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Gas Flaring: Can Oil Firms Meet 2012 Deadline?

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It  is no longer news that gas is becoming much more important to Nigeria’s economy since its production began years ago. Since its discovery, many companies have set up operations in the country but the flaring of the product has posed a very high challenge as it is not properly utilised for the benefits of the economy.

It is against this backdrop that the Nigerian government deems it necessary to develop gas resources to supply it for the provision of sufficient electricity for domestic and industrial use as well as for exportation. The nation’s power plants are not functioning adequately to generate required electricity and cannot meet domestic demand to end blackouts which now become a political priority.

The government is currently planning to produce enough gas to export as soon as gas flaring is ended in the country and also bring the President’s gas-to-power scheme to fruition.

The last House of Representatives before exist perfected the legislative framework pegging the deadline for gas flaring in Nigeria’s petroleum sector at December 31, 2012 in realisation of the government’s plan to develop and capture gas that is being flared or burned off in parts of the country, especially the oil producing areas. Some million cubic feet of gas resources are being flared daily and the quality is sufficient to generate about 4, 500 megawatts of power. The House also imposed stiff penalties on oil firms that may flout new  regulation s on gas flaring.

The action of the House of Representatives followed the adoption of the report of its committee on gas resources on a bill for an Act to Amend the Associated Gas Reinjection Act No. 99 of 1999 Cap. A25 Laws  of the Federation of  Nigeria Further Amendment of the gas flare deadline is not among the many legislative responsibilities before the present House of Representatives.

Oil companies operating in the country had failed to meet the Federal Government’s umpteenth time shifted deadline for the anti-safety and environment Act, under which violators are meant to be penalised. The end of this year is the battle line for gas flaring to end in this country but the question now is, can the oil companies meet the deadline? It is gathered that the President Goodluck Jonathan-led administration which will be empowered by the Petroleum Industry Bill (PIB) may not allow the continuation of the flaring beyond this year, so it is in the best interest of oil companies to race towards meeting the deadline.

Nigeria is currently making progress towards optimising its gas and power industries and that has been the focus of the government. The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Austin Oniwon is quoted as assuring that the Gas Revolution programme for the country would not be abandoned and that to this end, two Memoranda of Understanding (MoU) had been signed. One between Xenel and NNPC and the other among India’s Nagarjuna Fertilisers, NNPC and Chevron as well as the award of the Akwa Ibom/Calabar area gas Control  Progressing Facility (CPF) to Agip and Oando in Abuja, to show how serious and committed NNPC and government are to the Gas Revolution Programme.

In pursuance of the programme, the Brass Liquefied Natural Gas plant is put in place for the production of gas in greater quantity and transmission.

The president is very passionate about the project and the journey has started. We do know that we have large deposit of natural gas resources. Before now, most of the product was being wasted through flaring because of the system we adopted, but with what is happening now, that will change.

Just like the crude oil, natural gas is money, so there should be a concerted effort to commit this natural resources into money for the benefit of Nigerians. The status report of the Nigerian Gas Masterplan, if sincerely and optimally implemented in line with the gas-to-power framework, will support the president’s power agenda and make power available for many ‘dead’ industries to come back to life. Not only that, it will also provide gas as fuel for industries such as the textile mills in Kano and Kaduna that went down because of lack of fuel and they will be able to have clean, cheap and affordable fuel to run their business.

In its commitment to ending routine gas flaring and consolidating leadership position in the domestic gas market, the Shell Petroleum Development Company (SPDC) has said it will continue to make good progress in bringing projects that will reduce flares and boost gas supply to the domestic market as well as sustain economic growth and kick-start new industries that will provide jobs for Nigerians.

Ending gas flaring in the country should be a long-term programme and there must be continuing commitment on the part of the oil companies because the project will help the economy and generate billions of naira or dollars to enhance development funding.  Nigeria holds about 8 per cent of global proven natural gas reserves and about 10 per cent of proven oil reserves but for Nigeria to continue to attract international investments, it needs to sustain confidence and stability and respect the sanctity of contracts.

There is ambition and expectation in the gas sector, but there is also uncertainty about who is going to gain and who is going to lose now that the federal Government is gearing efforts towards optimal utility of our gas resources. Nigerians are scared at the rate things are going in the country and people are no longer interested in the way funds are managed as they want to see practical things on ground.

