The Global Gas Market: It's really not so global after all By, Madelaine Drohan, Globe and Mail, Ottawa, Canada Oct. 4, 2000 Here's a brain teaser for you on a Saturday morning: Why is it that natural gas prices in North America are set to soar through the roof, when in Nigeria oil producers are burning off more than two billion cubic feet of the stuff every day? We're told prices are set to rise because supply is not keeping up with demand. And it certainly seems that the demand for natural gas in the U.S. market is insatiable. Net imports of natural gas to the United States hit a record in every year of the past 13. That's been good news for Canadian producers, because they supply most of these natural gas imports -- about 9.3 billion cubic feet a day. But countries as far a field as Algeria, Qatar, Australia and Malaysia are also shipping into the U.S. market. Meanwhile in Nigeria -- which, in terms of distance, is no farther away from the U.S. market than Algeria or Qatar -- giant flares turn night into day in the oil patch as natural gas is burned just to get rid of it. Nigeria produces about 3.4 billion cubic feet of natural gas a day, mostly as a byproduct of oil. And about 70 per cent of the total, or 2.4 billion cubic feet, is flared. That's about a quarter of what Canada ships to the United States daily. Granted, the oil companies have to do something with it. When oil is pumped, gas and water come up with it and must be separated and disposed of somehow. Aside from being flared, natural gas could be injected back into the ground, which increases the pressure on remaining oil, making it easier to extract. Or it could be collected for fuel, which is the practice in Canada and the United States where there are far stricter limits on flaring. The oil companies have been wasting natural gas in Nigeria because it is cheaper and easier for them than dealing with it some other way. Never mind the severe environmental consequences. And never mind that it robs the Nigerian people of much needed avenues. Imagine how much waste there has been since the first oil was pumped in Nigeria back in 1958. The situation is about to improve, for two reasons. The Nigerian government has passed regulations that require most of the flaring to end within a decade. The oil companies will have to find some other way of dealing with the gas. Anticipating this, some of the major players -- Shell Gas BV, Agip International BV and Cleag Ltd. (Elf) -- have built a liquefied natural gas plant in a joint venture with Nigerian National Petroleum Corp. That $3.8-billion (U.S.) facility began exports a year ago and when fully complete will use enough gas to significantly reduce gas flaring. It will also mean an extra $500-million a year in revenue for the Nigerian state petroleum corporation. But why wasn't such a plant built years ago? The oil companies say they tried but corruption and cheaper sources of natural gas stymied their six previous attempts. And even once they had those problems licked, they still had to find customers to sign 20-year, take-or-pay contracts to ensure they would have the revenue to pay for the expensive infrastructure. In fact, this has proved easier to do because more and more consumers, particularly in Europe, are shifting to cleaner fuels. But it is also the case that the lax regulatory regime and decades of corrupt government in Nigeria allowed the oil companies to take the cheapest, dirtiest route for a long time. Why worry about doing something with all that gas, when it could be flared with no questions asked? Local demand from the surrounding African countries might have kick-started a liquefied natural gas project or a West African pipeline project that is also in the works. But this part of Africa is sadly under-industrialized, and governments have not put the money into building up local gas distribution networks. The demand had to come from farther a field to get the oil companies to move. And even now, that demand is not enough to stop the waste completely. When we're bundling up in Canada this winter and turning down the thermostat to save heating costs, the oil companies will still be burning natural gas in the Niger Delta just to get rid of it. When it comes to some kinds of heating fuel, the global market isn't so global after all. Courtesy: http://www.electrifyingtimes.com