FG to scrap NNPC, DPR, PPPRA, others; to sell unprofitable refineries

The Federal Government’s draft National Oil Policy has proposed to consolidate Nigeria’s oil industry regulatory authorities into a single agency to be known as Petroleum Regulatory Commission, PRC, while scrapping all other regulators, including the Nigerian National Petroleum Corporation, NNPC, Department of Petroleum Resources, DPR, and Petroleum Products Pricing Regulatory Agency, PPPRA, among others. According to the document released by the Ministry of Petroleum Resources, last weekend, the new regulator will incorporate the activities of the existing petroleum regulatory authorities and also cover some new regulatory activities not currently covered.

The document revealed that the existing institutional regulatory framework was weak, largely ineffective and inefficient, arising from a number of single-issue agencies; overlaps in regulation, gaps in regulation, mixture of policy, regulation and operations; and ineffective regulation. It stated: “Although the agencies generally work well together, their roles, sometimes, overlap and there are significant information gaps within the government as, sometimes, one institution is unaware of what the other is doing. New GMD, NNPC, Dr. Maikanti Baru “At the same time, policy making capacity has been weak, resulting in NNPC and its subsidiaries setting policy and regulation as well as conducting operations in the petroleum sector. The result is an ineffective and inefficient institutional environment in the petroleum sector in Nigeria.” The draft policy is also proposing that, in order to reduce the inefficiencies in parastatals in the petroleum sector, the proposed single petroleum sector regulatory authority will operate under the policy supervision of the Minister of Petroleum Resources. According to the document, the Minister will set the policy for the PRC; ensure monitoring of the implementation of the policy; and ensure monitoring of the performance of the authority. “This does not mean that the regulatory authority will report to the Ministry on a day to day basis.

The new single regulatory authority will be an operationally independent regulatory institution. The Minister’s involvement will be hands off and just to ensure that the regulatory authority properly carries out its roles of implementing the policy,” it explained. Automatic oil licence renewal jettisoned Meanwhile, the Federal Government is considering a policy that would rule out the automatic renewal and extension of oil and gas licenses, while it has listed stringent conditions which would be met before these can be granted. This was also contained in the draft oil policy which indicated that the new oil and gas licensing processes would become more transparent in respect of allocations of oil blocs, mining licences and leases, while local communities would be able to compete in the bids. According to the draft policy, licence renewals or extensions will now be based on progress made by licence holders in meeting their exploration or production targets. It stated that licence holders, who do not meet licence conditions, including oil production, gas flare down, gas supply obligations, will risk losing the licence.

Regulate petroleum revenue spending In addition, the document is proposing a policy that would ensure that certain percentage of petroleum revenue is set aside for capital expenditure and for savings for future generations. According to the document, under the new policy, the government will agree to a cap on the proportion of petroleum revenues that can be spent on recurrent expenditure, while setting aside a percentage of the petroleum revenue for capital expenditure items and savings for future generations. To give vent to this proposal, the document disclosed that appropriate legislation would be passed to back the policy. Unprofitable refineries to be sold The draft policy also stated that each of the country’s refineries will be given a transition period within which to become viable and profitable, adding, however, that the government intended to divest, sell off, concession or if necessary, close down any non-performing refinery that failed to make the transition. It stated: “The aim is to make the NNPC refineries successful, high volume, commercially viable enterprises. They will be encouraged to become so and will be supported as much as it is within the government’s ability to do so. “Of the three NNPC refineries (Port Harcourt, Warri and Kaduna), Port Harcourt is expected to be the best placed to succeed. It has installed its independent gas-fired power supply; it has undertaken its own turnaround maintenance; it is close to jetties and the pipeline length from crude oil suppliers is short (less of a pipeline security risk); it is operationally ready to produce refined products to international standards, although the cost structure is still not right. “Of the three, Kaduna, is perhaps, the least ready currently because of its distance from crude oil supplies and reliance on a poorly maintained crude oil pipeline.”