Analysis of Fiscal Provisions of the Pia Related to Associated Gas Utilization and Flaring Penalties in Nigeria

Nanna Rimtip, Hezekiah Agogo

Abstract


Nigeria possesses the largest proven natural gas reserves in Africa, yet the persistent flaring of associated gas continues to undermine its energy transition, fiscal stability, and environmental commitments. This article critically analyses the fiscal provisions of the Petroleum Industry Act (PIA) 2021 related to associated gas utilization and flaring penalties, using a techno-fiscal framework supported by empirical data. Drawing from production statistics, profitability models, and comparative policy analysis, the study evaluates the economic viability of gas utilization projects, explores the fiscal incentives embedded in the PIA, and assesses the effectiveness of penalties for flaring. The analysis reveals that the PIA introduces a more attractive investment climate for gas projects through a unified tax regime, reduced royalty rates for domestic gas utilization, and specific incentives like tax holidays and capital allowances. Results from financial simulations reveal that the profitability of associated gas projects significantly improves under the PIA regime, with Internal Rates of Return (IRR) increasing from 26.25% to 43.02% as gas prices rise from $2.50 to $3.60/Mscf, and Net Present Values (NPVs) for both government and contractors showing positive growth. However, despite these improvements, regulatory ambiguities, infrastructure deficits, and enforcement weaknesses still hinder optimal implementation. The article concludes that a harmonized fiscal regime—coupled with transparent administration and investment in gas infrastructure—is crucial for realizing Nigeria’s goal of achieving zero routine flaring by 2030 and sustainable economic diversification through gas monetization. 


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