Broken promises, shifting commitments, shady deals and ignored legislation mar the history of flare-out targets. In this section we focus on two questions: what date has the government fixed for ending flaring? And, is it likely to be met?
What date has the government fixed for ending flaring?
It is widely reported that the government has set a date of 2008 for the ending of flaring. This was apparently set relatively recently, replacing the previous apparent date for ending the flaring of 2004. It is very difficult to know for certain where either of these dates come from. The decision itself has not to our knowledge been officially published. And no report of it that we have seen attempts to link it to the exercise of any lawful authority.
In 1996, the Federal Government of Nigeria set up a Committee that prepared a report called "Vision 2010". In its report, it apparently set 2008 as the flares-out date.[ 33 ]
However, according to the Vice President's website:
"In May 2000, representatives of the major oil companies operating in Nigeria announced that they would be able to meet Nigeria's required phase-out of associated gas flaring by the following dates: Chevron, 2008; TotalFinaElf, 2008; Shell, 2008; Texaco, 2005/6; Agip, 2005; and ExxonMobil, 2004. Dr. Imeh Okupido, Minister of State for the environment, stated that an agreement had been reached between the government and the oil companies to end all gas flaring in Nigeria by 2004. The agreement, announced in August 2000, was a compromise, the companies had proposed an end date of 2006, while the government wished to end flaring by 2003." [ 34 ]
On the other hand, in November 2003 the Nigerian government informed the United Nations that:
"The government of the Federal Republic of Nigeria has placed a dateline for all oil/gas producing companies to eliminate gas flaring by the year 2010." [ 34A ]
In March 2004, the World Bank said that:
"The Nigerian government has announced a target to end all nonoperational gas flaring by 2008." [ 34B ]
Given (as will be discussed in Section 8) that flaring is a violation of human rights, and given (as will be discussed in Section 9) that it has generally been prohibited under the regulations since 1984, the effect of the flare out date is political and not legal. This lack of alignment of a political agreement with the legal framework, and the lack of transparency highlighted by the overall confusion on the end date itself, are serious causes for concern. The consequent public perception, that continuation of gas flaring is a stitch-up between government and the companies, is a reasonable one.
Whatever the date, is it likely to be met?
It is tempting to believe that the flaring will end by 2008. Not only is that date too late, the history of Nigerian flaring suggests that such a belief would be na´ve. This view is confirmed by SPDC's announcement, as our report was at the printers, that their flares won't be out now till the end of 2009 (see Box at right).
Indeed, the Strategic Plan states that:
"It also seems that industry is seeking clearer guidance from the FGN in meeting the 2008 zero flaring deadline and it is trying to "guess-out" true FGN intentions as meaning business this time or just another down the road deadline that this government would not live to see." [ 35 ]
We set out in Table 5.1 below three different descriptions of the work that is supposedly being done to end the flaring by the JV companies, prepared for us by E-Tech International.
Clearly, the security situation in the Delta, and adequate budget allocation will in general affect the progress of this work, as they do oil production. We have seen no evidence, however, to support the view that these factors affect work necessary to end flaring more than they affect work necessary to enable oil production.
Will Shell make it?
Much work is apparently being undertaken by SPDC. But neither smoothly nor in a manner that attaches equal importance to crude oil production and AG use. And we now know that Shell will miss the 2008 deadline (see Box above).
The offshore EA field was allowed to start production in 2002 without its AG gathering system in place. In its 2002 Annual Report, SPDC stated that:
"The associated gas produced from EA and other fields, such as Odidi, Forcados-Yokri and Cawthorne Channel, will be transported to the NLNG plant in Bonny through the new Offshore Gas Gathering System, a 32- inch pipeline which will come into operation in 2003."
But by the time of the 2003 report:
"Onshore associated gas gathering (AGG) projects have suffered slippage. The Cawthorne Channel project, scheduled to come on stream during the year, was delayed until the second quarter of 2004, while those at Forcados Yokri and the Southern Swamp area are now scheduled for commissioning in 2005 and 2008 respectively, due to re-phasing driven by joint venture funding constraints. The Odidi-Forcados-Yokri pipeline will now be commissioned in the second quarter of 2005 to facilitate gas supply to the LNG plant in Bonny."
