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IOCs Reluctant to Sell Flare Gas to Third Parties – FG

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  • IOCs Reluctant to Sell Flare Gas to Third Parties – FG

International oil companies that are involved in the flaring of gas in Nigeria are often reluctant to sell the commodity to third parties, the Federal Government has said.

It was gathered that the oil producers preferred to pay the tiny cost incurred in gas flaring, rather than to deal with a third-party investor that might be interested in off-taking the commodity.

Flare gas is essentially associated gas that is produced with oil, as they both come out of the ground. But flare gas pollutes the environment, causing sickness and other environmental hazards, particularly in locations where these IOCs operate, like in the Niger Delta.

“Although the Federal Government owns the flare gas and has the power to take it, oil producers have, up till now, treated flare gas as if it is their own, to sell or to flare as they choose,” the Programme Manager, Nigeria Gas Flare Commercialisation Programme, Justice Derefaka, said.

In a copy of the presentation he made at the 3rd Lawyers in Oil and Gas conference in Lagos, Derefaka explained that IOCs were reluctant to sell flare gas because the cost of gas flaring to a producer had been tiny and tax deductible.

The presentation, which was entitled, ‘The Impact of Government Regulatory Policy and the Road to Sustainable Economic Growth Through The Lens of the NGFCP,’ was made available to our correspondent in Abuja on Wednesday.

The programme manager for the NGFCP said, “Typically producers have been reluctant to sell to third parties, preferring to make the miniscule flare payment than have the operational hassles of dealing with third parties, the poor technical gas evacuation system and the poor gas payment record.

“The result is that the low hanging fruit has been fully picked for producers’ own projects, and the higher hanging fruit, i.e. the 178 flare sites left, have been ignored.”

Derefaka, however, noted that “under the new regulations approved in 2018, the Federal Government has asserted its right to take gas free at the flare and will auction it off to third parties. Those third parties will have surety of title from the Federal Government. Under the regulations, flare payments have been increased substantially.”

Historically, associated gas is regarded as a waste product, as the commodity was separated from the oil and flared in situ.

Meanwhile oil was piped to local refineries or for export and progressively associated gas has been captured or harnessed and used for power generation; in industry for fertiliser, methanol and petrochemical plants; and for production of liquefied petroleum gas (and liquefied natural gas.

However, flare capture is expensive, therefore it is often only done at production sites where there are economies of scale

Derefaka noted that there had been no teeth in the flare payment structure that was set in 1998 at N10/million standard cubic feet, which was approximately $0.50 in 1998

He observed that currently, this flare payment sum had been eroded by inflation, as “the value of that flare payment today is approximately $0.028/mscf.”

He added, “This has equated to a total of about $8m in flare payments for 2017. The moral hazard is that these are tax-deductible which, at 85 per cent tax rate, means that the Federal Government received net $1.2m (gross export revenue of crude oil in 2017 was $33bn).

“This net figure expressed as an average cost per barrel of crude oil produced is less than $0.002 (one fifth of a US cent).”

But Derefaka noted that the 2018 regulations required a higher flare payment, expressed in $/mscf, adding that a legislative change was being developed to make the flare payment non-tax-deductible.

“The Flare Gas (Prevention of Waste and Pollution) Regulations 2018 has been approved by Mr. President and gazetted to underpin the implementation of the NGFCP. It was approved on July 5, 2018, and gazetted on 9th July, 2018,” he stated.

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.

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Tony Elumelu Acquires Shell, Total, ENI Stakes in OML 17

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Tony Elumelu Acquires Shell, Total, ENI Stakes in OML 17

Tony Elumelu owned Heir Holdings Limited and its related company Transnational Corporation of Nigeria Plc on Friday announced it has completed the purchase of 45 percent stake in Oil Mining Lease (OML 17) through TNOG Oil and Gas Limited.

The acquisition includes all assets of Shell Petroleum Development Company of Nigeria Limited (30 Percent), Total E&P Nigeria Ltd (10 percent) and ENI (five percent) — in the lease.

It was further stated that TNOG Oil and Gas Limited will also have the sole right to operate OML 17.

The field presently has a production capacity of 27,000 barrels per day. Also, there are estimated 2P reserves (proven and probable) of 1.2 billion barrels and an additional one billion barrels in possible reserves — all of oil equivalent.

A consortium of global and regional banks and investors provided a financing component of $1.1 billion for the largest oil and gas financing in Africa in over a decade.

In a statement released on Friday, Shell said the completion was after all the necessary approvals have were received from authorities.