Our social set-up has been shaken and we are yet to come to terms with it. Other countries use their funds to develop the people by providing infrastructure and social amenities but Nigeria’s case is different and not sure to understand. President Goodluck Jonathan has launched the “Roadmap for the power sector reform, so great majority of Nigerians are waiting for dramatic improvements to their quality of life. More gas and more power will raise living standards and support the economy, so lessons should be drawn from countries that have successfully executed gas-to-power and gas industry optimisation reforms with a view to enabling Nigeria learn from and possibly replicate the best practices of these countries.

Because the expectations of government and the societies they represent evolve over time, it is inappropriate to expect that what was obtaining when the oil  and gas industry was at its infancy, 50 years ago would still be obtainable today. This follows that with both the socio-political climate and the oil and gas industry changing, the International Oil Companies/National Oil Companies relationship must also evolve. A lot of things are expected when changes occur. This is why the Federal Government should ensure that all recommendations made to it are fully implemented to engender growth and change in the oil/gas industry.

To make the whole dream come true, the partnership between international oil companies and national oil companies needs to be strengthened to enhance the full exploitation of natural resources and develop capability that will bring more value to the industry. The basis of mutual benefit should exist between the two or more parties.

Nigeria has been finding it difficult to maximize its gas-to power potential because of certain factors which create imbalances in the value chain, which include gas pricing. That is why the new price regime put in place by the federal government is commendable as it will give investors reasonable returns on their investments and allow those who build gas transmission infrastructure to achieve certain returns that would justify their investments. In Nigeria, the gas price before 2010 was put at less than $1 per million scf, but with the recent review of the price, which is about $2 per million scf for the domestic gas-to-power, the gap between the international and our local price has been narrowed and with that, people can now invest in gas development.

When there are opportunities  for people to invest in gas development and power distribution and generation then the private sector would be able to take control of gas and power, and that will be the right way to guarantee power supply in the country.

The government should try to address the issue of regulation for the downstream gas sector which has become the bane of the sector’s development. The regulation must take into consideration the non  and partial deregulation and closed access of gas infrastructure, while other issues bordering on security in operational communities should also be visited as well. There is the need to do this because it has been discovered that the problem of insecurity is causing extra expenditure for most oil and gas companies as most engineering, procurement and construction (EPC) contractors also use this as reason for their premium and prohibitive charges.

As soon as government’s increased focus on appropriate pricing is welcomed, it should further extend the focus to the full value chain rather than restricting it to the upstream argument alone. If there is gas in the country, which we know,we, the indigenes should benefit more than everybody else. The rate of economy growth is expected to double from what it has been over the years when gas flaring ends at the end of this year. Not just foreign or intentional oil companies should participate in the gas project but indigenous firms should be given priority consideration. The gas-to-power distribution is a boost the country badly needs, so there must be a corrupt-free national strategy for managing the gas revenues because the worry about monies generated from the oil and gas sector in the country is the ‘curse’ of embezzlement and misappropriation or mismanagement, ie, the judicious utilisation of funds accruing from the sector for the benefit of the ordinary citizens rather than using it to fuel conflict and corruption.

We hope we will avoid the mistakes.

Nigeria is a democracy and everybody is watching. So it is expected that there is going to be improvement when gas flaring will become a thing of the past by December 31, 2012.

With a proven reserves of 182 tonnes per cubic feet, Nigeria is adjudged the world’s seventh largest producers of  high grade gas with zero per cent sulphur and rich in natural gas liquids. Though the huge reserve has not translated to abundant domestic supply, investment in gas distribution is capable of helping to achieve the gas-to-power aspiration of the federal government and make gas readily available to industrial consumers and guarantee accelerated growth of manufacturing and power sectors.

 

Shedie Okpara

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Reactions Trail Protest At NLNG Facility In Bonny

