NUPRC Explains Disparity In Gas Flare Penalties

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has  explained that the disparity often noticed in the figures given by some industry participants was because theirs were from satellite estimates, whereas the ones from the commission were 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.

This is as it said the total gas flare penalty collected from oil and gas companies from January 2023 till date is $85.1m, representing N44.4bn at the average exchange rate of N521.2/$ in 2023.

Recall that the House of Representatives  vowed to recover the over $9 billion gas flaring fines imposed by the federal government on erring local and foreign oil and gas companies.

The House has noted that there was disparity in the gas flare data from NOSDRA and the  data from the NUPRC which were 838,667,211 Mscf and 700,975,019 Mscf respectively.

Accordingly, the representatives said the difference which is 137,692,192 Mscf indicated that the Federation Account was shortchanged.

However, NUPRC explained that organisations use different technologies and systems to measure flares according to their mandates and capacities.

 It explained that “These include the Gas Flare Tracker system, Fiscal Grade Metre, Gas to Oil, and Material Balance which is used to measure what goes to flare. However, not all can be used to measure actual gas flare for the purpose of accounting and fines.

 “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.

 “Its accuracy range is to the tune of thousands. Even bush fires and other terrestrial fires are misconstrued by the satellite as gas flares (except where such sites are confirmed by ground truthing), thus making the result inaccurate and unreliable.”

 It stressed that it was important to note that the flare payments or any taxes thereof could not rely on uncertain estimates since it was a matter of huge financial commitment.

 On the basis for compilation of gas flare penalty, it explained that based on the provisions of the Gas (Prevention of Waste and Pollution) Regulations 2018, the flare penalty was not a flat rate of $2 per thousand standard cubic feet, but a two-tier regime of $2 and $0.5 per thousand scf, depending on the average daily crude oil production.

The commission also said that the flare gas administration should not be viewed as a sustainable revenue stream, as the flare fees were to serve as deterrent to drive the industry to greater compliance towards eliminating gas flaring, and generation of revenue from gas monetisation rather than flare payment.

NUPRC disclosed this in a document released in Abuja by the Nigerian Upstream Petroleum Regulatory Commission, detailing some basic information on gas flare measurement and fines from oil and gas companies operating in Nigeria.

 “While efforts are towards flare elimination and not penalty, the commission has collected a total of $85.1m from January 2023 to date from gas flare penalty,” it stated.

 The upstream regulator said it had led the effort in ensuring that the Federal Government’s drive to eliminate gas flaring in the country was achieved in a timely manner.

 The document stated that, “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 take from the sector.

“For the avoidance of doubt, the commission, being the sole regulatory body in Nigeria’s upstream oil and gas industry keeps record of daily, weekly and monthly gas volumes from all oil and gas fields of operation.”

It 

 On the source of flare gas data, the NUPRC explained that 

 The commission said on matters like this, the NUPRC was the custodian of authentic data.

 It stated that, “Putting out erroneous data from sources which might be construed to have genuine data or from erroneous data sources can mislead stakeholders and undermine the mandate of the commission in the dispensation of its functions.

 “As the sole regulatory body in the upstream oil and gas industry, the commission is readily available to provide accurate and bankable data required for any publication and economic analysis.”