May 19, 2010 / 11:09 AM / in 8 years

Shell to spend $2 billion reducing Nigeria gas flaring

LAGOS (Reuters) - Royal Dutch Shell said on Wednesday it planned to spend $2 billion upgrading and replacing its gas gathering facilities at 26 locations in Nigeria’s Niger Delta in order to reduce flaring.

Gas flares burn day and night from onshore oilfields in the Niger Delta, one of the world’s biggest wetlands, creating a health hazard to nearby communities and contributing to global warming, environmentalists say.

Shell’s SPDC joint venture in Nigeria said the projects, many of them previously delayed by funding or security problems, would lead to more than three quarters of its production potential being covered by gas gathering facilities.

The gas would then be available for use in power stations and by industry in Africa’s biggest energy producer, which often suffers from power cuts.

“Security and funding conditions permitting, we have a real chance to progress our flaring reduction plans through these key projects,” SPDC Managing Director Mutiu Sunmonu said.

Nigeria flares (burns off) more gas than any other country except Russia, burning as much as 2.5 billion cubic feet of gas per day because it lacks the infrastructure to make use of it.

Oil companies were supposed to have stopped all gas flaring in the OPEC-member country by the end of 2008 or face hefty fines, but like previous deadlines it passed without any companies being punished.

Nigeria’s Senate last year passed a bill stating that firms that flare gas from January 1, 2011, will have to pay the going international market price of gas for the amount flared.

Firms are currently supposed to pay $3.50 per 1,000 cubic feet of gas flared.

Despite having the world’s seventh largest gas reserves and vying with Angola as Africa’s top oil producer, mismanagement, a lack of funds and poor maintenance mean parts of the country can go without electricity for weeks at a time.

As part of a “gas master plan”, Nigeria has invited foreign oil and gas firms to help it build gas gathering plants and pipelines to supply the ailing power sector, whose inefficiency is one of the main brakes on economic growth.

Shell said it had already spent more than $3 billion installing associated gas gathering infrastructure at 32 flowstations in Nigeria, covering about half of its production potential.

“It is important to emphasize that, as elsewhere in the industry around the world, even when we have associated gas gathering facilities, a small amount of gas flaring at production sites will always be required for technical, safety and maintenance reasons,” Sunmonu said.

Reporting by Nick Tattersall; Editing by Randy Fabi

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