A Nigerian agency responsible for monetising flared gas, which accounts for 22 million tonnes per annum of carbon emissions, is preparing the gas sector for a major shake-up.

Justice Derefaka, general manager of the Nigerian Gas Flare Commercialisation Programme (NGFCP), told Upstream that he expected flare gas monetisation schemes to lead to major changes in the gas price.

He cited market analysis currently being carried out for NGFCP by the International Finance Corporation (IFC) as suggesting that profitable monetisation of flares can occur only if “a realistic pricing range for flared gas to market (FG2M) is adopted to incentivise off-takers to switch”. The IFC's work is primarily focused on how off-takers impact the value chain and how flared gas can be redirected to the marketplace under sound economic criteria over the next decade.

A preliminary report from the World Bank-controlled corporation attempts a competitive analysis of flared gas versus non-associated gas by referencing “soft costs, capital costs, capacity and taxation", said Derefaka, adding that the state had now asserted its right "to take gas free at the flare and auction it off to third parties”.

IFC's study is getting feedback from the finance community on the appetite to fund NGFCP projects and how to mitigate the principal gaps identified. “We are focused on providing services and products to unserviced markets like community power demand or fertiliser provision to local districts. And we know we can generate savings by offering lower-cost energies like compressed natural gas, liquified petroleum gas and mobile liquefied natural gas or simple pipe gas options,” said Derefaka.

Some 178 sites across the Niger Delta currently flare about 888 million cubic feet per day of gas, a volume that could generate 5000 megawatts of electricity, doubling Nigeria’s power supply and — at $3 per million British thermal units — generating revenues of $800 million annually. Confronted with manufacturers’ laments about a lack of competitive gas pricing, Derefaka pointed out the IFC study "will douse all these tensions once it gets published".

Last month, Minister for Petroleum Resources Ibe Kachikwu announced that a new gas pricing policy would be in place by 29 May to address what he called “unreasonable tariffs” imposed by gas distributors on commercial consumers.

Kachikwu questioned why consumers should be charged $7.45 per thousand cubic feet of gas when the international price is $5 per per thousand cubic feet. He also queried the rationale of continuing to benchmark Nigeria's gas price with the US dollar.

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Monetisation of flared gas in Nigeria to affect prices