The flaring of AG in Nigeria has been in general and in principle prohibited for over twenty years
The current regulatory position is that flaring of AG in principle and generally has been illegal since 1984. However, the Minister has power to disapply the general prohibition in respect of a particular field or fields by issuing a certificate, if the minister is satisfied that utilization or re-injection of the produced gas is not appropriate or feasible in that field(s).
This regulatory position has been reached in four distinct steps:
We outline in this section the legislative history in this regard.
The primary and framework legislation governing oil and gas activities in Nigeria is the Petroleum Act. Under section section 9(1)(b)(iii) of that Act, the Minister has the power to make regulations providing for matters relating to licences, including prevention of pollution of the atmosphere.
Under the Petroleum (Drilling and Production) Regulations 1969, made under that Act, Regulation [42] provides that:
"not later than five years after the commencement of production from the relevant area, the licensee or lessee shall submit to the minister, any feasibility study, programme or proposals that he may have for the utilization of any natural gas, whether associated with oil or not, which has been discovered in the relevant area".
This provision was strengthened by the Associated Gas Reinjection Act, 1979. Section 2(1) of that Act provides:
"Not later than 1st October, 1980, every company producing oil and gas in Nigeria shall submit to the minister, detailed programmes and plans for either-
(a) the implementation of programmes relating to the re-injection of all produced associated gas; or
(b) schemes for viable utilization of all produced associated gas."
Section 3 of the same Act provided as follows:
"(1) Subject to subsection 2 of this section, no company engaged in the production of oil or gas shall after 1st January, 1984 flare gas produced in association with oil without the permission in writing of the Minister.
(2) Where the Minister is satisfied after 1st January 1984 that utilization or re-injection of the produced gas is not appropriate or feasible in a particular field or fields he may issue a certificate in that respect to a company engaged in the production of oil or gas-
(a) specifying such terms and conditions as he may at his discretion choose to impose, for the continued flaring of gas in the particular field or fields; or
(b) permitting the company to continue to flare gas in the particular field or fields if the company pays such sum as the Minister may from time to time prescribe for every 28.317 standard cubic metres (SCM) of gas flared: provided that any payment due under this paragraph shall be made in the same manner and be subject to the same procedure as for the payment of royalties to the Federal Government by companies engaged in the production of oil."
With effect from January 1985, the Associated Gas Re-injection (Continued Flaring of Gas) Regulations 1984 provided that:
" 1...the issuance of a certificate by the Minister under section 3 (2) of the Associated Gas Re-Injection Act, for the continued flaring of gas in a particular field or fields, shall be subject to any one or more of the following conditions, that is -
(a) where more than seventy-five per cent of the produced gas is effectively utilized or conserved;
(b) where the produced gas contains more than fifteen per cent impurities, such as N2, H2S, CO2, etc. which render the gas unsuitable for industrial purposes;
(c) where an on-going utilization programme is interrupted by equipment failure: provided that such failures are not considered too frequent by the Minister and that the period of any one interruption is not more than three months;
(d) where the ratio of the volume of gas produced per day to the distance of the field from the nearest gas line or possible utilization point is less than 50,000 SCF/KM: Provided that the Gas to Oil ratio of the field is less than 3,500 SCF/bbl, and that it is not technically advisable to re-inject the gas in that field;
(e) where the Minister, in appropriate cases as he may deem fit, orders the production of oil from a field that does not satisfy any of the conditions specified in these Regulations.
2. The Minister may, from time to time, review, amend, alter, add to or delete any provision of these Regulations as he may deem fit."
It should be noted that the above Regulations apply to ministerial certificates to permit flaring, regardless of whether a payment is made under section 3(2) of the 1984 Act.
To date, despite requests by ERA, neither the Big 5 companies nor the NNPC have disclosed whether any such Ministerial certificates have been issued, nor have they disclosed such certificates for their lawfulness to be assessed. The current position, as far as the public is concerned, is therefore that the lawfulness of the continued flaring has not been demonstrated.
Under the regulations - quite apart from illegalities based on human rights legislation (see section 8), and quite apart from the lawfulness of the Minister determining a generic 'flares out date' when the regulations have prohibited the practice in general for the last 20 years - there are, broadly, many possible bases upon which continued flaring may be illegal. For example:
In other words, even if a ministerial certificate has been issued, and even if payments are being made by the companies to continue to flare, flaring may still be illegal under the regulations. Until, in particular, the ministerial certificates have been disclosed, along with the information on which their issuance was based, the public is not able to satisfy itself that the regulations have been complied with. Given the failure of the companies and the NNPC to disclose the certificates, regulatory compliance has not been demonstrated and it is reasonable for the public to assume, without further information, that it cannot be demonstrated.
