In my opinion, the 2016 “Nigeria Gas Flaring Commercialization Program (NGFCP)” and the 2023 “Gas Flaring, Venting and Methane Emissions Regulations” are aimed at improving gas standards in various ways. This is an important initiative aimed at ensuring the availability of gas. Live in Nigeria and boost the country’s GDP.
However, especially considering the 2020-2030 “Decade of Gas” initiative, 40% of this period has already passed and with little measurable progress in reducing flaring, we have made significant progress. Can we really prepare for gas intake and use?
“Furthermore, the gas market is ripe, with a shortage of LPG for cooking, potential future use of CNG for local consumption, and opportunities for gas-to-chemical conversion.”
Indeed, these policies and regulations have prompted the exploration and production industry to launch gas gathering efforts. The G7’s policy to exclude gas finance has made this matter even more urgent. Nevertheless, the high costs associated with gas investment facilities and infrastructure and the challenges of establishing viable gas markets at appropriate prices have historically hindered gas development.
The new regulations that make gas flaring uneconomic are coupled with an 11% increase in domestic gas prices in April 2024 (from $2.18/MMBtu to $2.42/MMBtu under the 2023 Gas Price and Domestic Demand Regulations). , potentially increasing profits. Investment in gas development projects.
Related article: NUPRC remains optimistic about gas flare commercialization program
Additionally, the gas market is ripe as there is a shortage of LPG for cooking, potential use of CNG for local consumption in the future, and opportunities for gas-to-chemical conversion. These resources are located in close proximity to the flare site and can be accessed via virtual pipelines, reducing the need for large-scale physical pipeline infrastructure.
With these policies and regulations in place, there is hope that the political will exists to encourage decisive government action, especially during the current period of austerity that is affecting most households in the country. It has been. What remains important is securing adequate funding to realize gas commercialization.
The main requirement now is financing gas projects and infrastructure. I believe that most of the successful bidders in the bidding process for flare gas commercialization were small local companies. Securing adequate financing can be a daunting task, given the high interest rates and uncertainty surrounding obtaining financing for oil and gas projects. Many of these projects are considered to be in the feasibility study stage and efforts to obtain financing are progressing.
To ensure the success of this initiative, it is essential that governments take special measures. This could include helping awardees secure funding at reasonable interest rates through financial institutions within and outside Nigeria, as has been done in the past. The anticipated establishment of an African Energy Bank to finance major investments in Nigeria’s energy sector is a welcome development, and the decision to locate its headquarters in Nigeria is commendable.
The potential application of the “CapEx to OpEx” strategy could provide a new approach to enhance Nigeria’s gas flaring commercialization efforts. In this context, the NUPRC may consider adopting a “gas-as-a-service” model.
One approach could be for a large exploration and production (E&P) company or NNPC to absorb the cost of the gas infrastructure and convert it into OpEx for the awardee over a specified period through a subscription or pay-as-you-go model. This will help minimize initial capital expenditure and facilitate a faster ramp-up, similar to the Nigerian OML sale scenario.
Like other flexible financing options, this approach addresses financing challenges and could lead to more adaptive financing methods for gas projects. Such strategies have the potential to accelerate gas commercialization.
Additionally, since flare gas is owned by NUPRC as required by the NGFCP, another option is to provide the gas to awardees at zero cost and for NUPRC to receive direct revenue through taxes on the revenue generated by awardees. It is also possible to obtain. In the short term, this increases revenues and offsets capital expenditures, leading to a faster return on investment costs.
Despite financial constraints on investment, securing a relatively constant and predictable amount of flared gas is paramount to the economic viability of the gas offtake recipient. This is because flare gas is associated gas (AG), a byproduct of oil production, and is linked to crude oil production. Flare gas availability is influenced by field development scenarios, crude oil export allocations, and the time-varying nature of the proportion of light oil produced. Therefore, NUPRC, as a regulator, must ensure predictable and relatively constant gas volumes.
In my view, for off-takers to be successful, they cannot operate in isolation from the OML operator of a particular field.
Nigeria has a proven track record of successfully delivering projects of this scale, backed by local expertise, know-how and operational capabilities. If similar outcomes are achieved in the upstream, midstream and downstream sectors with modular refineries and gas processing facilities in the Niger Delta, the country will achieve its Nationally Determined Contribution (NDC) and Energy Transition Plan goals. You will be in a good position to do so. Particular emphasis is placed on ending gas flaring and achieving zero fugitive gas emissions.
As we face challenges in financing the energy sector, particularly the oil and gas sector, amid the global energy transition, now is the time to accelerate investment in the sector.
Nigeria’s energy landscape continues to deteriorate despite calls for a multidimensional transition from hydrocarbon-rich countries in the Global South, including African newcomers waiting to develop their first oil in some areas. The focus must remain on promoting substantial progress in the
