Nigeria receives $307.4m as oil companies’ gas flare payments
PAYMENTS FOR FLARING GAS made by oil companies to Nigeria increased from a paltry $15.5 million in 2018 to $307.4 million by 2019, according to a most recent audit report from the Nigeria Extractive Industries Transparency Initiative (NEITI).
Gas flare, alternatively known as a flare stack, flare boom, ground flare, or flare pit, is a gas combustion device used in industrial plants such as petroleum refineries, chemical plants and natural gas processing plants.
In Nigeria, gas flaring is the controlled combustion of associated gas, a large volume of which makes up Nigeria’s gas reserves, generated during various processes, including oil and gas recovery, petrochemical process, and landfill gas extraction, into open-air.
According to PricewaterhouseCoopers (PwC), the percentage of gas flared in Nigeria has been reducing since 2002 and stood at 10 percent in 2018. But in terms of volume of gas flared, the country still ranks in the top 10 gas-flaring countries in the world, with 7.4 billion cubic feet flared in 2018.
Data sourced from the National Oil Spill Detection and Remediation Agency (NOSDRA) revealed that Nigeria’s flared gas is valued at $6.3 billion, and can generate 179.9 thousand GWh of electricity. In 2020 alone, natural gas valued at $1.24 billion was burned by oil companies, one which could generate the annual electricity use of 804 million Nigerian citizens, according to the tracker.
While gas flaring, the controlled combustion of associated gas, is almost impossible in the extraction of molecules, companies which operate in the hydrocarbons space are usually penalised for overstepping their limits.
A World Bank’s 2020 global gas flaring tracker, a leading global and independent indicator of gas flaring, recently ranked Nigeria as the seventh-largest gas-flaring country globally, only surpassed by Russia, Iraq, Iran, the United States, Algeria and Venezuela.
However, the NEITI report, which covered the industry’s activities for 2019, indicated that a total of 264,732 MMscf of gas was flared during the year under review but was 0.8 percent lower than that of 2018, which was 266,869 MMscf.
NEITI said the revenue from flare gas payment was significantly higher from $15.4 million in 2018 to $307.496 million in 2019. The dramatic increase in the gas flare revenue came from enactment of the Flare Gas (Prevention of Waste and Pollution) Regulation Act promulgated in 2018 by the National Assembly, and administered by the gas division of the Department of Petroleum Resources (DPR) under the Nigerian Gas Flare
Commercialisation Programme (NGFCP).
The regulation provides a new legal framework to support the policy objectives of the federal government for reduction of GreenHouse Gas (GHG) emissions through the flaring and venting of natural gas. This increased the initial meagre flare payments penalties of N10 per 1,000 standard cubic feet (scf). The new law raised the penalty payment to $2.0 per 1,000 scf for anyone producing 10,000 barrels of oil or more. In the case of anyone producing less than 10,000 barrels of oil per day, the amount is $0.50 per 1,000 scf of gas.
The regulation further introduced mandatory additional payments by the producer of $2.50 per 1,000 scf of gas for failure to produce accurate flare data, failure to provide access to flares or flare sites, and failure to sign a connection agreement.
Also, in the event of continuous or egregious breaches, there is the suspension of operations or termination of the producer’s licence.
According to gas value chain experts, the regulation was meant to discourage gas flaring, while encouraging flared gas to be passedon for commercial purpose, thereby creating a win-win situation.
NEITI said the data collected showed that companies conducted a total of 22 environmental impact assessments (EIA) in 2019, with costs associated with the process running into $480,525 and N154,484 423 respectively.
The report noted that the fees and other costs associated with environmental monitoring and evaluation in 2019 was also partly incurred in US dollars and partly in naira, with the total at $2,420,268 and N33,190,931, respectively. In all, a total of 85 incidents were reported, consisting of 64 incidents of air pollution, four spillages in water and 17 spillages on land, while the payment to the government was $102,850 and payment by one unnamed company to local communities was $143,074.18.