President Muhammadu Buhari has directed the Nigerian Upstream Petroleum Regulatory Commission to immediately take over the regulation of all crude oil export terminals in Nigeria.
He also directed that the exercise of any regulatory role by the Nigerian Midstream and Downstream Petroleum Authority on any crude oil export terminal established prior to the effective date of the Petroleum Industry Act should cease immediately;
The President’s directive has effectively put to an end, the longstanding friction between the NUPRC and the NMDPRA over who has the power to regulate all crude oil export terminals in Nigeria.
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The directive from the President is coming after an exclusive report by THE WHISTLER, which revealed how the immediate past Minister of State for Petroleum Resources, Timipre Sylva undermined key provisions of the Petroleum Industry Act through two letters written to the regulatory agencies in the oil and gas sector.
The letters, according to a Report submitted by a Senate Ad-Hoc Committee to investigate oil lifting, theft and the impact on petroleum production and oil revenues led to serious friction between the two key government agencies saddled with the responsibilities of regulatory the oil and gas industry.
The two agencies are the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) saddled with the responsibility of regulating the midstream/downstream sector and the Nigerian Upstream Petroleum Regulatory Commission for the upstream sector of the oil and gas industry.
The Committee had during the site visits to the terminals discovered dual and conflicting regulatory presence of both the NUPRC and the NMDPRA.
The conflicting regulatory presence was outrightly against the spirit and letters of the Petroleum Industry Act, 2021 (PIA).
There are two provisions of the PIA 2021 which seem to be in apparent conflict on the same subject matter.
These are Sections 7(ee) and 32(i) which respectively empower the NUPRC and the NMDPRA to issue certificates of quality and quantity to exporters of crude oil, natural gas and petroleum products.
The PIA vests the regulatory oversight over all upstream operations and activities (including crude oil terminals whether integrated or otherwise), on the NUPRC.
This dual regulatory oversight has become a source of conflict and crises among members of staff of the two affected agencies.
The development had led to several complaints by oil and gas producers on the terminals; and also had a negative impact on the ease of doing business by the industry operators at the terminals.
While the PIA distinctively created two regulatory agencies for the oil and gas industry, it gave NUPRC the powers to regulate the upstream sector and the NMDPRA for the midstream and downstream sector.
In a bid to resolve the crisis caused by the conflicting roles between the two regulatory agencies, a Presidency source told THE WHISTLER that the President through a letter dated April 18, 2023 directed the immediate compliance with the resolution of the Senate that NUPRC become the sole and only regulatory entity to regulate and monitor the activities of all crude oil export terminals in Nigeria subsists in compliance with section 7(ee) of the PIA (2021).
The section reads, “The commission shall be responsible for the technical and commercial regulations of upstream petroleum operations and shall issue certificates of quality and quantity to exporters of crude oil, natural gas and petroleum products from integrated operations of crude oil export terminals established prior to the effective date and the commission shall have the power to monitor and regulate the operations of crude oil export terminals and responsibility of weights and measures at the crude oil export terminals shall cease from the effective date.”
The Presidency source also said that Buhari has also directed that the exercise of any regulatory role by the NMDPRA on any crude oil export terminal established prior to the effective date of the PIA should cease immediately.
The President, according to the source also directed the Minister of State for Petroleum Resources to ensure immediate compliance and report back within 14 days that the resolution must be adhered to by the NUPRC, NMDPRA, Nigerian National Petroleum Company Ltd, Ministry of Industry Trade and Investments, industry players and relevant MDAs.
The source said, “You will recall the regulatory friction that has been existing between NUPRC and NMDPRA on who has the powers to regulate the crude oil export terminals in Nigeria.
“This has led to various confusion among players in the oil and gas industry. In view of this development, the President has directed the immediate compliance with the resolution of the Senate that NUPRC become the sole and only regulatory entity to regulate and monitor the activities of all crude oil export terminals in Nigeria subsists in compliance with section 7 of the PIA (2021).
“The President has also directed that the exercise of any regulatory role by the NMDPRA on any crude oil export terminal established prior to the effective date of the PIA should cease immediately.
