Gas flaring: Federation Account shortchanged $277m —RMAFC
…Reps to investigate 19 oil companies, summon CEOs
…Lawmakers vow to recover over $9bn fines from oil companies
…Expert calls for legislative backing for adoption of oil tracker
Nigeria’s Federation Account was short changed $277million between 2020 and 2022, the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) has revealed.
The RMAFC Chairman, Gas Monitoring Committee, Mr. Patrick Mgbebu disclosed that the gas flare penalty payment regime from 2013-2018 (2018 Jan-June) was US$0.30, while from 2018 (July-Dec) to 2023 It is pegged at $2.00.
He noted that within the period in question, the Federation Account was shortchanged.
“The penalties payable amounted to $3,465,299,226.55 and the value of gas would have been $12,403,000,001.20 if the gas was sold and not flared,” he disclosed.
“The Commission compared the data from NOSDRA with the data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the following observations were made; that the volume of gas flared according to National Oil Spill Detection and Response Agency (NOSDRA) and NUPRC were 838,667,211 Mscf and 700,975,019 Mscf respectively. The difference which is 137,692,192 Mscf indicated that the Federation Account was shortchanged. It should be noted that the comparison covered three years from 2020 to 2022.
“That the value of gas flared according to NOSDRA and NUPRC are $320,583,355.48 and $43,325,050.76 respectively. As such the variance Indicated that the Federation Account was shortchanged by $277,258,304.72,” he disclosed.
He lamented that Nigeria has a proven gas reserves of 201 trillion standard cubic feet and unproven gas reserves of 600 trillion standard cubic feet, yet production of gas remains very low and unstable.
In his presentation, Director General, NOSDRA, Mr. Idris Musa, noting that the extant penalties on gas flaring are to serve as deterrent, submitted that the penalties on gas flaring should be stiffened.
While stressing the need for improvement on the penalty application process and procedure of the application and collection, he harped on the need to abolish the dichotomy of penalty administration.
According to him, a total of 3.8 billion Mscf was flared between 2013 to date while total sum of $7.6 billion penalties are payable.
…Reps to investigate 19 oil companies, summon CEOs
Meanwhile, the House of Representatives is set to investigate 19 oil companies and summon their CEOs to investigate the payment of gas flaring fines.
The lower chamber on Monday said it has constituted a Committe with the terms of reference to among others “investigate the payment of gas flaring fines and management of proceeds therefrom; and determine the extent of compensation to oil producing communities in accordance with the Petroleum Industry Act. Engage affected communities, CSOs and experts. Make recommendations for further legislative action.”
Following the development, the Ad-hoc Committee also resolved to summon all the Chief Executive Officers of 19 oil and gas companies and others to appear before the Committee on Tuesday, 25th July, 2023 (today).
The companies in question include: Total/Mobil JV Domestic Wing; Total/Oando JV; Total Energies; African Petroleum (AP) Plc. now Ardova PLC; Azman Oil & Gas Limited; Matrix Oil & Gas; A. M Shafa Ltd; Nigerian Electricity Regulatory Commission (NERC); National Council on Climate Change (NCCC); Nigerian Petroleum Development Company (NPDC); Yinka Folawiyo Petroleum Company (Aje Oilfield Offshore); Sterling Oil Exploration & Energy (SEEPCO); Belemaoil Production Limited; Walter Smith Petroman Oil Limited; Green Energy International Limited Millennium Oil and Gas Company Limited; Folawiyo Energy; Eroton Exploration and Production Nigeria Limited; and Niger Delta Petroleum Resources Ltd, respectively.
…Lawmakers vow to recover over $9bn fines from oil companies
On the other hand, the lawmakers have vowed to recover a whopping sum of over $9 billion imposed as fines for gas flaring by the Federal Government on local and foreign companies operating in the oil and gas industry, but which the later have failed to pay.
The lower chamber on Monday vowed it would do all within its power to ensure the recovery of all unpaid fines as well as facilitate compliance with extant legislations and regulations guiding operation in the sector.
This is just as the House said it will be taking up matters, going forward, to see how appropriate penalties are meted out to those companies still guilty of the act of polluting the environment with flaring of gas.
The chairman of the Ad-hoc Committee investigating gas flaring, Hon. Ahmed Munir gave assurance to recover the fines during the post-investigative hearing briefing in Abuja which was attended by various stakeholders drawn from the Federal Ministry of Environment, Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), National Oil Spill Detection and Response Agency (NOSDRA), among others.
The lower chamber will be investigating the rationale behind a $277,258,304.72 disparity in the gas flare penalties computed by NOSDRA and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
Speaking during the meeting, Hon. Munir said it has come to the notice of the House the level of impunity being displayed by operators in the sector, stating that the 10th Assembly will do all within its power to ensure the recovery of all unpaid fines issued as penalties for gas flaring.
He said, “I can assure you that we will not take this lying down. There are two ways to go about it; we have the issue of penalties that are not paid, amounting to about $9 billion or thereabout, that one is there. We know how to recover it.
“Secondly, going forward, those that are still polluting how do you ensure you get it down to zero and what are the penalties that are going to be out in place?
“Thirdly, the big difference between then and now is, we now have a PIA in place so how do you implement it? Where we have loopholes that’s why we are here to hear from the people concerned. Is there any amendment that will be required?
“If you are going to bid for oil bloc in Nigeria, and you see that out of the criteria one is your gas master plan, how do you key into that? You can’t win a bid without ensuring you will be able to utilise that gas or evacuate the gas responsibly.
“The issue of how many people do FIRS run around and make them to pay their taxes, if you are a contractor and you are bidding, and you don’t have your FIRS Certificate, you are not going to go anywhere if you don’t have various certificates whether BPP (Bureau of Public Procurement), BPE (Bureau of Public Enterprises) or whatever may be the case.
“So, if don’t have that, you can’t win the bid. So, are we going to go and look for you to pay your fees or you go yourself to pay your fees? So, we have to create a mechanism where the business environment requires that certain things need to be put in place.
“If an establishment is going out to go and look for loan and you are owing another bank, I believe there’s a central database of CBN that even if you’re owing N1 you will be declined.
“So, why shouldn’t we have a centralised database of defaulters owing, of the people who are not doing the right thing they can’t further renege on these issues.”
…Expert calls for legislative backing for adoption of oil tracker
A Director at the Federal Ministry of Environment, Mr. Olubunmi Olusanya has harped on the need to give legislative backing to the use of oil tracker as benchmark for sanctioning of erring companies.
“I also want to plead that the oil tracker should be given a legislative backing, so that it can be used as benchmark for sanctioning of the 44 companies.
“Presently, a lot of companies are flaring because what they’re are flaring is nothing compared to the investment in the utilisation of gas that is being flared.
“But when the penalty is adjusted appropriately and we are not depending on their meters and we are using the gas flare meter developed by NOSDRA, and they are paying heavily for the flaring gases, I’m very sure all of them will begin to think of alternative use of gas being flared unabatedly,” he stressed.
