Nigeria sets to lose over N1trillion in 5 years to gas flaring activities – Report

…as evasion by oil companies persists

Solomon Ezeme

The Nigerian Government has been warned that the country is likely to lose over N1.29 trillion in the next five years, if it continue to show lack of commitment to tackling false declaration of gas flaring data by some oil companies and permanently addressing inaccurate data released by monitoring agencies on gas flaring activities in the Niger Delta region.

Experts who made this position in a conversation with EnergyDay revealed that the country is likely to lose this huge revenue to false data declarations by these oil companies, if no conscious effort is made on the part of the Federal Government to investigate and sanction those who are sabotaging the system.

Gas flaring, it would be recalled, is a process whereby the natural gas associated with petroleum extraction is burned off in the atmosphere rather than being removed by alternative means. This is one of the major factors causing unrest in the Niger Delta region of Nigeria, arising from the activities of the oil industry.

Nigeria is among top 7 countries responsible for about 65% of flared gas in the world, beside Russia, Iraq, Iran, the United States, Algeria and Venezuela, according to the World Bank.

In its 2021 Global Gas Flaring Tracker Report, the international agency said, “While these seven countries have together produced some 40 percent of the world’s oil each year, they have also accounted for roughly two-thirds (65 percent) of global gas flaring.”

Prior to 2018 when gas flare penalty was first pegged at $3.50 per standard cubic feet (scf), oil companies found it easier to pay for flared gas as the fines were relatively low. The penalties were not enough deterrent, and so fueled more gas flaring which necessitated the review.

Before 2018, penalty for flaring gas had been between $0.50 to $1 depending on the quantity flared.

EnergyDay gathered from PwC’s (PricewaterhouseCoopers’) recent report assessing the impact of gas flaring on the Nigerian economy, that Nigeria lost an estimated N301.29bn for flaring 393.84bn standard cubic feet gas into the atmosphere in 2014.

In 2015, the country flared 330.93bn scf worth of gas, losing about N243.04bn (15.97 percent decrease from 2014 figure) while 288.92bn scf was flared in 2016, with an annual loss of N299.86bn, further dropping amount of flared gas by 12.69 percent.

12.21% increase was recorded in 2017, based on the PwC report. Nigeria flared a total of 324.19bn scf of gas which accrued to a loss of about N267.85bn.

Data obtained from the Nigerian Gas Flare Commercialisation Programme (NGFCP) by EnergyDay, revealed that in 2018 (the year in which the penalty was reviewed upward to $3.50 per standard cubic feet (scf)), 12.99% drop was recorded as about 282.08bn scf was flared with an annual loss of N987bn at new rate.

The volume rose again in 2019 by 15.22% as total flared gas stood at 325bn scf, while loss was estimated at N1.138trn.

From the above analysis, a downward trend in total gas flare was noticed in 2018 due to the increase in the severity of penalty.

EnergyDay noted that the percentage decrease in flared gas in 2018 is, however, not a true reflection of reality but a deliberate attempt by oil companies to sabotage the system by falsifying their records in order to reduce amounts paid to Government as penalty.

After the said 2018 review which changed the penalty from $0.50 to $3.50/ per 1, 000 standard cubic feet (scf) of gas flared, disparities were noticed in

gas flared figures released by various monitoring agencies monitoring the situation, hence the country received different conflicting figures yearly.

Some groups including the Oil Sector Transparency and Reform in Nigeria (FOSTER) and the African Initiative for Transparency, Accountability and Responsible Leadership (AfriTal), accused oil companies of declaring false figures with a view to evading fines since 2018 when penalty was increased.

For instance, based on the figure released in 2018, EnergyDay gathered that the Nigerian National Petroleum Corporation (NNPC) reported that 282bn scf of gas was flared, whereas, the Gas Flaring Tracker by the National Oil Spill Detection Response Agency (NOSDRA) showed that 472bn scf of flared gas for the same year.

If the conflicting figure between the two monitoring organizations are to be considered it therefore means that the Nigerian government did not collect fines for about190bn scf of flared gas in 2018. This amounts to N257.9b (190bn x $3.50=$665m) revenue lost in just one year.

