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.

TABLE OF CONTENT
Title Page……………………………………………………………………………………………..i
Approval Page ………………………………………………………………………………………ii
Dedication…………………………………………………………………………………………….ii
Acknowledgement…………………………………………………………………………………..iv
Table of
Contents……………………………………………………………………………………vi
List of
Tables………………………………………………………………………………………viii
List of Abbreviations………………………………………………………………………………….x
Abstract…………………………………………………………………………………………….xii
CHAPTER ONE – INTRODUCTION
1.1. Background to the Study…………………………………………………………………….1
1.2. Statement of the Problem ……………………………………………………………………4
1.3. Objectives of the Study ………………………………………………………………………7
1.4. Significance of the Study ……………………………………………………………………7
CHAPTER TWO – LITERATURE REVIEW
2.1. Literature Review ……………………………………………………………………………9
CHAPTER THREE – METHODOLOGY
3.1. Theoretical Framework…………………………………………………………………….44
3.2. Research Design…………………………………………………………………………….53
3.3. Hypotheses/Test of Hypotheses……………………………………………………………..55
3.4. Method of Data Collection …………………………………………………………………56
3.5. Method of Data Analysis……………………………………………………………………58
3.6. Logical Data Framework…………………………………………………………………….60
CHAPTER FOUR – AN OVERVIEW OF OIL PRODUCTION AND GAS FLARING IN NIGERIA
4.1. Background to Oil Production and Gas Flaring in Nigeria………………………………….63
4.2. Nigerian Government and Gas Flaring Reduction and Elimination Efforts……………….65
4.2.1. Nigerian Government and the Legal Frameworks for Enforcing Gas Flaring Reduction
and Elimination……………………………………………………………………………… …66
4.2.2. Nigerian Government and Provision of Incentives for Gas Flaring Reduction and Elimination…………………………………………………………………………………70
4.2.3. The Role of the Nigerian Government in the International Initiatives for Gas Flaring and Climate ChangeMitigation…………………………………………………………………75
4.2.4. Nigerian Government and Setting of Zero-Gas Flaring Deadlines………………………….82
4.3. Oil Revenue and Nigerian Economy……………………………………………………….84
CHAPTER FIVE – JOINT VENTURE EQUITY HOLDINGS AND ZERO-GAS FLARING REGIME IN NIGERIA
5.1. The Joint Venture Partnerships in the Upstream Oil Sector in Nigeria………………………91
5.2. The Joint Venture Efforts to Achieve Zero-Gas Flaring in Nigeria…………………………96
5.3. The Joint Venture Equity Arrangements and Non-implementation of Zero-Gas Flaring in Nigeria……………………………………………………………………………………..104
CHAPTER SIX – BUDGETING PROCESS OF THE JOINT VENTURE OPERATORS AND ADOPTION OF INEFFECTIVE GAS FLARE ELIMINATION STRATEGIES
IN NIGERIA
6.1. The Oil Multinational Corporations in the Oil Joint Venture Partnerships (JVPs) in Nigeria ………………………………………………………………………………………..115
6.2. The Oil Multinationals’ Strategies for Meeting Zero-Gas Flaring Deadline in Nigeria ………………………………………………………………………………………119
6.3. Budgetary Process and Cash Call Obligation of the Joint Venture Partners……………….138
6.4. Improper Budgeting Process of the Joint Venture Operators and Adoption of Ineffective
Gas Flare Elimination
Strategies……………………………………………………………………141
CHAPTER SEVEN – INADEQUATE FUNDING OF NNPC’S PARTICIPATION IN JV AND FINANCING OF GAS UTILIZATION FACILITIES
7.1. Establishment of the NNPC and Participation in the Joint Venture Partnership in Nigerian
Upstream Oil Industry…………………………………………………………………………..157
7.1.1. NNPC Subsidiaries Involved in Upstream Oil Joint Venture Partnerships……………………164
7.2. The Role of NNPC in Achieving Zero-Gas Flaring in Nigeria………………………………..168
7.3. NNPC’s Inadequate Funding of Participation in Joint Venture Partnerships and Financing of
Gas Utilization Facilities in Nigeria………………….………………………………………176
CHAPTER EIGHT – SUMMARY, CONCLUSION AND RECOMMENDATIONS
8.1.Summary………………………………………………………………………………………189
8.2.Conclusion…………………………………………………………………………………….196
8.3.Recommendations…………………………………………………………………………….198
BIBLIOGRAPHY
APPENDIX