MEMR Regulation No. 30 of 2021 on Procedures for Determining the Allocation, Utilization and Pricing of Flare Gas

In 2021, the Ministry of Energy and Mineral Resources (“MEMR”) issued MEMR Regulation No. 30 of 2021 on Procedures for Determining the Allocation, Utilization and Pricing of Flare Gas, which establishes certain standards for the pricing and utilization of gas that would otherwise be flared (hereinafter “flare gas”). The Regulation stipulates that flare gas can be bought by business entities that hold a processing licence or a trading licence (Article 2). The Regulation further specifies that flare gas can be utilized for various purposes, including electricity supply, industrial or household use through pipelines, compressed natural gas, liquefied petroleum gas, dimethyl ether, and other purposes according to the gas’ composition (Article 3). 

 

Under the Regulation, an oil and gas operator that has signed a production sharing contract with the Special Task Force for Upstream Oil and Gas Activities (“SKK Migas”) can submit an application to SKK Migas to receive authorization to sell gas that would otherwise be flared (Article 3). The application must contain information regarding the proposal to sell the gas, including the source of the gas, the estimated amount of gas that will be delivered, and the proposed price. SKK Migas then transfers the application to the MEMR with its recommendations. Based on these recommendations, the MEMR approves or denies the application (Article 4). If the MEMR approves the application, the oil and gas operator must proceed to signing a flare gas purchase agreement with the flare gas buyer (Article 5). The flare gas buyer (e.g., a processor) is required to utilize the gas within a period of 3 months following approval of the application. 

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