“He also directed the Honourable Minster of State for Petroleum Resources to ensure immediate compliance and report back within 14 days that the resolutions are being adhered to by the NUPRC, NMDPRA, NNPCL, FMITI, industry players and relevant MDAs.”
Sylva had in a letter dated July 7, 2022 addressed to the Chairman of the Oil Producers Trade Section admitted the dispute between the NUPRC and the NMDPRA with respect to the administration and regulation of Crude Oil and Gas Export Terminals arising from an apparent conflict in the provisions of the PIA 2021.
To resolve this inter-agency dispute, the Minister had issued a Legal Opinion dated 3rd February 2022 which delineated the Terminals to be respectively regulated by the agencies.
However, this has not resolved the issues between both agencies as they have resorted to issuing conflicting instructions and directives to their respective staff as well as industry operators.
This has created and heightened the uncertainty in the regulatory administrative roles in the Terminals and Gas Midstream sector of the Petroleum Industry.
The Minister said in the letter, “The creation of a dual regulatory structure was to ensure, among other things, that adequate focus was given to the midstream and downstream sectors of the Petroleum Industry to create a positive multiplier effect on the economy through licensing regimes that will create increased participation by Nigerians, gainful employment, and greater contribution to the GDP.
“This cannot be achieved if the roles and responsibilities which should ordinarily devolve to the NMDPRA are being undertaken by the NUPRC because of the lacuna created by the PIA 2021.
“There is clearly a need for legislative intervention to provide greater clarity on the roles of the respective agencies on this subject, and steps will be taken to achieve this outcome. Pending the legislative intervention, I am issuing the following directives in line with my powers under section 3(5), PIA 2021 to resolve this dispute:
“NUPRC shall provide regulatory oversight on integrated terminal facilities (FPSO) to the extent permitted by Section 7 (ee) and the industry’s definition of Upstream petroleum operations.
“NUPRC shall continue to determine Technical Allowable Rate to the operators as is the current practice and advise the NMDPRA accordingly as a n input for the purpose of processing export permit by NMDPRA.
“NUPRC shall provide royalty payment clearance to NMDPRA which is a prerequisite for grant of vessel clearance for loading crude oil at export terminals by NMDPRA.
“NMDPRA shall provide regulatory oversight for all land-based terminals, standalone terminals, gas terminals, pipelines, barging and trucking operations; and issue certificate of Quality and Quantity in line with Sections 32 (it), 125 la- f), 129, 132, 135 and 174 (1)d of the PIA 2021.”
“NUPRC and NMDPRA shall continue to effectively implement all provisions of the PIA 2021 in a collaborative manner, while urgent steps are taken to review and amend the PIA 2021 to address observed ambiguities and provide clarity on this subject. Neither NUPRC nor NMDPRA should take unilateral decisions on any area of the PIA 2021 that are still in contention.
“I shall appoint a technical team that includes an independent arbiter, NUPRC and NMDPRA, to determine what constitutes integrated facilities as contemplated in the PIA 2021.
“Until a contrary communication emanates from my Office, you are enjoined to kindly disregard any request from the agencies which is not in line with my directives above.”
To stop the regulatory conflict, the Senate Committee had recommended that Minister’s letter be jettisoned as the PIA takes precedence over administrative directives, especially since there exists no ambiguity regarding the oversight responsibilities of the two regulators of the oil and gas sector regarding terminal operations regulatory oversight.
The Committee had resolved that “The NUPRC should resume full regulatory oversight of all existing crude oil terminals in Nigeria including integrated terminals, crude oil pipelines, issuance of loading clearance and processing of export permit in line with section 8(d) of the PIA, as regulatory activities at crude oil terminals are interdependent and contingent.
“There should be an immediate streamlining of the agencies present at the terminals in line with the relevance of their PIA delineated upstream and midstream/downstream statutory functions while NUPRC should strengthen deployment of digital accounting procedures (such as advance cargo declaration, digital integration of LACT units) at all crude oil terminals for transparent hydrocarbon accounting.”