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New PIB’s Dec 2012 Deadline: Why Permit Gas Flaring At All? By Ifeanyi Izeze

July 24, 2012

No doubt, there is a general consensus on the need to stop gas flaring in our oil fields. The government, oil companies, host communities, non-governmental organisations and private individuals agree on this but the question is: Whose fault is it that gas flaring still happens despite expressed and genuine concerns on the absurdity?

No doubt, there is a general consensus on the need to stop gas flaring in our oil fields. The government, oil companies, host communities, non-governmental organisations and private individuals agree on this but the question is: Whose fault is it that gas flaring still happens despite expressed and genuine concerns on the absurdity?

In what has been described as an insincere proposal, Section Three, Chapter D of the new Petroleum Industry Bill (PIB) which focuses on Gas Flaring (Prohibition and Punishment), stipulates that no natural gas shall be flared or vented in the country in any oil and gas production operation beyond December 31, 2012.

As approved by the President, Goodluck Jonathan on Wednesday July 11, 2012 and transmitted to the National Assembly, the bill says “Any licensee or lessee who flares gas after 31st December, 2012 contrary to section 251 commits an offence under this Act, and shall be liable on conviction to pay a fine which shall not be less than the established value of the gas flared.”

The only exceptions as may be granted by the Minister of Petroleum Resources for a period not longer than 100 days include cases of start-up operations in an oil field, equipment failure, shut down, safety flaring or due to inability of gas customer to off-take. Outside this, the new law demands strict adherence to a gas flaring and utilization plan as to be submitted within six months of the commencement of this Act.

Truth be told, the biggest bottleneck in this issue of zero gas flare deadline is funding of the infrastructure projects required to achieve that. The new deadline is unrealistic for the same reasons that previous ones were not met reason being the huge investment and resources required to put the needed infrastructures in place. The operating oil companies had made it clear to the government that 2013 is the only date that might be feasible as a deadline for prohibition of gas flaring. But the problem is that even the companies are skeptic whether they can meet the proposed deadline they clamoured for themselves since they cannot guarantee whether government would be able to pay up its share of the joint venture financing. And this is where the big problem lies. The oil companies in unison had alleged that the Nigerian government had not kept up its end of the funding agreements, preventing more investments along this line. But the body language of the federal government had been that though the national oil company (NNPC) has a controlling stake in the existing joint ventures, the responsibility to stop gas flaring lay solely with the oil companies.
We need to know and honestly confront issues that caused the failure of previous attempts/regulations to stop gas flaring. Are there government structures (fiscal facilities) in place to help phase-out gas flaring and in all honesty, is there political will to achieve this feat? What are the incentives if any and how lucrative are they?
Is it not interesting that a country which has no two kobo (as alleged) to rob each other as investment fund for the needed gas infrastructures is setting an ambitious deadline that requires massive capital injection? The genuine worry here is that such deadlines only sets a comfortable stage for messier frauds in our nation’s upstream oil development projects. Nigeria’s Niger Delta is one of the cheapest frontiers to produce oil and gas in the world. But interestingly, tendered cost of oil and gas projects in the region is one of the highest amongst the OPEC nations even in OECD countries.  This is a result of the entrenched systemic fraud and corruption by the foreign operators and their collaborators in government. Most of these foreign oil companies are in different kinds of marriages called joint ventures with the national oil company (now NNPC). So whatever needs to be paid is going to be shared accordingly and if you don’t have the money to pay your share, then you can forfeit part of your share of produced crude oil and/or gas. You see it? It has always been a blackmail situation and this is truly pathetic.

Ever since the first order by a Nigerian Head of State related to gas flaring in 1969 when Yakubu Gowon ordered that within 5 years of set-up, a company must cease flaring, the oil operators had continued the practice with impunity ignoring all existing regulations and preferring to pay pittance as fine. Through the Associated Gas Re-Injection Act Number 99 of 1979, the Nigerian government required oil corporations operating in Nigeria to guarantee zero flares by January 1, 1984. And since the advent of the current democratic dispensation, we had different proclamations of deadlines by the executive and legislature on the issue of ending gas flaring in Nigeria. The executive of the Nigerian government fixed 31st of December 2008 and later shifted the deadline to December 2011 as the terminal date to halt gas flaring. While the Senate passed a gas flaring prohibition and punishment bill of 2009 and fixed 31st December 2010 as the deadline. Then the House of Representatives pegged the end of 2012 as its own flare-down deadline. None of these regulations were obeyed or rather enforced.

In the new law, giving the operators an option of paying the value-equivalent of flared gas is a misstep. The question is, would they be expected to pay the value equivalent of what government sells natural gas to the Power Holding Company/NIPP or the international market price? Since the flaring is a domestic operation, the companies would definitely argue they pay the domestic price which in real terms would be so meager and as good as nothing. Also, who ascertains the true volume of gas flared at every facility? The government has to come up with a stringent penalty without a caveat and this would act as a deterrent for companies, which find it easier to pay the laughable fines rather than worry themselves with the extra investments required to address this mammoth waste which is more of a rape of a nation.

It is pathetic that the new PIB failed to take the issue of stopping gas flaring in the country with the seriousness it deserves. If government is sincere, they would have known that this idea of stupid fine never worked in the past because if it did, the several deadlines set in the past would not have casually passed without making any difference. When previous regulations to phase-out gas flaring practices in Nigeria were enacted, a number of instruments in form of penalties for defaulters were also put in place. The Gas Flaring Re-Injection Act of 1979 came with a penal fee of ₦ 0.05 for every million cubic feet (MCF) of gas flared was promulgated as a fee to be paid by the offenders of the law. This was reviewed in 1998 to ₦10 for every million cubic feet (MCF) of gas flared during oil production by oil companies. This was later upgraded to US $ 3.5 for every 1,000 cubic feet of gas flared following the new flare-out deadline of 31 December 2008. Then the National Assembly (House of Representatives) came with the amendment of the Gas Re-Injection Act and stipulated a penalty of US$ 500, 000 for any defaulter. The lawmakers also fixed 2012 as terminal date to stop gas flaring in the Niger Delta. Oil companies nonetheless have continued to flare gas, merely paying nominal fines and that’s what they are going to opt for in the new dispensation to be set in by the new PIB. We still have the chance to correct this and make the foreign operators know in strong terms how serious our people are in stopping gas flaring in the Niger Delta or elsewhere.
(IFEANYI IZEZE can be reached on: [email protected]; 234-8033043009)

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