Ending Gas Flaring could increase electricity generation in Nigeria by 20 per cent

In the last four years, Nigeria’s electricity generation could only meet 4% of the demand of its population. The country’s power supply barely met 5% of the national peak electricity demand in 2017. Subsequently, there was a decline to 4.4%, 3.6%, and 3.2% of the population’s electricity demand met, in 2018, 2019, and 2020 respectively. 

In the same four-year period, an estimated 1.9 billion Mscf of gas was flared in 206 flare sites. This amount could generate 173.1 thousand gigawatts (GHw) of electricity, according to the Nigerian gas flare tracker.

Despite the massive amounts of natural gas generated daily, only about 9 percent, or 800 million standard cubic feet of gas per day, is supplied to power plants, according to the NNPC annual statistical bulletin. In addition, 8.53 percent of the produced gas quantity is flared.

However, an analysis of the national peak demand for electricity, sourced from the Nigerian Electricity System Operator’s regular operational report, showed that the quantity of gas flared in the period 2017 to 2020 was enough to meet an average of 19.6% of electricity demand within the period. Thus, if this was factored into the total supply of electricity, the country could have met 23.6% of electricity demand from natural gas alone.

In the long run, the increasing rate of electricity demand not met would be a challenge for Nigeria in the future. Already,  a GIZ report on the Nigerian energy sector predicted that the national peak demand forecast will increase to 213,122 MW by 2040 as against the current national peak demand forecast of 28, 850MW.

According to World Bank data on energy access in Nigeria, only over half of the country’s population has access to electricity. To put Nigeria’s power sector in perspective, Energypedia, a forum that fosters free information exchange on energy issues, states that per capita electricity consumption equates to 151 kWh of electricity per year for each Nigerian. When this number is further analyzed, each Nigerian has the capacity to light four twenty-watt energy-saving bulbs for only five hours per year. This calculation is based on the population of Nigeria in 2014 and the average power generation in 2014.

Source: Nigerian gas flare tracker; NERC

Exploring flared gas to meet increasing electricity demand in Nigeria: the way forward 

In recent years, oil firms in the global south have considered producing electricity from flared gas, inspired by both environmental/sustainable policies and business considerations. This is also a cost-effective way to reduce the volume of flared gas.

Speaking via a phone call interview on the prospects of generating electricity from flared gas, Edu Okeke, an independent power producer and the Managing Director of Azura Power West Africa Ltd, opines that “the gas that is being flared, in a normal clime, should not be flared… That gas should be connected and used to generate electricity.

He did, however, point out that “the Nigerian government’s policies make it cheaper for gas to be flared rather than collected and used for the necessary purposes.” He reasoned further: “why would the government place a limit on the amount gas companies can charge for local gas supply… that is why gas investors aren’t interested in local gas output.” 

	Gas flared (million Mscf)	CO2 emissions (tonnes)	Gas value (billion USD)	Penalties payable (million USD)	Power generation potential (GWh)
2017	373	19.8	1.3	746.4	37.3
2018	471	25	1.6	941.9	47.1
2019	466.2	24.8	1.6	932.3	46.6
2020	354	18.8	1.2	708.1	35.4
Total	1664.2	88.4	5.7	3328.7	166.4

Source: Nigerian gas flare tracker

The energy expert added, “If the government tells gas companies to charge their customers what they’re willing to pay, those gas companies will look for gas wherever it is rather than flaring it, and they’ll rather spend and collect the gas and sell it to their customers.”

He went on to claim that the lack of economic analysis on the availability of fair quantities of flared gas and productive electricity evacuation/transmission lines after producing electricity from flaring sites also limits Nigeria’s exploration of flared gas-based electricity generation. 

“It is important to ascertain the amount of gas being flared at flaring sites, what kind of power plants the flared gas can help, the cheaper choice between connecting the flared sites via a pipeline to a centralized location where a large quantity of electricity can be produced or geothermal energy,” Mr. Okeke submitted.