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Reactions are now trailing the protest by Finima community against the Nigerian Liquefied Natural Gas Limited in Bonny, Rivers State and the counter protest, which led to destruction of properties and bodily injuries on the protesters.
The lawmaker representing Bonny/Degema Federal Constituency in the House of Representatives, Hon. Farah Dagogo, said the protest and the unfortunate violence would not have happened, if oil and gas multinationals operating in the Niger Delta, were doing things the right way.
Dagogo who described the violence as unfortunate, said it was a sad reflection of the sour relationship that now exist between companies and their host communities, as brothers were being pitched against brothers.
He urged the aggrieved people of Finima Community and all others in Bonny LGA to sheath their swords, adding that other means of getting a workable solution that would be beneficial to all, are being explored.
“The violence that was witnessed in Bonny Local Government Area of Rivers State between Finima community youths and other alleged youths of the LGA was unfortunate, and a sad reflection of the sour and acrimonious relationship that now exist between companies and their host communities.
“The peaceful protest against the NLNG, over the propriety or otherwise of a General Memorandum of Understanding, which was intercepted and later turned violent that has now left many injured and properties razed, would not have been necessary in the first place if things were done the right way.
“While apportioning blames now may not get the desired outcome , it is nevertheless instructive to note that the people of Finima Community and the various impacted communities in the Niger Delta and beyond, where the NLNG gas pipeline passed through, are within their rights to legitimately demand for what is theirs,” Farah said.
Meanwhile, the management of the Nigerian Liquefied Natural Gas Limited, has confirmed that there was a protest and counter protest, which led to blockade of the major routes to its facility in Bonny Island on Thursday.
NLNG General Manager, External Relations and Sustainable Development, Eyono Fatayi-Williams, in a statement said as a good corporate citizen, the company applies the principle of fairness and inclusiveness in engaging with its esteemed stakeholders.
“The Company has always considered all stakeholders in the community trusted partners, and it continues to maintain this position.
“NLNG remains fully committed to sustainable development in the kingdom, hinged on active community participation to drive initiatives and projects that positively impact the lives of the community.”

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This Tiny Country Could Become Europe’s Newest Oil Producer

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It is rather rare to see enthusiasm for completely new exploration projects in Europe. The overwhelming majority of OECD countries are either in terminal decline or are looking into ways how to ban exploration altogether. The less-appraised parts of Eastern Europe might still have some potential yet in the absence of oil majors such endeavors risk remaining a lifelong pipe dream. Still, the appearance of a new European frontier can rekindle upstream hopes (even if for a short period of time). Europe’s latest addition to the list of nations willing to tap into their prospective hydrocarbon resources is located in the southeast of the Old Continent, in Montenegro. The small ex-Yugoslav republic with just slightly more than 600 000 inhabitants has witnessed its first offshore well spudded on March 25, 2021. The 4118-5-1 wildcat was drilled in 100 meters of water to a total depth of 6525 meters, some 25km from the Montenegrin shore.
The first offshore Montenegrin well was spudded by the ENI-NOVATEK tandem, with the Italian major taking on the reins of operatorship. Given the geographic proximity, ENI’s interest in offshore Montenegro is quite understandable and was to be expected. In case of any discovery, ENI has the convenient option of accommodating prospective production within its system, the Italian shore is only 500km from the wildcat’s location. The first well is targeting an oil reservoir at depths of 6.5km, implying that the Italian major’s 120kbpd Taranto Refinery might be a safe backstop for any potential crude produced. Along with Total, ENI has been one of the most active drillers in the Mediterranean, marking suchsupergiant discoveries as the Egyptian Zohr or the Cypriot Calypso. Across the Adriatic from Montenegro, ENI has been developing the Aquila field offshore Brindisi,producing medium density crude of some 36° API.
The case for NOVATEK’s participation in an offshore project is much more peculiar, considering that the Russian gas producer has no assets in the Adriatic.Moreover, NOVATEK is on the US’ Sectoral Sanctions Identifications (SSI) List, meaning that equity investments and financing matters are substantially encumbered. Luckily for the Russian firm, offshore Montenegro does not fall under any of the three sanctioned areas, Russian deepwater, Arctic offshore, and shale. Domestically, NOVATEK is heavily focused on gas production on the Gydan peninsula and in the surrounding area, compelling it to seek new niches it can fill, new frontiers that could serve as bases for future growth. In a sense, NOVATEK needs to overgrow its LNG specialization and gain market-relevant competence in other segments, too.
NOVATEK’s first step into the foreign offshore segment took place in Lebanon where it landed two offshore blocks in a consortium with Total and ENI in 2018. In both cases NOVATEK did not lay claims to operatorship, focusing on building up key relationships with Europe’s leading drillers. It seems very likely that it is from the Lebanese joint experience that the Montenegrin drilling ambition branched out into a separate work track. Concurrently, although Montenegro is one of the hottest candidates for EU accession, Podgorica remains beyond the bounds of the European Union. For NOVATEK this is a great boon, as sanctions risk can be negotiated directly with the relevant national authorities, i.e. no involvement of Brussels is required.
Technically,the Montenegrin offshore area has already seen exploration drilling, though that was back in the SFRY (Socialist Federal Republic of Yugoslavia) times, in 1980. Although Yugoslavia was a socialist country with all its peculiarities, it was the US major Chevron that was the operator of drilling operations. The Jadran Juzni (Southern Adria) prospect turned out to wield signs of oil and gas systems which, however, were deemed non-commercial,effectively closing Chevron’s offshore endeavors in Yugoslavia. It needs to be pointed out that the current wildcat is farther off the Montenegrin coast the Jadran Juzni well was only 3km from shore. To carry out the drilling, the ENI-NOVATEK tandem contracted the Topaz Driller, a Panama-flagged jack-up drilling rig. The contract was clinched in July 2020, for drilling operations starting in Q1 2021 and taking up to 180 days.
Up to now the work progress of ENI-NOVATEK seems fairly solid. In late 2018 their contractor has carried out a comprehensive 3D seismic survey on the 4118-5 Block, then the summer of 2019 witnessed a string of hydrophysical and geophysical surveys on the prospects. Having completed this, it was assumed that the spudding of the first well would take place in 2020, however, the coronavirus-triggered chaos upended all plans and effectively delayed the wildcat into 2021. Most probably the Italo-Russian joint venture will drill 2 wildcats. Even if the first well turns out to be completely dry or non-commercial, the second well (expected to be spudded in May-June 2021) is targeting gas plays at lower depths, i.e. the first well’s fiasco does not automatically foreshadow the failure of the second well.
According to media reports, it will take ENI 4-5 months to finalize the drilling of the wildcat and assess the results. Nevertheless, Montenegro’s offshore zone might more activity coming up in the upcoming months. The Greek Energean holds 2 license blocks (4219-26 and 4218-30) and is expected to take a decision on whether it intends to proceed with drilling exploratory wells in its acreage. The data to assess the blocks’ resource bounty is already there, Energean carried out 3D seismic surveying on both blocks in 2019 already. The spark of interest towards its off shore zone might compel the Montenegrin authorities to expedite a 2nd offshore bidding round which would presumably cover the 7 remaining unallotted blocks. There is very little probability that Podgorica will be trying to auction off onshore blocks,especially considering their history of dry wells.
Katona is a contributor.

