Examining the Carbon Trading Potential in Nigerian Oil Fields

Abstract Nigeria holds reserves circa 200 TCF of gas, the largest gas reserve in Africa. With this comes the challenge of managing the environmental impacts of flaring associated with oil production. The Federal Government of Nigeria in recognition of the urgency to address the growing environmental concerns attending gas flaring in Nigeria and response to its commitment made further to the endorsement of UNFCC's Paris Agreement and the Zero Routine Flaring by 2030 initiative by the World Bank declared a national flare out target of 2020. In 2016, the Federal Executive Council approved the implementation of the Nigerian Gas Flare Commercialization Programme (NGFCP) which was the flagship programme for the implementation of the Government's flare-out policy. The programme seeks to, via a competitive and transparent bid process, grant the right to access the gas at the flare-stack. The issues of relevance to this study include – The development and subsequent enactment of new regulations guiding the treatment of flare gas in Nigerian oilfields – The regulations implemented a new flare payment regime adopting the polluter pays principle which internalized to a significant extent the environmental cost of flaring thereby motivating a behavioral change by operators. Also, the recognition of the carbon benefits that will follow the implementation of projects under the NGFCP and the stance of the government that any such benefits will be vested in the state. This study examines the carbon trading potentials of flare gas in Nigeria. This is key because players in the sector now seek all revenue opportunities that accrue to the implementation of flare down/ out project. In doing so, Carbon benefits now feature among potential revenue streams. This study models several composition scenarios to quantify the extent (if any) of any such benefits. The study also examines gas use cases and their carbon sequestration potentials to create a realistic band estimating the carbon benefits that will emanate from all use scenarios.