By Gideon Osaka
It is no longer news that some far-reaching transformations are currently taking place in the Nigerian oil and gas industry following the commencement of the implementation of the Petroleum Industry Act (PIA) signed into law by President Muhammadu Buhari in August 2021.
The enactment of the PIA amended about ten existing petroleum laws, particularly four major ones: the Petroleum Act 1969, Petroleum Profits Tax Act, Deep Offshore and Inland Basin Production Sharing Contract Act, and Associated Gas Reinjection Act, all of which are outdated and inconsistent with present economic and industry realities. The PIA now provides a more robust framework to drive growth within the sector and it now becomes the principal legislation that governs the Nigerian petroleum industry.
Chapter one of the Act provides for the Governance and Institutions of the industry with the parts and sections under the chapter providing the key aspects of the governance of the industry and its institutions. The law restructures the industry, particularly the functions of the various regulatory agencies, intending to eliminate overlaps and among other objectives create new institutions to govern the operations of the industry.
Following the signing of the PIA, Valuechain reports that there has been industrywide anxiety and uncertainty over the implementation, and what will become the fate of major critical issues such as; workers, assets & liabilities of the old agencies that will give way, and other stakeholder investments in the sector because of the overall changes that are currently taking place in the institutional structure of the petroleum industry.
Under the PIA, the Minister of Petroleum (MoP) continues to exercise general supervision over the affairs and operations of the industry, as it was obtainable under the pre-existing Petroleum Act (PA) while the Ministry of Petroleum Resources provides the primary oversight function for the industry, with other agencies acting in different regulatory capacities.
Dual Regulators: Birth of the Commission and the Authority
The PIA created two regulatory authorities, one for the upstream sector, i.e. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) or ‘the Commission’ and another one for the midstream and downstream sectors, i.e. The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) or ‘the Authority’.
inauguration
DPR, which was the principal regulatory agency for the Nigerian petroleum industry, has ceased to perform the functions that will now be executed by the Commission and the Authority. The Petroleum Products Pricing Regulatory Authority (PPPRA), which was responsible for regulating the prices of petroleum products; and Petroleum Equalisation Fund (Management) Board (PEF[M]B), which also was responsible for petroleum pump price equalisation has also ceased to exist, and their functions will be performed by the Nigerian Midstream and Downstream Petroleum Regulatory Authority.
According to the views of the promoters of the new reform in the sector, what existed before the current structure was a convoluted governance and institutional arrangement that impeded effective regulation, overlapping regulatory functions exercised by multiple agencies that bred inefficiency.
The Commission, the new upstream police
Section four of the PIB establishes the Commission to have primary regulatory powers and oversight over the technical and commercial activities of the upstream petroleum industry. The Commission will regulate all technical activities in the upstream sector by enforcing, administering, and implementing all laws, regulations, national and international policies, standards, and practices relating to the sector.
Going by the Valuechain analysis of the new law, the Commission is also to enforce compliance with the conditions of all leases, licences, permits and authorisations issued to companies in the sector. Such technical activities include seismic operations, drilling operations and design, construction, and operation of upstream facilities, among others.
It is clear that the Commission would replace the DPR in that regard as Section 10 of the law vests the Commission with the power as the successor to the DPR and the Petroleum Inspectorate Division. The Commission is also to take over some of the commercial regulatory functions previously undertaken by NNPC’s National Petroleum Investment Management Services (‘NAPIMS’).
The law requires any government body whose action would impact the upstream industry to consult with the Commission, prior to taking such action and to comply with any recommendation that the Commission may propose. This specific inclusion, according to a KPMG report, is commendable as it should help to minimize disruption by government agencies seeming to work at cross purposes when the overall objective should be the viability of the petroleum industry.
The Commission is to be run by a Governing Board, which is responsible for its policy and general administration. The members of the Governing Board, which is to be headed by a non-executive Commissioner, are to be appointed by the President subject to the Senate’s confirmation. One of the sources of funds to the Commission will be from fees earned from services rendered to licensees.
The Authority, end to fuel scarcity, smuggling over?
