Gas flaring penalties hit $341m in 10 months

The penalty for flaring gas in Nigeria from January to October this year has hit $341.1 million, according to the National Oil Spill Detection and Response Agency (NOSDRA).

This data was acquired via the Nigeria Gas Flare Tracker (GFT), a satellite-based technology created by NOSDRA.

Gas flaring is the surface combustion or burning of natural gas that is often associated with crude oil production when pumped up from the ground.

According to NOSDRA, the current penalties for gas flaring in Nigeria officially stand at $2 per 1000 standard cubic feet (scf).

Currently, companies producing more than 10,000 barrels per day (bpd) pay a fine of $2 per 1,000 scf of gas flared, while companies producing less than 10,000 bpd pay a fine of $0.5.

In 2018, the federal government increased the penalty for gas flaring from N10 per 1,000 standard cubic feet (scf) to $2 per 1000 scf of gas flared.

Furthermore, various legislative measures to curb gas flaring in Nigeria have been in place since 1969. Since 1984, it has been illegal to flare gas in Nigeria without the written permission of the minister of petroleum resources.

According to GFT, from January to October 2022, the flared gas emitted 9.1 million tonnes of carbon dioxide into the atmosphere, worth $596.9 million.

Furthermore, the gas flared has a power generation potential of 17.1 thousand gigawatts hour.

In addition, gas flaring shows economic losses because these gases can be utilised locally by power companies and other wholesale energy consumers or even exported.

“The amount of money companies pay for gas flaring by the ministry of environment is less than the amount they will use to capture the gas,” said Okoka Darlington, an electrical design consultant.

“If the penalty for flaring gas is higher, oil-producing companies will find a way to convert the gas to electricity.”

Darlington said it should be compulsory for companies that flare gas to pay a lot of tax for polluting the environment.

According to the World Bank, regulations that impose penalties on companies that flare gas may not always be effective at curtailing the practice, especially if flaring and paying a penalty is more economically viable than capturing the gas and selling it.

It said, “Oil operators can re-inject associated gas back into the ground or build the infrastructure needed to capture, store and transport the associated gas to market.

“Meanwhile, governments can implement effective regulations and policies to incentivise and encourage gas flaring reduction.”

According to NOSDRA, flared gas could be harnessed to provide electricity, which Nigeria faces an acute shortage of.

“This could be done at a local scale, or by feeding into Nigeria’s national grid,” it said.

“However, this is in a bad state of repair, and a combination of infrastructure, regulation and investment is required to encourage gas-to-power initiatives that could help address Nigeria’s power challenges.”

Chinedu Onyegbula, an energy sector expert and director at Bullox Resources Limited, said the biggest problem is that international oil companies (IOCs) have been able to get away with flaring and not paying the penalties required.

“Reason could be regulatory agency’s complicity by being compromised, Nigeria’s inability to verify gas flaring data from IOCs, and very little has been done to punish the IOCs for their actions,” Onyegbula said.

Onyegbula said Nigeria should enforce existing legislation, and empower the regulator with the technology and capacity to enforce its mandate.

He also said Nigeria should incentivise the commercialisation of gas flaring for the stakeholders across the value chain, especially those buying it from the flared sites, and stronger legislation should be enacted that criminalises and penalises gas flaring.

Nigeria’s inability to commence the gas flare commercialisation programme approved by the government in 2016 is said to be limiting efforts to end flaring.

The Nigerian Gas Flare Commercialisation Programme is an ambitious plan to sell over 700 million scf of gas a day flared at 178 different sites. The programme is set to restart under the new regulatory agency formed by the Petroleum Industry Act.