Business Day

Shell says it requires an additional $3 billion (N375 billion) and the resolution of the Niger Delta crisis to be able to end gas flaring in the country, insisting that it will be unable to meet the December 2008 deadline due to insecurity in the oil-rich region and funding shortfalls.

The oil giant said in a report on “The elusive goal to stop flares” released during the week that its major challenge in the country was to gather gas from more than 1,000 wells scattered over the Niger Delta which, it said, is larger than Portugal.
According to the company, this means building gas collection facilities at the oilfields and constructing an extensive pipeline network to carry the gas to an industrial facility where it is turned into a liquid for transport.
“Recent experience at Shell illustrates the challenges companies face as they try to put out flares. Shell reduced the amount of gas burned in oilfields by almost 60 percent between 2001 and 2007 as part of a decade-old commitment to halt the practice of continuous flaring by 2008. Shell, however, has struggled to meet that deadline, mainly due to security issues and funding difficulties with its main partners in Nigeria,” the company said.
The company also said that Shell Petroleum Development Company (SPDC), a joint venture being operated by Shell and owned 55 percent by the NNPC, 30 percent by Shell and 15 percent by two other partners has invested around $3 billion to reduce flaring.
It however, stated that work had been interrupted by attacks on oil workers and installations.
“For example, a project to build gas-gathering equipment at the Forcados Yokri field in the Niger Delta was initially scheduled to be completed in 2006. But increased violence and kidnappings in the area made it unsafe for work crews and the project has been stalled for two years. And now the project is not funded for completion by the Nigerian government,” the company said.
“Indeed, even if the violence subsided, allowing work crews to safely return to the field, funding is another stumbling block. More than an additional $3 billion needs to be spent to complete the programme to build gas gathering facilities and pipelines. Reduced funding from Shell’s government partner has already delayed work on several projects,” Shell added.
The company maintained that apart from Nigeria, it had largely met its goal of ending continuous flaring.
Shell added however, that in four locations the practice continues on a limited scale for several reasons.
According to it, in three fields, measures to end flaring would produce more greenhouse gases than the flares themselves do.
“You get to a state of diminishing returns,” says John Barry, Shell vice president for Unconventionals and Enhanced Oil Recovery.
Citing estimates from World Bank Global Gas Flaring Reduction partnership (GGFR) and the United States National Oceanic and Atmospheric Administration (NOAA), Shell said that gas flaring has declined in 16 countries worldwide, with Nigeria recording the highest decrease.
According to satellite photos taken over a 12-year period ending in 2006 by NOAA, the country recorded a reduction of 10 billion cubic metres of gas per year.
With 24.1 billion cubic metres (about 851.08 billion cubic feet) flared gas out of a total of 107.5 billion cubic metres (about 3.796 trillion feet) of flared or vented gas worldwide, Nigeria is second to Russia in flaring gas. This country was among more than 160 nations that met in Kyoto, Japan, from December 1 to 11 1997, to negotiate binding limitations on emission of gases for the developed nations, pursuant to the objectives of the United Nations Framework Convention on Climate Change of 1992.
The outcome of the meeting was the Kyoto Protocol, which came into force in February 2005, and in which the developed nations agreed to limit their greenhouse gas emissions, relative to the levels emitted in 1990. The countries agreed to reduce emissions from 1990 levels by six percent during the period 2008 to 2012.
The United Nations set a deadline to end flaring, or burning off natural gas, by 2008 under the 1997 Kyoto Protocol. Consequently, the Federal Government gave 2008 deadline for all the oil companies in the country to build gas-gathering projects to stop gas flaring.
Tony Chukwueke, director of the Department of Petroleum Resources (DPR), had threatened to increase the fine for flaring gas from N10 (9 cents) per 1,000 cubic feet to $3.50 per 1, 000 cubic feet.
Government also appeared to have rejected the intervention of World Bank Global Gas Flaring Reduction Partnership (GGFR) on gas flare deadline in the country, and insisted that there was no going back on the 2008 deadline.
“The flare down deadline is clear. There is no change in government position. It is a matter of procedure and again consultation on government side. The World Bank cannot tell the government what to do. The government position is clear and it has been there for several years. It was not fixed today. The flare down may not be achievable but the measures the government will take have not changed,” Chukwueke said.
On whether the deadline is January 2008 or December 2008, Chukwueke said: “You can interpret it as you like. The position of the government is clear and has not changed. It is a matter of procedure.”
According to him, the deadline is for the operators while it is the responsibility of the government to regulate. He maintained that if the operators fail in what they are supposed to do, the government would take action.
However, no date has been set for imposing the penalty, as government only recently developed a gas master plan to address the gas issue and harness gas to produce power for domestic use