Section 29 of the PIB establishes the Authority to have technical and commercial regulation of midstream and downstream petroleum operations. It is also to determine the appropriate tariff methodology for processing of natural gas, transportation and transmission of natural gas, transportation of crude oil, bulk storage of crude oil and monitoring the quality of service provided. The Authority is empowered to issue regulations in pursuance of its regulatory oversight powers. The powers vested in the Authority indicate that it is taking over part of DPR, PPPRA and PEF(M)B’s functions.
Management (policy and general administration) of the Authority is also to be run by a Governing Board. Members of the Governing Board, which is to be headed by a non-executive Commissioner, are to be appointed by the President subject to the Senate’s confirmation. As noted with the Commission, one of the sources of funds to the Authority, is from fees earned from services rendered to licensees. Another key funding source is a charge of 0.5% of the wholesale price of petroleum products sold in Nigeria, which is collectible from wholesale marketers.
The transition towards new regulation
The ideal situation is that regulators of the industry in Nigeria are supposed to be business enablers and opportunity providers, institutions are supposed to operate with shared vision of optimizing the nation’s vast hydrocarbon resources for the benefit of the government and people. These are institutions responsible for the day-to-day monitoring of the petroleum industry and for supervising all petroleum industry operations. Therefore, it was not out of place that one of first steps in the implementation of the law by the federal government was the takeoff of the new regulatory agencies.
Few weeks after the president signed the PIA, the government inaugurated a Steering Committee with the mandate of effective and timely implementation of the law. Part of the mandate of the Committee was also to approve or ratify the appointments of consultants who will support an Implementation Working Group/Coordinating Secretariat; approve all recommendations for the institutional design and personnel movements as envisaged by the Law. In addition, the Committee was required to coordinate timely preparation of appropriate model licences, leases and regulations including reviews and endorsements for presidential approval.
Members of the Steering Committee included the minister Chief Timipre Sylva, as Chairman, Dr. Sani Gwarzo, Permanent Secretary, Ministry of Petroleum Resources and Mallam Mele Kyari, Group Managing Director, Nigerian National Petroleum Corporation Limited. Others are Muhammad Nami, Executive Chairman, Federal Inland Revenue Services, Dr. Nuhu Habib, Senior Special Assistant to President on Natural Resources, representative of the Ministry of Finance, Budget and National Planning. Others are representative of the Ministry of Justice, Mr Olufemi Lijadu, External Legal Adviser and Dr. Bello Aliyu Gusau, Executive Secretary, PTDF – Head of the Implementation Working Group/Coordinating Secretariat.
Consequently, on October 18, 2021 the Minister of State Petroleum Resources, Chief Timipre Sylva, in Abuja inaugurated Mr. Gbenga Komolafe as the Chief Executive Officer of the Nigerian Upstream Regulatory Commission (NUPRC) and Engr. Farouk Ahmed as Chief Executive Officer of the Nigerian Midstream & Downstream Petroleum Regulatory Authority (NMDPRA). The inauguration of the heads of the new regulators marked the dissolution of the old regulatory agencies and the take-off of the new ones.
One of the issues that stirred controversy after the inauguration was the fate of the Director of the Department of Petroleum Resources (DPR), Engr. Sarki Auwalu, the Executive Secretaries of the PPPRA and PEF(M)B, Alhaji Abdulkadir Umar Saidu, and Alhaji Ahmed A. Bobboi who were reappointed for another four-year term after the expiration of their first term in office recently.
Responding to the issue, the Minister of State for Petroleum Resources Chief Timipre Sylva specifically stressed that while the law provided for the transfer of career staff in the old institutions into the new ones, political appointees were not covered.
“It is a matter of law, the law states that all the assets and staff of DPR are going to be vested in the Commission and also in the Authority, that means the DPR will not have anything, it doesn’t exist anymore, technically. It (the PIA) also repeals the Petroleum Inspectorate Act, the Petroleum Equalisation Fund Act and the PPPRA Act. It is very clear that those agencies do not exist anymore. The law also provides for the staff, the jobs in those agencies are protected but that doesn’t cover, unfortunately, the CEOs who were on political appointments,” the minister said.
