Tuesday, November 13, 2007

Oil: Nigeria and beyond

Every few months I here something about the oil industry in Nigeria. It is a disaster in both the figurative and literal sense.

One major source of carbon dioxide emissions that can be reduced almost completely is flaring - burning off of oil that cannot be refined and the gas associated with the oil (See here). Remarkably, one-third of all Nigeria's oil is flared. This is almost completely due to lack of capacity in the oil industry.

Now Nigeria is a poor country (despite being the fifth largest oil producer, but that is another story), so not having capital to build its oil infrastructure would be understandable. However, the actual case is that the oil refining industry in Nigeria is controlled by large multinational oil companies - most notably Royal Dutch Shell - and they do have the capital. These companies say they continue to flare because the Nigerian government did not give them the funding.

There are some very important issues here. First, these companies make huge profits, yet they need money from the Nigeria government? Second, they do not get money from the US or British governments to not flare gas, yet these countries are much richer than Nigeria. Third environmental regulators in the US or Europe would never allow this much gas to flared, but the companies can do it in countries such as Nigeria because they have lower standards, if any.

What is it about oil companies? As mentioned in my previous post, US companies complain about proposed greenhouse emission standards reducing capacity, yet they have not built a new refinery in 20 years. And now there making the same claim about new sulfur emission standards.

The oil companies want to claim they are "green", showing ads on TV with lush forests saying how they take care to not harm the environment, and then go and fight all environmental standards. In doing so they will use any excuse - there not enough subsidy, it will cause us to cut back on infrastructure, there is no global warming.

Why do they not come out and tell the truth. It will hurt their profit margin.

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