 

By: Viktor Katona

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‘NCDMB’ll Not Invest In Businesses With Competitive Private Players’

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The Nigerian Content Development and Monitoring Board (NCDMB), has said that it only partners with strategic policies and projects that are promoted by the Federal Government and would not invest in oil and gas businesses that have competitive private players.
The Executive Secretary of NCDMB, Engr. Simbi Kesiye Wabote, made the clarification recently when he hosted members of the Women in Energy Oil and Gas (WEOG) Nigeria, led by their President, Dr. Oladunni Owo at the Board’s liaison office in Abuja.
He clarified that the Board would not invest in competitive business areas because such investments would compromise its morale position as a regulatory agency.
“Our role is to act as a catalyst of strategic government policies and programmes and we exit once those businesses become successful,” he added.
He also stated that NCDMB is a regulatory agency and not an interventionist organisation and would not get involved in programmes outside its mandate.
According to him, in line with the Board’s vision to serve as a catalyst for the industrialisation of the Nigerian oil and gas industry and its linkage sectors, the NCDMB has partnered with investors in modular refineries, manufacturing of LPG cylinders, LPG Depots, gas processing facilities, lube oil production plant, and a methanol plant using gas as feed stock.
Speaking further, Wabote listed some policies introduced by the Board to support women in the oil and gas industry to include the inauguration of the Diversity Sectorial Working Group in the Nigerian Content Consultative Forum (NCCF) and the creation of the Women in Oil and Gas Product in the Nigerian Content Intervention Fund (NCI Fund).
He explained that the Bank of Industry (BoI) is responsible for managing the NCI Fund, assessing applications and disbursing loans to approved companies.
He said “the NCI Fund is one of the most successful loan schemes. About 98 percent of the borrowers are paying back because we go through a very rigorous process”.
Dwelling on the Project 100 Initiative of the Board, the Executive Secretary stated that it was designed to nurture 100 wholly owned oil and gas service providers in a competitive and sustainable way through targeted interventions, into larger scale players that create high impact.

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