FG Fixes Price For Gas Flaring In NGFCP
The federal government has disclosed that third-party investors in its new flare gas programme – the Nigeria Gas Flare Commercialisation Programme (NGFCP) would be given every one thousand standard cubic square feet of gas (scf) at $0.25 cent.
The price on offer is below what obtains in the Domestic Supply Obligation (DSO) which has a price tag of $1.50 per 1,000scf of gas.
Speaking recently in Abuja, during a press briefing held by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, on the chairman of the programme’s steering committee, Mr. Rabiu Suleiman, explained that the price would be gas stocks available at the 178 flare sites the programme has so far identified and put up for bids.
“Third party investors are to access and utilise the gas currently being discharged to flare stacks to convert same into Flare-Gas-to-Market-Products (FG-2-MP) and domesticate projects development expertise and proven technology in commercial application. The NGFCP is also designed as an important “climate change action plan” for the nation.
“And, it is the first market driven program undertaken on this scale globally where bidders will have flexibility of choosing which flare site(s) to bid for, the flare gas price to offer to the FGN (taking into cognisance the NGFCP floor price of US$0.25 Cents per thousand standard cubic square feet of gas) and the end market gas products, as well as the technology to be deployed,” Suleiman, said.
He listed some of the major highlights identified from an economic analysis of the programme, adding that harnessing gas from the programme’s biggest 50 flare points would reduce flare gas volumes by 80 per cent.
Suleiman, stated that the 178 flare sites identified collectively flare about 330 billion cubic feet (bscf) of gas produced per year in Nigeria, with majority of the gas flaring locations – about 65 per cent of them located at onshore oil fields.
“At least 80 per cent of gas from the flaring locations can be viably utilised; and about $ 3.5 billion worth of inward investments by third party investors is required to achieve the gas flare commercialisation targets by 2020,” he added.
According to him: “Although pipelines present the most viable option for transporting gas, scalable, containerised, skid mounted/barge type ‘plug and play’ technologies, virtual pipeline and compressed natural gas trucks would be preferred for quick wins.”
He further noted that despite a 70 per cent decline in flaring of gas in Nigeria over the past decade as a result of the efforts of the Nigerian National Petroleum Corporation (NNPC) and its joint venture (JV) partners, the country still flared about 324bcf of gas in 2017, exceeding an equivalent of 800 million standard feet per day (mmscfd) utilised for power generation and 450mmscfd utilised in the domestic market.
However, in its analysis of the NGFCP regulations and prospects, a Lagos-based commercial solicitor firm which specialises exclusively in non-courtroom practice, Detail Commercial Solicitors, stated that it was important the programme allowed whoever got permits in the bids to competitively sell their products to preferred end-users.
The law firm explained that based on the fact that the country’s oil minister was hugely involved in setting price caps for gas supply to certain industries and sectors, successful bidders would also need to know the local business interplays in this regards.
“Given the costs associated with the flare gas utilisation projects, it is imperative that the permit holders are able to competitively sell their preferred end-products to their chosen markets.