“A total of $453m was paid at completion with the balance to be paid over an agreed period. SPDC will retain its interest in the Port Harcourt Industrial and Residential Areas, which fall within the lease area,” the SPDC said.

Speaking after the completion of the deal, Elumelu said “We have a very clear vision: creating Africa’s first integrated energy multinational, a global quality business, uniquely focused on Africa and Africa’s energy needs. The acquisition of such a high-quality asset, with significant potential for further growth, is a strong statement of our confidence in Nigeria, the Nigerian oil and gas sector and a tribute to the extremely high-quality management team that we have assembled.

“As a Nigerian, and more particularly an indigene of the Niger Delta region, I understand well our responsibilities that come with stewardship of the asset, our engagement with communities and the strategic importance of the oil and gas sector in Nigeria. We see significant benefits from integrating our production, with our ability to power Nigeria, through Transcorp, and deliver value across the energy value chain.

“I would like to thank Shell, Total and ENI, for the professionalism of the process, the Federal Government of Nigeria, the Ministry of Petroleum Resources, and the NNPC for the confidence they have placed in us.”

Tony Elumelu is the Chairman of Heirs Holdings Limited, Transcorp and United Bank for Africa Plc.

Also, read Transcorp Plc Acquires FGN’s 100% Equity in Afam Power for N105 Billion

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Exporters Say CBN Pre-export Requirements is Frustrating Export of Goods

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Exporters Say CBN Pre-export Requirements is Frustrating Export of Goods

Exporters have said the recently introduced pre-export requirements by the Central Bank of Nigeria is creating unnecessary bottlenecks for exporters and the movement of goods out of the country.

Exporters, who spoke under the aegis of the Network of Practicing Non-oil Exporters of Nigeria (NPNEN), said the electronic Nigeria Export Proceed Form now required by financial institutions from exporters had come with so many challenges.

Ahmed Rabiu, the President, NPNEN, explained that the new policy had several requirements that often led to delays and loss of income on the part of exporters.

He said, “We acknowledge the CBN’s desire to ensure that all exports out of Nigeria are documented in order to ensure that the proceeds of such exports are repatriated.

“However, the reality on the field shows that the process is causing undue delays and consequently, encouraging corruption.

According to them, in the new pre-export requirements, the Central Bank of Nigeria wants an export transaction to be initiated through eNXP processing on the trade monitoring system.

After which exporters are expected to have a pre-shipment inspection agent, the Nigeria Customs Service and other designated government agencies carry out their pre-export inspections.

The exporters said the pre-shipment inspection agent was expected to issue a clean Certificate of Inspection while Customs would issue the Single Good Declaration. All these they said takes time and delay goods from leaving the country on time.

Pointing to a recent report, they said about N868 billion worth of goods bound for export were stuck at the ports due to the new policy.

Speaking further Rabiu said, “For example, for the PIA to issue the CCI, the exporter is required to upload a certificate of origin as one of the supporting documents for the eNXP.

“The PIA is also required to upload the CCI to the TRMS(M) and until this is done, the Customs service will not issue the Single Good Declaration.”

He added, “After issuing the SGD, the customs is further required to upload it into the TRMS before the goods are allowed to be gated into the port and loaded on the vessel by the shipping line.

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Ardova Plc in Talks to Acquire Enyo Retail and Supply Limited

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Ardova Plc in Talks to Acquire Enyo Retail and Supply Limited

Ardova Plc, Nigeria’s leading integrated energy company, has commenced discussions to acquire Enyo Retail and Supply Limited.

According to the statement issued and signed by Oladehinde Nelson-Cole, Ag. Company Secretary/General Counsel, Ardova Plc, Enyo is one of the newest and fastest-growing retail and supply companies in the downstream sector.

It stated, “This announcement is pursuant to the acceptance in principle of AP’s offer and acquisition framework by the shareholders of Enyo, it is subject to the successful completion of a due diligence exercise and the receipt of all required regulatory approvals.”

“This announcement is pursuant to the acceptance in principle of AP’s offer and acquisition framework by the shareholders of Enyo, it is subject to the successful completion of a due diligence exercise and the receipt of all required regulatory approvals.

Speaking on the yet to be completed deal, Mr. Olumide Adeosun, CEO, Ardova Plc, said upon completion, Ardova will retain the Enyo branded stations which will operate side by side with the Ardova brand while simultaneously leveraging on the strengths of Ardova and its group companies.

He added that the two companies are determined to conclude the deal by the end of Q1 2021.

Enyo presently operates over 90 stations across the nation and attends to over 100,000 retail customers on a daily basis.

Ardova Plc and Enyo Retail & Supply Limited promised to furnish stakeholders with more information on the progress of the deal.

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