In 1991, the Associated Gas Agreement (AGFA) was finaled, providing tax incentives to improve the profitability of the gas use project in order to promote the implementation of gas use projects. This agreement allowed CICs to offset the cost of capital of gas projects from oil revenues. This agreement has fostered the development of many gas projects, including most of the above-mentioned projects. Prior to the AGFA regime, investments in gas were not considered attractive by the KICs, as they required much more funds and the products have a lower market value than crude oil. Separate tax regime for oil and gasThe central plant provides a new tax framework that separates oil from gas. For the most part, gas projects are developed on the basis of their profitability and are not dependent on oil taxation or are not consolidated. Routine gas pumping has been a problem since the drilling of the first oil drilling in 1956. This problem has long resisted in Nigeria due to the lack of enabling laws and fiscal conditions for the marketing of natural gas. Although the Petroleum Act of 1962 and Order in Council 51 required all licensees to submit a feasibility study for the use of natural gas, the majority of international oil companies (IOCs) did not implement a gas use project because it was not economically attractive. The first gas improvement programmes focused on the recovery of low- and medium-pressure gases from hydrocarbon separators that had hitherto been set on fire.
Until 1999, when Nigeria`s De Liquefied Natural Gas (NLNG) plant was commissioned, more than 2.8 Bscfd, or 74% of the associated gas produced as part of oil exploitation. The guidelines essentially provide an operational framework for the implementation of flare gas regulations, which were previously adopted to promote the monetisation of gas from flares, while limiting the adverse environmental effects resulting from these fires and gas debutters. Currently, the Associated Gas Framework Agreement (“AGFA”) allows for the recovery of costs from oil revenues through cross-subsidization of oil projects to gas projects. This new tax framework aims to eliminate distortions within the AGFA by defining a corrective and optimal tax system, with the word “FRGA”. While the FRGA is good for the development of the gas sector and the oil industry as a whole, we find that the AGFA (which it wants to repeal) is codified in sections 11 and 12 of the Petroleum Profits Tax Act. Therefore, the FRGA created by NPP will only be able to come into force in the application of the separate oil and gas taxation regimes after the entry into force of the PIRB or other FRGA implementing laws. The recently published guidelines have jointly and more clearly defined the framework for the marketing of flare gas in Nigeria. In addition, these guidelines reflect FGN`s commitment to reducing the environmental and social impact of the gas flare-up and developing the gas market in Nigeria, facilitating access to new economic opportunities that may result from the registration of gas flares.
For now, the guidelines greatly expand the relevant provisions of existing laws and regulations, such as the Associated Gas Re-Injection Act, the Petroleum Act, the Petroleum Refining Regulations and the recently published Flare Gas Regulations. The Department of Petroleum Resources (“DPR”) has set, in accordance with its powers under flare`s gas regulations, data logging fees, data rental and the granting of permission to access torch gas through those directives. It could therefore be assumed that the Guidelines have introduced an important complement to the existing legal framework for torch gas The Guidelines for the Associated Project for the Use of Gas by Producers (“Guidelines for the Use of Companion Gas”) set the framework for: efforts to market and use gas began in earnest with the promulgation of the 1991 “Associated Gas Framework Agreement”. . .