He added that “The Authority has its staff coming from the defunct PEF, PPPRA and DPR. The commission has staff coming over from DPR and the process is going on for the next few weeks. So far, the chief executives of these agencies have not been in place, but of course, Mr. President in his wisdom made the appointment a few weeks ago and they went through a rigorous process of confirmation at the National Assembly.
“The agencies have now taken off because they now have clear leadership and today’s event marks that beginning for the new agencies.”
The Senate had earlier in the month confirmed the appointment of four nominees as board members of the new Nigerian Upstream Regulatory Commission (NURC) and also four members of the board of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). Their confirmation followed the consideration of the report of the Senate Committee on Downstream Petroleum sector.
However, before the confirmation, a strange drama took place when President Muhammadu Buhari sent a letter to the Senate requesting the replacement of the nomination of Engr. Sarki Auwalu, which was earlier nominated, as the Chief Executive Officer on the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NPRA) Board.
The request was contained in a letter dated September 28, 2021, and read by the Senate President, Ahmad Lawan, during the plenary. The President in a previous letter dated September 16, 2021, had requested the upper chamber to confirm Auwalu alongside three others as board members of the Nigerian Midstream and Downstream Petroleum Regulatory Authority.
However, President Buhari, in a new request sought the replacement of Sarki Auwalu with Engr. Farouk A. Ahmed as Chief Executive Officer without giving any reason for the replacement. This action did not go well with some stakeholders in the industry who think the name of Sarki Auwalu shouldn’t have, in the place, been nominated as the Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NPRA) Board, but rather he should have been nominated for the post of the Cheif Executive Officer of the Nigerian Upstream Regulatory Commission (NURC).
Meanwhile, the nominees confirmed by the Senate for the NURC were Isa Modibbo – Chairman; Engr. Gbenga Komolafe – Chief Executive Officer; Hassan Gambo – Executive Commissioner, Finance and Accounts; and Rose Ndong – Executive Commissioner, Exploration and Acreage Management.
Also, the nominees that were confirmed for the NMDPRA are Mr. Idaere Ogan, as Chairman, Engr. Farouk Ahmed (Chief Executive Officer), Abiodun Adeniji (Executive Director Finance and Accounts) and Ogbugo Ukoha (Executive Director, Distributions System, Storage and Retail Infrastructure).
The fate of over 2400 defunct regulatory agencies’ workforce
Following the resumption of new heads of the agencies and the imminent transition that will take place at the defunct DPR, PPPRA and PEF(M)B as a result of the implementation of the PIA, palpable anxiety and apprehension have gripped the workers at the agencies despite the assurance of the Hon. Minister of State for Petroleum Resouces, Chief Timipre Sylva that the new law has a provision that protects the job of the workers.
Although there is no publicly available data of the exact number of workers at the affected agencies, Valuechain checks revealed that the number of staff of the defunct DPR, PPPRA and PEF(M)B stand at about 1500, 400, 500 respectively.
The prevailing uncertainty has also created tension for most companies, contractors and marketers in the petroleum value chain especially those that deal directly and regularly with the defunct agencies.
The federal government has moved to douse growing anxiety over job security with the assurance that no worker would be sacked as assets and liabilities of the defunct agencies would be fully absorbed by the successor agencies.
In a bid to calm the fears and concerns of workers of the defunct organisations, Sylva went to the agencies recently to assure them of protection under the law.
Addressing employees of the defunct DPR, Sylva said: “It is normal that at junctions like this there are anxieties. That is why I thought I should come by myself along with the Permanent Secretary to assure you that this is a very normal transition.
The PIA has been passed and the law stipulates that certain actions must be taken; that the DPR as it then was, was to be split and succeeded by two agencies.
“But I want to assure you that the staff of DPR have nothing to worry about, because the law is very clear on the position of the staff of the DPR, of PEF and PPPRA.”
According to him, no job is to be lost in the process, stressing that no remuneration will also be lost in the process as their welfare is projected.
Sylva noted that contractors in the sector, as well as stakeholders like NARTO, has nothing to worry about as ongoing contracts and necessary functions remained covered under the law.
