NUPRC vs NMDPRA: Resolving the Quagmire Over the Regulation of Export Terminals

A popular African proverb states, “When two elephants fight, it is the grass that suffers.” This analogy emphasizes the consequences of conflicts or disputes between powerful entities, where the weaker or less influential ones bear the brunt of the negative effects. In the case of Nigeria’s upstream petroleum industry, the powerful entities are represented by the Nigerian Upstream Petroleum Regulatory Commission (“NUPRC”) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (“NMDPRA”), while the weaker parties are the upstream companies regulated by them.

In recent months, these two entities have been engaged in a dispute over the authority to regulate terminal operations and the export of crude oil. This conflict stems from ambiguities in the Petroleum Industry Act (“PIA”). This paper traces the origins of the problem and proposes alternative approaches to the adversarial position taken by the regulators.

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CRITICAL DEADLINES IN THE PETROLEUM INDUSTRY ACT 2021

close up photography of vintage watch

by Dr. Adeoye Adefulu & Oludamola Awobokun

The Petroleum Industry Act 2021 (PIA) provides timelines within which certain critical actions must be performed by holders of oil mining leases (OMLs) and oil prospecting licences (OPLs), awardees of marginal fields and settlors[1].

One year after the passage of the PIA, this article details the activities, relevant timelines (some of which have lapsed) & practical considerations, before opining on whether these timelines are realistic. This is done taking into consideration the relevance of the regulations and guidelines that are yet to be issued by both the Nigerian Upstream Petroleum Regulatory Commission (“NUPRC” or the “Commission”) and the Nigerian Midstream and Downstream Regulatory Authority (NMDPRA)[2], which ought to provide guidance in complying with the PIA.

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Petroleum Industry Act 2021

The copy of the Petroleum Industry Bill (now the Petroleum Industry Act 2021) signed into Law by President Muhammadu Buhari yesterday, 16th August 2021.

http://www.petroleumindustrybill.com/wp-content/uploads/2021/08/PETROLEUM-INDUSTRY-ACT-2021.pdf

Senate Report on the PIB

The Senate Report on the PIB may be found here. A notable difference from the report of the House of Representatives is the insertion of a new section 317(8), which seeks to implement the backward integration policy, previously utilised in the sugar and cement industries, in the petroleum industry. Section 317(8) provides as follows:

(1) The Authority shall apply the Backward
Integration Policy in the downstream
petroleum sector to encourage investment in
local refining.
(2) Pursuant to subsection (1) of this section,
licence to import any product shortfalls may be
assigned only to companies with active local
refining licences and proven track records of
international crude oil and petroleum products
trading.
(3) Import volume to be allocated between
participants shall be based on criteria to be set
by the Authority taking into account the
respective refining output in the preceding
quarter, share of active wholesale customers
competitive pricing and prudent supply and
distribution track records.
(4) To safeguard the health of Nigerians,
imported petroleum products shall conform to
the Afri-5 specification (50 ppm sulphur) as per
the ECOWAS declaration of February, 2020 on
adoption of the Afri-Fuels Roadmap.

The effect of the provisions of section 317(8)(1-3) will be to stifle competition in the supply of petroleum products and will ultimately have an impact on the price of all petroleum products.

House of Reps passes the Petroleum Industry Bill

The Nigerian House of Representatives passed the Petroleum Industry Bill today. The Senate is also expected to pass the bill later today, after which the versions of the Bill will be reconciled before being sent to the President for assent. The reconciliation process is expected to be short as the House of Reps and Senate Committees worked together in the review of the Bill. The President is likely to give his assent fairly quickly to the Petroleum Industry Bill, given that the Bill was proposed by the Executive and its drafting committee worked very closely with the National Assembly. We will share the version of the Bill we have received shortly.