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Oil and gas production in Nigeria dates back to 1958, when the first oil discovery well was drilled in Oloibiri (present day Bayelsa State, Niger Delta Region). A noticeable increase in gas production commenced in the early 1970s, ultimately rising above 2.7 bscf/d by 1979. By this time, a domestic market had been created for the consumption of produced gas in the eastern part of the country, close to the gas source. Since 1990 gas production has steadily increased with daily production rising above 8.2 bscf/d in 2015.

The steady increase in production in recent times is strongly linked to the discovery of more non-associated gas (NAG) reserves in deeper reservoirs, the development of deep offshore oil fields with huge associated gas (AG) reserves, participation in the gas export business through the Nigerian Liquefied Natural Gas (NLNG) Company, and increasing demand for local gas supply for power generation. In 2015 there were 39 companies directly involved in oil and gas production in Nigeria, producing natural gas from 189 fields with daily AG production of 4.74 bscf/d and NAG production of nearly 3.46 bscf/d.

Forecasts indicate that Nigerian domestic gas demand, coupled with regional demand from the greater West Africa region, may push annual gas production in Nigeria beyond the 10 bscf/d mark by 2020. The global population is expected to rise to nearly 10 billion people by 2050, spurring global energy demand to levels nearly 60% higher than today by 2060.

Gas Utilization

Gas utilisation in Nigeria commenced in 1963 with gas sales by the Shell Petroleum Development Company of Nigeria (SPDC) to industrial users in Aba. In its bid to create value for AG, which was routinely being flared by operators, the Government initiated several projects to increase gas utilisation in the country from the mid 1960s to the late 1990s. These projects included gas supply to thermal power plants in Delta state, the Port Harcourt refinery in Rivers State, Power Holding Company of Nigeria (PHCN) Sapele, Delta Steel Aladja, Nigerian Fertilizer Company of Nigeria (NAFCON), the Ajaokuta Steel complex, the Egbin Thermal Power Station and the Aluminium Smelting Company of Nigeria (ALSCON) in Ikot Abasi).

The development of the Nigerian LNG project was pivotal to increased gas utilisation in Nigeria and to creating a position in the international market. Other major sources of gas demand today include the West African Gas Pipeline Company (WAGPCo), the Escravos Gas to Liquid Plant (EGTL), the SPDC Afam Power Plant and numerous gas plants operated by producing companies to process gas and recover natural gas liquids for export to international markets.

Oil and gas producers were also encouraged to utilise the produced AG for gas-lift, fuel for production operations and re-injection into the reservoir for conservation and reservoir pressure maintenance. Accordingly, of the 4.74 bscf/d of AG produced in 2015 about 4.26 bscf/d representing nearly 90% was utilised either by consumption or re-injection back into the reservoir.

Gas Flaring

All AG was routinely flared and disposed-off into the atmosphere during the early days of oil production in Nigeria. This practice of flaring 100% of AG lasted until the commencement of gas supplies to industrial users in Aba in 1963. In spite of this early source of utilisation and other government schemes, over 95% of AG was routinely flared over the next 15 years. Despite the intervention of the government, gas flaring increased sharply in the 1970s due to increased oil production that was triggered by higher international crude oil prices. Conversely the slowdown of crude oil production in the 1980s brought about a reduction in AG production and gas flaring. At the dip of production in 1987, flaring of AG had dropped from over 95% to 70%.

It was the commencement of production at the Nigeria LNG plant, however, that brought about a major leap in gas flare reductions in Nigeria. Since 1999, a variety of gas utilisation schemes and regulatory interventions forced gas flaring down to the current position of 11.4%. The ultimate goal for the government is to eliminate routine gas flaring by 2020, with unavoidable gas flaring limited to 2% of total gas production.

On behalf of the Federal Government of Nigeria, this programme seeks to attract investments and develop a transparent market mechanism through a competitive procurement process for allocating gas flares, under clear and transparent criteria, to competent third party investors using proven technologies in commercial application globally. The Nigerian Gas Flare Commercialization Programme (NGFCP) is an opportunity for Government, industry, State Government, ethnic nationalities, and local communities to work together to resolve an oil field unacceptable practice.