W’Bank’s Study Confirms Marketability of Nigeria’s Flare Gas Plan

The Programme Manager for the Nigeria Gas Flare Commercialisation Programme (NGFCP), Mr. Justice Derefaka, has disclosed that a market analysis carried on the NGFCP by the International Finance Corporation (IFC) of the World Bank showed that the programme will be profitable if implemented on certain premises.

Derefaka, explained in a recent presentation he made at the third edition of the ‘lawyers in oil and gas conference,’ in Lagos, that based on the market studies of the IFC, it was discovered that a realistic pricing range for flare gas to market (FG2M) would incentivise off-takers to participate in the project.

He noted that apart from the cost- benefit analysis and net back pricing that was done in the process, the market survey also covered areas such as risk and sensitivity analysis, market sounding and challenges that could derail the project, with all showing that implementing the NGFCP would be beneficial to all parties.

“The primary focus of the market study is on the off-takers (market) inputs and the total value chain economics and each of its corresponding links to determine whether and under what conditions flare gas can be taken to market based on sound economic and market criteria,” Derefaka explained.

According to him, focus was equally on current market conditions and potential adverse changes in market conditions within the next five and 10 years.
He explained: “This is premised on the fact that the flare gas-to-market projects will mainly provide services and products to unaddressed markets (e.g. supply electric power where today communities have no electricity, fertilizers where there are none.), generate savings by substituting a higher-cost with a lower-cost energy source (e.g. providing lower-cost power, substituting diesel or HFO with CNG, LNG or pipeline gas.)”

Derefaka further stated that the main objectives of the market study were to, “Determine the feasibility, attractiveness and sustainability of flare gas to market projects which includes the transformation of flare gas to ‘end products’ and the delivery and sale of these ‘end products’ to the off-taker.”
He added that, “Market intelligence related to the various Flare Gas to Market Products (FG2M-P) as well as estimated soft costs, estimated cost of capital, capacity factors, taxes, contingencies,” were considered in the survey.

“Risk and sensitivity analysis – identify, quantify and qualify risks and impacts related to: flare gas supply interruption; interruptions in any link of the flare gas to market value chain; risks related to inflation, devaluation (currency mismatch between capital investment currency and revenue currency); future flare gas to market dynamics; competitive analysis of flare gas versus Non-Associated Gas and how certain weaknesses in the flare gas supply chain need to be mitigated to enhance flare gas to market solutions,” he noted were also covered in the survey.

On market sounding of the programme, he stated that the survey considered general perception within the oil industry regarding the NGFCP, as well as the ability and willingness under which producers will provide guaranteed flare gas.

Also, the survey he noted, got feedback from the finance community regarding appetite to fund NGFCP projects and identify or quantify the main gaps that need to be mitigated, while original equipment manufacturers, potential investors and lenders were also consulted to develop a strong business scenario for the programme.
Derefaka, equally stated that the largest 50 gas flare sites in Nigeria accounted for about 80 per cent of the volumes that were flared, with about 65 per cent of the flare sites located on land or swamp in the country.

He also noted that the approximately 178 flare sites identified so far, flare approximately 888 million standard cubic feet per day (mmscfd) of gas, and produce approximately 22 million tons of carbon (CO2) emissions.
Derefaka, reiterated that 888mmscfd of gas flared could produce about 5000 megawatts (MW) of electricity, doubling Nigeria’s power generation, or generate $800 million per year to Nigeria at $3/MMBtu.

“Energy is a critical input for the achievement of the SDGS hence, the positive impact of government regulatory policy and the road to sustainable economic growth through the lens of the NGFCP by harnessing Nigeria’s flare gas towards affordable, clean and sustainable energy for economic development and climate change impact,” said Derefaka.