Oil firms pay $646m gas flaring penalty, highest in five years

Oil and gas companies operating in Nigeria paid an estimated $646 million in gas flaring penalties in 2025, the highest level in five years, as emissions surged.

This development revealed persistent gaps in the country’s long-running efforts to curb the wasteful and environmentally damaging practice.

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The available data on the Nigerian Oil Spill Monitor spans from March 2012 to date. According to the data, the all-time high penalties payable was $934 million when oil companies in the country flared gas valued at $1.6 billion in 2018.

Corroborated by the National Oil Spill Detection and Response Agency (NOSDRA), data showed penalties accounted for 58.7 percent of the total value of gas flared, which stood at $1.1 billion during the year.

The increase reflected a sharp rise in flaring activity, despite decades of regulatory interventions aimed at reducing emissions and encouraging the commercialisation of associated gas.

Oil producers flared about 323.2 million standard cubic feet (scf) of gas in 2025, highlighting enduring inefficiencies in upstream operations and limited progress in commercialising associated gas.

Flaring volumes have remained inconsistent over the past five years. Nigeria recorded 349.3 million scf in 2020, declining to 264.6 million scf in 2021 and 230.1 million scf in 2022, before rising again to 278.3 million scf in 2023 and 301.3 million scf in 2024, signalling a reversal of earlier gains.

Industry analysts said the current penalty regime has not been strong enough to drive behavioural change among operators.

“Fines for flaring should be increased to make reinjection more attractive,” said Jide Pratt, country manager at TradeGrid, noting that weak penalties and the high cost of gas infrastructure continue to incentivise flaring.

Nigeria has enacted multiple regulations to curb gas flaring since 1969, including a 1984 provision that makes the practice illegal without written approval from the Minister of Petroleum Resources.

Under current rules, producers pumping 10,000 barrels per day or more are charged $2.00 per 1,000 scf flared, while smaller operators pay $0.50.

Concerns are also mounting over the pace of progress under the government’s “Decade of Gas” initiative.

“Are we truly prepared for significant gas uptake and utilisation, especially with about 40 percent of the timeline already elapsed and limited progress in flare reduction?” said Oyinkepreye Orodu, a sub-surface and energy researcher.

Recent disclosures by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) show that N289.306 billion in gas flare penalties were remitted to the Federal Government between January and November 2025.

This represents about 3.07 percent of the N9.411 trillion total revenue collected from oil and gas operators over the same period, indicating that while penalties are rising, they remain a relatively small component of overall sector earnings.

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Historical data pointed to a sharp increase in collections in recent years. The Commission’s Annual Financial and Operational Performance Report shows that N602.2 billion was generated from gas flare penalties between 2022 and 2024.

Breakdown of the figures indicated collections rose from N70.4 billion in 2022 to N140.5 billion in 2023, before surging to N391.3 billion in 2024, highlighting both improved enforcement and sustained high flaring levels.

Despite this upward trend in penalty revenues, analysts warned that without stronger economic incentives and expanded gas infrastructure, Nigeria may struggle to achieve meaningful reductions in flaring in the near term.