Infrastructures Cost of Nigeria’s N30.5 billion Gas Flaring Fines

By Deji Adekunle

In Nigeria, Natural gas remains a resource which continues to generate discussions in economic, political and global spheres. This is because of its importance as a source of national income, electric power and allied products. On the other hand, its negative effects on the environment when dispersed or flared contribute to global warming and various health hazards.

Why is Natural Gas flared?
When crude oil is extracted from onshore and offshore oil wells, it brings with it raw natural gas to the surface. Where natural gas transportation, pipelines and infrastructure are lacking, this gas is instead burned off or flared as a waste product as this is the cheapest option, particularly when gas fines are low or fines are not collected by National regulatory bodies.

A recent report by the United State Energy Information Administration (EIA), estimated the cost of gas flared in Nigeria in 2015 at 379 billion cubic feet (bcf) which is about 12 per cent of its gross production. From the NNPC’s 2010-2014 Annual Report, we can view the pathway for natural gas consumption and flaring for the time period covered by the report.

Two years ago, the Federal Government increased the penalty for flaring to $3.50 per 1000scf to further discourage the practice but enforcement has not been transparent and compliance by the oil companies cannot be verified. If enforced, the penalty for 2015 should have amounted to $108,285,714(N30,536,571,348) which would have been much needed as revenue for the country in the current economic situation.

dd5891fb-1546-4204-90e1-ada6b4241cc9

 

In the wake of the EIA report claiming that Nigeria is currently Number 5 in Global Gas Flare Rankings, a little improvement from the former rank of 2nd, and from the trend in the data provided by the NNPC reports, it appears Gas Flaring is finally on a decline in Nigeria.

In more recent events, Vice President, Yemi Osinbajo used the occasion of the opening ceremony of the 6th African Petroleum Congress and Exhibition to inform the stakeholders who thronged the International Conference Centre, Abuja that the Nigerian government has set an earlier national target of 2020 to end gas flaring in the country as compared to the joint African target of 2030.

One can only hope that this would not be another item in the series of unfulfilled targets as pertaining this issue. To put more emphasis on this concern, EIA report also stressed that “The federal government has been working to end natural gas flaring for several years, but the deadline to implement the policies and fine oil companies has been repeatedly postponed, with the most recent deadline being December 2012. In 2008, the Federal Government developed a Gas Master Plan to promote investment in pipeline infrastructure and new gas-fired power plants to help reduce gas flaring and provide more gas.”