Discrepancies in Oil Production, Revenue, Blamed on Weak Regulation

04 Jun 2013

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  Dizeani Allison Madueke

Chika Amanze-Nwachuku

Reactions have continued to trail a recent study by Revenue Watch Instituted (RWI), which ranked Nigeria weak among the world’s 58 countries covered in a survey conducted on transparency and accountability, in the governance and management of their oil, gas and mining sectors.

The Institute noted in the report that over 80 per cent of the world’s leading oil and gas-producing and mining countries, including Nigeria, failed to meet “satisfactory standards” for managing their natural resources.

Lack of contract transparency and incomplete reporting on most aspects of the petroleum industry were identified as major challenges to efficient management of Nigeria's hydrocarbon resources for the benefit of all Nigerians.

A highly-placed industry source, who spoke on the issue at the weekend, blamed the situation on weak regulatory agencies, positing that the Department of Petroleum Resources (DPR), the oil and gas industry regulator, lacked enough capacity to effectively monitor Nigeria’s oil and gas dealings.

The source expressed regret that in almost six decades of oil exploration in Nigeria, the government cannot say the actual volume of oil being lifted by oil companies from Nigerian oil fields, as the DPR, the Nigerian National Petroleum Corporation (NNPC), the Ministry of Finance and the Central Bank of Nigeria (CBN) often release conflicting figures.

While blaming the situation on corruption and incompetence on the part of the agency saddled with the responsibility to police the oil and gas industry, the source noted that there are discrepancies between the actual volume of crude oil produced in Nigeria and how revenue was generated from the sale of oil.

He declared that the agency has failed in its responsibility of regulating both the upstream and downstream sector of the oil and gas industry, by its failure to enforce laid down policies and standards.

The source noted that “petroleum products diversion and adulteration,  existence  illegal refineries, illegal petrol stations, sharp practices by oil marketers, such as under dispensing of petrol to consumers, discrepancies in pump price of petroleum in the country, are all evidence that the agency has failed”. 

A source at the petroleum Ministry has however blamed under staffing and inadequate funding, inter-agency bureaucracy, politics, and lack of cooperation among government agencies for the inability of the agency to effectively discharge its regulatory functions.
He however expressed optimism that these lingering problems would be addressed when the Petroleum Industry Bill (PIB) is signed into law. The PIB proposes the establishment of two different agencies - the Upstream Petroleum Inspectorate and Downstream of the Downstream Petroleum Regulatory Agency to regulate activities in the upstream and downstream sectors respectively.

Under the current dispensation, the DPR regulates activities in both the downstream and upstream sectors of the oil and gas industry.

The Inspectorate, under the proposed law, shall be vested with the assets and liabilities relating to the upstream petroleum sector, functions hitherto vested in the DPR.

The Inspectorate shall include: to promote the efficient, safe, effective and sustainable infrastructural development of the upstream sector of the petroleum industry; regulate all technical aspects of the upstream petroleum sector; regulate commercial activities within the upstream sector as may be designated by the minister and to execute government policies for the upstream petroleum sector assigned to it by the minister.

The Inspectorate shall also administer and enforce policies, laws, and regulations relating to all aspects of upstream petroleum operations which are assigned to it under the law; ensure and enforce compliance with the terms and conditions of all leases, licences, permits and authorisations issued or in respect of upstream petroleum operations; establish, monitor, regulate and enforce health and safety measures relating to all aspects of upstream petroleum operations; carry out enquiries, tests, audits or investigations and take such steps as may be necessary to monitor the activities of the holders of leases, licences, permits and other authorisations to secure and enforce compliance with the terms and conditions thereof.

On the other hand, the Downstream Petroleum Regulatory Agency shall be vested with assets and liabilities relating to the downstream petroleum sector, functions hither performed by the DPR and the Petroleum Products Pricing Regulatory Agency (PPPRA).

The new downstream regulatory agency shall be saddled with the responsibility to administer and enforce policies, laws and regulations relating to all aspects of downstream petroleum operations as may be assigned to it by the law; ensure and enforce compliance with the terms and conditions of all licences, permits and authorisations issued in respect of downstream petroleum operations; set and enforce approved standard for design, procurement, construction, operation and maintenance for all plant, installations and facilities pertaining to downstream petroleum operations;  issue and renew licences, permits or other authorisations and modify, amend, extend, suspend, renew, cancel and reissue, revoke or terminate such licences, permits, as well as to regulate the activities of the downstream petroleum sector in Nigeria in a non-discriminatory and transparent manner.

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