And completion of the Offshore Gas Gathering System (OGGS), which originates in the Western Area off Forcados, was delayed until December 2003 (36-inch pipeline with 1,200 mmcfd capacity). When will the Eastern Gas Gathering System (EGGS) be operational?
The Figure below is how the current Chief Executive of SPDC depicted the company's flare-out plans in 2001.[ 36 ]
We now know that the projected 2003 flared volume was exceeded. And in its 2003 report, SPDC admitted that the 2008 deadline was "becoming tight" and would be reviewing in 2004 the resources needed to meet it.[ 37 ] As the Box above shows, we now know they will miss the deadline. SPDC blames mainly lack of government funding in the past, but we doubt this is the full story.
In the midst of the Shell reserves fiasco, the New York Times reported a clear difference between Shell's public statements and its internal documents:
"In any case, the documents about Nigeria offer a far bleaker assessment of Nigerian operations than the company's public disclosures. Nigeria, for example, has called for an end to the practice of flaring, or burning off, natural gas that is a byproduct of oil production; two billion cubic feet of natural gas are burned this way in Nigeria every day, and this has become an environmental and political issue. Mr. Corrigan [a Shell spokesperson] said the company was committed to meeting the target. Shell's Web site says "this opportunity" to gather gas "is going well." But the Shell documents present a different view. A high-level review in December found that many oil field projects did not include plans to gather natural gas, and that "oil production would have to be shut in," or stopped, unless the company found a way to use the gas." [ 38 ]
The full extent of the relationship between Shell's reserves fiasco and the flaring has yet to emerge. It should be noted, however, that its failed concealment strategy was to increase production in order to play for time.[ 39 ] Increased oil production in Nigeria means increased flaring. And it was in 2001, with this failed strategy underway, that the current SPDC Chief Executive was telling a seminar in Norway that the reason SPDC could not put the flares out before 2008 was the significant growth in production.[ 40 ]
Projects promising to use AG aren't delivering
Two major projects have been consistently touted by the companies as key to stopping the flares. But their stories so far give little confidence that they will use enough AG to end the flaring.
Bonny LNG In 2001, LNG exports were described as "the cornerstone" of SPDC's flares-out programme by the current Chief Executive of SPDC, Basil Omiyi. How has it turned out so far?
Nigeria LNG Limited (NLNG) was set up in 1989, 49% owned by NNPC, 25.6% by Shell, 15% by Total and 10% by Agip/Eni. It began LNG production at Bonny in September 1999 (Train 2) with the second train (Train 1) coming on stream in February 2000. Train 3 began production in November 2002, along with LPG facilities. Trains 1-3 require 1.476 bcf/d of gas. Disgracefully, it was only in November 2002 that the Plant was reported to be able to take 100% AG. And the amount of AG used so far has fallen well short of this figure.
Train 4 is expected to be on stream in mid-2005, and Train 5 in early 2006. Once all 5 Trains are in place, the Plant will require 2.8 bcf/d of natural gas. Train 6, the final Train, is planned to be operational by 2007. NLNG has long-term Gas Supply Agreements with the three joint ventures operated by the Nigerian affiliates of NLNG's three foreign shareholders namely: Shell, TotalFinaElf and Agip. For the first two trains, the joint ventures supply 960 million scf/d feedgas in the proportion of 53.33%, 23.33% and 23.33% respectively.[ 41 ]
Shell is therefore currently entitled to supply 512 Mmscf/d to Trains 1 and 2, with Agip and TotalFinaElf 224 Mmscf/d each. For Train 3, Shell and Agip only supply 516 Mscf/d in the proportion 69.57% and 30.43%, respectively. Shell is therefore entitled to supply 359 Mmscf/d to Train 3, with Agip 157 Mmscf/d. As the Bonny LNG Plant therefore currently stands, Shell is able to supply 871 Mmscf/d, Agip 381 Mmscf/d and TotalFinaElf 224 Mmscf/d. According to SPDC, 812 Mmscf/d of gas sold to NLNG and others in 2002, out of which only 140 Mmscf/d was AG. In 2003, 1,170 Mmscf/d was sold, of which 210 Mmscf/d was AG at year end. SPDC failed in their 2004 annual report to disclose the amount of AG sold.
