Nigerian Government to Conduct A Bid Round For Flare Gas
By Toyin Akinosho
President Muhammadu Buhari has signed a new legal framework on flare gas reduction, the implementation of which is expected to lead to a government takeover of fields where flaring is taking place and a bid round of some of such fields before the end of 2018.
The Flare Gas Reduction (Prevention of Waste and Pollution) Regulation 2018, signed in early July 2018, is currently being gazetted. The document seeks the reduction of environmental/social impact caused by the flaring of gas; protection of the environment; prevention of waste of natural resources and creation of social and economic benefits from flare gas capture.
The regulation asserts the right of the government, under Section 9 of the Petroleum Act, to take natural gas produced with crude oil free of cost at the flare site and without payment of royalty. The provision of this regulation is applicable to all petroleum licences, including marginal fields.
Two key aspects of the regulation are the outlines of Bid Processes and the Penalties for supply of inaccurate data by a producer of flared gas.
The minister may, by a permit to access flare gas, authorize a Qualified Applicant selected further to competitive bid processes conducted by the Federal Government, to take Flare Gas on behalf of the government at any Flare site as specified in the permit.
Any producer may apply to the minister to utilize Flare Gas for commercialization, provided that such application shall(a) exclude any Flare Gas volume that is being offered in a bid process conducted by the Federal Government or has been assigned to a permit holder, (b) be made by the producer on behalf of a midstream subsidiary corporate entity, either existing or to be incorporated.
There is, of course, more.
Nigeria flares an excess of 800Million standard cubic feet of gas a day from 178 flare sites, according to the Ministry of Petroleum Resources. The country’s power sector, however, struggles to get enough gas to fire the turbine capacity of 7,000MW.
The government is hoping to use the regulation to bring more investment into the natural gas market.
To achieve this, ministry sources say, there is need for improved oilfield practices and improved regulatory supervision.
The new regulation contains higher penalty for gas flaring than currently obtains and contains an overwhelmingly large number of references to “The Qualified Applicant” and “Permit Holder” of Flare Gas sites, two entities that are largely unknown in extant Nigerian Petroleum ecosystem.
The regulation says that the Department of Petroleum Resources may request a producer to provide Flare Gas Data and when that request is made, the producer shall provide such Flare Gas Data in the format required within 30 calendar days of the date of the request.
In the last 18 months, the MPR has called for data twice from flare gas producers. The Ministry will call again for data after the regulation has been gazetted.
Any individual, in any company, that signs a letter conveying the data has a duty to ensure that the data is accurate. Any person acting on behalf of a producer, who supplies inaccurate or incomplete Flare Gas Data to the DPR or any other duly empowered lawful authority, will be liable to criminal prosecution, the new regulation says.