TRULY OBA IS WORKING
(By Victor Efik)
Chairman, Senate Committee on Gas resources, Senator Bassey Albert Akpan (OBA) today, 9 March, 2017 made yet another history by presenting the Gas Flaring (Prohibition and Punishment) Bill 2017. The Bill passed through the second reading today. It was first presented on November 3, 2016.
Below is the lead debate as presented by Senator Albert :
GAS FLARING (PROHIBITION AND PUNISHMENT) BILL, 2016.
SPONSOR: Senator Bassey Albert Akpan
Mr. President, Distinguished colleagues, it is with profound gratitude that I lead this debate on Gas Flaring (Prohibition and Punishment) Bill, 2016.
This Bill was first read in this Chamber on November 03, 2016 and its speedy passage, will enhance a rapid infrastructural development of the oil and gas sector, enhance revenue of government and its related impact on the improvement of the life of our people in the Niger delta both socially and environmentally.
The flaring of natural gas produce in association with crude oil is one of the most dangerous environmental and energy waste practices in the Nigerian petroleum industry. Gas flaring affects the environment and human health, results in economic loss, deprives the government of associated tax revenues and trade opportunities, and deprives consumers of a clean and cheaper energy source and environment.
Available data from the Nigerian National Petroleum Corporation (NNPC) has shown that Nigeria lost over N217bn in revenue last year as oil and gas companies flared a total of 244.84 billion standard cubic feet (scf) of natural gas within the same period. With the average price of natural gas put at $2.90 per 1,000 scf as of February 16, 2017, the 244.84 billion scf flared translates to a loss of $710m or N217bn (using the official exchange rate of N305.25/dollar).
Mr President, Distinguished colleagues, this volume of flared gas according to analysis, is sufficient to feed 3 LNG trains or generate 3.5 GW of electricity (Nigeria’s average power generation). This is apart from the unquantifiable social, health and environmental impacts.
The latest report from the NNPC also shows that in 2016, 22.32 billion scf of gas was flared in January; 20.38 billion scf in February; 20.11 billion scf in March; 18.7 billion scf in April; 15.8 billion scf in May, and 14.8 billion scf in June.
Similarly, in the second half of the year, the country recorded the highest volume of gas flared in November at 24.54 billion scf, up from 22.60 billion scf in October; 21.5 billion scf in September; 21.14 billion scf in August, 21.79 billion scf in July and a total of 21.15 billion scf in December.
Mr President, distinguished colleagues, it appears that the euphoria of oil discovery and commencement of production in 1958 blinded the eyes of Nigerians as there was no provision to handle produced Gas in association with crude oil. Government, neither stipulated any laws nor Guidance during the nascent period of our oil production history.
It was not until 1969 that the first attempt to address gas flaring was made via the Petroleum (Drilling & Production) Regulations which merely required that Oil producing companies submit a Gas Utilisation Plan (GUP) five years into the commencement of production. After this, the Associated Gas Re-Injection Act, 1979 came into force. The 1979 Act provides for the implementation of programmes of gas re-injection by oil producing companies, a flares-out date of 1st January, 1984 and 1985 with the conditions for flaring thereafter as well as the related penalty of forfeiture of concession. The Act also empowered the Minister to make regulations for the governance of the oil and gas industry. Consequently, the Associated Gas Re-injection (Continued Flaring of Gas) Regulations, 1985 was made to specify conditions for issuance of certificate for continued gas flaring and matters connected therewith, yet all these till date has not stop the flaring of natural gas and Nigerians have remained the victims of lack of a gas flaring prohibition Act.
It is pertinent to note that Gas re-injection is not applicable in every scenario as the decision to re-inject or store gas follows extensive studies of the field or reservoir systems to determine the most appropriate development mechanism for optimum recovery of hydrocarbon. The law did not take this constraint into consideration, hence the need to provide a solid legal framework for the effective regulation and monitoring of gas flaring activities in line with current realities, which this Bill is basically set out to achieve.
In 2008 as part of the Nigerian Gas Master Plan, Government’s regulation through the National Domestic Gas Supply and Pricing Policy, 2008 was primarily focused on domestic obligation of our gas produce in the development of domestic market in the area of industrialization, commercialization and domestic utilization. The Regulation specifically introduced domestic gas supply obligations to all operators in the industry with a penalty charge of $ 3.50/ 1000 scf for operators’ inability to meet its Domestic Supply Obligations to the domestic market.
It should however be noted here that, the ambiguity between the Domestic supply obligations penalty and gas flaring penalty provisions of the 2008 Regulations, has led to operators’ non adherence to the payment of this penalty.
Mr. President, Distinguished Colleagues, today, thirty eight (38) years after, the Associated Gas Re-Injection Act, 1979 still remains the only subsisting legislation on gas flaring and related matters. You will agree with me that it is most expedient to enact an Act which will:
address the inadequacies and shortcomings of the 1979 Act;
Bring gas flare penalty in line with current economic realities; and
ensure the achievement of the National Flares-out Target of 1st January, 2030.
The current gas flare penalty of N10 per 1,000 scf is too low, and not in line with current economic realities and encourages continuous gas flaring by operators with its attendant negative effect on our environment instead of encouraging investment in infrastructure by the operators to make gas available for our domestic use.
Mr. President, Distinguished Colleagues, this Bill seeks to increase the gas flaring penalty to an appropriate and commensurate level sufficient to de-incentivise the practice of gas flaring, whilst introducing other market measures to encourage efficient gas utilisation. The Bill equally makes it mandatory for operators to submit gas utilisation plan within 90 days of the commencement of the Act for effective monitoring.
The Bill has taken into cognizance the experiences of other countries like the United States of America which emphasises creation of infrastructure for gas utilisation as condition for grant of license. The Bill also makes specific provisions for the installation of requisite gas flare meters equipped with facilities that enable real time, online data retrieval for independent reporting and monitoring by the industry regulator.
Mr. President, Distinguished Colleagues, with the exit of Joint Venture Cash Call regime by government, attendant low oil price, the consideration and passaged of Petroleum Industry Governance & Fiscal Bill, low construction cost in the oil and gas industry, the time for investment in gas infrastructure by all stakeholders is now, hence the need for the speedy passage of this Bill.
I thank you for your support towards its speedy process and passage into law and therefore move that this Bill be read the second time.