By Obas Esiedesa, Abuja
The Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, has declared that the Petroleum Industry Act 2021 established a clear distinction between upstream operation and midstream operation in the oil and gas sector in the country.
Speaking at a forum organized for General Counsel and Legal Advisers in Abuja yesterday, the NMDPRA Chief Executive, Engr. Farouk Ahmed said the PIA was designed to restructure the industry by creating a demarcation between the upstream, midstream and downstream value chain for growth and efficiency.
Engr. Ahmed who was represented by the Executive Director, Distribution Systems, Storage and Retailing Infrastructure, Mr. Ogbugo Ukoha, noted that to achieve this objective, the PIA created two regulatory bodies from the erstwhile regulators with clear, distinct functions and mandates.
“The NUPRC (Nigerian Upstream Petroleum Regulatory Commission) is mandated to fully regulate all Upstream operations as defined in Section 318 in the PIA, conduct measurement of crude oil and natural gas produced for the purpose of royalty determination and ensure an arm’s length transfer to midstream operations at measurement points while the NMDPRA on the other hand is saddled with regulating the midstream and downstream operations whether or not related to a lease”, he added.
Ahmed’s declaration came a week after a major dispute arose between the two regulators over which were in charge of regulating operations at the Bonny River Terminals.
He explained that “part of the change management in the implementation of the PIA is that the entire industry, especially those dealing with the defunct regulators must understand that the two agencies are not the same, complementary or substitutes for each other as their functions are clear and distinct. The law made it clear in section 25 and 48 that regulations of upstream operations and midstream/downstream operations are exclusive to NUPRC and NMDPRA respectively. NMDPRA cannot perform the NUPRC functions and vice versa”.
“Beyond the restructuring of the regulatory agencies”, he stated that “the law also required the restructuring of companies and operations in the oil and gas industry, while also addressing hitherto industry established norms such as what is upstream? What are midstream and downstream operations?
“It further elucidates on licenses required for export, calculation of royalties’ definition of measurement point etc. All these provisions in the law were not done in isolation but with a clear target; the remodeling of the oil and gas value chain in Nigeria by creating distinct midstream business entities which had previously been subsumed in upstream operations”.