– To be wholly financed by operators
Dublin, Ireland — The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), is set to introduce the Midstream and Downstream Environmental Remediation Fund, aimed at addressing the negative impact of hydrocarbon exploration on the environment.
In a draft of the regulations guiding its establishment, as required by the Petroleum Industry Act, the NMDPRA, also known as the Authority, disclosed that the fund is to be established for midstream and downstream petroleum operations carried out under licences, permits and authorisations administered by it.
The Authority, which will also be the administrator and manager of the fund, noted that the fund shall be financed from financial contributions from operators in the Nigerian midstream and downstream oil sectors.
On establishment of the fund, after consultations with stakeholders in the sector, NMDPRA stated operators in the midstream and downstream would be expected to pay a fixed rate of between $40 and $8, for areas lying between the onshore high risk and shallow water areas, respectively.
In addition, the companies would also be expected to pay between 0.0010% and 0.0001% of their annual midstream and downstream capital expenditure (CER); $0.00200 and $0.0001 from their average daily capacity for liquids in US dollar per barrel per day (LCR); and $0.000200 and $0.000010 of their average daily capacity for natural gas, in US dollar per 1,000 cubic feet per day (GCR).
It added that the Environmental Remediation Fund would be utilised to manage the environmental impact of midstream and downstream petroleum industry operations, as well as for the rehabilitation of impacted areas.
According to the NMDPRA, the funding shall only be used where a licencee fails to rehabilitate or manage, or is unable to undertake rehabilitation or management of any negative impact on the environment.
It said: “Where the Authority determines to apply the Fund to rehabilitate or manage the negative environmental impact relating to a particular licence, the Authority shall provide a written notice to the holder of such licence that it has defaulted to fulfil its obligation.
“Where the Authority determines to apply the Fund, the procurement of any goods, works or services required for the utilisation of the Fund shall be subject to the Public Procurement Act.”
The Authority maintained that the financial contribution shall be paid on or before 31st December of every calendar year for each licence, permit and authorisation including for the year in which a licence, permit and authorisation has been granted.
It added that the financial contribution shall be paid in the United States dollars, noting however, production delivered to local refineries may be paid for partly or wholly in naira at the applicable exchange rate as stipulated by the Central Bank of Nigeria (CBN).
Specifically, the NMDPRA listed the formula for determining the yearly contributions of the companies as “Fixed Contribution + (Midstream and Downstream Capital Expenditure x CER) + (CL x CLR) + (CG x CGR)”; where CER is the rate applicable to the capital expenditure, and CL is the average daily capacity of facilities under a licence during a year for which the financial contribution is payable, in barrels per day.
Furthermore, CLR is the rate in US dollar per barrel per day for average daily capacity for liquid hydrocarbons (CL); while CG is the average daily capacity of facilities under a licence during a year for which the financial contribution is payable, in thousand cubic feet (Mcf) per day; and CGR is the rate in US dollar per Mcf per day for average daily capacity for gaseous hydrocarbons (CG).
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