UCLBS News

December 3, 2020

Associated Gas Framework Agreement (Agfa)

Filed under: Uncategorized — Administrator @ 8:58 am

Separate oil and gas regimeThe plant provides for a new fiscal framework separating oil and gas. For the most part, gas projects are developed on the basis of their profitability and are not subordinated or consolidated to the taxation of oil. In 1991, the Framework Agreement on Associated Gas (AGFA) was developed, which provided tax incentives to improve the efficiency of gas use projects to encourage the implementation of gas use projects. This agreement allowed the IOC to offset the cost of capital from gas projects on oil revenues. This agreement has encouraged the development of many gas projects, including most of the projects mentioned above. Prior to the AGFA regime, gas investments were not considered attractive by IOCs because they required much more resources and products had a lower market value than crude oil. The average demand for gas in Nigeria is estimated at about 600 millimetres cfpd. According to a recent study, average domestic gas demand could reach 1,900 millimetres cfpd in 2010 and more than 4,800 millimetres cfpd by 2020. Existing natural gas laws and regulations include: — Decree 51 of 1969 on oil drilling and production, Section 42, provides that the licensee or taker submits to the delegate (in this case the Minister) any feasibility study, program or proposal for the use of natural gas no later than five years after the start of natural gas production; whether or not it is related to the oil discovered in the region. There are no punitive clauses in the regulation. This may explain the inability of operators to comply with the provisions of the decree. — The 1973 Oil Amendment Order provided that the federal government collects free natural gas produced by the licensee or purchaser of crude oil to burn or royalty. Thus, burnt gases for which no project has been scheduled by the licensee or leaseholder at the Department of Petroleum Resources (DPR) can be taken away without payment to the producer, for use by interested parties authorized by the DPR.

It is therefore necessary for the DPR to be informed of plans to use the company`s ag once they are consolidated. — The 1979 Order on the Injection of Associated Gas requires producing companies to submit proposals for the use of AGs produced in their areas of exploitation and to stop burning gas from 1 January 1984, except with the express permission of the Minister of Petroleum Resources.

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