fuel. But logic, as veterans of the conflict-prone region remark, is an infrequent visitor to the delta. With the government offering to buy gas at what they say is a fraction of the production cost, oil companies are reluctant to invest billions of dollars in pipelines and other infrastructure.

The delta's flares serve as a reminder of a difficult task. Last year Nigeria, which boasts sub-Saharan Africa's biggest energy industry and is the fifth biggest crude supplier to the US, flared 15 bn cm of gas, more than any other country apart from Russia and about one tenth of the global total, according to US defence department data.
At the same time, 150 mm Nigerians share roughly as much electricity as the 3 mm inhabitants of Wales. Businesses are hamstrung while the delta's chimneys give off millions of tons of greenhouse gasses each year without producing a single watt of power.

Most economists agree the power crisis is the single biggest barrier between Nigeria and increased prosperity. The government has vowed to boost capacity, slowly raising the tariff it offers to gas suppliers and opening up the market to private power providers.
Western oil companies including ExxonMobil, Chevron, ENI and Royal Dutch Shell have reduced flaring but continue to burn off about a quarter of Nigeria's annual gas output despite incurring fines. Frustrated with the slow progress of its "gas master plan", the government in June signed a $ 2.5 bn (EUR 1.7 bn, £ 1.5 bn) production joint venture with Gazprom in the hope the Russian giant will accelerate supply to the domestic market.

Legislators are working on a bill that, if approved, would force oil companies to pay the "international market price" for any gas flared after the end of next year, plus an extra 50 % to affected communities. Other measures might prevent lucrative gas exports until domestic demand is met.
Apart from generating extra revenue for the government of $ 500 mm-$ 2.5 bn annually, dousing the flares would also address one of the many grievances that lie behind years of unrest in the delta.

The flame beside Akalaolu, a village at the end of one of the delta's rutted roads, has burned since 1974, when Chief Saturday Olimini, now an elder of "around 49", was a teenager.
"Since then we are suffering," the chief says. "Our women have been miscarrying. Men, small and big, we urinate with blood. Our fish ponds have been polluted; there is no clean water to drink."
The operator, ENI, says none of its employees at the site present such symptoms. The Italian energy group provides Akalaolu's villagers with electricity they could not expect from the national grid.

While the technology to capture flared gas is straightforward, the commercial mechanism is vexed. Shell, which supplies about 70 % of Nigeria's domestic gas, says it has spent $ 3bn gathering gas from flares since 2000 and would need to spend the same again to finish the task.
But funding from its joint venture partner, the cash-strapped state oil company, is often not forthcoming. Most of the reduction has been due to production cutbacks the company blames on militant attacks.

Another avenue the government is promoting is the UN's clean development mechanism, which allows green projects to earn extra revenue from the sale of carbon credits to polluters in industrialised countries. Seven projects under the scheme are already forecast to make Nigeria responsible for one third of Africa's emissions reductions under the scheme by 2012, mostly from curbing flaring. Yet insiderssay few big investors, green or otherwise, are likely to be lured into Nigeria's power sector until there is a functioning market.
"The tariff is the absolute, fundamental problem," says Bart Nnaji, chairman and chief executive of private provider Geometric Power, whose $ 400 mm power facility in the delta city of Aba agreed a gas contract with a group of oil companies only after it offered to pay a price far higher than the government tariff.

Many activists dismiss the commercial arguments of oil groups that regularly make tens of billions of dollars in profits annually. They note that the first deadline for ending flaring came and went in 1984, 26 years after oil production began. The most recent passed last New Year's Eve.
Some suspect the flares will only be extinguished once the oil runs out -- or once green technologies render hydrocarbons redundant. As Morris Alagoa of Environmental Rights Action puts it: "The stone age did not come to an end because people ran out of stones."

The processis a legacy of production techniques dating from before the widespread use of natural gas for energy. Today, rich nations have all but ceased flaring. Instead the gas is used or re-injected into the ground. In the developing world, however, flaring remains common, in spite of the harm to communities living near the chimneys.
The World Bank, which in 2002 began a drive to curb flaring, says the gas burned away each year equates to 30 % of the European Union's gas usage. The gas flared in Africa would, if harnessed, fuel half its energy consumption.

Source / FT
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