Gas Flares Over Deadline: Fed Closing Oil Wells

The Federal Government has said that it is ready to shut in oil wells and lose revenue if that was what would be required to achieve the 2008 gas flares out deadline.

The Deputy Director/Head of Gas, Department of Petroleum Resources, Mr. Billy Agha, stated this at the second quarterly business forum of the Nigeria Gas Association in Abuja.

A document obtained by our correspondent on Sunday quoted Agha as saying that shutting in the wells would not amount to revenue loss, as the country would, instead, be conserving revenue.

The oil producing companies argued that shutting in the oil wells, which flared gas so as to meet the 2008 deadline, will cut Nigeria ’s production by about 870,000 barrels of oil per day, amounting to a revenue loss of $12bn at the price of $40 per barrel.

But Agha, who bemoaned the value of the gas being flared as well as the wider effect on the environment, economy and social consequences, described the oil production, which would be cut as deferred income.

He added that the nation’s revenue profile might not necessarily be negatively affected by the shut in because the cost of crude oil in the international market was high, hence the country would still derive significant revenue.

The DPR boss recalled that Nigeria started pursuing the gas flares out policy since 1993 through the Associated Gas Re-injection Act, which required oil companies to put associated gas to commercial use or re-inject it with the aim of achieving flare down by 1984.

He regretted that the companies refused to comply even after government amended the Act, which levied a volume based penalty on gas flaring as the companies gladly paid the penalties.

Reacting to the proposition by the major oil companies for the flare out deadline to be extended to 2012, Agha warned that the companies would still not respect the deadline.