Background

It has been almost 2 years since the enactment of the Petroleum Industry Act, 2021 (“PIA”), which overhauled the legal and regulatory regime of the Nigerian petroleum industry (“Industry”). Given the extensive changes introduced to the Industry by the PIA, it is not surprising that the implementation of certain provisions of the PIA have led to ambiguity and overlap in the functions of the regulators in the Industry.

Unlike under the erstwhile regulatory regime where the main regulator of the different streams in the Industry was the Department of Petroleum Resources (“DPR”), the PIA established 2 new regulators: that is, the Nigerian Upstream Petroleum Regulatory Commission (“NUPRC”) and Nigerian Midstream and Downstream Petroleum Regulatory Authority (“NMDPRA”) to take over the functions of the defunct DPR. Pursuant to the PIA, the NUPRC is responsible for the technical and commercial regulation of upstream petroleum operations, while the NMDPRA is responsible for the technical and commercial regulation of midstream and downstream petroleum operations in the Industry.

Despite the extensive descriptions in the PIA of what constitutes upstream petroleum operations and midstream and downstream petroleum operations in the Industry, there appears to be some ambiguity and overlap in the functions of both regulators. One of the main regulatory issues from the PIA revolves around its provisions on integrated petroleum operations¹ (that is, upstream and midstream operations) which created an overlap of regulatory functions of the NUPRC and the NMDPRA. Under the PIA, the NUPRC has technical and commercial regulatory control of integrated petroleum operations.² Specifically, section 8(d) of the PIA provides that where in situ facilities or fixed or floating platforms or vessels provide for fully integrated upstream and midstream petroleum operations, the NUPRC shall be in charge of such integrated operations.

The regulatory overlap created by integrated operations was apparent in a recently reported matter involving ExxonMobil Corp.³ To address the matter, the NUPRC issued a statement noting that it is only the NUPRC that has the responsibility to monitor crude oil export from terminals in Nigeria and that ExxonMobil obtained the approval of the NUPRC for its operations in accordance with Sections 8(d) and 318 of the PIA that provides for integrated operations.⁴

In providing a temporary solution to the regulatory issue, President Bola Ahmed Tinubu issued a directive dated 26 June 2023 to the Permanent Secretary of the Ministry of Justice regarding the delineation of the regulatory oversight between the NUPRC and NMDPRA (the “Directive”) pending clarifications by way of amendment to the PIA. The President further employed the use of a diagrammatic illustration to clarify the limits of each regulator’s oversight with a request that the Directive be published in the Federal Government Gazette.

The directive

The Directives provide as follows in relation to the functions of both regulators:

1. NUPRC will be the exclusive technical and commercial regulator in respect of upstream operations and facilities, which includes licensing, administration, and monitoring of petroleum facilities that are operationally linked from extraction to and including crude export terminals and the gate of the natural gas processing plant;
2. NMDPRA will be the exclusive and commercial regulator in respect of petroleum operations and facilities from the exit of crude export terminals and the entry gate of the natural gas processing plant;
3. Integrated upstream and midstream petroleum operations shall be considered as upstream petroleum operations, and NUPRC shall have the sole jurisdiction over the technical and commercial regulation of integrated petroleum facilities for upstream petroleum operations; and
4. NUPRC has the sole responsibility to determine whether petroleum facilities qualify as integrated facilities and is required to establish clear guidelines and criteria to ascertain the integration status of facilities to ensure consistent application of the criteria established.

Both regulators are mandated to comply with the Directive and ensure that no duplication of regulatory responsibilities occur across any activity, including refraining from overlapping regulatory functions in relation to activities leading up to and including export terminal operations.

Prior directives

It is not the first time that a directive will be issued by a President of the Federal Republic of Nigeria in an attempt to clarify the regulatory functions of the NUPRC and the NMDPRA within the Industry. There were reports in April 2023 that the former President Muhammadu Buhari had directed the NUPRC to take over the supervision of all crude oil export terminals in the country in a bid to end the frequent altercations between both the NUPRC and NMDPRA.⁵ It was also reported that the directive from President Buhari required that the exercise of any regulatory role by the NMDPRA on any crude oil export terminal established prior to the effective date of the PIA should cease immediately.⁶

It, therefore, appears that the Directive signed by President Bola Ahmed Tinubu is an attempt to reiterate the previous administration’s directives on the subject matter with a further request for the same to be published in the Federal Government Gazette.

