CHAPTER ONE

 INTRODUCTION

1.1   Background of the Study

Natural gas means gas obtained from boreholes and oil wells consisting primarily of hydrocarbon. It is the combination of certain hydrocarbon substances in gaseous form that accompany crude oil in its occurrence. It is in this form of its unrefined state that makes it natural gas. Because petroleum and natural gas are formed by similar natural processes, these two hydrocarbons are often found together in underground reservoirs. Petroleum is fossil fuel that has been formed from long-buried plants and microorganisms. Fossil fuels, includes petroleum, coal, and natural gas. Chemically, fossil fuels consist largely of hydro-carbons, which are compounds composed of hydrogen and carbon. Some fossil fuels also contain smaller amounts of other compounds. [1]

Hydrocarbons are formed from ancient living organisms that were buried under layers of sediment millions of years ago. As accumulating sediment layers exerted increasing heat and pressure, the remains of the organisms gradually transformed into hydrocarbons. Thus, oil and natural gas, like other fossil fuels are formed from the fossilized remains of dead plants and animals by exposure to heat and pressure in the Earth's crust over hundreds of millions of years. Over time, the decayed residue was covered by layers of mud and silt, sinking further down into the Earth’s crust and preserved there between hot and pressured layers, gradually transforming into oil and natural gas reservoirs. The most commonly used fossil fuels are petroleum, coal, and natural gas. These substances are extracted from the earth’s crust and refined into suitable fuel bye-products, such as petrol, heating oil, kerosene et cetera.[2]  

 Thus, Petroleum and natural gas often occur together and they currently constitute the world’s major energy resources.[3] They are however, non-renewable energy resources, because they are depleting energy sources.

 1.2Statement of the Problem 

         Nigeria has been noted to hold the largest proven natural gas reserves in Africa as well as being one of the top ten Liquefied Natural Gas exporting countries globally for several years. [4]

Nigeria is the second largest offending country, after Russia, in terms of the total volume of gas flared, in 2004 Nigeria’s volume of gas flared was equivalent to one‐sixth of total gas flared in world. [5]  Nigeria with a population of over-140 million is today the World's 12th largest oil producer and the 8th largest exporter of crude oil, and has the 10th largest proven reserves.[6]  . Prospecting and extraction of petroleum occur in over 50% of the Niger Delta region, resulting in a cornucopia of access roads, pipelines, wells, gas flaring, dredged spoils and flow stations that are often located near homes, schools, farms, and within communities. [7]

         A certain amount of natural gas always occurs in connection with oil deposits in underground reservoirs and is brought to the surface together with the oil when an oil well is drilled.[8]  During this drilling, natural gas is treated as a waste by-product of petroleum and is burned off by flaring. Sadly, gas flaring has defied successive regulations to end it in Nigeria. Historically, the first attempt at oil and gas exploration in Nigeria commenced in 1908, during the colonial era. This attempt was largely unsuccessful, but served as an impetus that was needed for the future exploration of oil and gas in Nigeria. An attempt by Shell Petroleum (Shell-BP) yielded result in 1956 when oil and gas were discovered in commercial quantity in

Oloibiri, in present day Bayelsa State.[9] With this discovery, Nigeria was ushered into the international oil stage as a producing nation.

         Gas flaring occurs not only in Nigeria but also in many other countries in Africa, Middle East, a few countries in Asia and North America. Some producing countries lack the requisite technology and infrastructure to put natural gas into useful purposes. It has been said that the cost of separating associated gas from oil, for purposes of utilization, is very high and prohibitive. This often complicated process of separation involves the use and installation of powerful compressors for transmission of the gas. These are expensive to procure. In the same vein, re-injection of the associated gas into the reservoirs is also a costly venture which must be handled with utmost care and skill. The result is that oil companies are left with the option of flaring which has become comparatively cheaper.

