By Yange Ikyaa
Nigeria is a major hydrocarbon producer on the African continent, the “black gold” popularly referred to by some people. This resource is the mainstay of the country’s economy.
Hydrocarbons are a family of compounds with a combination of hydrogen and carbon molecules, oil and gas being the two most prominent resources in the hydrocarbon value chain globally. In Nigeria, revenue from hydrocarbons form the primary source of foreign exchange, and changes in crude oil price can drastically affect the country’s economic fortunes.
According to Statista, between October and December 2020, the oil industry contributed 5.9 per cent to the total real GDP, a decrease of roughly three percentage points compared to the previous quarter. Then, in the second quarter of 2023, the contribution of the oil sector to the country’s GDP reached 5.34 percent.
Statista is a German online platform specialized in data gathering and visualization. In addition to publicly available third-party data, Statista also provides exclusive data via the platform, which is collected through its team’s surveys and analysis.
While the importance of hydrocarbons to the Nigerian economy cannot be overstated, issues of wrong or inaccurate measurements of production volumes and questionable revenue remittance to government have also been monumental over the years.
“This is one of the areas where we support the industry because, during the production process, whether it is upstream, whether it is midstream and whether it is consumption or refining in the downstream, there are losses,” said Dr. Sunday Kanshio, Managing Partner, Fleissen & Company, an energy consultancy and supply firm based in Abuja.
According to him, “during production, you have things like process venting, which is basically a deliberate effort to get rid of gas for the safety of the operation. But this in itself is a waste and it is a practice that is discouraged around the world because natural gas, basically methane, is a greenhouse gas. These are gases that trap heat, which basically means that they allow heat to get into the atmosphere but stop the heat from going back, so they serve as a blanket.
“Apart from the resource loss is the environmental impact of production, meaning that it could be during production, it could be during processing, and it could be during continued consumption along the value chain that these losses may happen, and these losses have financial implication and also have environmental health implication.”
The leaks, he said, could be unintentional leaks or leaks that occur as a result of equipment failure, which may also be regarded sometimes as fugitive gas. This is because, in the oil and gas sector, so many pipelines are used, and these pipelines are connected by joints, so a joint may not be properly tied and gas can be coming out, which is what is called fugitive emission.
Apart from this, there is another phenomenon called venting, which is deliberate, as well as flaring, which is also deliberate due to operational concerns, where the operation may be over-pressurized and the operator may need to get rid of the pressure. But while it is a safe way of operating the facility, it is also a waste in terms of value that is lost.
Another bad thing in all of this, apart from the commercial losses, there is gas that is going into the environment and increasing the amount of greenhouse-gas emission in the atmosphere.
Methane is particularly an issue because its potency in terms of global warming is 25 to 28 times greater than carbon dioxide, and one way of ensuring its abatement is to make sure that the methane coming out from the reservoir is used.
Gas is needed for power generation, petrochemicals, feedstock and heating, and in domestic sector for cooking. All these are ways of abating methane emission, but it can also be injected back into the reservoir in some cases.
There are many activities that the government of Nigeria is coordinating in order to turn wasted gas into wealth. For example, you have the Nigerian Gas Flare Gas Commercialization Program is one of the approaches that the government is using to curtail or abate the emission of methane.
In the words of Dr. Kanshio, “what I can also say is that some of the progress seems to be slow, for obvious reasons, which is finance and a key factor when we talk about abatement. I will say that maybe we should do something that will accelerate this progress, that will help to generate money from gas, reduce methane emission into the atmosphere, and which will be good for our environment.”
While government efforts may seem slow in this regard and some of the private companies operating various assets in the Nigerian oil and gas industry may continue to embrace the unhealthy practice of gas flaring, known for its damaging impacts on human health and the natural environment, Aradel Holdings PLC has vowed to maintain its zero gas-flare policy.
Victor Columba, who is the Manager of Production System at Aradel Holdings PLC, stated this during a presentation at the just concluded Nigerian Hydrocarbon Measurement Conference (NiHMEC), which held in Lagos.
The practice of zero gas flaring by Aradel is in compliance with section 105 of the Petroleum Industry Act (PIA), which stipulates “no flaring or venting of natural gas at the facility.” On the contrary, many energy companies in Nigeria, including multinationals, are known for routine gas flaring.
Aradel Gas, a subsidiary of Aradel Holdings PLC, has a gas plant with a designed capacity of 100 MMscf per day, as well as the ability to produce liquefied petroleum gas (LPG).
It is also the only indigenous operator that supplies export gas to Nigeria Liquefied Naturel Gas (NLNG) in Bonny through the Rumuji node. In doing this, Aradel has consistently met its supply obligations since 2012.
While producing gas for domestic consumption, it still has existing and prospective customers that have lined up in contractual engagements for increased offtake.
Aradel meets her Domestic Gas Delivery Obligation (DGDO) by leveraging an off-takers, who are located across the company’s fence since 2016.
This is then processed into compressed natural gas (CNG) by the off-taker and delivered to various parts of the country by means of virtual pipelines.
The delivered gas is measured at Aradel’s facility before shipping it across to its off-taker for compression.
As a result of its carbon reduction footprint, the company has won many awards, among which is the 2015 Award of Excellence from the World Bank’s Global Gas Flaring Reduction Partnership under the “Zero Routine Flaring by 2030” Initiative.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) said a policy framework is being designed that will ensure proper monitoring, transparency and accountability of crude oil taken from the country. NUPRC also expressed that the new regulatory framework known as the Nigerian Upstream Petroleum Measurement Regulations, 2023 in line with the PIA, is a new initiative that will create a paradigm shift in oil-related revenue generation in the country.
Engr. Gbenga Komolafe, the Commission Chief Executive (CCE), said the step is part of the effort to stop oil theft and illegal financial flows in the country.
He further explained that the policy will also address the issue of overloading and dispensing oil from the source, which invariably gives rise to making money from the illicit process.
His words: “While it’s critical to follow and recover illicit financial flows, it’s perhaps more critical to prevent illicit financial flows. One is reactive while the latter is proactive.
“The Commission is focused on proactive corruption prevention and elevation of transparency in hydrocarbon accounting in the Nigerian oil and gas industry.
“Wrong hydrocarbon accounting practice has pervaded since 1956 oil discovery in Nigeria. So, NUPRC is poised in a revolutionary move to stop the corrupt practice. The idea is to stop the illicit financial flows from the source. When that happens, it will make the work of the EFCC, and ICPC very easy.”
The policy document under review requires a licensee or lessee to hold a metering plan approved by the Commission for the measurement of petroleum production from its producing license or lease area. It further states that the measurement equipment and metering systems deployed by a licensee or lessee under a metering plan shall conform with the standards as prescribed in a regulation, guidelines, or directives issued by the Commission.
Also, the policy document stated that a lessee shall carry out the installation of metering equipment and metering services under a metering plan through a licensed metering services provider in accordance with the provisions of these regulations.
It reads: “A licensed metering services provider shall be an original equipment provider (OEM) or its agent, approved by the Commission.
“The standards and specification referred to in sub-regulation of this regulation shall relate to the design, fabrication, manufacture, installation, calibration, operation, maintenance, upgrade and inspection or any other requirement as may be determined by the Commission.
“A metering service provider shall deploy technology and back-office systems to measure production from the licensee’s or lessee’s petroleum operation; report the measured production to the Commission on an on-line real time basis; and create an interface for data sharing on an on-line real time basis between the lessee and the Commission.”