NIGERIA: Shell Extends Gas Flaring Deadline

A major hiccup on government's effort to terminate gas flaring by 2008
has occured as oil multinational, Shell Petroleum Development Company
(SPDC) said the official deadline will no longer be realistic to the
firm.

Shell said it will now end flaring by 2009 and cited job failures in
the company's (AGG) project as one of the reasons for its action.

Gas flaring is a vexed issue, particularly in the Niger Delta, where
groups in the region said it had devastating effects on humans, flora
and fauna of the oil-rich area.

Shell declared in its 2004 annual report published on the internet
at the weekend that the AGG project, designed to provide gas conduits
to over 1000 wells in the Niger Delta, has been hampered by failure in
counterpart funding, contract delivery deadlines and community
cooperation.

Besides, it stated that an additional joint venture (JV) funding of
$1.85 billion (or about N247.9 billion) would be required to activate
an alternative plan to deliver the project by 2009 to extinguish
flares.

Shell is the biggest oil and gas producer in Nigeria, pumping over
50 per cent of the nation's crude oil, condensate and gas as the
operator of the NNPC/Shell/Elf/Agip joint venture.

The company plays leading role in policy implementation in the
sector since its compliance accounts for 50 per cent success in any
official policy on the upstream petroleum industry.

Although elimination of routine flaring of associated gas is an old
national aspiration, it received a fillip in the economic reform agenda
of the present administration in which government works to harness
economic potentials of natural gas for revenue and sundry development
goals.

In the race to beat the 2008 deadline handed down by government, oil
companies in the country initiated gas-based projects including
Independent Power Production (IPP), Liquefied Natural Gas (LNG),
Gas-to-Liquid (GTL) and gas export pipelines.

Shell stated that the JV had spent over two billion dollars (or
about N268 billion) towards its 1996 commitment to harness associated
gas in its network of 73 flow stations to meet supply commitments to
Nigerian Liquefied Natural Gas (NLNG) and National Electric Power
Authority (NEPA), and suspended new field developments that would
entail gas flaring.

According to the report, five of the AGG projects have been
commissioned, eliminating gas flares by 33 per cent or 430 million
standard cubic feet per day (430 mscpld) in 22 of the 73 flowstations.

With work still in progress at another 25 flow stations and design
work underway for another nine flow stations, Shell said total
elimination of flares is estimated at end of 2009.

It added that options are being considered to shut in production
from 17 low producing flow stations by 2008 if no economically viable
solution is evolved for their associated gas output.

"We very much regret that we will not be able to meet our, and the
Nigerian Government's, flare down target of 2008 - and we are
discussing with the relevant Nigerian authorities the available
options," Shell stated.

The company blamed the failure on a four billion dollar (about N536
billion) joint venture funding shortfall, poor contractor performance
and escalating costs of materials and services.

According to the report, shell has engaged its JV partners on all
the issues of funding, shut-ins and deferments encountered in the AGG
with a view to reaching a consensus on how to put the project on fast
track to avoid further shift in the 2009 flare down target.

On the completion of the AGG project as designed, Shell stated, the
facilities will cover 95 per cent of all associated gas produced.

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