NMDPRA, IOCs, Independent Producers Clash over Collection, Remittance of 0.5% Wholesale Products Price Levies to Govt

•Authority alleges resistance to some PIA provisions’ implementation

•Producers kick against coercion to act as collection entities, cite additional burden on their operations

Peter Uzoho

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) yesterday engaged in a heated argument with international oil companies (IOCs) and independent petroleum producers over the right entity to collect and remit the 0.5 percent charges deducted from the wholesale price of processed natural gas and refined petroleum products supplied.

According to Sections 47 and 52 of the Petroleum Industry Act (PIA) 2021, the NMDPRA is to collect the 0.5 percent levies as part of its revenue.

However, the upstream players who are the wholesale suppliers of gas in the country, disputed their unilateral appointment by the NMDPRA as the agents to collect and remit the levies to the federal government, arguing that that would place additional burden on their operation.

Speaking to journalists yesterday in Lagos on the sidelines of the stakeholders’ sensitisation workshop on wholesale supply operations, Legal Adviser to the NMDPRA, Dr. Joseph Tolorunse, said the agency encountered some thorny issues while implementing the PIA.

He said those thorny issues necessitated the convening of the sensitisation workshop to discuss with the stakeholders in order to reach alignment.

“One of the issues is the implementation of the Collection of government revenues, especially the 0.5 percent of wholesale price of petroleum products and natural gas. Because the Provisional Sections 47 and 52 of the PIA empower the authority to collect these levies as part of its revenue.

“But the thorny issue is that because the PIA did not specify the entity to collect it, regulation has been made to provide that the supplier should collect it and remit it to the government,” Tolorunse explained

He said the authority had explained to the stakeholders that the charges were not on the supplier, but rather on the wholesale customer, noting however, that the convenient point to collect the levy was at the wholesale point.

He said, “And since it forms part of the wholesale price, the authority feels the appropriate entity to remit it to the authority and to the government is the supplier who collects the wholesale price. That’s one of the points. One of the other points is how do we ensure that it’s not a kind of  levy on the producer or supplier.

“And we explained to them that it’s not a levy on them. Through these discussions and dialogue, it’s going to be resolved. Mind you, we had the first engagement at Abuja, this is the second engagement, and we’re almost reaching alignment. We will see that after our break, we will resume again and continue our discussion.”

The legal adviser maintained that the agency had been trying to implement that provision of the PIA since it was signed into law in August 2021.

He revealed that some companies have been paying, while others have not, saying the NMDPRA was trying to explain to those yet to comply to start paying the levy.

He however alleged that the authority has been experiencing resistance in its efforts to implement the law from the time it was passed, pointing out that part of such pushback came from implementing that 0.5 percent wholesale price provision retroactively.

Tolorunse added, “We are having resistance in the sense that implementation did not begin immediately when the law was passed, because we need to pass regulation, we need to make guidelines that will specify the procedures for collections. So the timing for implementation is also part of what we are discussing.

“Although the pushback is that we should not do it retroactively. We are saying this is the law, the law was made in 2021, and it ought to be applied around that time. But like I said, we are trying to also reach an alignment on that.”

But expressing their concerns at the session, wholesale petroleum products and natural gas suppliers under the aegis of the Oil Producers Trade Section (OPTS) argued that their coercion to be the entities to collect and remit the said 0.5 percent wholesale price levies was not backed by law.

They further said placing the responsibility of collecting and remitting the charges to the government would have an additional burden on them, make their life more difficult, and also lead to significant value erosion in their business.

Presenting the producers’ positions, the Vice-Chair, OPTS Gas Sub-committee, Edeimu-Chukwumah, insisted that there were no statutory provisions that place an obligation on upstream producers to deduct the 0.5 percent levies and remit to the authority.

She argued, “We have reviewed the provisions of the PIA that the NMDPRA has cited and relied on it for its position. And regrettably, those provisions do not place any obligations on or identify upstream producers as collectors or collecting agents for the levies.

“Accordingly, we maintain our position contained in our initial letter of August 6, 2024. The PIA, by its provisions, has not conferred on upstream producers the duty of collection or remission of the authority fund or the NMDPRA levy.”

Citing the Midstream and Downstream Petroleum Operations Regulations 2023, the OPTS official noted that the party responsible for the remittance of 0.5 percent levy into the midstream and downstream gas infrastructure fund was a wholesale customer.

Edeimu-Chukwumah further said, “Accordingly, we remain of the respective view that neither the PIA nor that regulation imposes an obligation on upstream producers to act as collection agents or to deduct the levy.

“Three, we foresee that the implementation of this retroactive intent of the directives by demanding remittance of the levy from August 21, 2021 to June 30, 2024, could potentially lead to significant disruptions to existing gas sales transactions, as this obligation was not captured in extant gas sale and purchase agreements.

“So existing contracts that we have and the existing prices that we sell for also do not take 0.5 per cent consideration. For example, during the period under consideration, August 21, 2021 to June 30, the upstream gas producers or suppliers, not wholesale customers, did not provide for the requested levy in its gas sales invoices to any of the off-takers or customers, as there was no legal obligation to do so, considering that the regulations came into effect February 9, 2023.”

Based on the following, she warned that a retroactive application of the directive would subject affected parties to significant financial exposure and result in protracted disputes and or termination of existing gas contract agreements, which would be counterproductive.