The recent call for the merger of existing Nigerian petroleum regulatory bodies to form one entity has generated a lot of interest and debate. In this article, Valuechain Editorial Team, including Yange Ikyaa, Moses Patience Chat & Adaobi Rhema Oguejiofor made a critical review of the arguments.
The Policy Advisory Council (PAC) of Nigeria’s President, Bola Ahmed Tinubu, recently proposed that his administration streamline the number of petroleum regulatory agencies in the country by merging the three existing ones.
Those agencies recommended by PAC to be merged are the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) together with the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and the Nigerian Content Development and Monitoring Board (NCDMB) to make up a single regulatory body.
This proposal was part of the various recommendations that were issued by the Energy and Natural Resources Sub-Committees, captured in the Policy Advisory Council report, dated May 2023 and submitted to the President.
According to PAC, “the President should strip NNPCL of policy-making roles and keep NCDMB within its mandate as prescribed by the Nigerian Content Act and also integrate NUPRC, NMDPRA, and NCDMB into a single regulator or include all midstream activities into NUPRC’s scope.”
It encouraged President Tinubu to consider restructuring NUPRC and NMDPRA in order to meet defined milestones, as well as recruit and install capable resources in key positions in the petroleum industry.
These regulatory agencies that PAC seeks to merge currently have different individual duties and responsibilities. For instance, NUPRC, which is led by Engr. Gbenga Komolafe, has the constitutional responsibility of ensuring compliance with petroleum laws, regulations and guidelines in the upstream section of the petroleum industry.
The NMDPRA, on the other hand, is the body that is responsible for regulating and monitoring all activities peculiar to midstream and downstream operations in Nigeria’s oil and gas sector. It is led by Engr. Farouk Ahmed.
On its part, NCDMB, a body led by Engr. Simbi Wabote, is responsible for reviewing, assessing and approving Nigerian Content and monitoring industry operations in order to ensure compliance with approved operational guidelines. It also issues Certificates of Authorization for approved projects and operations in oil and gas industry.
According to PAC, “the President should strip NNPCL of policy-making roles and keep NCDMB within its mandate as prescribed by the Nigerian Content Act and also integrate NUPRC, NMDPRA, and NCDMB into a single regulator or include all midstream activities into NUPRC’s scope.”
Considering the latest proposition by President Tinubu’s advisers, there is one question that is now calling for answers: Is a Single Petroleum Sector Regulator Good or Bad for Nigeria?
Looking at the different regulatory approaches employed by different countries worldwide, reg- ulations are either made by different agencies or parastatals under a particular ministry or made by a single regulator.
For instance, Russia has three regulators, Brazil has two, Saudi Arabia has two, South Africa has seven, and China has three, which is similar to what is obtainable in Nigeria.
However, countries like Singapore, Qatar and Iran have a single regulatory body that ensures compliance with the laws governing the oil and gas industry, which is also similar to what has been recommended by PAC for endorsement and implementation by President Tinubu.
In China, for instance, the main regulatory agencies for upstream operations, such as oil and gas prospecting and mining include: the National Development and Reform Commission (NDRC), which is responsible for the approval of foreign cooperation on oil and gas projects, including the risk exploration and development blocks; the Ministry of Natural Resources (MNR), which is responsible for the drafting of management policies for mining rights and administering the registration of transfer and approval of mining rights of petroleum and other resources; and the National Energy Administration (NEA), which is responsible for formulating plans and policies on national petroleum and natural gas reserves, as well as implementing them, monitoring the changes in supply and demand in domestic and foreign markets, proposing and organizing the implementation of national petroleum and nat- ural gas reserve.
They are also responsible for the ordering, rotation and use, as well
as the approving or examining of petroleum and natural gas reserve facility projects within the prescribed authority, and supervising and administering commercial petroleum and natural gas reserves.
In addition to the above competent departments, the administrative authorities, such as environmental protection and production safety, will also implement environmental and safety management and regulation in the exploration and exploitation of oil and gas according to their respective functions.
In South Africa, the main regulatory bodies responsible for overseeing upstream oil and gas operations are the Department of Mineral Resources (DMRE), the Petroleum Agency of South Africa (SOC) Limited, and the Mineral and Petroleum Titles Registration Office (MPTRO). Other key regulatory agencies in South Africa include the Department of Environment, Forestry and Fisheries, which oversees compliance with the provisions of National Environment Management Act (NEMA); and the National Energy Regulator of South Africa, with the mandate to regulate and determine tariffs and pricing for the electricity, piped gas and petroleum pipelines industry.
Others are the International Trade Administration Commission, responsible for the issuing of import and export permits for the import and export of petroleum; and the South African Maritime Safety Authority, with powers to approve Oil Spill Contingency plans required to be developed in connection with exploratory and production drilling.
The Iranian oil and gas industry is regulated by the Ministry of Petroleum (MOP) and it is responsible for regulating oil and gas upstream development and has vested its governance to its subsidiary, the National Iranian Oil Company (NIOC).NIOC is exclusively responsible for the exploration, drilling, production, distribution, and export of crude oil and natural gas exploration, extraction, and sales. International oil companies (IOCs) can
participate in the exploration and development phases through IPCs. The petroleum industry in the country is regulated using the Iranian Constitution Law of 1979, as well as many other laws, acts and
duties and resolutions.
Elsewhere in Qatar, all natural resources belong to the State, and the Ministry of Energy Affairs, headed by the Minister, exercises regulatory administration of the energy sector, covering both oil and gas production, operations and distribution. Although Qatar Petroleum (QP) is Qatar’s national oil company and not the regulator, given its high stakes and dominant position in the oil and gas sector, it exerts a very significant influence on the regulatory regime.
