The
Federal Government is set to scrap the Nigerian National Petroleum
Corporation, Department of Petroleum Resources, and Petroleum Products
Pricing Regulatory Agency, among others.
NNPC Towers Abuja
The President Muhammadu Buhari-led 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.
“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.”
Source: Vanguard
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