Nigeria Imposes Heavy Fine on Oil and Gas Firms for Gas Flaring

The Nigerian Federal Government has announced that it will impose a fine of $49 million (N22 billion) 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 comes as a result of the latest gas flare data by the National Oil Spill Detection and Response Agency (NOSDRA) revealing that the companies operating onshore will pay the penalties for violating the gas flaring rule.

Gas flaring, which involves burning off gas as part of the oil production process, has been a long-standing issue in Nigeria. However, the government has recently been leading campaigns for gas monetization instead of flaring, which would bring economic benefits and help reduce carbon emissions.

According to the NOSDRA report, companies operating onshore flared 24.5 billion SCF of gas valued at $85.8 million, with $49 million penalties payable.

In January and February 2023, the companies flared 19.14 billion SCF of gas and 14.04 billion SCF of gas, respectively, contributing 1.3 million tonnes of carbon dioxide emission with a power generation potential of 2,500 gigawatt hours.

On the other hand, companies operating offshore flared 25.8 billion SCF of gas valued at $90 million, which has the potential to generate 2,600 gigawatt hours of electricity and an equivalent of 1.4 million tonnes of carbon dioxide emission.

In January and February 2023, offshore companies flared 10.84 billion SCF and 13.09 billion SCF of gas, respectively, but NOSDRA did not state how much penalties offshore companies would pay for the flare.

In total, NOSDRA said 50.3 billion SCF gas was flared, amounting to about N81 billion ($176 million) lost in the months under review. The volume of gas flared in both months was 11.9% lower than the 57.1 billion SCF of gas flared in the same period in 2022.

The affected companies include Shell Petroleum Development Company, Nigerian Agip Oil Company, Chevron Nigeria, Mobil Producing Nigeria, Nigerian Petroleum Development Company, Addax Petroleum Limited, Famfa Oil, and Elf Petroleum, among others.

Despite efforts to reduce it, gas flaring has been ongoing in Nigeria since the 1950s, releasing carbon dioxide and other gaseous substances into the atmosphere, and continuously leading to environmental and health challenges in oil-producing areas.

In response to the issue, the Chairman of the Society of Petroleum Engineers, SPE Nigeria Council, Prof. Olalekan Olafuyi, said the Federal Government would increase gas flare penalties as Nigeria races towards achieving its commitment to the United Nations net-zero goals by 2060.

Companies that flare gas will now pay more than those utilizing it, which will incentivize companies to start thinking of ways to utilize their gas instead of flaring it.