Also, Thurber and Chang, in one of their papers reasoned that “the domestic gas market in Nigeria is underdeveloped, owing largely to dysfunctional pricing and other institutional issues in both electricity and natural gas markets.” 

Regretting the wasted electric energy potentials in gas flaring, Emeka Ojijagwo and his co-researchers at the University of Wolverhampton and Coventry University noted that “electricity generation could be improved from its current daily output rate of 4358 MW to around 12000 MW by using part of the 18.27 BCM of gas flared annually in Nigeria.” This fuel is used to power 50 gas turbines with a total output of 150 kW and the potential to increase the daily electricity generation of 7500 MW. 

Concerning the financial investment required to transform the flared gas into electricity, they posit that “The economics of this evaluation requires a massive financial expenditure demand of about £1.6 billion ($2.1 billion) for projected capital investment; however, on a yearly basis, the investment might theoretically generate a net profit of £1.2 billion, which could be due to the cost of energy in Nigeria (£0.07 per kWh); very large amount of electricity generated from the turbines and high demand of electricity in Nigeria,” he .

They also emphasised the need for an effective policy and assert that, “in order for this strategy to work, the government must impose and track policies that promote gas-to-wire technology. Oil and gas companies should be required to construct and operate gas gathering and transportation facilities under such policies (pipelines). In addition, legislation should be enacted that allows licenses to be revoked for non-compliance with gas mitigation laws and frameworks.”

An analysis of the Nigerian gas flare tracker data based on their strategy reveals that $2.1 billion of the $3.3 billion payable penalties for gas flaring between 2017 and 2020 could have been invested as capital for 50 units of gas to electricity turbines, yielding a 16.3 percent annual return on investment yearly. Particularly because 48.1 billion cubic meters of gas were flared between 2017 and 2020, which is three times the amount needed to power 50 units of the gas turbine necessary for gas to wire technology.

Mark Thurber, illustrating the economic and market dynamics of flared gas, claimed that having a “deep economically viable gas market” is one way to avoid gas flaring while ensuring power generation. He went on to say that an “economically viable market” should “not be limited to the construction of power plants and electricity grids, but should also allow power companies to recover the costs of procuring market-priced gas and running gas-fired power plants  from their customers.”

Besides pricing issues with natural gas, the pricing of electricity on its own also contributes to a low electricity supply. Engr. Kenechukwu Anajemba, a feeder manager at Enugu Electricity Distribution Company, explained via a phone interview that “One of the reasons for the low generation of electricity in Nigeria is because some generating companies are not ready to produce more power due to low-profit generation as a result of late payment of the bad debt by distribution companies.”

Mr. Okeke of Azura concluded by stating that the government should either implement policies that enable global market forces to decide gas prices or raise the penalty for gas flares. Only then will investors be motivated to invest in gas and power, avoiding gas waste by flaring and lowering environmental risks.

The following penalty fees are currently in place for Gas Flaring: in the case of production of 10,000 barrels of oil or more (per day), a fine of $2 per thousand standard cubic feet (Mcf) of gas flared. For fewer than 10,000 barrels of oil per day, $0.50 per Mscf of gas flared. 

Regardless of the prescribed fees for gas flaring, a producer will be required to pay an additional sum of $2.50 per Mscf of gas flared upon certain breaches. Failure to plan, preserve, and send flare gas logs or documents in a timely manner is one of them. Failure to provide correct gas flare data when the DPR demands it; and failure to install metering equipment in a timely manner.

Thus, to explore the prospects of natural gas towards meeting electricity demand in Nigeria, a review of Nigeria’s gas flaring policies and regulations is required.                                 

Besides raising the penalty fee for gas flaring as a disincentive against the practice, policies that enable a market driven pricing of natural gas need to be explored. This way, investments in trapping flared gas could be recouped, when natural gas is traded at globally competitive prices. Besides, a market-based pricing of electricity, sourced from gas and other sources, could further incentivise businesses to generate more energy to meet the electricity demands of the population.

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This story was produced under the NAREP Media Oil and Gas 2021 fellowship of the Premium Times Centre for Investigative Journalism