The Economics of Gas Flaring

From the 5-Apr. edition of the Economist; 'Another deadline goes up in flames'

This article states that Nigeria flares the second most gas in the world after Russia and may be the single largest contributer of CO2 emissions in all of sub-Saharan Africa. It is estimated that the flared gas would amount to more than $500 million in additional revenues annually.

Nigeria outlawed gas-flaring in 1979, however is still trying to phase it out to date. It is unlikely to end this year . . . . or next year either, as oil accounts for 76% of government revenue and 90% of exports and the government is wary of imposing penalties.

Nonetheless, Shell has invested $3b, of an estimated $6b, in turning off the flares and collecting the gas. Instability in Nigeria however is further complicating these efforts. Risk of kidnapping and sabotage has forced contractors to increase prices in excess of 10x the global average of $1m per 1km layed pipe!

It appears that the failures of the state need to be addessed if there is to be any chance of turning off the gas flares.