In One Year, Oil Companies’ Gas Flare Payments Jump From $15.4m To $307.4m
Gas flaring payments made by oil companies increased from a meagre $15.5 million to $307.4 million between 2018 and 2019, the most recent audit report from the Nigeria Extractive Industries Transparency Initiative (NEITI) has revealed.
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 over-stepping 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 264,732mmscf of gas was flared during the year under consideration, but was 0.8 per cent lower than that of 2018, which was pegged at 266,869mmscf.
“The revenue from flare gas payment was significantly higher from $15.4million in 2018 to $307.496 million in 2019,” the NEITI audit said.
The dramatic increase in gas flare revenue may not be unconnected with the enactment of the Flare Gas (Prevention of Waste and Pollution) Regulation 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 the reduction of Green House Gas (GHG) emissions through the flaring and venting of natural gas.
The regulation increased the initial meagre flare payments (penalties) of N10 per thousand standard cubic feet, in the case of anyone producing 10,000 barrels of oil or more, to $2.0 per thousand standard cubic feet of gas and, in the case of anyone producing less than 10,000 barrels of oil per day, to US$0.50 per thousand standard cubic square feet of gas.
Furthermore, the regulation introduced mandatory additional payments by the producer of $2.50 per thousand standard cubic feet 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.
In the event of continuous or egregious breaches, there is also a possibility of suspension of operations or termination of the producer’s licence.
The regulation was meant to discourage gas flaring while encouraging flared gas to be passed-on for commercial purpose thereby creating a win-win situation.
On Environmental Impact Assessment (EIA), NEITI said that the data collected showed that companies conducted a total of 22 EIAs in 2019, with costs associated with the process running into $480,525 and N154,484 423 respectively.
“Furthermore, the fees and other costs associated with environmental monitoring and evaluation in 2019 was also partly incurred in US dollars and partly in naira. The total was $2,420,268 and N33,190,931, respectively,” the report noted.
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.
It listed the environmental audit as comprising management audits (every four years), quarterly compliance audit and site/ facility/ plant audit (every 2 years).
Meanwhile, the report presented further information on gender, occupational level, the local employees (indigenes of communities of operation, national or expatriates), and information on physically challenged employees) in the oil and gas industry.
It stated that from data available from the field, a total of 18,856 employees of which 82 per cent was male and 18 per cent female was collected from 49 employment data collection templates.
It added, “From this, the percentage of top management was 10 per cent, middle level management was 47 per cent and 43 per cent was the lower-level staff.”
According to NEITI, in top management, 78 per cent was male and 22 per cent female in middle management, 62 per cent was male and 18 per cent female while in lower management, it was 83 per cent and 17 per cent respectively.
NEITI added that nationally employed staff in top management was 95 per cent, those in the middle and lower cadre were 96 per cent and 98 per cent respectively, while no information on physically challenged employees was obtained from the field exercise.