           In industrialized countries, with requisite technology and infrastructure, such as the United States, China, Japan, Saudi Arabia and some European countries, natural gas is condensed and put into beneficial uses such as for power generation, industrial heating, fertilizer and petrochemical manufacturing, feedstock for direct steel reduction, for aluminum smelting, gas for air conditioning system and even for residential uses for heating purpose.                                      

While the use of natural gas has continued to expand in the residential and commercial fronts in these developed countries, in Nigeria, it is flared as a waste bye-product of petroleum. This is not only wasteful but also harmful to health and the environment. Successive regulations to end gas flaring in Nigeria, including judicial pronouncements were seen to have yielded little result. The multinational oil companies operating in the Nigerian oil and gas industry are faced with not only the challenges of high cost of infrastructure and technology acquisition to put this gas into useful purposes, but also government policies which include appropriate gas pricing. [10]  

All these constitute apparent insurmountable challenges inhibiting against zero gas flaring in Nigeria. However, one major reason why Government eased its position was as a result of promulgating laws despite the absence of any infrastructure for associated gas utilization.[11]

1.3Aims and Objectives of the Study

      The aim and objective of this study is to carry out an analysis of gas flaring Regulations in the Nigeria oil and gas sector, which aim is to make strong recommendations to the appropriate Government Agencies with the view to ending gas flaring in Nigeria as soon as possible. The compliance or otherwise of the Regulations by the multi-national oil companies (MNOCs) operating in Nigeria are also examined, and the challenges inhibiting this compliance. Finally, the negative effects of gas flaring are also enumerated.

          The negative effects or consequences of gas flaring are enormous. In the case of Gbemre v Shell Petroleum development Co Nig Ltd & ors,[12] the court stated that gas flaring constitutes a threat to its environment and to the entire region. It pollutes the air and causes respiratory diseases. Other negative effects or threats are the problems and threats posed by climate change in several parts of the world which are so staggering and frightening that they call for the urgent attention of all everywhere. The challenges however differ in magnitude in different parts of the globe, unfortunately with the developing world being the worst hit, yet with no equal capability to attend to these challenges. These challenges therefore provide the ultimate demonstration of global interdependence. Climate change is likely to overwhelm local capacities to adapt to changing environmental conditions and reinforce crisis and tend towards general instability in several parts of Africa, especially, weak and fragile states with poorly performing institutions and systems of government[13]

           Nigeria is an influential nation and a member of the oil cartel, the Organization of Petroleum Exporting Countries (OPEC).[14] The country is a net exporter of crude oil, with a proven reserve of about 37.06 billion barrels of proven crude oil, (2.2% of world’s reserve), and about 182 trillion cubic feet (2.7% of world’s reserve) of natural gas[15]. With the above quoted figures of Nigeria’s oil and gas reserves, it is ranked the world’s ninth largest gas reserves holder and indeed the largest in Africa.

Recent discoveries and estimates have gas reserves growing to as much as 600 trillion cubic feet, making it the world’s 4th largest after Qatar. The country has been described as a gas zone. Nigeria is Africa’s largest producer of oil. The Nigerian government relies on the energy sector for over 85% of its revenues. A greater percentage of the associated gas encountered in oil exploration is still being flared, which makes Nigeria a high flarer of gas, second only to Russia, the world’s highest flarer.[16]

            Considering Nigeria’s virtual dependence on revenue from oil and its vast gas resources, the rate at which it still flares its gas more than 50 years after the commencement of oil exploration activities cannot but be of concern. It is even more worrisome considering the fact that flaring contributes more to global warming than other carbonized activities. A country touted to possess enormous deposit of gas as Nigeria cannot continue to wastefully flare this resource, to the risk of the environment indefinitely, without a check. This research project is therefore, aimed at not just analysis of the various regulations and framework to stop gas flaring in Nigeria since 1969, but also the various dangers posed by gas flaring.  It is therefore hoped that the recommendations proffered in this research project, especially the comparison and overview of Nigeria’s situation with that of Norway and the lessons to learn, shall help the appropriate authorities concerned to fast tract their policies and implement same to achieve a zero gas flaring status in Nigeria[17]. 

1.4Research Methodology

This research work examines the critical and underlying factors militating against zero gas flaring in Nigeria. The necessary information relied upon for this research work have been sourced from primary and secondary sources. The primary sources include statutory books, which are the various Acts in the oil and gas sector. Petroleum Act 1969, Petroleum (Drilling and Production) Regulations of 1969, the Associated Gas Reinjection Act 1979, the Associated Gas Re-injection (Continued Flaring of Gas) Act 1984, et cetera.

 The secondary sources include oil and gas text books, Journals, articles, research works by prominent scholars, writers, essayists. Also to be included here are oil and gas study materials from the National open University of Nigeria (Noun), that is, Law 411 and Law 412. Information was also sourced from the libraries of other institutions like the University of Uyo Law Library, some private law chambers were visited and also the Department of Petroleum Resources (DPR) Abuja.

