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Under-reported gas flaring leads to over $1bn losses in Nigeria

Nigeria is believed to be declaring about half of what the oil explorers were actually flaring, thus paying far less than they should pay to the government as fines, an amount that may have hit $1bn as loss.

This is said to have emerged since new penalty regime emerged about two years ago. Now, a shortfall of almost 100 percent has been reported in declaring gas flares in Nigeria, according to a study released Wednesday afternoon by a team of researchers monitoring Nigeria’s gas sub-sector.

This is as not less than 20 non-governmental organisations (NGOs) have declared their readiness to sign a petition to the Presidency demanding an urgent probe of how the Nigeria National Petroleum Corporation (NNPC) reports about half of what is actually flared as confirmed by international satellite system monitoring flared gas around the world. The discrepancy or underreporting is said to have started since 2018.

An expert on gas commercialisation, Jesse Martins Manufor, said in his presentation at a webinar on Wednesday that since 2013, gas flares in Nigeria have been monitored from two sources; the Department of Petroleum Resources (DPR) on behalf of the NNPC and the international satellite system for Gas Flare Tracking (GFT).

Whereas the NNPC reported 228 billion cubic feet of gas (bcf) flared in 2018, the GFT reported 472bcf, a difference of almost 100 per cent. In 2019, the presentation revealed, the NNPC reported 325bcf while the GFT reported 475bcf. The difference since 2018 is said to have alerted international and local observers and investors. Sources close to the NNPC are said to have also expressed surprise.

Manufor, who made the presentation at the web-based training for NGOs and media groups organized by the African Initiative for Transparency, Accountability and Responsibility Leadership (AFRITAL) with support from FOSTER, said the surprising thing is that since 2013, both the NNPC and GFT had been reporting almost the same figures, only for sharp discrepancies to creep in since 2018.

Speculating on reasons for the sharp underreporting since 2018, some resource persons revealed that the new gas policy became known in 2018 and was signed in July 2018 to take effect in 2019. The new policy imposes $2.50 penalty per cubic feet of gas flared instead of the previous penalty of $0.50. The sharp increase may have motivated underreporting in recent years to reduce the penalty to be paid and accounted for.

The ugly scenario in the Nigerian gas sub-sector is believed to be due to absence of independent monitors in the industry. It was revealed that it is the oil corporations that also submit figures of gas flared.

Manufor however, wondered how the independent gas buyers that have submitted bids to take over the gas flare fields would get accurate figures for business planning and bidding since the NNPC figures have sharply disagreed with satellite reports. The situation is also believed to have exposed the absence of metering and independent monitoring of production in the oil sector.

It was at this point that the participants and NGOs at the training resolved to fire off a petition to the Presidency calling for probe of the discrepancies in reporting gas flares.

The groups agreed to form a coalition to sign the petition demanding immediate probe.

In his opening remarks, Brown Louis Ogbeifun of AFRITAL said the training was not to indict any authority or player but to add value to the gas commercialization policy and get the regulators to sit up and try to meet the 2020 target date to flare out.

Charles Madomi of FOSTER in his intervention said Nigeria has a huge opportunity in gas resources to survive the post-COVID and post-oil era, saying proper attention should be paid to gas.

Brened van den Berg who specialises on Latin America power sector especially Ecuador, said Nigerians are acutely aware of what is going on in the gas sector and flaring, saying their advocacy was very sharp. He also praised Nigeria’s model in gas commercialisation regime, saying going by all circumstances, the strategy of allowing independent groups to invest and manage the gas flare sites was the best.

Source: Business Day