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Oil firms default gas flaring fines

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By Abraham Adekunle

FG records a revenue shortfall of N13.33bn from penalties on involved firms.

Early in July 2023, Nigeria House of Representatives had rekindled the country’s concerns over the wasteful practice of gas flaring. The lower legislative chamber threatened to sanction the companies involved in the activity. Also, the Federal Government had imposed a $49m (N22 billion) fine on oil and gas firms operating onshore for flaring 24 billion Standard Cubic Feet (SCF) of gas valued at about N40 billion ($86 million) between January and February 2023. This was according to recent data by the National Oil Spill Detection and Response Agency (NOSDRA), which noted that the companies operating onshore would pay the penalties for violating the rule.

Gas flaring is the burning of the natural gas to extract premium motor spirit (PMS) and other by-products. The fracking, or standard process of refining crude oil, has contributed to environmental degradation and global warming. This is in addition to oil spillages happening mostly in the Niger Delta region. As the latter contaminates water bodies and destroys farmlands, the former releases pollutants like carbon monoxide, carbon dioxide, sulfur dioxide, polycyclic aromatic hydrocarbons, and soot into the atmosphere.

Valuable materials are also wasted in the process.

According to the World Bank, this practice has persisted since the advent of oil production more than 160 years ago. It takes place due to a range of issues, from market and economic constraints, to a lack of appropriate regulation and political will. It is a waste of a valuable natural resource that should either be used for productive purposes, such as generating power, or conserved. The World Bank data reveals that about 140 billion cubic meters of gas flared every year could power the whole of sub-Saharan Africa.

Children in the host communities where oil is produced in the country are adversely impacted by this activity. Many of them suffer from respiratory diseases, fever, and diarrhea. They also experience stunted growth, wasting, and underweight issues. Toxic pollutants similarly damage the environment, killing off plants and animals, despoiling the soil and water, while impoverishing the host communities. The World Bank says the method of disposing associated gas from oil production persists to the present because it is relatively safe but wasteful and polluting.

Firms were fined but FG did not recover all fines.

NOSDRA stated that companies operating onshore flared 24.5 billion SCF of gas valued at $85.8 million, with $49 million penalties payable. According to the report, companies flared 19.14 billion SCF of gas in January and 14.04 billion SCF of gas in February 2023. They contributed 1.3 million tonnes of carbon dioxide emission, with power generation potential of 2,500 gigawatts hours. On the other hand, companies operating offshore flared 25.8 billion SCF of gas valued at $90 million, which was capable of generating 2,600 gigawatts hours of electricity and had an equivalent of 1.4 million tonnes of carbon dioxide emission. The offshore companies particularly flared 10.84 billion SCF and 13.09 billion SCF of gas in January and February 2023 respectively.

However, findings by the media showed that the Federal Government did not get up to N22 billion from gas flaring penalties in January and February. Data from the quarterly statistical bulletin for the first quarter of 2023 by the Central Bank of Nigeria showed that the Federal Government earned N4.6 billion in January and N4.07 billion in February. This means that the government earned a total of N8.67 billion between January and February 2023, leaving a shortfall of N13.33 billion.

Affected companies which were involved in flaring listed by NOSDRA.

Meanwhile, the volume of gas flared in both months was 11.9 percent lower than the 57.1 billion SCF of gas flared in the same period in 2022. The agency noted that the gas which these companies flared in the period under review was equivalent to carbon dioxide emission of 2.7 million tonnes and had power generation potential of 5,000 gigawatts hour of electricity. The firms are liable for penalties amounting to $101 million (N46 billion). Affected companies include Shell Petroleum Development Company, Nigerian Agip Oil Company, Mobil Producing Nigeria, Nigerian Petroleum Development Company, Addax Petroleum Limited, Famfa Oil, Elf Petroleum, among others.

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