Abstract
Over the past two decades Nigeria has made significant progress in the production and utilisation of its gas resources. The development of Nigeria LNG (NLNG) brought about a sharp rise in annual gas production from about 1.5 TCF in 1999 to 2.8 TCF in 2010. The domestic utilisation of gas also got a boost with the approval of the Nigerian Gas Master Plan by government and subsequent issuance of the National Gas Supply and Pricing Regulations in 2008. Over the same period gas flaring has reduced significantly from about 52% of produced gas in the early 2000s to about 10% in 2016. Prior to the development of NLNG, as much 70% to 90% of the gas in Nigeria was flared.
As part of efforts by government to develop gas resources and increase gas utilisation, a series of amendments were made to the Petroleum Act 1969, including different flare-down initiatives as well as new regulations and commercial framework. Fiscal incentives were also provided specifically to increase gas utilisation in the domestic market.
This paper will review the impact of the fiscal incentives on the domestic gas market in Nigeria with a focus on the involvement of the indigenous upstream oil and gas companies. The level of investments in domestic gas utilisation projects by indigenous companies will be analysed. The paper will further explore the level of gas flaring among the different upstream oil and gas companies operating in Nigeria. Comparisons will be made between the different companies under different fiscal arrangements, namely IOCs with JV and PSC arrangements, indigenous companies with sole risk and JV contracts and indigenous marginal field operators. We will review the effectiveness of fiscal incentives in increasing domestic gas utilisation and lessons on areas of improvement for stakeholders.