Therefore, of 1,982 Mmscf/d sold by SPDC mostly to NLNG in 2002/3, only 350 Mmscf/d or 17.6% was AG - while on SPDC's own figures 1,270 Mmscf/d of AG has been flared.
This is an appalling state of affairs, and undermines the promises made about the impact that Bonny LNG would have on reducing flares. The reality is that SPDC will sell as much non-AG as it can get away with. But the Nigerian national interest is not synonymous with the Shell or SPDC corporate interest. Shell has stated that one of its strategies for eliminating flaring is apparently to replace non-AG with AG,[ 42 ] but in the absence of an enforced obligation to do so it would be unwise to believe them.
For Trains 4 and 5, Shell and Agip have the same supply shares. On the basis of NLNG's figures, these trains will take 1,324 Mmscf/d, of which SPDC's share will be 921 Mmscf/d.
In 2002, Malcolm Brinded, one of Royal Dutch Shell's Managing Directors, made a speech in which he showed a slide promising 70% AG to Bonny LNG by 2006. [ 43 ] If the US government's view in April 2005 is correct, this is pie-in-the-sky:[ 44 ]
"The facility is currently supplied from dedicated natural gas fields, but within a few years it is anticipated that half of the input natural gas will consist of associated (currently flared) natural gas from Akri/Oguta, Otumara, Utapate and offshore blocks."
To achieve Mr Brinded's promise, Bonny LNG would need to take 1.96 bcf/d of AG once Train 5 is operational. SPDC's share of that would appear to be 1.79 bcf/d.
Despite the promises and the spin, the Bonny LNG plant bears the hallmarks of a non-AG project. Without a legal obligation to use AG, there can be no confidence that AG will be supplied.
West African Gas Pipeline In November 2004, the World Bank approved US$125 million in guarantees supporting the construction of a 678 km gas pipeline to transport natural gas from Nigeria to Benin, Ghana and Togo - the West African Gas Pipeline (WAGP). The WAGP will be built, owned and operated by a new company, the West African Gas Pipeline Company, expected to be owned (directly or indirectly) by Chevron Nigeria Limited (36.7%), NNPC (25%), SPDC (18%), Volta River Authority of Ghana (16.3%), Societe Beninoise de Gaz S.A. (2%) and Societe Togolaise de Gaz S.A. (2%).
The WAGP feasibility project dates back to 1992, and its promise to end the flaring has been around for years. According to the US government:
"The $500-million WAGP will initially transport 120 Mmcf/d of gas to Ghana, Benin and Togo beginning in June 2005. Gas deliveries are expected to increase to 150 Mmcf/d in 2007, to 210 MMcf/d in 7 years and be at 400 Mmcf/d when the pipeline is functioning at its capacity (approximately 15 years after construction).... The major positive environmental impact of WAGP will be the development and use of gas currently flared in Nigeria." [ 45 ]
ERA and other civil society groups in Nigeria, Africa, and in the US have been criticising the proposed WAGP for the inability of the project sponsors led by ChevronTexaco to address the problem of gas flaring from its Escravos Gas fields. Though the transnational corporation claims that the project will contribute to flares reduction, there remains no clear programme for use of flared AG into the WAGP. Moreover, the WAGP will be connected to the Escravos- Lagos Gas Pipeline, which was built in the 1980s to transport unflared non-AG and was constructed without an environmental impact assessment.
