How Nigeria lost N53.26bn to gas flared by oil companies in two months

By Ebi Perekeme

Nigeria lost an estimated N53.26bn in the first two months of this year as international oil companies and local players flared a total of 33.04 billion standard cubic feet of natural gas.

The oil companies wasted 17.53 billion scf of gas in February, compared to 15.51 billion scf in February, according to data obtained from the Nigerian National Petroleum Corporation.

With the price of natural gas put at $3.93 per 1,000scf as of Wednesday, the 33.04 billion scf flared translates to an estimated loss of $129.85m or N53.26bn (using the official exchange rate of N410.13/dollar).

The NNPC, in its latest monthly report, said out of the 206.05 billion scf produced in February, a total of 133.06 billion scf was commercialised, consisting of 40.15 billion scf and 92.91 billion scf for the domestic and export market respectively.

It said this implied that 64.48 per cent of the average daily gas produced was commercialised while the balance of 35.52 per cent was re-injected, used as upstream fuel gas or flared.
Gas flare rate was 7.67 per cent in February (i.e. 565.52 million standard cubic feet per day), compared to 7.73 per cent in January (i.e. 554.01 million scfd).

In January, a total of 223.55 billion scf of natural gas was produced, translating to an average daily production of 7,220.22 million scfd.

Out of the total gas output in January, a total of 149.24 billion scf was commercialised, consisting of 44.29 billion scf and 104.95 billion scf for the domestic and export markets respectively.

This indicates that 67.15 per cent of the daily gas output was commercialised while the balance of 32.85 per cent was re-injected, used as upstream fuel, or flared, the NNPC said.

According to the revised payment regime for gas flaring, oil firms producing 10,000 barrels of oil or more per day will pay $2 per 1,000 standard cubic feet of gas, compared to N10 per 1,000 scf in the past.

Firms producing less than 10,000 barrels of oil per day will pay a gas flare penalty of $0.5 per 1,000 scf.

The penalties paid by oil and gas companies for flaring gas in the country will be invested to build midstream gas infrastructure in host communities, according to a new provision introduced into the Petroleum Industry Bill by the National Assembly.

“Moneys received from gas flaring penalties by the commission (Nigerian Upstream Regulatory Commission) pursuant to this subsection, shall be transferred to the Midstream Gas Infrastructure Fund for investment in midstream gas infrastructure within the host communities of the settlor on which the penalties are levied,” the Senate and House of Representatives said in subsection (4) of section 104 of the bill.