In this post, we explianed how the new regulatory on flare Gas Commercialisation opened up business opportunities in the industry, the procedures to access to flare gas from midstream operations, required permit to flare, Prohibition of flare gas, Conflicts and Penalties for gas flaring in Nigeria.
INTRODUCTION
The Midstream Gas Flare Regulations, 2023 (the “Midstream Regulations”) were issued by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (the “Authority”) in March 2023 and in exercise of the powers conferred on the Authority by section 33(y) of the Petroleum Industry Act 2021 (the “PIA”).
The Midstream Regulations states that “the Authority shall have the right to take free of charge or any payment, natural gas at the flare in midstream petroleum operations”. It also grants the Authority the powers to: grant or revoke a permit to access flare gas in accordance with the provisions of the Midstream Regulations; and grant a permit to allow the flaring or venting of flare gas for a specific period, as stipulated in guidelines to be issued by the Authority, where such flaring or venting is required for facility startup or for strategic operational reasons, including testing, exempt a licensee or permit holder who vents flare gas during a declared national emergency, from the payment of penalties.
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In relation to the above, it should be noted that the PIA only grants the Nigerian Upstream Petroleum Regulatory Commission (the “Commission”) the right to take free of charge natural gas that is destined for flaring at the flare stack; no corresponding right is vested in the Authority by the PIA.
Access To Flare Gas from Midstream Operations
Flaring in midstream petroleum operations may occur in the categories of —
- safety flaring
- continuous flaring when the plant or process unit is in operation; and
- non-continuous operational flaring on a planned or unplanned basis for scheduled maintenance, equipment shutdowns, and mechanical equipment failures.
Access to flare gas
- The authority shall have the right to take free of charge or any payment, natural gas at the flare in midstream petroleum operations.
- The Authority may, upon application by a licensee or permit holder to repurpose flare gas from midstream petroleum operations, grant a permit to access flare gas subject to terms and conditions as the Authority may determine.
Read: Central Gas Supply Systems Design & Installation
- A permit to access flare gas shall be valid for a term of one calendar year and renewable for a further term of one year.
- The Authority may, upon application by a third party to repurpose flare gas from midstream petroleum operations, grant a permit to access such flare gas subject to payment of prescribed fees and service charges, and the submission of an investment proposal by the third party.
Revocation of access to flare gas
The Authority shall revoke any permit to access flare gas where the:
- permit holder fails to comply with the terms and conditions of the permit;
- permit holder intentionally provides inaccurate information in connection with the issuance of the permit;
- permit holder is dissolved or enters into bankruptcy proceedings; or
- purpose for which the permit was obtained would negatively impact health, safety, environment or public interest.
A revocation of a permit to access flare gas shall not release the permit holder from any obligations arising from these Regulations.
A permit holder may assign or transfer its interest or rights under the permit provided that the —
- transferee satisfies the minimum technical and financial requirements necessary to become a permit holder and assumes all obligations of the permit holder; and
Read: LPG Tanks Fabrication & Manufacture
- transferee complies with the provisions of the Assignment or Transfer of Licence and Permit Regulations, 2023 and other relevant regulations, guidelines or directives issued by the Authority.
Prohibition of flare gas
- A person engaged in midstream petroleum operations shall not flare or vent flare gas beyond limits set by the Authority.
- A licensee or permit holder shall, prior to the issuance of a licence to operate, engage with the Authority to determine the maximum number of major flaring events and quantity of gas flared.
- The quantity of gas flared and number of major flaring events in sub regulation (2), shall include all planned maintenance, facility start-up or strategic operational reasons including testing.
- The Authority may exempt a licensee or permit holder who vents flare gas during a declared national emergency, from the payment of penalties.
Reporting Of Gas Flare Data
- A licensee or permit holder shall maintain a daily log of each occurrence of the flaring and venting of flare gas within its facilities, which shall be submitted to the Authority within 21 days following the end of each month.
Read: LPG / Gas Plant Design and Installation
- A licensee or permit holder shall install metering equipment in its facilities which shall provide the data for all flare gas logs, and the data shall include the date, time, duration and quantities of the venting or flaring of flare gas within the facilities.
- All flare gas logs shall comply with the form and manner stipulated in the Metering and Data Collection Standards issued by the Authority.
- A licensee or permit holder shall keep copies of flare gas logs in safe custody for not less than 36 months.
Conflicts and Penalties for flaring of flare gas.
Where there is a conflict or inconsistency between the provisions of these Regulations and provisions of any other regulation in relation to the flaring of gas in midstream petroleum operations, the provisions of these Regulations shall take precedence and supersede any other regulation to the extent of the conflict or inconsistency.
Read: NCEC Certificate Registration
Penalties for venting or flaring of flare gas
- A licensee shall be liable to pay a penalty for venting or flaring of flare gas of USD0.50 per 28.317 standard cubic meters (one thousand standard cubic feet) of flare gas flared or vented beyond the limit set by the Authority by not more than one million standard cubic feet (1MMSCF)
- A licensee shall be liable to pay a penalty for venting or flaring of flare gas of USD1.00 per 28.317 standard cubic metres (one thousand standard cubic feet) of flare gas flared or vented beyond the limit set by the Authority more than one million standard cubic feet but less than ten million standard cubic feet (between 1-10MMSCF).
- A licensee shall be liable to pay a penalty for venting or flaring of flare gas of USD1.50 per 28.317 standard cubic metres (one thousand standard cubic feet) of flare gas flared or vented beyond the limit set by the Authority by greater than ten million standard cubic feet (>10MMSCFD).
All midstream flare gas penalties collected shall be for the account of the Midstream and Downstream Gas Infrastructure Fund and shall be utilized for midstream and downstream gas infrastructure investment within the host community of a designated facility.