Similar to the Iranian government, the petroleum industry is also regulated by laws, decrees and resolutions in the country’s constitution.
In Russia, the Ministry of Energy, Minenergo, is a federal executive body that is responsible for drafting and implementing government policy and legal regulation in the oil and fuel sector, including issues related to the electric power industry, oil production, oil processing, major oil and gas pipelines, oil and gas products, renewable energy sources, development of hydrocarbon fields on the basis of production-sharing agreements, and the petrochemical industry.
The licensing regime in Russia is administered by the Ministry of Natural Resources and Ecology of the Russian Federation and the federal agencies under its jurisdiction. Subordinate to that Ministry, the Federal Agency for Subsoil Use, Rosnedra, is the administrative agency primarily responsible for the regulation of oil and gas extraction. Rosnedra is responsible for issuing, suspending, and revoking subsoil use licenses. It is also responsible for approving deposit development plans, transferring and storing geological information.
Another regulatory body in Russia is the Federal Service for Supervision of Nature Use, Rosprirodnadzor,
that regulates subsoil use and protection of the environment.
Additionally, the Federal Environmental, Industrial and Nuclear Supervision Service (Rostekhnadzor) issues mining allotments that determine deposit boundaries, safety certificates, and operating licenses. Rostekhnadzor also regulates on safety and environmental matters with some overlap of competence with Rosprirodnadzor.
In Brazil, the National Energy Policy Council (CNPE) and the Na- tional Agency of Petroleum, Natural Gas and Biofuels (ANP) are the regulators. ANP is the regulatory body for the oil, natural gas and biofuels industry. It is expected to ensure free competition, national supply, and consumers protection in terms of price, quality and product offer. It also enforces the standards and rules by the regulated industry. It covers the administrative process, judgment and sanction.
Then, in Singapore, the Energy Market Authority of Singapore (EMA) is the regulatory authority responsible for supervising the Singapore gas industry. EMA has the power to issue directions to any gas licensee or person for or with respect to any code of practice, standard of performance or other procedures, to ensure the security or reliability of the conveyance of gas to consumers’ premises, in the interests of public safety,including protecting the public from dangers to health arising from gas-related activities, including the import, production, processing, storage, conveyance, shipping, supply or use of gas or as may be necessary to enable EMA to perform its functions and duties prescribed in sec- tion 3 of the Gas Act (Cap. 116A) (section 63, Gas Act).
The EMA has various powers under Part IX of the Gas Act to investigate and enforce anti-competition measures like price fixing, production limits or controls, sharing of markets or sources of gas supply.
In Saudi Arabia, the Supreme Council for Petroleum and Minerals
or Petroleum Council makes decisions on all oil and gas matters. The Petroleum Council also drafts the general policy of Saudi Aramco and can make decisions on issues relating to petroleum investments. In addition, the Ministry of Energy, Industry and Mineral Resources (MEIM) regulates all aspects of commercial activity related to trade in petroleum products, including their use, sale, transfer, storage, distribution, import and export (Article 3, Petroleum Products Trading Law). In the ground, all operational matters including exploration, construction and trading matters are handled by the 100percent state owned oil and gas company, Saudi Aramco, one of the largest oil companies in the world.
MEIM is responsible for national planning in the area of energy and minerals, including petrochemicals. Aramco’s Board of Directors includes the Minister of Energy as the Chairman, along with the Minister of Finance, the Minister of Planning and Economy, the Managing Director of Saudi Public Investment Fund (the Saudi sovereign fund), the CEO of Aramco, and other distinguished international experts.
The regulatory regime for onshore and offshore oil and gas exploration is made up of Saudi Arabia’s Ministry of Petroleum and Mineral Resources and the Supreme Council for Petroleum and Minerals. These three entities have control and supervision of oil and natural gas exploration and production, along with Saudi Aramco. They also approve policies and strategies and supervise production, refinery upgrades and enhancement of the private sector’s role in oil and gas operations.
Then, the Saudi Ministry of Energy oversees policies related to the country’s oil and natural gas sectors. The government regulates the prices of oil products, such as gasoline, diesel, fuel oil, liquefied petroleum gas (LPG), as- phalt, and kerosene, which tend to be lower than market prices; while the Council of Ministers regulates
all natural gas prices, and the Ministry of Energy regulates natural gas sales within Saudi Arabia.
With respect to the recent call for a single petroleum sector regulator in Nigeria, the Ex-Head of Public Affairs Unit of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Mr. Mohammed Saidu Bulama, said that the PAC’s recommendation for a merger between the Nigerian oil and gas regulatory bodies is a very excellent move that will ensure effective and efficient monitoring and supervision of the much-challenged oil and gas industry.
Another commentator, who did not want to be named publicly, maintained that a separate regulator be established for natural gas and another one for the oil industry. He also suggested that a merger be formed between the Petroleum Technology Development Fund (PTDF) and NCDMB, as they are both regulators for local content development and enhancement of the capacity of Nigerian youths.
On his part, Prof. Omowumi Iledare, an Expert on Petroleum Economics and Energy Policy, also said that since the Petroleum Policy Gazette has only one regulatory institution, he believes that is preferable.
However, from the multiple global scenarios examined, it could also be argued that whatever system that is chosen by these individual countries under review has been able to produce results before and is still working for them. This means that whichever number of regulators that may be adopted by Nigeria will not be anything different from what is already being practiced in other countries on different continents of the world.
But what matters to all Nigerians is how the system can be made to efficiently work and produce profitable results, regardless of any number of regulators that is chosen or adopted by those with the power and authority to decide the future of the Nigerian petroleum industry.