Nigeria Tinkers with Flare Reduction Incentives
Nigeria’s petroleum and finance ministries remain divided over how to curb flaring, with the former still preferring the use of incentives.
The petroleum ministry held a stakeholder meeting March 28 with several civil society organisations about gas flaring in the country, chaired by minister of state Ibe Emmanuel Kachikwu. Its focus was on commercialising gas flaring, as advocated under the ministry’s Nigerian Gas Flare Commercialisation Programme (NGFCP).
NGFCP seeks to end gas flaring in Nigeria by 2020, through a tendering mechanism whereby gas flares are allocated to competent third-party investors so they can monetise the gas, using proven technologies. Critics though see this as too much use of carrot, and too little stick in imposing the spirit of the tax code.
International oil companies receive tax relief on gas flaring ‘charges’ that are imposed by the state. They would not be able to do so, if such fines were reclassified as 'penalties'. Finance minister Kemi Adeosun has said the failure to collect the fines costs Nigeria billions of dollars in revenues. But the law can only be amended by the National Assembly, which for decades has failed to treat this as a priority.
The NGFCP, inaugurated in 2016, listed four ways through which the government hopes to achieve zero gas flaring by 2020: fix the market and licensing process, improve access to financial incentives, improve monitoring and enforcement, and engage with partners.
Nigeria's ranking fell from fourth to seventh worst-flaring nation worldwide between 2013 and 2016. But flaring still causes significant environmental damage, particularly in the Niger Delta of southern Nigeria. In February 2018, Daniel Dasimaka of the region’s Ijaw Youth Council called on the government to stop allowing foreign operators to flare: "Poor regulation and poor oil field practices have led to environmental, health, social and security problems in the Niger Delta region and for Nigeria. Flaring often constitutes a waste of economically-valuable resources and contribute significantly to global warming."
During a recent press conference in Lagos on flaring, Sumeet Singh, the commercial director at Nigerian firm Powergas, which invests in compressed natural gas (CNG) schemes, said that flare monetisation projects can potentially save Nigeria over $2.5bn/yr by reducing fuel costs in the transport and power sectors by more than 30%. Many of these savings would involve substituting imported oil products – having a further positive effect on the country’s trade balance.