Regulating Downstream Energy Transition in Dynamic Times

Engr. Farouk Ahmed, Chief Executive, Nigerian Midstream & Downstream Petroleum Regulatory Authority

The Strategic focus and scope of Oil Trading Logistics (OTL) Africa’s activities which covers Promotion and development of businesses, policies and operational relationships in the downstream energy value chain is highly commendable.

Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) considers the OTL as one of its key government-to-business partners in the extensive downstream energy value sector and wishes to congratulate the board of OTL Africa, for an excellent organization of this year’s events.

The crucial role that the Downstream Petroleum sector plays in the economic growth of any country cannot be overemphasized, and the efficient and effective management of this sector is one of leading performance targets of a regulator like the NMDPRA.

Please permit me to proceed to present a few thoughts on the Theme of this year’s expo which was aptly defined as “Regulating the Downstream Energy Transition in Dynamic Times”

Energy Transition

History has taught us that the path-dependence in energy systems is an ever-changing phenomenon, and that from time to time, the dominant energy supply path in the energy mix experiences changes.

At some point in the past, the main source of energy was biomass. Later came crude oil and natural gas through their many derivatives which evolved to become the predominant global source of acceptable energy. However, today that dominance is being aggressively challenged by renewable energy sources.

We are 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 & more sustainable sources. These discussions have metamorphosed into a compelling strategic case which has emplaced another Energy

Transition in this century

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 optimization 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 considered for Africa, then a compelling case to accelerate the  emplacement of a sustainable supply framework of clean fuels by the  African downstream Industry becomes one of the most outstanding  challenges that the continent faces in the short to medium term that we  must comprehensively address.

To reposition our sector in this season of opportunity, we must be guided by a few pertinent drivers, which can be established from answering the following fundamental market related questions:

  1. How do we provide for more “cheap clean/green” energy, within the increased drive for a global decarbonized economic development?
  2. How must innovative technologies for supply of “cheap clean/green energy” be mainstreamed in the African energy markets?
  3. 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, NMDPRA is enhancing the regulatory environment in this sector in the following ways to ensure the midstream and downstream sector in Nigerian is strengthened and positioned properly in this era of energy transition

In accordance with the Nigeria’s aspirations for the decade of gas:

NMDPRA is supporting the accelerated development of all key initiatives and projects that will guarantee optimal supply of gas from the abundant natural gas resource of Nigeria Working with key stakeholders to unlock the huge demand opportunities for use of gas in transforming the economic fortunes of the Country Leveraging on the provisions of the PIA that would spur gas development. This would include concessionary royalties on domestic gas supply, concessionary tax regime for domestic gas infrastructure and co-financing of strategic gas investments.

Developing an investor friendly economic model for the domestic gas market promoting the use of LPG as a cleaner cooking fuel alternative to biomass. NMDPRA will be at the forefront of supporting programs that prioritize LPG adoption for cleaner cooking fuels and technologies to support Nigeria’s objectives of achieving universal access to affordable, sustainable, and modern energy by 2030 in line with UN Sustainable Development Goal

No. 7 (UN SGD-7). Recent research has demonstrated that transition to LPG for clean cooking reduces air pollutants and overall global temperature reduction by year 2040.

Furthermore, we are fully aligned with our upstream sector counterpart (NUPRC) in delivering optimal regulatory service and driving the use of gas through the Nigerian Gas Flare

Commercialization Program

In accelerating the full implementation of key provisions of PIA 2021, the NMDPRA: emplaced a functional governance system for the regulatory administration of the midstream and downstream sector developed twelve (12) new regulations for the midstream and downstream and finalizing the process of their issuance and gazetting. Other relevant regulations are also at different stages of development.

NMDPRA is strengthening the domestic gas market for enhanced performance through emplacement of new regulatory regimes for wholesale gas supply, domestic gas market aggregation and open access is reviewing pricing models for all Petroleum Products in the  downstream supply chain.

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 Nigeria Customs Service (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 Nigerian Customs Services led to the Suspension of Import Licenses for land border importation of Petroleum Products in order to eliminate sharp practices and enhance quality control. I thank the Comptroller General of NCS for the cooperation that we have received.

Further collaborations with NNPC Limited, SON, NCS, ARDA, Nigerian Society of Chemical Engineers (NSChE) and other key stakeholders on improving the standards of fuel utilized in Nigeria will continue.

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.

Nigerian Midstream and Downstream Petroleum Regulatory Authority

As part of our commitment to fuel quality improvements, I am pleased to inform you that the NMDPRA will be participating at the upcoming high-level African Petroleum Ministers Meeting on Cleaner Fuels organized by the United Nations Environmental Program (UNEP) in November 2022 in Nairobi, Kenya

  1. Let me use this opportunity to congratulate Pinnacle Oil and Gas on the commissioning of their expansive facilities at Lekki Free Trade Zone. These facilities are of strategic national importance in product supply and delivery. I also wish to extend our commendation to NNPC Limited for consolidation of their downstream business with the acquisition of OVH Downstream. We expect the consolidation would enhance Nigeria’s Energy Security and position the company to contribute more to Africa’s Energy revitalization.
  2. I wish to assure you all that the NMDPRA shall continue to support investment growth and expansion of the midstream and downstream sectors by facilitating and co-investing (through the Midstream and Downstream Gas Infrastructure Fund) in viable infrastructure projects.

The Nigerian Midstream and Downstream sector is at a transformational stage, where all investors are encouraged to seize the extensive opportunities that have been created by the on-going reforms brought by the PIA and other high impact initiatives that are being implemented.

Nigeria will continue to collaborate regionally and continent-wide in all initiatives that are geared to promoting the success of Africa in realizing its aspirations from the Midstream and Downstream Petroleum Sectors.

Considering that Nigeria has adopted Natural Gas as its transition fuel towards cleaner energy supply, I look forward to our next gathering to be captioned Energy Trading and Logistics Africa Week.

This presentation was made by Engr. Farouk Ahmed, Chief Executive, Nigerian Midstream & Downstream Petroleum Regulatory Authority at the 16th edition of Oil Trading Logistics Africa Downstream Week in Lagos. 


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