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Raise gas flare penalty from N10 per 1,000 scf to N50 to tame flares—Expert

Oil and gas expert, Dr. Kinsley Ujunwa has called on the federal government to raise the current gas flare penalty from N10 per 1,000 scf to N50 to tame the tide of free flow of flares in Niger Delta.

In an interview following the recent release of gas flare statistics by the Nigerian National Petroleum Corporation (NNPC), he said “It has become clear that the oil producing companies are taking Nigeria for a ride over the years in flaring gases at will because the penalty is so cheap when compared to what it is in even Angola”.

“N10 per 1,000 scf is a chicken change for all the oil companies. I believe that if it is raised to a little bit above N35 to 1,000 scf, nobody will tell them to do the needful which is very simple; deploy the best gas controlling and extraction technology which is everywhere.

Continuing, Dr. Ujunwa argued that “the main problem frustrating the needed legislation or regulation that will raise the penalty is the gluttony tendencies of policy makers who would easily fall prey to bribery by the oil companies”.

“For example, the EFCC impounded a total of $9.8m in Kaduna from the compound of a brother to the former NNPC GMD, Mr. Andrew Yakubu, who knows if the money was even part of the gift he received for seating on a possible review of the penalty. Remember he claimed that the money was gift.

Only recently, the NNPC in its report said, “Total gas supply for the period, January 2016 to December 2016, stood at 2,581.42 billion scf, out of which 1,448.91 billion scf (307.16 billion scf and 1,141.75 billion scf for the domestic and export market, respectively) was commercialised while non-commercialised stood at 1,132.52 BCF.

“Out of the 788.11million scf per day of gas supplied to the domestic market in December 2016, about 480.64 million scfpd of gas, representing 60.99 per cent, was used for gas-fired power plants while the balance of 307.47 million scfpd or 39.01 per cent was supplied to other industries.

“Similarly, for the period of January 2016 to December 2016, an average of 839.70million scfd of gas was supplied to the domestic market, comprising an average of 517.92 million scfd or (65.72 per cent) as gas supply to the power plants and 321.77 million scfd or (40.83 per cent) as gas supply to industries.”

A draft of the National Gas Policy (NGP) recently released by the Ministry of Petroleum Resources, noted that the flaring of natural gas that is produced in association with oil is one of the most egregious environmental and energy waste practices in the Nigerian petroleum industry.

It said “While gas flaring levels have declined in recent years, it is still a prevailing practice in the petroleum industry. Billions of cubic metres of natural gas are flared annually at oil production locations, resulting in atmospheric pollution severely affecting host communities.

“Gas flaring affects the environment and human health, produces economic loss, deprives the government of tax revenues and trade opportunities, and deprives consumers of a clean and cheaper energy source.”

“To ensure that flared gas is put to use in markets, the government will take measures to ensure that flare-capture and utilisation projects are developed and will work collaboratively with industry, development partners, providers of flare-capture technologies and third party investors to this end,” it added.

By the gas policy, the current gas flare penalty of N10 per 1,000 scf of associated gas flared is too low, having been eroded in value over time, and is not acting as intended, as a disincentive.

“Consequently, the low penalty has made gas flaring a much cheaper option for operators compared to the alternatives of marketing or re-injection. The intention of government is to increase the gas flaring penalty to an appropriate level sufficient to de-incentivise the practice of gas flaring.

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