Gas Flare Out

When crude oil – especially the lighter crude typical in Nigeria – is brought to the surface, large volumes of gas trapped with the oil (associated gas) often come with it. When SPDC first built many of its production facilities in Nigeria there was little demand for gas in the country. Instead it was burnt off safely – a process called flaring.

Flaring is a waste of resources as well as revenue for the government, Nigerians and for SPDC. Shell Nigeria has a plan to eliminate routine gas flaring in its operations. This is a huge undertaking that requires the company to gather and bring to market the gas produced from more than 1,000 wells. 

Between 2002 and 2008, the SPDC-operated joint venture invested $3 billion in gas gathering projects. This reduced associated gas flaring by more than 30%. Including the decline in SPDC production since 2006 due to security concerns, gas flaring has fallen by 60% over this period. This gas is now used to supply domestic customers, produce electricity in the country, and to supply the Nigeria Liquefied Natural Gas (NLNG) plant on Bonny Island. NLNG, in which Shell as a 25.6% share, accounts for 11% of global LNG production capacity. There is no continuous flaring of natural gas at Shell-run offshore operations nor at NLNG.

Completion of the gas gathering projects has been significantly delayed by both a lack of security in the Niger Delta and a lack of funding from the government-owned Nigerian National Petroleum Corporation, which owns 55% of the joint venture, and which has not been able to pay its share of the costs.

More than $3 billion of further investment is needed to complete the programme. The work will continue once SPDC has safe access to sites and stable funding. SPDC is working with the government to solve the funding issue. In late 2008 and early 2009 SPDC agreed two new funding agreements – essentially loans on favourable terms to the Nigerian government – to enable work to continue on several major gas gathering projects.

When completed, SPDC gas gathering projects will harness some 85% of the total associated gas produced in its operations. The remainder is from a number of small producing fields far from the gas gathering system for which other solutions are currently being sought. These may include the installation of micro-turbines for power projects for nearby communities. Subject to government approval, SPDC intends to shut in production from any fields where there is no prospect of a solution for gathering the existing associated gas.