Here’s why Gas Flaring, oil firms will need to pay fine.

Operators within the oil and gas sector involved in gas flaring are going to be expected to pay a yearly fine to the govt for the offence, consistent with the Petroleum Industry Bill (PIB) before the National Assembly.

The companies also are expected to submit a gas flare elimination and monetisation decide to government within 12 months from the effective date of their licence or lease.

President Muhammadu Buhari had asked the lawmakers to expedite action within the passage of the bill which he said will boost confidence and attract investment into the oil and gas sector also as increase government income
This bill ensure a licensee, leassee or operator that flares or vents gas , except within the case of an emergency; pursuant to an exemption granted by the Commission; or as a suitable safety practice under established regulations commits an offence under this Act and shall be susceptible to a fine as prescribed by the Commission in regulations under this Act”.

Although it had been not specific on the fine, it states: “A fine due under this section shall be paid within the same manner and be subject to an equivalent procedure for the payment of royalties to the govt by companies engaged within the production of petroleum. A fine paid pursuant to the present section shall not be eligible for cost recovery or be tax deductible.”

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The newly introduced law does not allow venting of gas , saying in Section 105: “A licensee or Lessee shall pay a penalty prescribed pursuant to the Flare Gas (Prevention of Waste and Pollution) Regulations.”

When passed, the law will makes it mandatory for companies operating within the oil and gas sector to put in metering equipment in facilities where gas could also be flared or vented in accordance with the regulations which will be put in situ.

Before the commencement of petroleum production, install metering equipment conforming to the specifications prescribed on every facility from which gas could also be flared or vented because the Commission or the Authority may prescribe during a regulation.”
Who fails or refuses to put in metering equipment pursuant to subsection (1) of this section commits an offence under this Act and is susceptible to a fine because the Commission or the Authority may prescribe under a regulation.”

It, however, makes provision for exemption to the principles , saying: “The Commission or the Authority may grant a permit to a licensee or lessee to permit the flaring or venting of gas for a selected period (a) where it’s required for facility start-up; or (b) for strategic operational reasons, including testing”.
Notwithstanding any provision to the contrary under this Act, a licensee or lessee producing gas shall, within 12 months of the effective date, submit a gas flare elimination and monetisation decide to the Commission, which shall be prepared in accordance with regulations made by the Commission under this Act.”

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The law also states that the availability of supply of petroleum and condensates for the domestic market on a willing supplier and willing buyer basis.

It mandate the Upstream Commission to issue regulations or guidelines on the mechanism for the imposition of a domestic petroleum supply obligation on lessees of upstream petroleum operations, where in its opinion, the domestic market leads to shortages or inadequate supplies of petroleum and condensates for holders of petroleum refining licences.

The law makes provision for the sale of petroleum to holders of petroleum refining licences, whose refineries are operational , while the availability of petroleum shall be commercially negotiated between the lessee and therefore the petroleum refining licensee, having reference to the prevailing international market value for similar grades of petroleum .

Also, holders of petroleum refining licences shall provide payment guarantees as needed by the applicable lessee and payment for petroleum purchased pursuant to obligations shall be in US dollars.

With wholesale gas suppliers supplying the sectors for delivery of marketable gas to the purchasers or suppliers and notify the Commission of the contracts, as long as where the quantity of the contract is adequate to or above the domestic gas delivery obligation for the lessee.

Volume of gas to be dedicated by a lessee towards the domestic gas delivery obligation shall be supported an allocation system among lessees as determined by the Commission upon consultation with the Authority considerately of supporting infrastructure availability.

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“A lessee shall be obliged to deliver the quantity of gas prescribed under subsection 6 of this section to a wholesale customer determined by the domestic gas aggregator.

“Subject to the provisions of subsection 7 of this section, a lessee who fails to suits the domestic gas delivery obligation shall incur a penalty of $3.50 per MMBtu not delivered, as long as , where the lessee has signed a gas purchase and sale agreement with a wholesale supplier of the strategic sectors, the penalty for failure to deliver shall be as stated therein agreement.