NMDPRA: ENHANCING EFFECTIVE REGULATION OF MIDSTREAM, DOWNSTREAM PETROLEUM INDUSTRY
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· The NMDPRA, through the able leadership of Farouk Ahmed, is driving sustainable development through all its value chain for stakeholders, writes Ifeanyi Onuba
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· In Nigeria, implementing reforms in public institutions has always been a difficult task. This is because such tasks come with a lot resistance. The enactment of the Petroleum Industry Act (PIA) 2021 has engendered a new regulatory and governance architecture in Nigeria, thereby providing enormous opportunities that will reshape the landscape of the petroleum industry in Nigeria.
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· Generally, the PIA focused and provided clarity on the oil and gas governing institutions in Nigeria, evolving petroleum administration systems, community stakeholders’ management system, and fiscal application systems.
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· The Act provides a legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry. Despite being a major source of revenue, the oil sector before the passage of the law had lagged behind other sectors in terms of Gross Domestic Product contribution. It is on this basis that the PIA was formulated to help facilitate Nigeria’s economic development by attracting and creating investment opportunities for local and international investors.
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· The PIA also created specific institutions to drive the operations of Nigeria’s petroleum sector. Purposefully, the PIA established the Nigerian Midstream and Downstream Petroleum Regulatory Authority in August 2021 as an institution responsible for the provision of legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry as well as development of host communities.
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· Consequently, former President Muhammadu Buhari approved the appointment of Mr. Farouk Ahmed as the Authority Chief Executive of the NMDPRA as conveyed by the then Secretary to the Government of the Federation to the former Minister of State for Petroleum Resources, Chief Timipre Sylva to run the day-to-day affairs of the new regulatory authority.
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· The NMDPRA encompasses a merger of three defunct regulatory agencies: Petroleum Products Pricing Regulatory Agency (PPPRA), Petroleum Equalization Fund {Management} Board (PEFMB), the Midstream and Downstream Divisions of the Department of Petroleum Resources (DPR). This birth ushered a new dawn for establishing a progressive regulatory framework that encourages investment and full optimization of the midstream and downstream sector of the petroleum industry in Nigeria.
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· The Authority is responsible for the regulation of the midstream and downstream petroleum operations in Nigeria which includes technical, operational, and commercial activities. In line with the vision of the NMDPRA which is “Enhancing lives through effective regulation of the Midstream and Downstream Petroleum Industry” and the mission which is “To be a world class regulator, promoting economic and social development through sustainable energy,” the Authority has used its core values of transparency, accountability, professionalism, integrity, innovation and teamwork to transform the downstream and midstream sector of the Nigerian economy.
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· At NMDPRA, the Chief Executive has created an enabling environment that drives sustainable development across Nigeria’s Midstream and Downstream value chain for all stakeholders. Ahmed has been able to achieve this through effective regulatory oversight which accelerates and deepens the economic development while ensuring sufficient product distribution and supply at an equitable and fair price. Working with his management team and other key partners, the NMDPRA Boss has taken steps to deliver impeccable world class service to oil and gas stakeholders through professionalism.
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· Since 2021 when he was appointed, Ahmed has been taking gradual, but steady steps towards reforming the Authority in line with the provisions of the PIA 2021. A graduate of Southern Illinois University, Carbondale, USA, the NMDPRA Boss has shown that he is a round peg in a round hole as he continues to take critical decisions to ensure that the Authority’s mandates are achieved.
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· With a cumulative professional and career experience spanning over 34 years in the American technological space and in the Nigerian oil and gas industry, Ahmed’s expertise as a seasoned engineer and lawyer has, no doubt, been instrumental in giving the regulatory body the needed impetus to achieve its mandate. In line with the mandate to regulate and monitor midstream and downstream operations in Nigeria in an efficient manner that ensures and institutionalizes energy security, the Authority under the leadership of Ahmed has been focusing on key regulatory areas.
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· One of these areas is the attraction of investments. Considering the significant decline in investment especially decrease in capital expenditure by 74 per cent within 2014 – 2022, the Authority is focused in turning around this negative tide by putting in place specific actions that would assist local and international financiers to provide funds for operators in the industry. Just recently, the Authority stated that it would create over $575bn in capital investment opportunities for Nigeria, through decarbonisation of operations.
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· Achieving this target of $575bn will be made possible through the NMDPRA Industry Sustainability Initiative (NISI). NISI is meticulously designed to align with the Global Sustainability Development Goals (SDG 3 – Good Health and Well-Being, SDG 7 – Affordable and Clean Energy, SDG 8 – Decent Work and Economic Growth, SDG 9 – Industry, Innovation, and Infrastructure, SDG 11 – Sustainable Cities and Communities, SDG 13 – Climate Action, SDG 16 – Peace, Justice, and Strong Institutions, SDG 17 – Partnerships for the Goals). It forms the foundation to reduce emissions, enhance health and well-being, ensure affordable and clean energy, and promote safety and responsible economic growth.
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· This initiative aims to create over $575bn in capital investment opportunities for Nigeria through the decarbonization of operations. The investment opportunities are $272bn in power; $127bn in infrastructure; $96bn in oil and gas processing optimization; $80bn in industry and $2.8bn in clean cooking. Achieving this target would require government’s commitment and collaboration with the private sector using technological innovation.
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· The Authority has also been determining appropriate tariff methodology as well as setting cost benchmarks for midstream and downstream operations in addition to advising the government and stakeholders on commercial matters relating tariff and pricing framework. Two weeks ago, the Authority announced the establishment of the year 2024 Domestic Base Price and applicable wholesale price on natural gas for the strategic sectors. The announcement saw an increase in the price of natural gas for the strategic domestic sectors including power generation companies by 11 percent. The move is in line with the provisions of the Petroleum Industry Act, 2021, assented to by former President Muhammadu Buhari on the 16th of August 2021 and gazetted on the 27th of August 2021.
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· The increased gas pricing would incentivize gas suppliers to bring on-stream gas from higher cost fields. Without significant new gas development, the shortfall in gas supply by 2030 is expected to be as high as 3 BCF per day, exacerbating gas constraints to the power sector, and severely affecting facility utilization for commercial, GBI sectors, and export markets. This is why the PIA 2021 empowers the Authority to set prices of natural gas and to facilitate a shift to a willing buyer/willing seller market.
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· With this development, it is expected that new gas projects would start coming on-stream in late 2024 and with the new gas price, existing gas supply agreements will remain valid though new pricing is expected to take immediate effect. With the new gas prices, it is expected that Nigeria will continue to be competitive in comparison with other gas producing countries, and mitigations have been designed to cushion the impact on the lower income population, which would be rolled out accordingly.
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· With Ahmed at the helms of affairs, there is no doubt that he would continue to discharge the mandate of the NMDPRA in the interest of Nigeria and to support the federal government in ensuring that the country continues to derive value from the oil and gas sector.
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· Onuba, a Chartered Accountant, writes from Abuja
