AOW l Wednesday, August 17, 2022
JOHANNESBURG, South Africa – The recent passing of Nigeria’s new petroleum act heralds an exciting new chapter for Africa’s energy sector. But it’s complicated. Oil industry players are set to unpack the complex new legislation at the forthcoming Africa Oil Week.
The recent passing into law of Nigeria’s Petroleum Industry Act (PIA), and the establishment of the Upstream Petroleum Regulatory Commission (NUPRC) (www.NUPRC.gov.ng), marks the beginning of an exciting new era for the energy sector in Nigeria, West Africa and the continent at large.
Policy and regulatory clarity are essential to the development of Africa’s energy resources, and the oil sector in particular. The new Act confirms that Africa is taking control of its own resources and setting the agenda for how they will be deployed.
The passing of the act follows decades of work to evolve the sector in line with the needs of the energy business in the industry, the communities impacted, and the Nigerian economy at large. However, the act is complicated, its language ambiguous, and its workings yet to be fully understood.
Global oil industry investors will have an opportunity to inspect the granular detail of the act and how they can get involved at the forthcoming Africa Oil Week, where NUPRC CEO Gbenga Komolafe and other senior Nigerian oil officials will engage with stakeholders on the new dispensation.
The Nigerian oil industry has grown significantly, and the energy landscape has changed enormously – hence the need for a new approach.
Nigeria remains Africa’s leading oil producer, with production of 86,9 metric tons (https://bit.ly/3QFxEca) during 2020. At the same time, oil plays a significant part in Nigeria’s domestic economy, with the oil and gas sector accounting for about 5,8% of the country’s GDP (https://brook.gs/3AqpBdN) and 95% of its foreign-exchange earnings in 2019.
The passage of the Act has come with a renewed assertiveness in the Nigerian oil sector, with underdeveloped assets being reallocated (https://bit.ly/3QxbU2p) and NUPRC CEO Komolafe signalling (https://bit.ly/3SZKc06) a commitment to building synergy and smooth industry operations in the national interest.
“The Commission is very deliberate in identifying and promoting new projects and new field developments to boost the national oil production” says Mr Komolafe “We will continue to work with all stakeholders on these strategic areas.”
The new PIA dispensation will allow for the more efficient and sustainable allocation of Nigeria’s oil assets in the best interests of Nigerians and African people at large.
That said, the new environment is deeply complex, and the ambit of the new regulations is vast. The NUPRC, for instance, is tasked with ensuring compliance to petroleum laws, regulations and guidelines, as well as monitoring operations at drilling sites, wells, production platforms and flow stations, crude oil export terminals, refineries, storage depots, pump stations, retail outlets and pipelines.
It must also supervise all petroleum operations carried out under licences in the country, monitor operations to ensure they are in line with national goals; ensure health, safety and environmental compliance; maintain records on petroleum reserves, production, licences and leases; advise government on technical and policy matters, process licence applications; collect government revenues and maintain and administer the National Data Repository (NDR).
Besides the NUPRC, the Petroleum Act also established the Nigerian Midstream and Downstream Petroleum Regulatory Authority, (NMDPRA) (https://www.NMDPRA.gov.ng). Together, these authorities are responsible for the technical and commercial regulation of petroleum operations in their respective sectors, and have the power to acquire, hold, and dispose of property.
The Act provides for the Nigerian National Petroleum Company to be run as a quasi-commercial enterprise, with its shares jointly held by the ministries of finance and petroleum.
The Act also establishes the Host Community Development Trust Fund (HCDTF), which is geared to providing social and economic benefits for host communities where petroleum resources are located, and to enhance peaceful coexistence between licensees or lessees and host communities.
The PIA also establishes a hydrocarbons tax, to be levied on income from oil companies’ onshore resources such as crude oil, condensates, and natural gas liquids.
The wide-ranging area of responsibility covered by the PIA, and the use of terms that have yet to be clarified in court, makes for a complicated piece of legislation that bears further explanation.
Energy players will have an opportunity to unpack the regulations and have them explained by the authorities tasked with implementing them at the forthcoming Africa Oil Week event, to be held in Cape Town in October.
“Nigeria is to be congratulated on the progress it has made in codifying the terms for the exploitation of its oil assets,” says Paul Sinclair, AOW Vice-President of Energy and Director of Government Relations. “However, the global oil industry is clamouring for the chance to gain further clarity on the new laws. We look forward to doing just that, at Africa Oil Week.”