Peter Uzoho
In a bid to avert the importation and consumption of poor quality petroleum products in Nigeria as witnessed early this year, the federal government has begun engagement with The Netherlands and Belgium petroleum authorities.
The Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Mr. Farouk Ahmed, disclosed this yesterday in Lagos, during his keynote address at the ongoing Oil Trading and Logistics (OTL) Africa Downstream Week 2022, with the theme: “Regulating Downstream Energy Transition in Dynamic Times.”
The Netherlands and Belgium are two of the major European petroleum refining countries, where Nigeria imports white products from despite being a major oil producer.
Around February this year, Nigeria was thrown into a severe petrol scarcity that lasted for weeks, with excruciating pains felt by the citizens owing to the importation of off-spec petrol by some importers.
During the period, many Nigerians had wondered why the NMDPRA, the agency in-charge of regulating the activities of the downstream sector could not intercept the product before it made its way into the market.
However, speaking at the event, Ahmed said the Authority was addressing the issue of fuel quality through strategic collaboration with key stakeholders in the petroleum products value chain such as Netherland Human Environment and Transport Inspectorate (ILT) and Belgium petroleum agency.
He said the agency was also engaging with the NNPCL, Standards Organisation of Nigeria (SON) and the Nigeria Customs Service (NCS).
“The Authority is addressing the issue of fuel quality through strategic collaboration with key stakeholders in the petroleum products value chain such as Netherland Human Environment and Transport Inspectorate (ILT), the NNPC Limited, Standards Organisation of Nigeria (SON) and the NCS.
“Of particular importance is our strategic engagements with our Netherlands and Belgian counterparts, considering that bulk of Nigeria’s petroleum products importation originates from the ARA region.
“Our collaboration with the NCS led to the suspension of import licenses for land border importation of petroleum products in order to eliminate sharp practices and enhance quality control,” Ahmed said.
Thanking the Comptroller General of Customs, for the cooperation his agency had received, the Authority chief executive informed that further collaborations with NNPCL, SON, NCS, African Refiners and Distributors Association (ARDA), the Nigerian Society of Chemical Engineers (NSChE) and other key stakeholders on improving the standards of fuel utilised in Nigeria would continue.
According to him, “we shall also continue sustaining deep collaboration with regional governments, regulatory entities, National Oil Companies and professional associations to improve fuel quality standards and implement the AFRI Clean Fuels roadmap.
“I want to specially recognise efforts of Dr. Mustapha Abdulhamid, MD, National Petroleum Authority of Ghana (NPA) for organising highly successful regional regulators’ workshop in September.”
As part of the regulatory agency’s commitment to fuel quality improvements, Ahmed said the NMDPRA would be participating at the upcoming high-level African Petroleum Ministers Meeting on Cleaner Fuels, organised by the United Nations Environmental Programme (UNEP) in November 2022, in Nairobi, Kenya.
He stressed that the role downstream petroleum sector plays in the economic growth of any country cannot be overemphasised, adding that the efficient and effective management of this sector was one of the leading performance targets of a regulator like the NMDPRA.
He said history had taught everyone that the path-dependence in energy systems was an ever-changing phenomenon, and that from time to time, the dominant energy supply path in the energy mix experiences changes.
He explained that at some point in the past, the main source of energy was biomass, with crude oil and natural gas later replacing it through their many derivatives which evolved to become the predominant global source of acceptable energy.
He maintained that today, that dominance was being aggressively challenged by renewable energy sources, saying the world is currently experiencing major developments in energy supply globally, with discussions on energy demand rapidly evolving and rallying around the need for energy supply to be guaranteed through cleaner and more sustainable sources.
These discussions, Ahmed noted, have metamorphosed into a compelling strategic case, which has emplaced another energy transition in this century.
Ahmed explained, “It is in the light of the current realities that all stakeholders in the energy sector, and more specifically, the downstream must ensure that the sector is properly positioned for enhanced performance during these rapidly changing times.
“This would entail the optimisation of technology; petroleum product quality upgrade; regional markets integration; HSEC assurance; human capital development; and strong regulatory enablement.
“We excitedly look forward to receiving well thought-out industry perspectives and strategic imperatives that will govern the effective management of the energy transition in the downstream petroleum sector and ensure reliable supply of clean energy for Nigeria, Africa and the world at large,” he added.