Despite the reassurance of job security by the Minister, Industry watchers are skeptical about whether the promise will hold water at the end of the day. In their opinion, though, the law has provided that the staff of the defunct agencies should be absorbed by the new agencies appropriately, but the reality will likely hang on the recommendation of the consultants that were appointed by the PIA Steering Committee. The Consultants are expected to recommend the institutional design and personnel movement. Either the staff are all retained or disengaged, the fact remains that the rising figure of unemployment in the country is a major contributor to the nation’s insecurity.
Gbenga Komolafe
The new upstream sheriff in town
The appointment and inauguration of Engr. Gbenga Komolafe CEO of the NURC has continued to trigger excitement and optimism owing to the man’s intimidating record of academic accomplishments and professional experience accumulated over the years as an engineer, lawyer, labour management specialist, marketer and administrator.
Komolafe attended the University of Benin, where he obtained a Bachelor Degree in Law (LL. B), University of Ibadan, where he got a Master of Science in Industrial & Production Engineering and same institution where he bagged a Master of Science in Industrial & Labour Relations. At the University of Ilorin, Kwara State Nigeria, Komolafe obtained a Bachelor of Engineering. He has attended several courses at home and abroad.
The accomplished oil and gas expert’s career has seen him traverse the relevant government agencies in the oil industry particularly the NNPC, PPMC, PEF(M)B and the PPPRA.
As Group General Manager, Crude Oil Marketing Division, NNPC, he facilitated optimum revenue for the Nigerian federation and performed transparently as acknowledged by the Nigeria Extractive Industries Transparency Initiative (NEITI) in its report within the period he served in office.
In the same vein, as Executive Director, (Commercial) between 2012 – 2014, he initiated strategic sales and retail plans and achieved revenue targets from downstream supply and distribution of refined petroleum products for nationwide consumption.
As General Manager Operations at PEF(M)B, he initiated operations policies for effective petroleum products supply and bridging to the inner parts of the country, price equalisation management, and pioneered successful implementation of electronic tracking of petroleum products distribution nationwide that saved government hundreds of billions of naira.
He also successfully coordinated seamless supply of petroleum products nationwide with multiplier sectorial effect in the Nigerian economy as General Manager, Operations in the PPPRA.
Komolafe also previously held roles as Assistant General Manager (Head, Kaduna Zone), Assistant General Manager, Planning Research & Development and Branch Manager, Nigeria Social Insurance Trust Fund (NSITF), Warri.
He has several research publications to his credit and has won many awards. A Fellow of Nigerian Society of Engineers, Council of Registered Engineers of Nigeria, and member of the Nigerian Bar Association, Gbenga’s expertise as a seasoned engineer and lawyer is required at this time to give the petroleum upstream the right atmosphere that will retain and attract old and new investment respectively.
Farouk Ahmed
The new downstream czar
Engr. Farouk Ahmed is a graduate of Southern Illinois University Carbondale, USA where he obtained a Bachelor of Science degree in Engineering Technology. He commenced his career as a Logic Board Verification Engineer at Apple Computer Inc. (later called Apple Inc.), in Dallas, USA.
He returned to Nigeria thereafter to honour the call to serve his father’s land under the National Youth Service Corps (NYSC) and later joined the Nigerian National Petroleum Corporation (NNPC) where he grew through the ranks and spent thirty-two meritorious years. Engr. Ahmed has a sound commercial and trading background and has held several senior positions over three decades spanning his professional career in the oil and gas industry including the positions of: Senior Crude Oil Trader – Duke Oil Inc.; Manager – Crude Oil Export Programming and Nominations, Shipping and Terminals (Crude Oil Marketing Division-NNPC); Executive Director-Commercial – Petroleum Products Marketing Company (PPMC); Managing Director – NiDAS Marine Limited; Executive Secretary – Petroleum Products Pricing Regulatory Authority (PPPRA); Managing Director – PPMC; Special Adviser (Downstream) to the GMD-NNPC.
Engr. Ahmed is a Member of the Nigerian Society of Engineers (NSE); Member of the Institute of Electrical and Electronics Engineers (IEEE-USA) and a Registered member of the Council for the Regulation of Engineering in Nigeria (COREN). He was a member of the Governing Board of the Nigerian Shippers Council and the MD/CEO – Hauwath Consulting Limited.