Oil & Gas

Oil companies pay $85.1million as gas flaring penalty in 6 months – NNPC

*Says gas flare fee not a sustainable revenue generation stream

The Nigeria National Petroleum Limited, NNPC Ltd, says that it has collected $85.1 million in six months from all companies currently flaring gas in the country as the penalty for gas flaring

 

According to the NNPC document, the charged gas flare fees which are intended to ensure the reduction of gas flaring by oil companies while increasing Government take from the sector, is in line with relevant provisions of the law.

 

It disclosed that the flare fees are to serve as a deterrent to drive the industry to greater compliance towards eliminating gas flaring and generation of revenue from gas monetization rather than flare payment and urged that it should not be viewed as a sustainable revenue stream.

 

It urged all stakeholders to confirm with the commission when there seem to be differences in the figures given by some industry participants.

 

It noted that the disparity is often because “theirs are from satellite estimates whereas the ones from the Commission are from fiscal grade metering systems and in a few cases material balance, with due consideration for gas oil ratios of the produced and associated gas.

 

“When it comes to matters like this, the NUPRC is the custodian of authentic data. Putting out erroneous data from sources which might be construed to have genuine data or from erroneous data sources can mislead stakeholders and undermine the mandate of the Commission in the dispensation of its functions.

 

“As the sole regulatory body in the upstream oil and gas industry, the Commission is readily available to provide accurate and bankable data required for any publication and economic analysis.

 

Section 25 of the PIA 2021 on Notice to the Commission mandates:

 

“Any Government ministry, department or agency exercising any power or function or taking any action, which may have direct impact on upstream petroleum operations to consult with the Commission prior to:

 

(a) Issuing any regulation, guideline, enforcement order of directive

 

(b) Exercising any such power or function; or

 

(c) Taking any such action.

 

“The Commission shall review the recommendations of the Government ministry, department or agency and communicate decision accordingly, and such decision shall be complied with by the Government ministry, department or agency.

 

As the sole regulatory body in Nigeria’s upstream oil and gas industry, the NNPC reports that the correct records of gas flaring in the country for the months of January and February 2023 based on its daily, weekly and monthly record of gas volumes from all oil and gas fields of operation is as follows:

 

Month Terrain Volumes

BScf

January Onshore 7.72

Offshore 7.01

February Onshore 8.49

Offshore 7.12

Source of Flare Gas Data

 

“Organizations use different technologies and systems to measure flares according to their mandates and capacities. These include the Gas Flare Tracker system, GFT, Fiscal Grade Metre, FGM, Gas to Oil, GOR, and Material Balance which is used to measure what goes to flare. However, not all can be used to measure actual gas flare for the purpose of accounting and fines.

 

For instance, while the GFT used by some monitoring agencies might be useful for monitoring emissions in remote areas, or for geo-locating of flare sites, it has some limitations such as cloud covering and atmospheric interference. Its accuracy range is to the tune of thousands. Even bush fires and other terrestrial fires are misconstrued by the satellite as gas flares (except where such sites are confirmed by ground trothing, thus making the result inaccurate and unreliable. It is important to note that the flare payments or any taxes thereof cannot rely on uncertain estimates since it is a matter of huge financial commitment.

 

Flare Data Measurement and Accounting

 

“Flare gas metres are used in the oil and gas facilities to measure gas flow. In many parts of the world, including Nigeria, it is a regulatory requirement to install FGMs for flare measurement. Where these metres are not installed, in few cases, other methods such as the use of Gas to Oil Ratio, GOR, and material balance are used in determining what goes to flare. These metres are duly calibrated to meet the stringent requirement of uncertainty/accuracy of +-3% set by the Nigerian Upstream Regulatory Commission, NUPRC.

 

Basis for Compilation of Gas Flare Penalty

 

“In accordance with the provisions of the Gas (Prevention of Waste and Pollution) Regulations 2018, the flare penalty is not a flat rate of USD2 per thousand Standard cubic foot, Scf, but a two-tier regime of USD2 and USD.5 per thousand Scf, depending on the average daily crude oil production.

 

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