Loomnie

WSJ: A Lack of Flare: In the oil-rich Niger Delta region of Nigeria, petroleum companies use giant torches to burn off natural gas found with deposits of crude oil.

The decades-old industry practice, known as flaring, has long been criticized as wasteful and harmful to the environment because of the carbon dioxide it releases into the atmosphere. But more recently, flaring has become a lightning rod for protests and armed attacks by Nigerian locals, many of whom lack reliable access to electricity and the economic opportunities that go along with it.

Amid escalating unrest that has shut down production of more than one million barrels of oil a day at a cost of billions of dollars in lost revenue, interest is growing in a handful of pioneering power plants that use unwanted gas to provide electricity to communities near the oil fields. There is a push on to build more of them in the belief that the way to prevent the violence that has shaken the West African nation is to address underdevelopment in the Delta, where the wealth generated by oil has done little to improve the lives of residents, who subsist on an average of $2 a day.

“Power will be a key issue” if a recent disarmament deal is to be followed by durable peace, says Kennedy West, who mediates between militants and the government as president of the Association for Non-Violence in the Niger Delta. “Everybody is looking at it.”

Some say proposed legislation that would fine oil companies for failing to stop gas flaring by the end of 2010 at twice the burned gas’s international market value is helping to spur action. Previous deadlines to end flaring in Nigeria have come and gone, but the fines proposed in the latest bill are much steeper than what the government has set in the past.

Today, about a third of the natural gas associated with crude-oil extraction in Nigeria is set ablaze in vertical columns. Most of the rest is liquefied and exported abroad.

While that is an improvement from five years ago, Nigeria ranks behind only Russia when it comes to gas flaring, accounting for 10% of flared gas world-wide—and more than 40 million tons of carbon-dioxide emissions annually—according to statistics from the World Bank’s Global Gas Flaring Reduction Partnership.

Flaring has been going on for decades in Nigeria, the fifth-largest supplier of oil to the U.S. The practice took off for a variety of reasons: The value of natural gas was low compared with oil, the oil industry lacked the pipelines and infrastructure to process and export gas, and there was no organized opposition to petroleum companies—armed or peaceful.

But it has become clear that in addition to carbon emissions, flaring takes a toll on the local environment, aggravating respiratory diseases in people living near the wells and generating acid rain that affects agriculture and fishing.

The most privileged communities in Nigeria are powered by generators that, ironically, rely on expensive imported fuel. At that price, “even hairdressers can’t work,” says Westham Adehor, president of Delta-based charity Youth and Development Initiative, or YDI.

The result is a chicken-and-egg situation, where lack of power fuels a seemingly unbreakable cycle of unrest and underdevelopment. Continue reading.

From Vanguard:

Nigeria’s excess crude account has dropped from $20 billion (N3.004 trillion) at the beginning of the year to $11.2 billion (N1.646trn) in June. This implies that in the last six months, the various tiers of government in the federation have shared a total of $9bn (N1.323tr) from that account.

This use of the fund was to beef up revenue allocation to the three tiers of government following the dwindling revenue accruing to the federation account as a result of the global economic recession that has resulted in the fall of prices of crude oil- the major revenue source of the country.

And you would have probably been hearing stuffs like this (this time around, it is from the Nigerian Minister of State for Finance, Mr Remi Babalola):

“We are addressing the issue of funding through revenue diversification. Our plan is to diversify from oil and gas based economy to other untapped areas such as agriculture and natural resources. Agriculture, however, remains very high on our list as it currently employs 68 per cent of labour force, contributes 40 per cent of GDP and provides 88 per cent of non-oil earnings.”

Sometime ago I wrote a post about my efforts to understand the Nigerian oil industry. Some Next reporters have done an article on their efforts to understand the industry. Nobody seems to know how much Nigerian exports, or how much it makes from oil:

Even a cursory check by NEXT has revealed that various agencies of our government give conflicting figures of how much oil we produce and sell.

The Central Bank, the Ministry of Finance, the Department of Petroleum Resources, the Nigerian National Petroleum Corporation (NNPC) cannot agree on exactly what the numbers are.

And:

The Nigerian National Petroleum Corporation, our state oil company which enters into joint ventures with the oil multinationals, even goes so far as to say on its website that it cannot be held responsible for the accuracy of the sales figures it publishes.

The Central Bank, which receives the money on behalf of the Nigerian people, also would say nothing regarding the veracity of these numbers.

The Department of Petroleum Resources (DPR), the industry regulator, makes the astonishing claim that it does not know the figures.

After more than two weeks of constant calls, text messages and email, the department’s acting director, Billy Agha, informed us through a spokesman that “we only corroborate what NNPC gives to us.”

Oil workers too do not know:

Even oil industry workers don’t have a clue. Peter Esele, former president of the Petroleum and Natural Gas Senior Staff Association, says, “Whatever information that is gotten from the NNPC is from the producers.

“One thing is clear, DPR does not even have the capacity to undergo or even know the quantity of crude. They don’t have a meter, they don’t have a measuring meter. Now, if you go to NNPC, the figure is different, DPR’s is different, producers’ different, CBN is different. So you cannot really reconcile all this.” Esele for a time had served in NEITI.

Peter Akpatason, president National Union of Petroleum and Natural Gas Workers, said: “Officially we don’t know. But we have access to the information each time we want to get them.

“But, it is not as if on daily basis, we get the figures. I’m sure you know that there is always discrepancy of some sort between what NNPC declares and what DPR declares.

“What somebody explained to us in DPR is that NNPC figure is taken at the point of production while DPR take theirs at the terminal.”

Really sad state of affairs. The full story is here.

Ogho Okiti of BusinessDay has a nice analysis:

How about another $5 billion for subsidy?
Thanks to soaring crude oil prices, we are receiving significant amount of income from crude oil exports.
Never mind that the government and the economy would have been in so much trouble by now, underlined by significant short fall in projected production, but for the huge price increases in oil.

Thanks once again to soaring crude oil prices, and our inability to refine the oil we produce, we are paying increasing amount for petroleum products we import. In response, it has been suggested by the government that it is prepared to subsidise the price of diesel at the pump, in the same way that the prices of petroleum motor spirit (PMS) and kerosene are subsidised. The suggestion came from a recent statement credited to the Minister for State, Petroleum, Odein Ajumogobia, that the government is looking for ways of ameliorating the pace of increases in diesel price…. Read more.