Recall that NOSDRA was partly instituted to provide data on flared gas in Nigeria. It sourced it data through the use of satellite applied on the field in generating accurate information every 24 hours.

The discrepancies between these two organizations raise some important questions on genuineness of the two flared gas figures. Which of these organizations provided the accurate and genuine data for public consumption and transparency? Are different figures declared to them by individual oil companies?

EnergyDay gathered that since 2013 when GFT took off, there has been unity between NOSDRA’s data and NNPC’s data on flared gas as declared by oil companies until 2017. Discrepancies in their figures began in 2018 when gas flare penalty was further reviewed and increased by 85.71%.

Experts in the industry believe that these discrepancies were as a result of the new $3.50 penalty which many oil firms saw as significantly high.

To avoid the huge sum, they resorted to giving out false data to monitoring agencies instead of making efforts aimed at reducing or completely end gas flare in the facilities.

There experts however charged the Federal Government, to beef up monitoring around production facilities of these companies to ensure that they pay the actual fines for the gas flared.

The conflicting figures show unwillingness of the oil companies to make efforts towards reducing toxic gas endangering the lives of Nigerians in living in those communities.

Dr. Edward Obi, National Coordinator, National Coalition on Gas Flaring and Oil Spills in the Niger Delta (NACGOND), said, “We noticed a huge drop the in the amount of gas flare in the data that is supplied from the time that government reviewed this penalty to now.

“The discrepancies is so much that the oil companies are reporting just about half of what are been flared, which is unfortunate.

“Why are you accepting what the oil companies present to you? Why are you not confirming if this is same as what an independent satellite is confirming or not? There should be somebody independent in government who should be able to raise those questions.”

Dr Edward suggested that NNPC which is already in Joint Ventures (JVs) with major oil companies, can not be trusted with responsibilities of giving accurate figure, because It has vested interests in those companies and is most likely to help them circumvent the figures.

According to him, if the Corporation’s 2018 data didn’t tally with that of NOSDRA (which was generated via satellite), should Nigerians still continue to believe that their yearly reports on gas flare is true and not manipulated?

Paul Alaje, Senior Economist at SPM Professionals, who reacted to the repeated losses to gas flaring in the nation, “Are we truly in need of money or we are failing to pick the money where they are? I think we are not ready to pick our money from where they are.”

The analysts therefore suggested that the government can stop this subtle ‘national theft’ by giving orders to the NNPC and other monitoring bodies that they must ensure that data obtained through the satellite is accurately reflected in their records.

According to them, in the case where there are discrepancies in their records, investigation should be immediately carried out to ascertain possible cause(s) and punish any violator, as the case may be.

They warned that if no conscious effort is being made on the part of the Federal Government to investigate and sanction those who are sabotaging the system for their selfish interests, the country would be losing an estimated N1.29 trillion between 2021 and 2025 when Nigeria is expected to have ended gas flaring, based on earlier 2018 calculation.

In 2021, Timipre Sylva, Minister of State for Petroleum, stated that Nigeria will end gas flaring by 2025.

“At the beginning of this year, we declared 2021, the beginning of the gas decade.

“We believe that with all the programmes we have in place, we are on course to achieve complete elimination of gas flaring by 2025, ” he had said.

The country also has a mandate to end all flares (whether oil or gas) by 2030 based on its commitment to the World Bank’s Global Gas Flare Reduction Partnership.

EnergyDay therefore gathered that the present silence on the existing discrepancies accruing to billions of Naira is a disaster waiting to happen. The evidence provided in this report raises suspicion as to whether or not officials of monitoring bodies themselves are not parties to the deliberate false declarations of gas flare data by oil companies.

The sector’s regulator, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) which had earlier reported that there are over 170 flare sites that jointly flare about 330billion scf of gas yearly, has been charged to more proactive than mere reporting – it should start taking the needed actions.

The government has therefore been charged not to fold her arms and watch some “unseen criminals” in the oil sector, make huge profits at the expense of their health and environmental safety, even without due compensation in form of fines.