Oil firms shun gas flare penalty payment for 2012

Soni Daniel

07 November 2012, Sweetcrude, ABUJA—NONE of the oil companies operating in Nigeria has paid any penalty to the coffers of the Nigerian government for gas flaring since the beginning of this year.

As a result of the evasion by the oil firms, Nigeria reportedly lost a whopping sum of money within the year, the Petroleum Revenue Special Task Force, headed by Nuhu Ribadu, has revealed.

According to the report, which was cited by Sweetcrude last night, the money was lost largely because the Department of Petroleum Resources, DPR, which is saddled with the task of enforcing compliance with the law, failed to carry out its job.

The submission of finding of the special task force, otherwise known as the Ribadu Report, which sparked controversy before President Goodluck last week, indicated that oil firms flagrantly ignored the introduction of a new gas flare penalty regime introduced by the Ministry of Petroleum in August last year.

The report said, “The Minister issued a directive which was signed on 15 August 2011 increasing the gas penalty fee from N10.00 to $3.50.

“However, the oil companies have failed to comply with the directive and have continued to flare gas without compliance with the new rate as communicated in the Minister’s directive.

” Using the DPR gas flare information (irrespective of the inherent errors arising per the factors earlier stated) to compute the potential revenues for the relevant years at the rate of $3.50 per standard cubic feet is $4.1billion versus the $177million computed by the DPR using the N10 per scf.

“The records at the DPR reveal that none of the companies have paid any gas penalty fee in 2012.

“CBN statements and reports of inflows were also obtained in order to corroborate the payment information received. Per the information obtained from DPR, total revenue from gas flaring during the review period was $175million.

“The balance outstanding as unpaid was approximately $58million. This indicates that $115million had been received in respect of gas flare penalty by the DPR.

“The Task Force however reviewed CBN statements and noted that $137million was received between 1 January 2005 and 31 December 2011. The DPR was not able to reconcile the $115 million to the $137million,” the committee noted in the report.

In a bid to check further loss of revenue in the oil industry, the committee recommended the use of fingerprint to check stolen crude from Nigeria and to apprehend the masterminds.

The report noted that if properly carried out the technology would help in identifying stolen oil from the legal one.

It also recommended the amendment of the Fiscal Responsibility Act of 2007 to criminalize withholding payment of petroleum revenue after due date and issuance of demand notice.

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  • Perhaps the unilateral increase in the gas flaring penalty by the minister is still unclear to the operators and we wonder if the minister has such powers.