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UpstreamOnline: Nigeria flaring fines ‘to target operators’

By Upstream staff

Any penalty imposed on oil producers in Nigeria for gas flaring beyond a 2008 deadline should target only the operators and not their partners, Tony Chikwueke, the head of Nigeria’s oil regulator said today.

This means Western multinationals could face fines or other penalties for flaring while the Nigerian state oil company, which owns majority stakes in the joint ventures operated by the foreign companies and gets more of the profits, would be exempt.

“In my view we should have a system that penalises the actual operators and not their partners,” Tony Chukwueke, director of the Department of Petroleum Resources, told Reuters in an interview.

The government has yet to decide whether to penalise producers and how, Chukwueke said, adding that the World Bank was acting as a mediator in talks with the industry.

Investment in pipelines and processing needed to deal with gas associated with oil deposits is limited by very low domestic prices for gas and a lack of certainty over taxation and other regulations, foreign executives say, forcing companies to flare off the recovered gas.

Gas flares are a major source of carbon dioxide pollution. With an estimated annual volume of 23 billion cubic metres of gas flared, Nigeria is second only to Russia.

The government and the oil industry agreed a decade ago that gas flares should be eliminated by 2008 but the deadline is certain to be missed.

Anglo-Dutch supermajor Shell, which operates one big venture with the state oil company, has said it would miss the deadline because the government failed to provide funding for a joint project to install gas-gathering facilities.

Other joint venture operators include US supermajors ExxonMobil and Chevron, France’s Total and Italy’s Eni.

Companies have also said that violence in the Niger Delta, the oil-producing region, had limited access to some installations and slowed down efforts to limit flaring.

Chukwueke said: “The industry knew the context when it agreed the 2008 deadline. Of course you can keep giving excuses but now something needs to be done.”

He said options to penalise producers could include fines, restrictions on some of their installations or giving them a lower priority in filling Nigeria’ Opec oil supply quota. However, he declined to give details and said no decision had been taken on any form of penalty.

Joint venture operators say they will be forced to close oilfields if the penalty is too high.
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29 October 2007 21:45 GMT  | last updated: 29 October 2007 21:45 GMT 

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