Nigerian firms to reduce gas flaring, boosting LPG

As domestic upstream firms take control of more of the country's assets, there will be increased pressure on them to curb gas flaring, writes Adebiyi Olusolape

Nigeria's drive to end gas flaring at the same time as foreign upstream operators continue to divest assets in the country is expected to result in increasing LPG production from domestic companies.

Nigeria's upstream regulator NUPRC puts domestic natural gas production at 8bn ft³/d (82.4bn m³/yr), of which around 10pc is flared. The country's flaring intensity has increased by 10pc over the past decade, according to global industry association the International Gas Union, a period that overlaps with the sale of onshore and shallow-water assets by foreign operators to Nigerian companies.

Domestic upstream operators are on course to control all of the country's onshore and shallow-water assets by 2025, and objection to their routine gas flaring is intensifying. Marginal field operator Chorus Energy was openly criticised this year at a monthly meeting of Nigeria's crude exporters for its zero gas utilisation.

The unfavourable economics of installing natural gas liquid (NGL) fractionation units at offshore facilities means that all of Nigeria's 3.5mn-4.5mn t/yr of LPG production is carried out onshore — most of which is exported by foreign producers. But the divestments will mean indigenous producers account for most of this output.

London-listed Seplat Energy has a sales and purchase agreement (SPA) to take over ExxonMobil's shallow-water business in Nigeria, including a 51pc stake in two NGL recovery plants. These facilities produced a total of 3,300t of propane, 4,000t of butane and 5,500t of pentanes last month and are forecast to yield 5,100t, 7,200t and 13,200t, respectively, in June, according to an industry source. State approval for the SPA was given then withdrawn last year. Seplat said on 24 May that it has extended the SPA to allow more time to secure official approval.

Seplat is increasing its gas processing capacity at existing assets to 775mn ft³/d in its aim to stop flaring gas by 2024. Integration of LPG extraction at its old and new gas processing plants is expected to start delivering about 100,000 t/yr of LPG by next year. Lagos-based Pillar Oil, a marginal field operator, is also partnering with a Seplat subsidiary to produce about 38,000 t/yr of LPG in 2025.

Abuja-based Green Energy is close to starting up a modular LPG plant that the marginal field operator bills as the first to be built in Nigeria. When it starts, the plant will produce 22,000 t/yr. Modular LPG technologies such as Green Energy's are the type of commercial applications sought by NUPRC in its gas flare auction. The Nigerian Gas Flare Commercialisation Programme (NGFCP) offers 49 flare sites and is expected to reduce the country's gas flaring to 7pc. Winners of the auction, which started last year, are soon to be announced.

Flare exchange

Global gas flaring in 2022 fell to its lowest since 2010, with Nigeria contributing most to this drop with a 20pc reduction from 2021 and a slight improvement in flaring intensity to 390 ft³/bl from 420 ft³/bl, the World Bank says in its 2023 gas flaring report. But Nigeria's progress last year has been attributed to declining upstream output owing to theft, vandalism, community disputes and severe flooding. In the coming years, its natural gas expansion plans and gas flaring penalties will be the main drivers of further reductions. NUPRC issued an updated gas flaring regulation on 25 May that reduces the differential threshold for gas flaring penalties to 5,000 bl of oil produced from 10,000 bl.

State-owned oil firm NNPC also plans to launch an LPG subsidiary with a target of producing 750,000 t/yr. This year, gas flared from all its joint ventures and production-sharing contracts has averaged 330mn ft³/d. Much of the feedstock for the plant of its planned subsidiary is likely to come from a 1.2 trillion ft³ gas development in the country's oil mining lease 143.