When the World Bank was asked in November 2004 to require the use of AG before approving its guarantees, it failed to do so. The continued failure to require the use of AG, and to enforce regulatory and human rights obligations to end the flaring, will mean that the WAGP will become yet another non-AG project. Moreover, the allied failure to ensure proper community participation and environmental impact assessment point to yet another project benefiting the multinationals and the corrupt local elite. This is wholly unacceptable.
We have no confidence in the flares being ended by 2008. Apart from the waste, which Nigeria cannot afford, they contribute to climate change and affect local communities. We next consider these environmental and human rights aspects.
[ 34B ] See page 5 of the Global Gas Flaring Reduction Initiative: Report No.3: Regulation of Associated Gas Flaring and Venting - a Global Overview and Lessons (World Bank, March 2004), accessible from here: http://www.ifc.org/ogc/global_gas.htm.The Nigerian Oil Handbook and Review, 2002, 11th edition, captures the confusion, referring both to the "government's compulsory flare out date of 2008" (page 92) and then three pages later to "the flare-out target of 2010".
[ 35 ] UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP)'s Strategic Gas Plan for Nigeria, February 2004, page 13, paragraph 10.
[ 36 ] SPDC Corporate Strategy for Ending Gas Flaring in Nigeria, A Paper Presented by Basil Omiyi, then External Relations Director, SPDC, at a seminar on Gas Flaring and Poverty Alleviation in Oslo, Norway, 18th-19th June, 2001, page 13. This 13-page document is available here.
[ 38 ] "Shell Withheld Reserves Data to Aid Nigeria," by Jeff Gerth and Stephen Labaton, New York Times, 19th March 2004.
[ 39 ]"...EP management's plan was to 'manage' the totality of the reserve position over time, in hopes that problematic reserve bookings could be rendered immaterial by project maturation, license extensions, exploration successes and/or strategic activity. Simply put, it is illustrative of a strategy to 'play for time' in the hope that intervening helpful developments would justify, or mitigate, the existing reserve exposures. Ultimately, as described below in the discussions of Australia (Gorgon), Oman, Nigeria and Brunei, this strategy failed as business conditions either deteriorated or failed to improve sufficiently to justify historic bookings.... SPDC accumulated over the 1990s and, particularly, in the late 1990s very large volumes of proved oil reserves. No later than early 2000, however, it became clear to EP management that SPDC's substantial proved reserves could not be produced as originally projected or within its current license periods. Rather than de-book reserves, an effort was undertaken to manage the problem through a moratorium on new oil and gas additions, in the hope that SPDC's production levels would increase dramatically to support its reported reserves. This solution remained in place for the next several years, until January, 2004, notwithstanding the knowledge of EP management that, in fact, production was not increasing to a level which could support the booked proved reserves." Report of US Attorneys, Davis Polk & Wardwell, to the Shell Group Audit Committee, Executive Summary, 31st March 2004, Section III, Summary of Findings, pages 6 and 12. The full report has not been made public.
[ 40 ] "The significant growth (▒300%) in the NNPC/Shell/Elf/Agip joint venture oil production programme is the reason it takes up to 2008 for the last flares to go out." SPDC Corporate Strategy for Ending Gas Flaring in Nigeria, A Paper Presented by Basil Omiyi, then External Relations Director, SPDC, at a seminar on Gas Flaring and Poverty Alleviation in Oslo, Norway, 18th-19th June, 2001, page 12. See note 36 above.
[ 41 ] This information, and much of what follows was taken from the NLNG website. However, when access was sought again on 9th April 2005, this web page was not available: http://www.nlng.com/NLNG/The%20Project/supply.htm. Obviously, we are assuming this information remains accurate.
[ 42 ] C.I. Ozumba, Shell Nigeria, Gaseous Emission Monitoring in the Land Area of the Western Niger Delta, Society of Petroleum Engineers, SPE 66499, 2001.
Executive Summary | Introduction | Section 2 | Section 3 | Section 4 | Section 5 | Section 6 | Section 7 | Section 8 | Section 9 | Conclusions