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FG to Introduce New Penalty for Gas Flaring

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  • FG to Introduce New Penalty for Gas Flaring

The Federal Government is considering the introduction of a new penalty for brown field sites, especially joint venture and service contracts, which contribute 88 per cent of the total associated gas flared in the country.

The new draft gas policy, produced by the Ministry of Petroleum Resources and made available to our correspondent, described the flaring of natural gas as one of the most egregious environmental and energy waste practices in the Nigerian petroleum industry.

The document said, “The current gas flare penalty of N10/Mscf (equivalent $0.03) of associated gas flared is too low, having been eroded in value over time, and is not acting as intended, as a disincentive. Consequently, the low penalty has made gas flaring a much cheaper option for operators compared to the alternatives of marketing or re-injection.”

It noted that while gas flaring levels had declined in recent years, it was still a prevailing practice in the petroleum industry, adding, “Billions of cubic meters of natural gas are flared annually at oil production locations resulting in atmospheric pollution severely affecting host communities.”

According to the gas policy, gas flaring affects the environment and human health, produces economic loss, deprives the government of tax revenues and trade opportunities, and deprives consumers of a clean and cheaper energy source.

It stated that a whole suite of anti-flaring legislation and initiatives had been introduced over the years to minimise gas flaring in Nigeria.

“Although Nigeria still flares a significant portion of its gross natural gas production (19 per cent of associated gas, 331sbcf in 2015), the amount of gas flared has significantly reduced in recent years. Its ranking has dropped from the second to fifth largest natural gas flaring country in the world (according to Cedigaz and OPEC).”

On gas flare-out targets, the document said the government planned to open an industry consultation mechanism as an important measure in ensuring flaring targets were feasible and regulations realistic.

According to the gas policy, the intention of government is to increase the gas flaring penalty to an appropriate level sufficient to de-incentivise the practice of gas flaring whilst introducing other measures to encourage efficient gas utilisation.

It said, “The government intends to 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, thereby ensuring that no gas flaring occurs during production of hydrocarbons, except in very special circumstances such as emergencies for operational reasons.”

It said for existing associated gas fields, brown field sites, the government would also consider other options to ensure significant gas flare reductions.

The policy said, “Operators of existing AG fields need to produce integrated gas flare reduction plans; they will then be expected to implement those plans.

“The government will consider a new sliding scale penalty to be introduced for existing brown field sites, especially for the JV and service contracts, which contribute 88 per cent of the total associated gas flared in the country.

“Existing AG fields need to start planning and investing in the utilisation of the associated gas to be supplied into the market, and to come up with economic plans for their development.”

The gas policy said the government would consider regulations to allow for open access to gas-gathering pipelines, to ensure that flared gas had access to gas gathering systems and gas processing facilities.

According to the document, if the proposed regulations do not prove enough, the government will consider further measures for effective and significant gas flare reductions.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

Electricity Consumers Get 611,231 Meters Under MAP Scheme

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Electricity Consumers Get 611,231 Meters Under MAP Scheme

A total of 611,231 meters have been deployed as at January 31, 2021 under the Meter Asset Provider initiative since its full operation despite the COVID-19 pandemic and other extraneous factors, the Nigerian Electricity Regulatory Commission has said.

NERC disclosed this in a consultation paper on the review of the MAP Regulations.

The proposed review of the MAP scheme is coming nearly four months after the Federal Government launched a new initiative called National Mass Metering Programme aimed at distributing six million meters to consumers free of charge.

“The existence of a huge metering gap and the need to ensure successful implementation of the MYTO 2020 Service-Based Tariff resulted in the approval of the NMMP, a policy of the Federal Government anchored on the provision of long-term low interest financing to the Discos,” NERC said.

The commission had in March 2018 approved the MAP Regulations with the aim of fast-tracking the closure of the metering gap in the sector through the engagement of third-party investors (called meter asset providers) for the financing, procurement, supply, installation and maintenance of meters.

It set a target of providing meters to all customers within three years, and directed the Discos and the approved MAPs to commence the rollout of meters not later than May 1, 2019.

But in February 2020, NERC said several constraints, including changes in fiscal policy and the limited availability of long-term funding, had led to limited success in meter rollout.

NERC, in the consultation paper, highlighted three proposed options for metering implementation going forward.

The first option is to allow the implementation of both the NMMP and MAP metering frameworks to run concurrently; the second is to continue with the current MAP framework with meters procured under the NMMP supplied only through MAPs (by being off-takers from the local manufacturers/assemblers).

