2022 Nigerian Gas Flare Commercialization Auction Round (Pt 2)- Compliance Requirements for Permit Holders.
Sandra Osinachi-Nwandem
Oil & Gas Lawyer || Author || Chief Columnist, SON Energy Digest || Energy Transactions || Energy Security Advocate || Member, the Questers’ Mastermind BOT || Life Coach.
The Petroleum Act 1969 (as amended) confers on the Federal Government of Nigeria (FGN) the right to take natural gas produced in association with crude oil by the Licensee or Lessee or Gas Producer at the flare stack free of cost, or at an agreed cost without payment of royalty.
The FGN, exercising its right to take flare gas and through an open and competitive bid process, grants a Permit to Access Flare Gas to the Flare Gas Buyer pursuant to the Nigerian Flare Gas Commercialization Programme (NGFCP).
The law mandates the Permit Holder (PH) to carry out its operations in a safe, environmentally sound manner in line with good oil field practices so as not to hamper the operations of the gas Producer and cause damage to the environment.
The law mandates the PH to provide a comprehensive safety, health, and environmental policy to guide its operations which shall at a minimum be in accordance with the laws and regulations issued by the FGN. The Gas Sale Agreement empowers the FGN through the NUPRC to revoke the Permit of any defaulting PH.
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Rights Granted Under the Permit to Access Flare Gas
The FGN grants a Permit to Access Flare Gas to a Flare Gas Buyer on an exclusive basis from one or more flare sites as designated by the permit. ?The Permit grants the PH the right to way leaves, easements, right of way or route within the license, and lease of marginal field required for purposes granted under the Permit.
The PH is not liable to pay royalties to the FGN and shall either utilize the gas or dispose of it in the manner authorized by the FGN. Once the PH has paid the mandatory fees to the NUPRC for the grant of Permit to Access Flare Gas, Data Access Permit, data prying, data leasing (as may be from time to time required) and handling and guarantee fee to be paid to the Producer as prescribed in the respective Connection & Deliver-or-Pay Agreements, the NUPRC shall mandate the Producer to provide the said Flare Gas Data in respect of flare site specified under the Data Access Permit to the PH within 30 days of PH’s request. The Data Access Permit is valid until the Permit to Access Flare Gas expires.
The NUPRC may, however, revoke the Data Access Permit if PH fails to comply with the terms and conditions of the Permit or where PH intentionally provides inaccurate information or withholds information in connection with the issuance of the Data Access Permit.
Such revocation, surrender or lapse of rights shall not release the PH from any obligation arising from the regulations guiding it, a Flare Gas bid process, or any agreement in connection thereto.
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Compliance Requirements for Permit Holders
The NUPRC is empowered pursuant to sections 7(e) and 10(a)(ii) & (f) of the Petroleum Industry Act (PIA) 2021 to issue and enforce regulations and guidelines for the elimination of natural gas flaring, for the operations of upstream petroleum activities and to enforce regulations & guidelines issued by the defunct Department of Petroleum Resources (DPR) respectively.
The PH is prohibited from routine flaring or venting from any facility operated by it, and is during his operations under the Permits mandated to comply with the following:
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§? Maintain Flaring and Venting Logs
PH is mandated to maintain a daily log of each occurrence of flaring and venting within its facilities. This log is to be submitted to the NUPRC within 21 days following the end of each month. A PH who deliberately flares or vents disposed gas received from Producer on Producer’s behalf at its facility commits an offence and is liable to a fine as prescribed by the NUPRC. All logs are to be based on data retrieved from metering equipment installed by PH & Producer in their respective facilities and shall include the date, time, duration, rates, volumes, gas source or type for each flaring and venting. ?The format and manner of all logs shall be in conformity with the Metering & Data Collection Standards issued by the NUPRC. PH and Producer are to keep copies of logs in safe custody for no less than 36 months. Paragraph 18 Gas Flaring & Venting (Prevention of Waste & Pollution) Regulations 2022
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? §? Submit Flare Reports
PH holder is mandated to, in a timely manner prepare and submit PH Annual Reports and Project Flare Gas Accounting Report monthly pursuant to the Gas Flaring & Venting (Prevention of Waste & Pollution) Regulations 2022 & the Guidelines for Flare Gas Measurement, Data Management & Reporting Obligations.
?The report is to be submitted every 31st March of the previous year. The Annual Report shall contain reports of:
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?The Monthly Accounting Report shall contain:
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The Gas Flaring, Venting & Methane Emissions (Prevention of Waste & Pollution) Regulations 2023 mandates PH to include flare notation for each flare at the site in its reports, highlighting the flare efficiency, cold venting and records of annual test/observation and unit flares annually.
This Regulation further requires that PH’s report be accompanied by a ‘Certification of truth, Accuracy & Veracity’ signed by a responsible official of the NUPRC.
§? Install Metering Equipment
PH has a duty to install the flare & vent metering system for measuring natural gas in conformity with the Metering & Data Collection Standards issued by the NUPRC.
The metering system shall prior to the installation and commissioning be approved by the NUPRC and such installation and calibration shall be witnessed by a competent representative of the NUPRC. PH is to maintain a gas control, registering station funded, designed according to industry standards. This station incorporates the Delivery Point and is located within Producer’s property at the perimeter of the flare site, and forms part of the Producer’s Connection Assets. The station must register amongst others; Pressure, Temperature and Flow.
The following parameters are the determining factors in selecting the type of meter to be installed for the purpose of gas measurement and production data management:
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§? Keep Accurate & Accredited Gas Data
PH has an obligation to set and report data of Flare gas consumption and Flare gas volumes vented/flared in the project to a standard temperature of 60 degrees Fahrenheit and a pressure of 14.73 psi. PH is obligated to meet the NUPRC on an annual basis to reconcile and resolve accounted flare gas volumes.
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§? Cure Meter Malfunctioning
PH is allowed 90 days to repair any malfunctioning meter. PH is mandated to log in all incidences of meter malfunction and reflect this in its monthly reports to the NUPRC. NUPRC may instruct PH to shut down operations until PH meets these obligations.
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§? Follow Calibration Procedure
PH shall ensure all meters specified are calibrated in a timely manner. The NUPRC may at any time direct a PH to carry out non-routine calibration of specific meters. Production Meters, Flare Payment & Flare Gas Sales Fiscal Meters & Allocation Meters are to follow the calibration procedures defined in the ‘Procedure Guide for the Determination of Quality & Quantity of Petroleum & Petroleum Products’ and the ‘Procedure Guides for the Determination of Quantity & Quality of Gas & Gas Derivatives at Custody Transfer Points’ issued by the NUPRC.
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?Consequences for Non-Compliance
Failure of PH to carry out operations in a prudent manner as outlined above could have any or all of the following effects:
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General Manager
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