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Reuters: Nigeria threatens stiff penalties for gas flaring

Tue 27 Nov 2007, 17:49 GMT
By Estelle Shirbon

ABUJA, Nov 27 (Reuters) – Nigeria’s oil industry regulator threatened on Tuesday to impose hefty fines and other penalties on firms that continue to burn off gas beyond a 2008 deadline.

Oil companies in Nigeria flare about 2.5 billion cubic feet per day of gas associated with the extraction of crude because there is no infrastructure to make use of it. Only Russia flares more gas than Nigeria.

Gas flares burning day and night are a health hazard to nearby communities and contribute to global warming, environmentalists say. The Nigerian government also wants to end flaring because it is a waste of a valuable resource.

Government and the oil industry agreed in 1998 to end flaring by 2008, but at least one of the major producers, Royal Dutch Shell , has said it would miss the deadline.

Billy Agha, head of gas at the Department of Petroleum Resources (DPR), said the regulator was seeking approval from the executive to impose meaningful fines for flaring beyond the deadline or to withdraw oilfields from their operators.

“The law gives me teeth to bite and I am going to bite you,” he said in a presentation at a gas industry conference.

“There will be no excuse whatsoever for deadline extension.”

Nigerian officials have made conflicting statements about whether the deadline was at the start or at the end of 2008.

The DPR usually speaks of January, but President Umaru Yar’Adua said in a speech to the same gas conference on Monday that the deadline was December. The minister of state for gas, Emmanuel Odusina, told the conference it was not clear to him if penalties were supposed to start in January or December.

CASH CALL

Oil majors Shell, Chevron , ExxonMobil , Total and Eni operate joint ventures with the Nigerian state oil company. The firms and the government are supposed to jointly fund investment in the industry through a system called the joint venture cash call.

The companies blame the government for delays in eliminating flares, arguing that it has failed to provide its share of the cash call funding needed to build gas gathering plants and pipelines that would allow them to make use of the gas.

Agha disputed this. He accused the companies of making use of cash call money to invest in new projects to extract gas separately from crude instead of solving the flaring problem.

Yar’Adua said on Monday that 36 percent of Nigeria’s gas production was flared, compared with 100 percent a few years ago. But Agha said this was simply a reflection of the fact that overall gas extraction had increased thanks to new projects not associated with crude, while flaring at oilfields was stable.

He said about 80 percent of gas associated with the extraction of crude was being flared and this had not changed significantly for two decades despite a series of pledges by government and the industry to reduce flaring.

Agha did not give details of how the proposed fines for flaring would work, but he said it would be cheaper for companies to shut down an oilfield rather than continue flaring and pay the fines.

He said another possible penalty would be to withraw fields where flaring occurs from the companies.

Some in the oil industry argue that Nigeria is unlikely to carry out such threats because it would not be in its interest to significantly reduce oil production, its economic lifeline.

Nigerian officials respond that oil production capacity is growing but is constrained by the OPEC quota. Thus if onshore fields that practice flaring are shut down, production could be ramped up at offshore fields to make up for the shortfall. (Editing by James Jukwey)

© Reuters 2007. All Rights Reserved.

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