The third option is to wind down the MAP framework and allow the Discos to procure meters directly from local manufacturers/assemblers (or as procured by the World Bank), and enter into new contracts for the installation and maintenance of such meters.

“Customers who choose not to wait to receive meters based on the deployment schedule of the NMMP shall continue to have the option of making upfront payments for meters which will be installed within a maximum period of 10 working days,” NERC said.

The regulator said such customers would be refunded by the Discos through energy credits, adding that there would be no option for meter acquisition through the payment of a monthly meter service charge.

“Where meters have already been deployed under the meter service charge option, Discos shall make one-off repayment to affected customers and associated MAPs. Such meters shall be recognised in the rate base of the Discos,” it added.

NERC urged stakeholders to provide comments, objections, and representations on the proposed amendments within 21 days of the publication of the consultation paper.

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Economy

Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

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Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

Nigeria is moving in the right direction economically but its movement is not fast, the United Nations stated on Thursday.

Deputy Secretary-General of the United Nations, Amina Mohammed, said this during a meeting at the headquarters of the Federal Ministry of Industry, Trade and Investment in Abuja.

She said the challenges in Nigeria were huge, its population large but described the country’s economy as great with lots of opportunities.

The UN scribe stated that after traveling by train and through various roads in the Northern parts of Nigeria, she discovered that the roads were motorable, although there were ongoing repairs on some of them.

Mohammed said, “This is a country that is diverse in nature, ethnicity, religious backgrounds and opportunities. But these are its strengths, not weaknesses.

“And I think the narrative for Nigeria has to change to one that is very much the reality.”

Speaking on her trips across parts of Nigeria, she said, “What I saw along the way is really a country that is growing, that is moving in the right direction economically. Is it fast enough? No. Is it in the right direction? Yes it is.

“And the challenges still remain with security, our social cohesion and social contract between government and the people. But I know that people are working on these issues.”

She said the UN recognised the reforms in Nigeria and other nations, adding that the common global agenda was the Sustainable Development Goals.

Mohammad commended Nigeria’s quick response to the COVID-19 pandemic, as she expressed hope that the arrival of vaccines would be the beginning of the end of COVID-19.

On his part, the Minister of Industry, Trade and Investment, Adeniyi Adebayo, told his guest that the Federal Government was working hard to make Nigeria the entrepreneurial hub of Africa.

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N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

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N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

Nigeria spent a total of N10.7tn on fuel subsidy in the last 10 years, the Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, has said.

Oyebanji, who was the guest speaker at the 18th Aret Adams Lecture on Thursday, said N750bn was spent on subsidy in 2019.

He highlighted the need for a transition to a market-driven environment through policy-backed legislative and commercial frameworks, enabling the sustainability of the downstream petroleum sector.

“Total deregulation is more than just the removal of price subsidies; it is aimed at improving business operations, increasing the investments in the oil and gas sector value chain, resulting in the growth in the nation’s downstream petroleum sector as a whole,” he said.

The managing director of 11 Plc (formerly Mobil Oil Nigeria Plc) said steps had been taken, “but larger and faster leaps are now required.”

According to him, deregulation requires the creation of a competitive market environment, and will guarantee the supply of products at commercial and market prices.

“It requires unrestricted and profitable investments in infrastructure, earning reasonable returns to investors. It requires a strong regulator to enable transparency and fair competition among players, and not to regulate prices,” Oyebanji said.

He noted that MOMAN had recently called for a national debate by stakeholders to share pragmatic and realistic initiatives to ease the impact of the subsidy removal on society – especially on the most vulnerable.

He said, “A shift from crude oil production to crude oil full value realisation through deliberate investment in domestic refining and refined products distribution, creates the opportunity to transform the dynamics of the downstream sector from one of ‘net importer’ to one of ‘net exporter’, spurring the growth of the Nigerian economy.

“Effective reforms and regulations are key drivers for the growth within the refining sector. Non-functional refineries cost Nigeria over $13bn in 2019. If the NNPC refineries were operating at optimal capacity, Nigeria would have imported only 40 per cent of what it consumed in 2019.”

Full deregulation of the downstream sector remains the most glaring boost to potential investors in this space, according to Oyebanji.

He said, “As crude oil prices will fluctuate depending on the prevailing exchange rates, it will be astute to trade in naira to avoid inevitable price swings.

“There needs to be a balance between ensuring the sustainable growth of the crude oil value chain (upstream through downstream) and providing value for the Nigerian consumer and the Nigerian economy.”

He said the philosophy should be for the government to put the legislative and commercial framework in place and let the market develop by itself.

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