NUPRC Explains Purported Gas Flare Penalties Shortfall, Says $85.1m Collected This Year

*Insists commission has most authentic industry data 

*Petroleum Engineers: FG’s gas flare-out policy yielding benefits 

*Kyari, Komolafe, Ahmed to lead discussions at SPE’s conference tomorrow

Emmanuel Addeh in Abuja and Peter Uzoho in Lagos

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) at the weekend explained how the gas flare penalties against oil companies work, maintaining that the commission deploys the most authentic tracking data as the industry regulator.

Similarly, the Society of Petroleum Engineers (SPE) Nigeria Council has commended the federal government over its implementation of the gas flare-out policy, saying the programme has started yielding benefits as the country gradually diversifies its energy sources.

THISDAY learnt that the explanation by the NUPRC came against the backdrop of reports that the federal government recorded a revenue shortfall of N13.33 billion from gas flaring penalties issued against oil and gas firms in January and February 2023.
The report also quoted data from another agency of government as reporting that companies operating onshore flared 24.5 billion SCF of gas valued at $85.8 million, with $49 million penalties payable.

But in a note at the weekend, the NUPRC stated that organisations use different technologies and systems to measure flares according to their mandates and capacities.
It listed them as: The Gas Flare Tracker system (GFT), Fiscal Grade Metre (FGM), Gas to Oil (GOR), and Material Balance which it said is used to measure what goes to flare.

However, the upstream regulator clarified that not all the systems can be used to measure actual gas flare for the purpose of accounting and fines.
It noted that 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’.

The NUPRC argued that GFT’s accuracy range is to the tune of thousands, stressing that even bush fires and other terrestrial fires are usually misconstrued by the satellite as gas flares, thus making the result inaccurate and unreliable.

According to the agency, flare payments or any taxes thereof cannot therefore rely on uncertain estimates, since it is a matter of huge financial commitment.
On the other hand, it stated that 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,” the NUPRC said.

Where these metres are not installed, in a few cases, is noted that other methods such as the use of Gas to Oil Ratio (GOR) and material balance are used in determining what goes to flare.
The metres, it argued, are duly calibrated to meet the stringent requirement of uncertainty/accuracy of +-3% set by the commission.
Explaining that the overall aim of the flare gas administration is not to serve as a sustainable revenue stream, the flare fees, the commission said, are to serve as deterrence.

In addition, the NUPRC stated that it will help drive the industry to greater compliance towards eliminating gas flaring and generation of revenue from gas monetisation rather than flare payment.
“In that spirit, the commission has led the effort in ensuring that the federal government’s drive to eliminate gas flaring in the country is achieved in a timely manner.

“All companies currently flaring gas are charged gas flare fees in line with the relevant provisions of the law, thus driving down the appetite of oil and gas companies to continue gas flaring, while increasing government’s take from the sector,” the NUPRC said.
For the avoidance of doubt, the commission pointed out that being the sole regulatory body in Nigeria’s upstream oil and gas industry, it keeps record of daily, weekly and monthly gas volumes from all oil and gas fields of operation.

The commission stated the correct position for the months of January and February as 7.72 bscf and 8.49 bscf for onshore terrain while they were 7.01 bscf and 7.12 bscf for offshore for the months respectively.
The NUPRC explained that the disparity often noticed in the figures given by some industry participants is 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.

FG’s Gas Flare-out Policy Yielding Benefits, Say Petroleum Engineers

The SPE Nigeria Council has commended the federal government over its implementation of the gas flare-out policy, saying the programme has started yielding benefits as the country gradually diversifies its energy sources.

This is just as the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPC), Mallam Mele Kyari; Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Mr. Gbenga Komolafe and his counterpart at the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Mr. Farouk Ahmed, would lead strategic discussions in Lagos, tomorrow, at the 2023 Society of Petroleum Engineers’ (SPE) conference.

Addressing journalists in Lagos, at a press conference heralding the Nigeria Annual International Conference and Exhibition (NAICE), the Chairman of SPE Nigeria Council, Mr. Felix Obike, called for strategic approach by both the government and industry players to solve emerging energy issues in Nigeria and the African continent.

While reiterating the positive impact and gains the nation’s flare-out policy was yielding, he added that the policy was fetching revenues for companies playing in the country’s oil and gas industry.

Obike, however, acknowledged the need to continue to build local content as the nation’s economy moves closer to cleaner energy sources.

He noted that a lot of companies were currently deploying modern technologies to recycle the gas and bring values out of the natural resource rather than flaring it and damaging the environment.

Obike said, “We are making money out of them. So the gas flaring policy is gradually yielding benefits.

“No company will ever want to flare gas, there is what we call social governance; all the companies know that there are basic things you have to do to make sure that you meet the standards of what the government wants you to do.

“We are already addressing it and there are a lot that companies are doing now to avoid flaring. Not only that we have penalties that we pay but the companies have Environmental, Social and Government (ESG) obligations they must keep to and we have seen that they are trying to recycle the gas.

“Now, there are so many things that we are doing in companies that will eliminate flaring at least gradually. But we all know the timeline that the government gave. Of course, the more you flare, the more you pay penalties, and so, companies do not want to get into both the penalties and flaring to affect people around.

He maintained that many oil companies have technologies put in place in-company to reduce flaring in line with government standards, stressed that a good number of the exploration companies were seriously reducing gas flaring.

The SPE chair equally praised the Petroleum Industry Act (PIA) 2021, which he noted expressly condemned gas flaring.

“The PIA is purely discouraging flaring in so many ways; your penalty is going to go high and no companies will like to do that. Of course, it is better for the companies to try and curb flaring by making good money out of it.

“We have a flare out time that has been for companies and is gradually coming to effect seriously and companies are going down on flaring”, Obike stated.

Presenting the details of the forthcoming NAICE, he said the programme would start today and end on August 2, 2023, with pre-conference training courses held on Saturday and yesterday.

He disclosed that some of the industry leaders expected to lead discussions at the conference were Kyari, Komolafe, Ahmed; as well as the Permanent Secretary of the Ministry of Petroleum Resources, Mr. Gabriel Aduda amongst others.