1.5  Significance of the Study

A research work on ‘Analysis of Gas Flaring Regulations in Nigeria’ is worth undertaking. The findings will help remind the policy makers and the public at large of the dangers posed by gas flaring. Gas flaring is the world’s sole major cause of global warming   ; It pollutes the air, causes respiratory diseases etc, and a major cause of climate change in several parts of the world. Gas flaring is also a wasteful activity which denies Nigeria of billions of dollars because it has a huge income potential if processed and put into beneficial uses domestically or even exported to other countries. 

          This research work therefore, seeks to create a renewed awareness to the Nigerian government and the public at large about the negative effects of gas flaring and the huge economic benefit to Nigeria if the necessary infrastructure is put in place to process the gas for beneficial uses instead of wastefully flaring it into the atmosphere and the stratosphere which depletes the ozone layer. It is hoped that the recommendations made at the end of this research work would be implemented by the Nigerian government and the multi-national oil companies (MNOCs) for the betterment of Nigeria.

1.6   Scope and Limitation

This research work is within the context of the oil and gas law in Nigeria, and in particular within the ambit of the various regulations made since 1969 to stop gas faring in Nigeria. Therefore, this study will be limited mainly to the various regulations that have been made to end gas flaring in Nigeria, their compliance or otherwise, and the various challenges militating against smooth implementation such as lack of necessary infrastructure.. On a minor scale, comparison has been made between the situation in Nigerian and that of Norway. Both countries coincidentally started oil exploration and drilling activities about the same time: 1958 and 1960 respectively.[18]

1.7  Synopsis of Chapters

For the purpose of this research work on ‘Analysis of Gas Flaring Regulations in Nigeria’ this work is divided into five chapters for clarity and logical presentation. Chapter one focuses on introducing the topic of this work. It gives broad introduction of concepts and ideas as they relate to gas flaring regulations in Nigeria. The problem that it aims to solve, aim and objective of the study, the method adopted in conducting the research, significance of the work, it defines the scope and limit within which this research project will focus on. It also gives the brief definition of terms that may likely be ambiguous in general sense, thereby narrowing the terms and conceptions to the context of the work under assessment.

Chapter two is the literature review. Here effort is made to elaborate on what natural gas extraction and flaring are all about, i.e. associated natural gas production, as a bye-product of oil well drilling. The rich abundance of natural gas in Nigeria, predominantly in the Niger Delta sedimentary basin of Southern Nigeria and its harmful environmental effect when flared. The health implications of gas flaring and the wasteful economic loss to the country. The oil communities and their rights to clean environment is also considered in this chapter. [19] Chapter three takes a look at the various regulations in the oil and gas industry, particularly regulations to end gas flaring in Nigeria. This begins with the Petroleum Ordinance of 1907 during the colonial era, through the Petroleum Act of 1969 and ends with the yet-to-be-passed Petroleum Industry Bill (PIB) 2012 (still under deliberation by the National Assembly)

Chapter four takes a look at the framework for combating gas flaring in Nigeria. This includes judicial pronouncements in various court cases brought against Government and the MNOCs operating in Nigeria, other non-statutory control of gas flaring such as the tort of negligence, nuisance and the rule in Rylands v Fletcher (also called the rule of strict or absolute liability in tort)[20] Chapter five sums up with the summary, conclusion and recommendation and also bibliography of the study.

1.8  Definition/Conceptualization of terms

1.8.1 Gas Flaring:                             Burning of associated gas (AG) during oil well drilling.

1.8.2  Associated gas                         Gas encountered in connection with oil deposits

1.8.3 Multi national Oil companies   International companies in the petroleum industry

1.8.4 oil prospecting license              Exclusive right to explore and prospect for petroleum

1.8.5 Oil mining lease                       An exclusive right granted by Government to exploit

1.8.6 Adverse Effects                        Negative reaction caused by some action

1.8.7 Climate change                       Change in atmospheric condition caused by some actions

1.8.8 Pollution                                 The presence in or introduction into the environment of a 

                                                         substance which has harmful or poisonous effects.   

1.8.9 Hematology                            The branch of medicine involving study and treatment of

                                                          the blood.

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