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PIA: NMDPRA clarifies regulatory distinction between upstream, midstream operations

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2 years ago

PIA: NMDPRA clarifies regulatory distinction between upstream, midstream operations

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) on Wednesday said the Petroleum Industry Act (PIA), created clear distinction between the upstream, midstream and downstream operations in the oil and gas sector.

This was even as it disclosed that four new regulations are set to be gazetted for the mid and downstream sector.

The Authority Chief Executive, Engr Farouk Ahmed stated this at a meeting with general counsel and legal advisers’ forum of mid and downstream operators in Abuja on Wednesday.

This is coming barely a week after a major disagreement between the NMDPRA and NUPRC over lifting of Butane at Bonny River Terminal by ExxonMobil.

But in a latest development, the Authority Chief 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.

“To fully achieve this key objective, it also created two regulatory bodies from the erstwhile regulators with clear, distinct functions and mandates,” he said.

Engr. Ahmed, who spoke through the Executive Director, Distribution Systems, Storage & Retailing Infrastructure Ogbugo Ukoha at the forum, said the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is mandated to fully regulate all Upstream operations as defined in Section 318 in the PIA, “conduct measurement 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.”

On the other hand, he said the NMDPRA is saddled with regulating the Midstream and downstream operations,”whether or not related to a lease.”

He said:”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.”

Also he stressed that stakeholders and potential investors would require regulatory clarity to drive investment decisions and guide operations that will ensure compliance with legal provisions thus preventing reputational damage.

According to him, regulatory clarity is also beneficial to the regulators as it will allow both entities to focus on their mandate as intended by the law for the benefits of the industry and Nigerians.

He explained that the essence of the engagement was to deliberate on the current legal framework for the Nigerian Oil and Gas industry as intended by the PIA 2021, present clarity and insights to the sections of the law with diverse/different interpretations.

“It is therefore imperative that as co-implementers of this Act we do not lose sight of these key objectives and deliverables of the PIA which took over 20 years to develop,” he added.

Also,he noted that to fast track the implementation of the PIA, there was need for all stakeholders to adhere to the provisions of the law adding that in case of ambiguities engagements must be encouraged to seek clarity and deepen collaboration.

On the four new regulations to be gazetted, the Executive Secretary and legal adviser, NMDPRA Dr. Joseph Tolorunse explained that a total of 20 regulations have been finalized.

In a breakdown, he said currently, 12 regulations have been gazetted, 8 are in line while four are ready to be gazetted.

Similarly, he said the forum is such that deepens industry legal practitioners’ understanding of the Authority’s powers, functions, and regulations while also providing clarity on perceived regulatory overlaps between the Authority and the Nigerian Upstream Petroleum Regulatory Commission(NUPRC).

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