The Effects of Oil Joint Venture Partnerships on Enforcement of Zero-Gas Flaring Policy in Nigeria, 2003-2011

Abstract

The act of gas flaring in Nigeria began with production of crude oil in 1958, and has since engendered serious trans-boundary environmental, energy, economic and health implications. This has led to the adoption of zero-gas flaring policy in 2003 in line with the domestication of related international initiatives and treaties in Nigeria. However, oil joint venture partnerships between Nigeria’s NNPC and international oil corporations (IOCs) from the United States of America, Britain, France and the Netherlands in oil production flared 514,779,616 standard cubic feet (scf) of associated gas out of 619,032,858 scf of total associated gas flared in 2011. Available records indicate that Nigeria’s oil joint venture partners prioritized profits through increase in oil production without relating oil production to the capacity of gas utilization facilities required to meet policy deadline. This study focused on the effects of oil joint venture partnerships on the enforcement of zero-gas flaring policy in Nigeria, 2003-2011. The specific objectives were to: (i) determine whether equity arrangements of the oil joint operation agreements hindered the implementation of zero-gas flaring policy in Nigeria, (ii) ascertain whether the budgeting process of the oil joint venture operations impeded the adoption of effective gas flare elimination strategies in Nigeria, and (iii) establish whether funding of NNPC’s participation in oil joint venture partnerships constrained financing of associated gas utilization facilities in Nigeria. The study adopted the rentier state theory as the theoretical framework and ex-post-facto research design. The study also made use of secondary data sourced from books, journals, conference papers and official documents from the Nigerian National Petroleum Corporation (NNPC), the Organization of Petroleum Exporting Countries (OPEC), the World Bank, Global Gas Flaring Reduction Partnership (GGFRP), the Nigerian Extractive Industries Transparency Initiative (NEITI), the National Bureau of Statistics (NBS), and the Central Bank of Nigeria (CBN). The study used logical induction to analyze the data. The major findings were that: (i) the equity arrangements of the oil joint operation agreements hindered the implementation of zero-gas flaring policy in Nigeria, (ii) the budgeting process of the oil joint venture operators impeded the adoption of effective gas flare elimination strategies in Nigeria, and (iii) the inadequate funding of NNPC’s participation in oil joint venture partnerships constrained financing of associated gas flaring utilization facilities in Nigeria. The recommendations were: (i) restructuring the equity arrangements of the oil joint venture partners in order to effectively implement zero-gas flaring policy, (ii) reforming the budgeting process of the joint venture operators for adopting effective gas flaring elimination strategies, and (iii) sufficient funding of NNPC participation in the joint venture partnerships necessary for adequately financing associated gas utilization projects.