It is worth noting that there seems to be widespread agreement that the payments made by the companies to continue to flare have not been effective, and are tiny compared to the loss of revenue to Nigeria.
For example, in the First National Communication to the UNFCCC, the Federal Ministry of the Environment states:[ 81 ]
"There has been various attempts by the government to reduce gas flaring in the past, including introduction of penalties for the amount of gas flared by the producing companies. These have had only little effects."
And here is what the World Bank says about these payments:[ 82 ]
"In accordance with the Associated Gas Reinjection Act 1979, a fee is charged for flaring. This was first set at 0.50 Naira per million cubic feet (mcf) but effective January 1998 is 10 Naira per mcf, which at November 2003 exchange rates is equivalent to US$0.076 per mcf. This sum is payable in the same way as royalty - in foreign currency into the designated foreign account into which royalties are paid. It is worthwhile noting that in recent years oil companies in Nigeria have been charged a total of between 20 million and 50 million Naira (or US$150,000-370,000) annually for flaring associated gas. However, this has to be seen in the overall context of gas flared. A recent study carried out for the Bureau of Public Enterprises of Nigeria estimated that each year the country loses between US$500 million and US$2.5 billion to gas flaring."
Alongside the gas flaring regulations, section 2(2) of the Environmental Impact Assessment Act (Decree No. 86 of 1992) requires an environmental impact assessment (EIA) to be carried out:
"where the extent, nature or location of a proposed project or activity is such that it is likely to significantly affect the environment."
An EIA is compulsory in certain cases including oil and gas fields development and construction of oil refineries, some pipelines, and processing and storage facilities. The Federal Environmental Protection Agency is the competent authority for EIA purposes, apparently in conjunction with the Ministry of Petroleum Resources which has a clear and unacceptable conflict of interest.
According to the World Bank:
"The issue of atmospheric emissions must be addressed in the EIA prepared in support of the overall production plan. Standards for gaseous emissions from E&P activities are prescribed by the Effluent Limitation Regulations 1991. In summary, the maximum natural gas emission levels for upstream operations are set at 5,000 mg m-3, with a flaring emission limit of 5 mg/m3 hydrocarbons. Other operational restrictions are included in guidelines."
The World Bank has made the following comments on the relationship between the gas flaring regulations and EIA requirements:
"With the implementation of Decree No. 86 of 1992, EIAs have become an integral part of the planning process and are mandatory for the development of oil and gas fields. Permits to flare are, therefore, now granted in the context of EIA procedures, which are overseen by the Federal Environmental Protection Agency (FEPA) and the DPR. FEPA's EIA Guidelines for Exploration and Production (E & P) Projects 1994 state that mitigating measures to preserve air quality must specifically include the minimization of venting during production. In effect, petroleum operators are subject to two sets of regulatory provisions, with no clear precedence of one over the other having been established. Jurisdictional conflicts between FEPA and the Environmental Branch of the Department of Petroleum Resources are currently being addressed. The DPR's Environmental Branch now operates in conjunction with FEPA and it is understood that FEPA has played an active role in the review of the draft Environmental Guidelines for the Petroleum Industry. FEPA and DPR have the right to carry out inspections of industrial installations where reasonable grounds exist for believing that environmental degradation is taking place. Furthermore, FEPA and DPR are the competent authorities with regard to managing the EIA procedure."
No confidence in the enforcement of gas flaring regulation and in the adequacy of EIA procedures will be possible for as long as the Ministry of Petroleum Resources continues its dual roles.
[ 81 ] Section 3.2.1, page 41, available here.
[ 82 ] Global Gas Flaring Reduction Initiative: Report No.3: Regulation of Associated Gas Flaring and Venting - a Global Overview and Lessons (World Bank, March 2004), page 64. Accessible from here: http://www.ifc.org/ogc/global_gas.htm.
Executive Summary | Introduction | Section 2 | Section 3 | Section 4 | Section 5 | Section 6 | Section 7 | Section 8 | Section 9 | Conclusions