Government to commercialise gas flaring by Q1 2017

Targets flare out by 2020

Barring any unforeseen circumstances, the Federal Government has set aside Q1 2017 for the commercialisation of gas flaring in the country and total flare out by 2020.

Besides, exploration and development of new gas supply sources from the inland and offshore basins is to be actively encouraged, while gas terms for PSCs will be produced before the end of 2016.

The Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, disclosed this on Monday in Lagos, at the 10th International Gas Conference and Exhibition, organised by the Nigerian Gas Association (NGA).

Kachikwu, who hinted that government has developed a Draft National Gas Policy, explained that the policy will promote a competitive business environment for both current and new investors, articulates government’s vision for the sector and sets policy goals. It will also set out strategies and an implementation plan for medium to long-term targets for gas market development.

According to him, government’s vision for the Gas sector is to be an attractive gas-based industrial nation, giving primary attention to meeting local gas demand requirements, and developing a significant presence in international markets.

The Minister restated that the priority of the government is the utilisation of natural gas for domestic needs with the power sector as the priority end-use sector.

“However, it is also desired that demand from the industrial, commercial, transportation and industrial sectors will be high. The attainment of these projects will not only broaden the economy; related industries will grow out of these projects, such that jobs and other multiplier benefits will follow. This is the direction we must follow,” he stated.

According to him, most of the investment required in the sector will be drawn from the private sector, adding that government will set the environment and support investors with appropriate interventions to bring their projects to fruition.

Hence, he said government’s policy challenge is to develop a policy, institutional, legal, regulatory and fiscal framework that is attractive to the private sector.

Speaking on the Petroleum Industry Bill (PIB), Kachikwu said government is in the process of completing a draft legislation on the bill, which will address the institutional and regulatory reforms necessary for the petroleum sector as a whole.

He explained that with respect to the gas sector, the draft bill will capture the key positions in the gas policy, including addressing the current gap in the Petroleum Act by providing clear rules for the exploration, development and utilisation of gas.

He said the draft will also address other issues that are of critical importance to government and investors, such as the issue of gas flaring, gas pricing, wholesale gas market development, and the basis for licensing of activities throughout the gas chain.

He listed government’s role in the whole process to include; remaining the policy maker, through the Minister of Petroleum Resources; and regulate the industry, albeit through a new independent petroleum regulatory authority that will be established and empowered with sufficient capacity to regulate the petroleum industry. The new agency will cover the activities of the existing petroleum regulatory authorities as well as new responsibilities.

According to him, government will be responsible for the economic, competition, technical, and safety regulation of the gas sector and shall have licensing, investigative, monitoring and dispute resolution powers.

“Government will remain a commercial operator; however, the full legal separation of the upstream from the midstream and the legal separation of gas infrastructure ownership and operations from gas marketing will ensure that the NNPC and NGC are legally restrained from acting as a barrier to the private sector,” he stated.

The minister informed that the current threats to the nation’s security of gas supply from militancy and insurgency in the Niger Delta are being addressed by government along with the growing gas payment arrears in the power sector.

He also disclosed that LPG sector presents a window of opportunity to create jobs and improve the quality of life of the populace, saying that the policy for LPG is to ensure the development of a strong and rapidly growing LPG market in Nigeria.

He stressed that the overall goal of the policy is to promote its wider use in domestic, power generation, autogas and industrial applications towards the attainment of five million MT utilisation in five years.

Gas flaring, Kachikwu observed is still a prevailing practice in the petroleum industry, saying that it is the position of the government that the protection of the environment is a more important objective than oil or gas production.

Hence, he said government is determined to ensure flare out within the earliest possible time, preferably by year 2020.

To achieve this, a number of measures will be introduced and gas utilisation will be a priority consideration over other considerations for the handling of associated gas; restrict undue re-injection of associated gas and encourage the deployment of technology solutions for the capture and utilisation of associated gas. Others are commercialisation of flared gas for supply into the domestic market; increase the gas flaring penalty to an appropriate level sufficient to de-incentivise the practice of gas flaring and develop regulations which will prohibit any greenfield gas project from moving forward until there is a proper integrated plan for the development of the hydrocarbons.