Legal effect of the directive

From a legal standpoint, an issue arises on the legal effect of the Directive vis-a-vis the interpretation of the PIA – an Act of the National Assembly. On the one hand, there may be arguments that the Directive attempts to usurp the functions of the Judiciary, which has the responsibilities of interpreting laws passed by the National Assembly and ascertaining the rights and obligations attached to such provisions.⁷ Also, only the National Assembly has the power to amend the provisions of an Act of the National Assembly . The function of the Federal executive arm of government, headed by the President, is to implement the provisions of the laws validly passed by the National Assembly.⁸Therefore, where there are ambiguities and conflicts in a law validly passed by the National Assembly,⁹ the two options available to clarify the ambiguity are (i) to seek an interpretation of the ambiguous/conflicting provisions by the Judiciary; or (ii) to procure an amendment to the offending provisions by the National Assembly.

On the other hand, presidential directives hold legal validity if they align with applicable legislation. Pursuant to section 3(4) of the PIA, the Minister of Petroleum Resources has the power to give policy directives to the NUPRC on matters concerning upstream petroleum operations and to the NMDPRA in matters relating to midstream and downstream petroleum operations. Directives may also be given on matters related to cooperation among the two regulators in line with the provisions of PIA. The NUPRC and the NMDPRA are required to comply with such policy directives, which are required to be published in the Federal Government Gazette.

However, the form of the Directive does not show that it is one of such directives referred to in section 3(4) of the PIA. Moreover, there is currently no Minister of Petroleum Resources empowered to issue the directives referenced in section 3(4) of the PIA. It therefore appears that the Directive may have been issued by President Bola Ahmed Tinubu as an ‘executive order’ which has legal force only when issued based on the President's constitutional or statutory authority. While some legal commentaries¹⁰ have called into question the validity of executive orders issued by the President without clear statutory provisions that empower the issuance of such orders, there are also arguments that Nigeria’s President’s powers to issue executive orders are derived from section 5 of the Constitution of the Federal Republic of Nigeria 1999 (as amended) vesting the executive powers of the federation on the President.¹¹

Given the above, the question of the legal effect of the Directive remains one that industry practitioners would continue to mull over pending a Judicial determination of the same or an amendment of the PIA by the National Assembly. Notwithstanding, the Directive will provide regulatory certainty which is essential for the Industry.

Conclusion

The Directive is a much-needed step toward providing clarity on the respective responsibilities of both the NUPRC and the NMDPRA. However, it is worth considering that an amendment to relevant provisions of the PIA is necessary to provide lasting clarity on the delineation of responsibilities between the NUPRC and the NMDPRA to avoid the continuous regulatory tussle between both regulators of a very important sector of the Nigerian economy. From an investor perspective, it is equally important that regulatory certainty is achieved on the clear roles and functions of both regulators.

1. Petroleum operations may be considered integrated where there is a joint use of utilities used exclusively for the upstream and midstream operations. See section 8(d) of the PIA.
2. See sections 7(ee), 8(d), 79 (3)-(4) and 318 (definition of “upstream petroleum operations”) of the PIA.

3. Nigerian regulator links Exxon to illegal lifting of petroleum from terminal, Reuters, June 9,2023.

4. NUPRC, NMDPRA disagree over ExxonMobil lifting oil from Bonny Terminal, The Nation Newspaper, June 15

5. After Buhari, Tinubu Wades into NUPRC, NMDPRA Altercation over Overlapping Functions, This Day Live, July 17, 2023

6. After THE WHISTLER Exclusive, Buhari Directs NUPRC To Take Over Regulation Of All Crude Oil Export Terminals In Nigeria, The Whistler, April 26, 2023 

7. Section 6(6) of the Constitution of the Federal Republic of Nigeria 1999 (as amended)
8. Sections 4 and 9 of the Constitution of the Federal Republic of Nigeria 1999 (as amended)
9. Section 5 of the Constitution of the Federal Republic of Nigeria 1999 (as amended)

10. OKEBUKOLA & KANA: Executive Orders in Nigeria as Valid Legislative Instruments and Administrative Tools

11. Executive Order and presidential power in the Nigerian constitutional democracy, The Guardian, October 17, 2018