The NMDPRA boss stated that a compelling case to accelerate the emplacement of a sustainable supply framework of clean fuels by the African downstream industry had become one of the most outstanding challenges the continent faces in the short to medium term, that must be comprehensively addressed.
To reposition the continent’s downstream sector in this season of opportunity, he advised that stakeholders must be guided by a few pertinent drivers, which he said could be established from answering some fundamental market related questions.
Those questions he listed included how to provide for more cheap clean and green energy, within the increased drive for a global decarbonised economic development and how must innovative technologies for supply of cheap clean/green energy be mainstreamed in the African energy markets?
Ahmed further said, “How must regulation be optimally integrated in the race for sustainable energy supply in a manner that responsibly enables businesses / investments.
“As expected, major policy changes are often associated with significant disruptions, but I wish to assure that this phase of energy transition as much as it is a game changer in the energy ecosystem, it also clearly offers opportunities for all players in the downstream energy value chain.”
In line with its primary mandates and objectives, he said the NMDPRA was enhancing the regulatory environment in the sector in several ways to ensure the midstream and downstream sector in Nigerian was strengthened and positioned properly in this era of energy transition.
In accordance with the Nigeria’s aspirations for the decade of gas, he maintained that the NMDPRA was supporting the accelerated development of all key initiatives and projects that would guarantee optimal supply of gas from the abundant natural gas resource of Nigeria by working with key stakeholders to unlock the huge demand opportunities for the use of gas in transforming the economic fortunes of the country.
In addition, he said the agency was leveraging the provisions of the Petroleum Industry Act (PIA) that would spur gas development, which he explained, would include concessionary royalties on domestic gas supply, concessionary tax regime for domestic gas infrastructure and co-financing of strategic gas investments.
Also speaking at the event, the Chief Executive, National Petroleum Authority of Ghana, Dr. Mustapha Abdul-Hamid, submitted that the continent needed to strike a good policy and commercial balance among the three issues of energy equity -affordability and accessibility, energy security, and environmental sustainability in order to survive the current global energy trilemma, which Africa was mostly exposed.
He added that African nations needed to be able to provide energy equity by ensuring that affordable energy was made accessible to the citizens, adding that they needed to provide energy security by ensuring that there was continuous and uninterrupted supply of energy.
Abdul-Hamid also advised that environmental sustainability needs to be pursued with a just and equitable energy transition to net zero emissions on the continent.
He said, “Demand for transportation fuels such as petrol and diesel will still be significant on the African continent for a while.
“Therefore, for us in the petroleum downstream industry, it is important to operate an enabling regulatory environment that maximises our oil and gas potentials while promoting a just transition. To achieve this, it is important to pay attention to four key areas:
“Number One: Creation of a good business enabling environment for all petroleum downstream service providers. Investors need to be assured of cost recovery and guaranteed return on investment.
“In Ghana, the way we have done this is to deregulate petroleum product prices, and to remove subsidies on all products except Residual Fuel Oil and Premix which we classify as social products that benefit the poor.
“In addition, we have established a competitive margin and tariff setting regime with the aid of our petroleum products pricing formula.
“Number Two: Ensure that there are effective standards and a strong legal framework. Service providers and consumers have confidence when they know that industry standards are benchmarked against world class standards and that the legal framework provides consistency in the application of these regulatory standards.”
While noting that projects such as Dangote’s 650.000 barrels per day refinery would be a breakthrough for the West Africa region when it becomes operational, he noted, “I watched with admiration on television, the recent (Saturday 22nd October 2022) commissioning of Pinnacle’s $1 billion dollar offshore subsea petroleum terminal significant (which includes offshore mooring facilities, a network of pipelines and product storage) in Lekki.”
Abdul-Hamid, however, observed that government regulations play a vital role in ensuring the implementation of a just transition where there are no drastic job losses and there are no stranded oil and gas assets on the continent.
“Regulations and incentives lead to greater innovation, and in tum, this allows companies to commercialise more rapidly oil and gas assets. We must therefore steer our countries towards low carbon economies and net zero energy sector but prioritize economic growth and development in the process,” he noted.
