In keeping with its policy to decisively address the issue of gas flaring, the Federal Government of Nigeria (the “FGN”) has commenced the implementation of the Nigerian Gas Flare Commercialization Programme (“NGFCP”) by inviting interested parties to participate in the first bid round for flare gas sites.
It will be recalled that the FGN provided a legal framework for the NGFCP through the Flare Gas (Prevention of Waste and Pollution) Regulations, 2018 (the “Regulations”). By the provisions of the Regulations, the Minister of Petroleum Resources may authorize a “Qualified Applicant” selected through a competitive bid process to take flare gas on behalf of the FGN at any specified flare site. The “Qualified Applicant” is defined by the Regulation as a bidder who is deemed qualified following submission of its response to a request for qualifications in accordance with tender documentation and who intends to utilize flare gas for its own use or for on-sale to third party offtakers.
Consistent with the requirement of the Regulations, the FGN has now invited interested parties to register and apply for the issuance of the Request for Qualification (“RfQ”) package which will lead to the submission of Statements of Qualification (“SoQs”) by the interested parties. The closing date for submissions of the SoQs is 20 January 2019.
As part of the qualification criteria, interested parties are required to establish their technical and commercial capacity and also demonstrate their project development experience and proposed proven technology to be deployed. Interested parties that are deemed to be technically and financially qualified will receive a request for proposal to bid for the flare sites.
In order to ensure that the bid process is commercially driven, bidders have flexibility to choose which flare site(s) to bid for, determine the gas price, their end-use market or gas product and the technology to be deployed. Please click on this link (http://www.acas-law.com/storage/app/public/publication/Newsletter%20on%20the%20Flare%20Gas%20(Prevention%20of%20Waste%20and%20Pollution)%20Regulation%202018%20._.pdf) to read our newsletter summarizing the bid process as contained in the Regulations.
Following submission of bids and evaluation of the same by the FGN, preferred bidders will be announced before the end of the third quarter of 2019. As provided in the Regulations, preferred bidders granted flare gas permits will also be required to enter into gas supply agreements with the FGN. In addition, a connection agreement and a deliver or pay agreement will be executed between preferred bidders and relevant upstream producers.
While the prompt commencement of the first bid round for flare gas site by the FGN is no doubt a laudable move, the FGN should aim to effectively and efficiently coordinate the same in order to ensure investors’ effective participation in the NGFCP, the resulting reduction of gas flaring and the ultimate development of the gas sector.
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