06 April 2008

Another deadline goes up in flames

The Economist print edition - Apr 3rd 2008

Original URL

Continued gas flaring harms both the environment and the economy

LONG before you reach Akalu-Olu village, in Nigeria's oil-rich Delta region, a metres-high flame of gas gives the place away. Solomon Odum's farm is close by. When he was a child, the land grew more than enough cassavas and yams to feed his family. “Now you could plant from here to the school across town and not have enough,” he says. Half a century after oil exploration began, communities across the Niger Delta region say the environment and the livelihoods that relied upon it are permanently damaged.

Gas flares like the one burning in Akalu-Olu may well contribute more greenhouse gas to the atmosphere than any other source in sub-Saharan Africa. Nigeria flares more than any country after Russia: 20 billion cubic metres a year out of a global total of 150 billion. For years oil companies have flared the gas to separate it from the lucrative crude oil. Lacking facilities to harness the gas or a market to sell it, flaring made good business sense, even if it damaged the atmosphere. But flaring not only continues to pollute horribly, it is also wasteful. The gas that is wasted could earn the country more than $500m a year.

AFP Just part of the scenery

All this was supposed to have changed by this year to meet a deadline to end flaring agreed on by the government and international oil companies. But no one seems to agree on whether the 2008 deadline was January 1st or December 31st. The petroleum minister says it has passed. Billy Agha, head of gas for the government's internal oil regulator, says the president, Umaru Yar'Adua, thinks it means the year's end. Either way, no one expects operators to stop flaring by the end of this year—or next. Bent Svensson, manager of the World Bank's Global Gas Flaring Reduction Partnership, says the volume of gas flared in Nigeria has been stable for a decade, though oil production has risen.

Nigeria outlawed gas flaring in 1979, to be phased out five years later. But since companies pay a minuscule fee for flaring and are allowed to carry on under government-granted exceptions, there is little incentive to stop. No legislation regulates the gas industry; penalties and procedures are irregularly enforced.

In February the government approved a “gas master plan”. This provides for building new facilities and injecting gas into the domestic supply, so encouraging producers to stop flaring once and for all. But although regulators have threatened heavier penalties for flaring, the fact that oil accounts for about 76% of government revenue and 90% of exports makes the government wary of imposing penalties so tough that they might persuade oil companies to shut down production instead.

Turning off the flares and collecting the gas is expensive. The Shell Petroleum Development Company, Nigeria's largest onshore operator, says it has invested $3 billion in the process so far and guesses that that figure will at least double. At the same time the national oil company has only recently moved towards putting up its share of the money needed to reduce flaring. Allowing for the kidnapping and sabotage that increase the already high cost of doing business, some contractors now demand ten times the average global price of $1m to lay a kilometre of pipeline.

Putting the gas to good use in Nigeria will take time. The country has an enormous appetite for new energy sources because the electricity supply is so erratic. But there is no infrastructure that would let gas fill the void. The 18m tonnes of liquid natural gas produced by Nigeria LNG Ltd every year are all sold abroad.

In the meantime, local campaigners say that the flaring causes acid rain, which rusts local roofing material and pollutes ground water. The World Bank is studying claims, backed by anecdotes of respiratory and skin disease, that flaring harms humans. Life expectancy, once just below 70 years in the Niger Delta, is now around 45. The oldest man in Awalu-Olu is not yet 60.

Such statistics help sustain the region's militancy, which, among other things, is responsible for shutting down about a quarter of Nigeria's oil production. “Our environment is being destroyed,” says an angry local. “So there is an acceptance that if [militants] blow up a pipeline, at least they are taking revenue out of the government's pocket.”

Copyright © The Economist Newspaper Limited 2008

Read more... Sphere: Related Content

No comments: