Oil companies in Nigeria are under-reporting the volume of gas they flare from oil fields to avoid paying the upgraded levy imposed, a development that has cost Nigeria over N521.9 billion last year.
By day, gas flares in the Ebedei, Goi, Oloibiri, Bodo and other villages in the Niger Delta constantly burning flames atop large metal pipes up the skies like a thick fog are an eerie reminder of the waste and pollution associated with the oil industry in Nigeria. By night, locals say the flares are so bright in some places they fear it damages their eyes.
Oil and gas companies operating in Nigeria flared 475.3 billion standard cubic feet (SCF) of gas in 2019, causing the country a loss of $1.7 billion, about N521.9 billion, according to data obtained from Gas Flare Tracker (GFT).
GFT is a satellite-based technology, created by the Social Democracy Network (SDN) in 2013. It uses remote sensing to determine the amounts and volumes of gas flares in Nigeria.
The 475.3 billion SCF of gas flared in 2019 represents an equivalent of 25.2 million tonnes of carbon dioxide (C02) emissions and is capable of generating 47,500 gigawatts of electricity per hour.
Interestingly, from 2013 when the GFT was deployed to 2017, the flare volumes declared by both the GFT and the oil and gas companies in the records of state-owned Nigeria National Petroleum Corporation (NNPC) were almost perfectly aligned.
However, when a new gas flare regulation was introduced in 2018, with an increase in gas flare penalty from $.0.03 to as much as $ 2.00 per million standard cubic feet of gas flared (MMSCF), there has been a sizeable and growing disparity in the volumes of gas flare reported.
According to the NNPC’s data, in 2018, Nigeria flared 282bcf of gas which makes about 10 percent of the total gas produced. On the other hand, GFT reported 472.4bcf of gas for the same year.
Also, according to Nigerian Gas Flare Commercialisation Programme (NGFCP), Nigeria flared 325bscf of associated gas in 2019, representing 11 percent of gas produced in the country, while GFT recorded 475bscf as gas flared for the same year.
“Arguably, this disparity may be because the oil companies could have been under-reporting their gas flare volumes, as the increase in fines from the new gas flare regulation may have significantly impacted their bottom lines,” said Charles Majomi, an energy consultant and managing director, Trajan Energy Ltd.
Justice Derefaka, programme manager at NGFCP, acknowledged that there is a tendency that flaring is systematically underreported based on report from IOCs, although he also clarified the conversion factors used by GFT may overstate flare volumes.
“It may not be surprising that satellite data may include flaring of both associated and non-associated gas from gas processing plants including refinery flares and illegal refineries in the estimates,” Derefaka told BusinessDay.
To solve the issue of data discrepancies, Derefaka, who is also the technical adviser on gas and policy implementation to minister of state for petroleum resources, said key provisions in the new regulatory law require mandatory reporting, access to gas flare data and penalty for providing inaccurate or incomplete flare gas data.
Nigeria is a signatory to the Global Gas Flaring Partnership (GGFR) principles for global flare-out by 2030 whilst committing to a national flare-out target by year 2020.
Less than three months ago, the Department of Petroleum Resources (DPR) announced it has shortlisted 200 companies from over 800 that expressed interest to develop 45 gas flare sites across the country.
Gas flaring in Nigeria has been a perturbing problem since the commercial exploration of crude oil started in the country. This comes despite Yakubu Gowon, the then military head of state, as far back as 1969 ordering that within five years of set-up, a company must cease flaring.
The flares emit poisonous chemicals that make people sick and damage the farming and fishing industries. At the same time. they cause acid rain, cancer and a host of respiratory problems.
Nigeria is the sixth-largest gas flaring country in the world, and the second-largest in Africa after Algeria, according to the World Bank’s Global Gas Flaring Reduction Partnership (GGFR).
Recently, the government has made several efforts to curtail gas flaring, including introducing policies and legislative measures such as the NGFCP, which seeks to eliminate gas flaring through technically and commercially sustainable gas utilisation projects and ensures value and wealth creation.
Another legislative policy is the Flare Gas Regulation 2018 introduced to minimise environmental and socio-economic impact by increasing the imposed penalty fee for flaring gas. The regulation also requires oil producers to install a metering system to provide accurate flare data and report the amount of flare gas to the DPR.
Also, the Nigerian Senate is considering a bill which proposes stiffer sanctions for any person or corporate entity involved in gas flaring in the country from January 1, 2021.
The Gas Flaring (Prohibition and Punishment) Bill, 2020, which has scaled second reading, is expected to guarantee rapid infrastructural development of the oil and gas sector, enhance revenue accruable to government and ensure environmental improvement for the people of the Niger Delta.
